SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-Q/A
                               (Amendment No. 1)

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended June 30, 2003

                                       OR

[  ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                         Commission File Number: 0-26556

                           KLAMATH FIRST BANCORP, INC.
             (Exact name of registrant as specified in its charter)


                     Oregon                                      93-1180440
---------------------------------------------------         -------------------
(State or other jurisdiction of incorporation                 (I.R.S. Employer
or organization)                                                I.D. Number)

540 Main Street, Klamath Falls, Oregon                             97601
---------------------------------------------------         -------------------
 (Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code:           (541) 882-3444
---------------------------------------------------         -------------------

Securities registered pursuant to
  Section 12 (b) of the Act:                                       None
---------------------------------                           -------------------

Securities registered pursuant to
  Section 12 (g) of the Act:             Common Stock, par value $.01 per share
---------------------------------        --------------------------------------
                                                      (Title of Class)



     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES X    NO .

     Indicate by check mark whether the Registrant is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2).      YES X    NO

     As  of  July 31,  2003,   there  were  issued  6,980,635  shares  of  the
Registrant's  Common  Stock.  The  Registrant's  voting  common  stock is traded
over-the-counter  and is listed on the Nasdaq  National  Market under the symbol
"KFBI."

                          KLAMATH FIRST BANCORP, INC.
                        QUARTERLY REPORT ON FORM 10-Q/A
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

                                EXPANATORY NOTE


The  purpose of this Form  10-Q/A  ("Form  10-Q/A")  is to amend Part II - Other
Information,  Item 6 Exhibits and Reports on Form 8-K Exhibits a) 10(a)  through
Exhibits  10(h) of the Quarterly  Report on Form 10-Q of Klamath First  Bancorp,
Inc. for the quarterly  period ended June 30, 2003, to include copies of all the
participants employment agreements, salary continuation agreements, and director
fee continuation agreements finalized and executed during the quarter.

<PAGE>
                          KLAMATH FIRST BANCORP, INC.

                               TABLE OF CONTENTS





                          PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

Signatures

<PAGE>
PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

Exhibits

Exhibit Number    Description
---------------   -----------

Exhibit 10(a).1   Employment Agreement for Kermit K. Houser
Exhibit 10(a).2   First amendment to employment agreement
                  for Kermit K. Houser
Exhibit 10(a).3   Salary continuation agreement for Kermit K. Houser

Exhibit 10(b).1   Employment Agreement for Marshall J. Alexander
Exhibit 10(b).2   First amendment to employment agreement
                  for Marshall J. Alexander
Exhibit 10(b).3   Salary continuation agreement for Marshall J. Alexander

Exhibit 10(c).1   Employment Agreement for Ben A. Gay
Exhibit 10(c).2   First amendment to employment agreement for Ben A. Gay
Exhibit 10(c).3   Salary continuation agreement for Ben A. Gay

Exhibit 10(d).1   Employment Agreement for Frank X. Hernandez
Exhibit 10(d).2   First amendment to employment agreement
                  for Frank X. Hernandez
Exhibit 10(d).3   Salary continuation agreement for Frank X. Hernandez
Exhibit 10(d).4   First amendment to salary continuation agreement
                  for Frank X. Hernandez

Exhibit 10(e).1   Employment Agreement for Craig M Moore
Exhibit 10(e).2   First amendment to employment agreement
                  for Craig M Moore
Exhibit 10(e).3   Salary continuation agreement for Craig M Moore
Exhibit 10(e).4   First amendment to salary continuation agreement
                  for Craig M Moore

Exhibit 10(f).1   Employment Agreement for James E. Essany
Exhibit 10(f).2   First amendment to employment agreement
                  for James E. Essany
Exhibit 10(f).3   Salary continuation agreement for James E. Essany
Exhibit 10(f).4   First amendment to salary continuation agreement
                  for James E. Essany

Exhibit 10(g).1   Employment Agreement for Walter F. Dodrill
Exhibit 10(g).2   First amendment to employment agreement
                  for Walter F. Dodrill
Exhibit 10(g).3   Salary continuation agreement for Walter F. Dodrill
Exhibit 10(g).4   First amendment to salary continuation agreement
                  for Walter F. Dodrill

Exhibit 10(h).1   Employment Agreement for Nina G. Drake
Exhibit 10(h).2   First amendment to employment agreement
                  for Nina G. Drake
Exhibit 10(h).3   Salary continuation agreement for Nina G. Drake
Exhibit 10(h).4   First amendment to salary continuation agreement
                  for Nina G. Drake

Exhibit 10(i).1   Employment Agreement for Jeffrey D. Schlenker
Exhibit 10(i).2   First amendment to employment agreement
                  for Jeffrey D. Schlenker
Exhibit 10(i).3   Salary continuation agreement for Jeffrey D. Schlenker
Exhibit 10(i).4   First amendment to salary continuation agreement
                  for Jeffrey D. Schlenker

Exhibit 10(j).1   Director fee continuation agreement
                  for Rodney N. Murray
Exhibit 10(j).2   Director fee continuation agreement
                  for Bernard Z Agrons
Exhibit 10(j).3   Director fee continuation agreement
                  for Timothy A. Bailey
Exhibit 10(j).4   Director fee continuation agreement
                  for James D. Bocchi
Exhibit 10(j).5   Director fee continuation agreement
                  for Donald N. Bauhofer
Exhibit 10(j).6   Director fee continuation agreement
                  for William C. Dalton
Exhibit 10(j).7   Director fee continuation agreement
                  for Dianne E. Spires

Exhibit 31        Section 302 Certification *
Exhibit 32        Section 906 Certification *

Signatures


*    Previously filed on August 14, 2003
<PAGE>
                                                                 Exhibit 10(a).1
                              EMPLOYMENT AGREEMENT
                         Amended and Restated May 9, 2003

     THIS  AGREEMENT is made  effective  as of November  15, 2002,  by and among
KLAMATH  FIRST FEDERAL  SAVINGS AND LOAN  ASSOCIATION  ("Association"),  Klamath
Falls, Oregon;  KLAMATH FIRST BANCORP, INC. ("Company"),  an Oregon corporation;
and KERMIT HOUSER ("Executive").

     WHEREAS, Association and Company wish to assure for themselves the services
of Executive for the period provided in the Agreement; and

     WHEREAS, Executive is willing to serve in the employ of the Association and
Company on a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants contained herein,
and upon the other terms and conditions  hereinafter provided, the parties agree
as follows:

1.   POSITION.

     During the term of Executive's employment under this Agreement, Association
agrees to employ  Executive and Executive agrees to serve as President and Chief
Executive Officer of Association and Company.  During said term,  Executive also
agrees to serve, if elected, without separate compensation, as an officer and/or
director of company and/or Association or any subsidiary or affiliate of Company
or Association.

2.   DUTIES.

     As  President  and Chief  Executive  Officer of  Association  and  Company,
Executive  shall have such powers and duties and  appropriate to that office (a)
as may be provided by the articles  and/or bylaws of Association and Company and
(b) as  determined  by the board of directors  of  Association  and Company,  or
either of them,  respectively,  from time to time.  Executive shall at all times
discharge  his  duties  in  consultation  with and  under  the  supervision  and
direction of the board of directors of Association  and Company.  Subject to the
provisions of the Agreement, Executive's duties may be changed from time to time
during the term of the Agreement, and Executive's place of work may be relocated
at the sole discretion of the board of directors of Association and Company,  or
either of them.

3.   TERM.

     The term of Executive's employment under the Agreement shall commence as of
the date first  written  above and shall  continue  for a period of two years at
which time it will end,  unless sooner  termination in accordance with the terms
of this  Agreement  or  extended  as  provided  below.  Beginning  on the  first
anniversary  date of the  Agreement,  and  continuing at each  anniversary  date
thereafter,  the board of directors  of  Association  and Company,  or either of
them, may in their sole  discretion  extend  Executive's  employment  under this
Agreement  for  an  additional  one-year  period.  Prior  to  the  extension  of
Executive's  employment  under this  Agreement as provided in this Section,  the
board of directors of Association  and Company,  or either of them, may in their
sole  discretion  conduct a performance  evaluation of Executive for purposes of
determining  whether to extend this  Agreement.  Executive  may  terminate  this
Agreement at any time,  after providing at least sixty (60) days' written notice
to the chair of the board of directors of Association and Company,  or either of
them.  In such  event,  Executive  will remain  subject to the post  termination
provisions set forth in this Agreement.

4.   OUTSIDE ACTIVITIES.

     During the term of his employment  under this  Agreement,  Executive  shall
devote all his  business  time,  attention,  skill,  and efforts to the faithful
performance  of his duties  under this  Agreement.  Executive  shall  obtain the
consent of the board of directors of  Association  and Company before he engages
in any other professional or business activities that may require an appreciable
portion of Executive's  time or effort to the detriment of the  Association's or
Company's business or that of their affiliates.

5.   COMPENSATION AND FRINGE BENEFITS.

     (a)  As  compensation  for services  under the Agreement,  Association  and
          Company  shall pay to  Executive an annual  salary of  $200,000,  less
          legally  required   deductions  and  withholdings   ("Basic  Salary").
          Executive's  Base Salary shall be payable in accordance with the usual
          payroll  practices  of  Association  and  Company.  During the term of
          Executive's  employment under this Agreement,  Executive's Base Salary
          shall be  reviewed  at least  annually  by the board of  directors  of
          Association  and Company and the board of directors of Association and
          Company,  or  either  of them,  may in their  sole  discretion  adjust
          Executive's Base Salary from time to time.

     (b)  In  addition to the Base Salary  provided in Section  5(a),  Executive
          shall be eligible to receive an annual bonus payable within 30 days of
          each  anniversary date of this Agreement.  Executive's  entitlement to
          and the  specific  amount  of any such  annual  bonus  shall be at the
          discretion  of the board of directors of  Association  and company (or
          their duly convened committee),  based upon and subject to Executive's
          satisfactorily   meeting   certain  goals  and   objectives   mutually
          established  and  agreed to in writing  by the board of  directors  of
          Association and Company and Executive.

     (c)  In  addition  to the  compensation  described  above,  to  the  extent
          otherwise  eligible,   Executive  shall  be  entitled  to  receive  or
          participate  in, at not cost to  Executive,  all such other  benefits,
          including  without  limitation  pension  plans,  employee stock option
          plans,  and health and welfare  plans as may from time to time be made
          available to other senior  management  employees  of  Association  and
          Company.

6.   EXPENSES.

          Association and Company shall  reimburse  Executive for all reasonable
     and  necessary  expenses  incurred by  Executive in carrying out his duties
     under this  Agreement.  Executive  shall present to Association and company
     from time to time an itemized  account of such expenses in such form as may
     be required by Association and Company, or either of them.

7.   PAYMENTS TO EXECUTIVE UPON EVENT OF TERMINATION.

     (a)  For purposes of the Agreement, "Event of Termination" means any one or
          more of the  following:  (i)  termination of Association or Company of
          Executive's  employment under this Agreement for any reason other than
          a Change in Control (as defined in Section 8), disability (as provided
          in  Section  9),  or  death  (as  provided  in  Section  10);  or (ii)
          termination  by  Executive  of  Executive's   employment   under  this
          Agreement in accordance  with the  provisions of this Section upon (A)
          unless  consented to the Executive,  a material  change in Executive's
          title or job duties,  which change would cause Executive's position to
          become one of materially lesser  responsibility  from the position and
          duties  described  in  Sections  1 and  2,  or the  assignment  to the
          Executive of any duties or responsibilities substantially inconsistent
          with the Executive's  title or duties,  or a relocation of Executive's
          principal place of work by more than 35 miles from its location at the
          effective date of the Agreement; (B) unless consented to by Executive,
          any reduction in Executive's  Base Salary;  (C) the liquidation of the
          dissolution of Association and Company;  or (D) any material breach of
          the Agreement by Association  and Company.  Upon the occurrence of any
          event described in clauses (A), (B), (C), or (D) of clause (ii) above,
          Executive  shall have the right to elect to terminate  his  employment
          under this  Agreement upon not less than 60 days' prior written notice
          to the board of directors  of  Association  and  Company,  and each of
          them,  given  within a  reasonable  period of time not to exceed  four
          calendar months after the event giving rise to said right to elect.

     (b)  Upon  termination  of employment  following  occurrence of an Event of
          Termination  other  than for Cause or for  Neglect  (as  described  in
          Sections  11 or 12  hereof),  or upon  failure  to extend  Executive's
          employment for additional  one-year  period,  Association  and Company
          shall pay to  Executive  a sum equal to (i) the amount of  Executive's
          Base Salary (at the then current  rate) for the  remainder of the term
          of this  Agreement  following  the Date of  Termination  (as described
          below),  and (ii) the value of any employer  contributions  that would
          have been made by Association  and Company on Executive's  behalf over
          the remaining term of Executive's  employment  under this Agreement to
          any retirement  plan  sponsored by  Association  and Company as of the
          Date of Termination (as defined  below);  provided,  however,  that if
          Association or Company is not in compliance  with its minimum  capital
          requirements of if such payment would cause Association's or Company's
          capital to be reduced  below its minimum  capital  requirements,  such
          payment shall not be made until such time as  Association  and Company
          are in capital compliance.  Additionally,  Executive shall be entitled
          to receive the stock option and grant described under Section 5(c) and
          5(d).  The payment  described  in this Section 7(b) shall be made in a
          single lump sum within 30 days of the Date of Termination.

8.   CHANGE OF CONTROL

     (a)  For  purposes  of the  Agreement,  a "Change in Control" of Company or
          Association  shall be deemed to occur if and when (a) an offeror other
          than  Company  purchases  shares of the  common  stock of  Company  or
          Association  pursuant to a tender or exchange  offer for such  shares,
          (b) any person (as such term is used in Sections 13(d) and 14(d)(2) of
          the  Securities  Exchange  Act of 1934) is or becomes  the  beneficial
          owner, directly or indirectly, of securities of Company or Association
          representing 25% or more of the combined voting power of the Company's
          then  outstanding  securities,  (c) the  membership  of the  board  of
          directors  of  Company  or  Association  changes  as the  result  of a
          contested  election,  such that  individuals who were directors at the
          beginning of any twenty-four month period do not constitute a majority
          of  the  board  of  directors  at  the  end  of  such  period,  or (d)
          shareholders   of   Company   or   Association   approve   a   merger,
          consolidation,  sale or  disposition  of all or  substantially  all of
          Company's or  Association's  assets,  or a plan of partial or complete
          liquidation.

     (b)  In the  event of a  Change  in  Control,  in lieu of  amounts  payable
          pursuant to Section 7(b),  Executive  shall be entitled to the payment
          provided in Section 8(c) upon his subsequent  involuntary  termination
          of employment at any time during the term of his employment under this
          Agreement,  unless such  termination is because of Executive's  death,
          disability  (as  provided  in Section  9), or for Cause (as defined in
          Section 11).

     (c)  Upon a Change in Control  followed by the  involuntary  termination of
          Executive's  employment as provided in Section 8(b),  Association  and
          Company  shall  pay  to  Executive  a sum  equal  to  (i)  2.00  times
          Executive's "base amount," within the meaning of Section 280G(b)(3) of
          the Internal Revenue Code of 1986, as amended ("Code"); (ii) his stock
          option and grant  described under Section 5(c) and 5(d); and (iii) the
          value of any  employer  contributions  that  would  have  been made by
          Association and Company on Executive's  behalf over the remaining term
          of Executive's  employment under this Agreement to any retirement plan
          sponsored by  Association  and Company as of the Date of  Termination.
          Such payment  shall be made in a single lump sum within 30 days of the
          Date of Termination.

     (d)  IRS Section 280G Issues.  If 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 Company
          or Association,  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 Company or
          Association (and their successor) shall be responsible for any loss of
          deductibility  related  thereto;  provided,  however,  that Company or
          Association  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 Company or  Association  immediately
          prior to the change in control  or such other  independent  accounting
          firm or advisor as may be mutually agreeable to Company or Association
          and Executive in the exercise of their reasonable good faith judgment.

9.   TERMINATION UPON DISABILITY OF EXECUTIVE.

     (a)  If Executive  shall become  disabled as defined in  Association's  and
          Company's then current disability plan (or, if no such plan is then in
          effect,  if Executive is  permanently  and totally  disabled  with the
          meaning of Code Section  22(e(3)) and unable to perform the  essential
          functions  of  his  position  even  with   reasonable   accommodation,
          Association and Company, or either of them, may terminate  Executive's
          employment  for  disability.   (b)  Upon  termination  of  Executive's
          employment  for  disability,  Association  and  Company  will  pay  to
          Executive,   as   disability   pay,  a  bi-weekly   payment  equal  to
          three-quarters  of  Executive's  bi-weekly  rate of base Salary on the
          Date of  Termination.  The  disability  payments shall commence on the
          Date of  Termination  and  will  end on the  earlier  of (i) the  date
          Executive  returns to employment with  Association  and Company;  (ii)
          Executive's employment by another employer;  (iii) Executive attaining
          age 65; (iv)  Executive's  death; or (v) the expiration of the term of
          Executive's  employment under this Agreement.  The disability payments
          shall also be reduced by the amount,  if any, paid to Executive  under
          any plan of Association and Company providing  disability  benefits to
          Executive.

10.  TERMINATION UPON DEATH OF EXECUTIVE.

          Upon the death of Executive  during the term of his  employment  under
     this Agreement,  this Agreement shall terminate immediately and Executive's
     Base Salary  pursuant to Section 5(a) shall be prorated  and payable  until
     the date of termination of this Agreement.

11.  TERMINATION FOR CAUSE.

          Association and Company, or either of them, may terminate  Executive's
     employment under this Agreement at any time for Cause. For purposes of this
     Agreement,  "Cause"  means  any  fraud  or  dishonesty  by  Executive;  the
     Executive's  willful  misconduct,  incompetence,  or intentional failure to
     perform  stated  duties;  any failure by or refusal of  Executive to comply
     with  any   instructions  or  directives  of  the  board  of  directors  of
     Association or Company,  or either of them, any breach of fiduciary duty by
     Executive;  willful  violation of any law or government  regulation  (other
     than misdemeanor  traffic  violations or similar  misdemeanor  offenses) by
     Executive;   any  other  willful  conduct  by  Executive  which  materially
     adversely  reflects or impacts on Association's or Company's  reputation or
     business;  or any  material  breach  of the  Agreement  by  Executive.  For
     purposes of this  Section,  no act,  or the failure to act, on  Executive's
     part shall be  "willful"  unless done,  or omitted to be done,  not in good
     faith and without  reasonable belief that the action or omission was in the
     best interest of the  Association or its  affiliates.  Notwithstanding  the
     foregoing,  Executive  shall not be deemed to have been terminated by Cause
     unless  and until  there  shall  have been  sent to  Executive  a copy of a
     resolution  duly  adopted  by  the  affirmative   vote  of  not  less  than
     three-fourths  of the board of directors  of  Association  and Company,  or
     either of them,  (after  reasonable  notice to Executive and an opportunity
     for  Executive,  together  with  counsel,  to be heard  before the board of
     directors  of  Association  and  Company),  finding  that in the good faith
     opinion of the board of directors  of  Association  and Company,  Executive
     engaged  in  conduct  justifying   termination  for  Cause  and  describing
     specifically the conduct. Executive shall not have the right to receive any
     compensation  or other  benefits  for any period after  termination  of his
     employment  for Cause.  Any stock  options  granted to Executive  under any
     stock option plan that have vested shall remain the property of  Executive,
     but any unvested  awards  granted  under any other  stocks  benefit plan of
     Association,  Company, or any subsidiary or affiliate thereof, shall become
     null and void effective upon  Executive's  receipt of Notice of Termination
     (as defined  below) for Cause and shall not be  exercisable by Executive at
     any time subsequent to such termination for Cause.

12.  TERMINATION FOR NEGLECT.

     The  Association and Company,  or either of them may terminate  Executive's
     employment  under this  Agreement at any time for Neglect.  For purposes of
     this  Agreement,  "Neglect" means the failure of Executive to give due care
     to stated duties or to comply with  instructions or directives of the Board
     of Directors  of the  Association  or Company or either of them,  but where
     such failure is not  determined to be willful or  intentional as defined in
     Section 11.  Termination for Neglect includes  termination as the result of
     any continuing or repeated  problems with  Executive's  job  performance or
     conduct after written notice  specifying  such problem with  performance or
     conduct,   and  where  such  continuing  and  repeated  problems  were  not
     determined  to be  willful or  intentional,  or where the  conduct  was not
     deemed to have a material  adverse  impact on the  Association  or Company.
     Notwithstanding  the foregoing,  Executive shall not be deemed to have been
     terminated  by  Neglect  unless  and until  there  shall  have been sent to
     Executive a copy of a resolution duly adopted by a majority of the Board of
     Directors of the Association and Company,  or either of them (excluding the
     Executive in counting the majority if the Executive is then on the board of
     directors,  and after reasonable notice to Executive and an opportunity for
     Executive to be heard before the board of  directors),  finding that in the
     good  faith  opinion  of the  board of  directors  of the  Association  and
     Company,  or  either  of them,  Executive  engaged  in  conduct  justifying
     termination for Neglect and describing specifically the conduct.  Executive
     shall  not have the right to  receive  any  salary or bonus for any  period
     after  termination  of employment for Neglect.  Executive  shall retain any
     vested  benefits in defined  benefit  plans,  defined  contribution  plans,
     supplemental  executive  retirement plans,  stock option plans,  restricted
     stock plans, or other such benefits, but shall forfeit any rights that have
     not vested.

13.  REQUIRED PROVISIONS.

     (a)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
          participating in the conduct of Association's or Company's,  or either
          of their,  affairs by a notice served under Section  8(e)(3) or (g)(1)
          of the Federal  Deposit  Insurance  Act  ("FDIA"),  Association's  and
          Company's  obligations  under this Agreement  shall be suspended as of
          the date of service, unless stayed by appropriate proceedings.  If the
          charges in the notice  are  dismissed,  Association  and  Company,  or
          either of them,  may, in their  discretion,  (i) pay  Executive all or
          part of the compensation  withheld while its contract obligations were
          suspended  and  (ii)  reinstate  (in  whole  or in  part)  any  of its
          obligations that were suspended.

     (b)  If   Executive  is  removed   and/or   permanently   prohibited   from
          participating in the conduct of Association's or Company's,  or either
          of their,  affairs by an order issued under Section  8(e)(4) or (g)(1)
          of the FDIA, all  obligations  of  Association  and Company under this
          Agreement shall  terminate as of the effective date of the order,  but
          vested rights of the contracting parties shall not be affected.

     (c)  If  Association  or  Company is in  default  (as  defined in Section 3
          (x)(1) of the  FDIA),  all  obligations  under  this  Agreement  shall
          terminate  as of the date of  default,  but this  paragraph  shall not
          affect any vested rights of the parties.

     (d)  All obligations  under this Agreement  shall be terminated  (except to
          the extent  determined that continuation of the Agreement is necessary
          for the continued  operation of Association and Company,  or either of
          them):  (i) by the  Director  of the Office of the Thrift  Supervision
          (the  "Director")  or his or her  designee  at the  time  the  Federal
          Deposit  Insurance  Corporation  or the Resolution  Trust  Corporation
          enters into an agreement to provide  assistance to or on behalf of the
          Association or Company under the authority  contained in Section 13(c)
          of the FDIA;  or (ii) by the  Director,  or his or her designee at the
          time the Director or such designee  approves a  supervisory  merger to
          resolve  problems  related to operation of  Association  or Company or
          when Association and Company,  or either of them, is determined by the
          Director  to be in an unsafe or unsound  condition.  Any rights of the
          parties that have already  vested,  however,  shall not be affected by
          such action.

     (e)  Any  payments  made  to  Executive  pursuant  to  the  Agreement,   or
          otherwise, are subject to and conditioned upon compliance with Section
          18(k) of the FDIA and any regulations promulgated thereunder.

14.      NOTICE.

     (a)  Any  purported  termination  of  Executive's   employment  under  this
          Agreement  (except by reason of Executive's  death) by Association and
          Company,  or either of them, or by Executive  shall be communicated by
          Notice  of  Termination  to the  other  party.  For  purposes  of this
          Agreement,  "Notice of Termination" means a written notice which shall
          state the specific termination provision in this Agreement relied upon
          and the effective date of the termination of Executive's employment.

     (b)  For  purposes  of this  Agreement,  "Date of  Termination"  means  the
          effective date of the termination of Executive's  employment specified
          in the Notice of Termination.

15.      NONCOMPETITION AND CONFIDENTIALITY.

     (a)  During the term of Executive's employment under this Agreement and for
          a period of one year  following an Event of  Termination as defined in
          Section  7(a) of this  Agreement,  Executive  will  not  compete  with
          Association  and/or  Company  in any  city,  town or  county  in which
          Association  and/or  Company has an office or has filed an application
          for regulatory approval to establish an office.  Executive agrees that
          during  such  period  and  within  said  cities,  towns and  counties,
          Executive  shall not work for,  advise,  consult,  or otherwise  serve
          with,  directly or indirectly,  any entity whose  business  materially
          competes with the depository, lending, or other business activities of
          the  Association  and/or  Company.   The  parties,   recognizing  that
          irreparable  injury will result to  Association  and/or Company in the
          event of Executive's  breach of this Section 14(a),  agree that in the
          event  of  any  such  breach  or   threatened   breach  by  Executive,
          Association and/or Company will be entitled,  in addition to any other
          remedies and damages available, to a temporary restraining order and a
          preliminary  and  permanent  injunction  to restrain the  violation or
          threatened  violation  hereof by Executive and  Executive's  partners,
          agents,  employers,  employees,  and all  persons  acting  for or with
          Executive.  Executive  represents  and  admits  that in the event of a
          termination  of  his  employment  under  this  Agreement,  Executives'
          experience  and  capabilities  are  such  that  Executive  can  obtain
          employment in a business  engaged in other lines and/or of a different
          nature that Association's  and/or Company, and that the enforcement of
          a remedy by way of injunction will not prevent  Executive from earning
          a  livelihood.   Nothing   herein  may  be  construed  as  prohibiting
          Association  and/or Company from pursuing any other remedies available
          to  Association  and  Company for such  breach or  threatened  breach,
          including recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
          business  activities and plans for business  activities of Association
          and Company,  or either of them, and  affiliates of either,  as it may
          exist from time to time,  is a valuable,  special and unique  asset of
          the business of  Association  and Company.  Executive will not, at any
          time during or after the term of his employment  under this Agreement,
          use or disclose to any person or entity for any reason  whatsoever any
          knowledge  of the  past,  present,  planned,  or  considered  business
          activities  of  Association  and  Company,   or  either  of  them,  or
          affiliates of either.  Notwithstanding  the  foregoing,  Executive may
          disclose  any  knowledge  of  banking,   financial   and/or   economic
          principles, concepts or ideas which were not derived from the business
          plans and activities of  Association or Company.  This provision is in
          addition to and not in lieu of any duties or  obligations of Executive
          under any  applicable  statute or common law. In the event of a breach
          or threatened  breach by Executive of the  provisions of this Section,
          Association  and  Company,  or either of them,  will be  entitled to a
          temporary restraining order and a preliminary and permanent injunction
          restraining  Executive  from  disclosing,  in whole  or in  part,  the
          knowledge  of  the  past,  present,  planned  or  considered  business
          activities of Association and Company, or either of them or affiliates
          of either. Nothing herein will be construed as prohibiting Association
          and  Company,  or either of them,  from  pursuing  any other  remedies
          available  to  Association  or Company for such  breach or  threatened
          breach, including the recovery of damages from Executive.

16.  EFFECT ON PRIOR AGREEMENTS.

          This agreement contains the entire  understanding  between the parties
          concerning   the  subject  matter  hereof  and  supersedes  any  prior
          agreements  (express or implied,  oral or written) among  Association,
          Company,   and  Executive   concerning  the  subject  matter  of  this
          Agreement.

17.  SUCCESSORS AND ASSIGNS.

          This Agreement  shall inure to the benefit of any successor or assigns
          of the  Association or Company.  In case of any termination in which a
          successor  would not by the foregoing  sentence or operation of law be
          bound by this  Agreement,  Company  shall  require  such  successor to
          expressly  and  unconditionally  assume  this  Agreement  and  perform
          Company's obligations under this Agreement.

18.  MODIFICATION AND WAIVER

     (a)  This Agreement may be modified or amended only by a written instrument
          signed by the parties.

     (b)  No term or  condition of this  Agreement  shall be deemed to have been
          waived, nor shall there be any estoppel against the enforcement of any
          provision of this Agreement,  except by a written instrument signed by
          the part charged with such waiver or estoppel.  No such written waiver
          shall  be  deemed  a  continuing  waiver  unless  specifically  stated
          therein,  and each such waiver  shall  operate only as to the specific
          term or  condition  waived and shall not  constitute  a waiver of such
          term  or  condition  for the  future  as to any act  other  than  that
          specifically waived.

19.  SEVERABILITY.

          If, for any reason,  any provision of this  Agreement,  or any part of
          any provision,  is held invalid,  such invalidity shall not affect any
          other  provision of this  Agreement or any part of such  provision not
          held so invalid,  and each such other provision and part thereof shall
          to the full  extent  consistent  with law  continue  in full force and
          effect.

20.  HEADINGS FOR REFERENCE ONLY.

          The heading of sections  herein are included solely for convenience of
          reference and shall not control the meaning or  interpretation  of any
          of the provisions of this Agreement.

21.      GOVERNING LAW.

         This Agreement shall be governed by the laws of the state of Oregon.

22.      ARBITRATION.

          Any  dispute or  controversy  arising  out of or in any way related to
          this Agreement or Executive's  employment  under this Agreement or the
          termination of that employment,  except a claim by Association  and/or
          Company of a breach or  threatened  breach by  Executive of any of the
          provisions  of Section 14, shall be submitted to binding  arbitration,
          conducted in Portland,  Oregon,  in  accordance  with the then current
          rules of the American Arbitration Association.  Such arbitration shall
          be the  exclusive  remedy  for any such  dispute or  controversy,  and
          judgment may be entered on the arbitrator's  award in any court having
          jurisdiction.

23.      ATTORNEY FEES.

          If any action  (including  any  arbitration)  is brought to enforce or
          interpret  the  terms  of  this  Agreement  or any  part  of  it,  the
          prevailing party shall be entitled to recover from the other party its
          reasonable  attorney fees and costs  incurred  therein,  including all
          attorney fees and costs on appeal.

24.      INDEMNIFICATION.

          Association and Company,  or either of them,  shall provide  Executive
          (including  his heirs,  executors  and  administrators)  with coverage
          under a standard  directors' and officers'  liability insurance policy
          at its expense, or in lieu thereof, shall indemnify Executive (and his
          heirs,  executors and  administrators) to the fullest extent permitted
          under law against all expenses and liabilities  reasonably incurred by
          him  in  connection  with  or  arising  out of any  action,  suit,  or
          proceedings in which he may be involved by reason of his having been a
          director  or  officer of  Association  or  Company,  or either of them
          (whether or not he  continues  to be a director or officer at the time
          of  incurring  such  expenses or  liabilities),  such as expenses  and
          liabilities to include without limitation  judgment,  court costs, and
          attorney fees and the cost of reasonable settlements.


          IN WITNESS  WHEREOF,  the parties hereto have caused this Agreement to
          be  executed  by  a  duly  authorized   officer  or  director  of  the
          Association and the Company,  and Executive has signed this Agreement,
          all on the 9th day of May, 2003.

KLAMATH FIRST BANCORP, INC.             KLAMATH FIRST FEDERAL SAVINGS
                                        AND LOAN ASSOCIATION


BY:  /s/ Rodney N. Murray                BY:  /s/ Rodney N. Murray
     Rodney N. Murray, Chairman          Rodney N. Murray, Chairman



     /s/ Nina G. Drake                   /s/ Kermit K. Houser
WITNESS:                                 Kermit K. Houser


<PAGE>
                                                                 Exhibit 10(a).2
                     FIRST AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This FIRST  AMENDMENT TO AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal  Savings and Loan  Association  ("Association"),  Klamath First Bancorp,
Inc.,  ("Company")  and the  undersigned  executive  officer of Association  and
Company (the "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an Amended and
Restated Employment Agreement dated May 9, 2003, (the "Employment Agreement");

     WHEREAS,  Company has entered into an Agreement and Plan of Merger dated as
of July 14, 2003, (the "Merger  Agreement") with Sterling Financial  Corporation
("Sterling") with respect to a proposed transaction (the "Transaction")  whereby
Sterling will acquire all of the outstanding shares of Company common stock in a
stock merger;

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
the  Transaction  so as to  enable  his  change in  control  of  benefits  to be
triggered under the Employment  Agreement and his Executive Salary  Continuation
Agreement,  and to enhance the value of shares of common stock of Company  owned
by the Executive  and the value of his stock options to acquire  common stock of
Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Capitalized terms used herein, to the extent not defined  otherwise,  shall
     have the meaning ascribed to them in the Employment Agreement.

2.   Section 8(c) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association shall pay the Executive as severance pay or
     liquidated damages, or both (the "Base Severance Amount"),  an amount equal
     to $400,000.  In the event that all  conditions to closing under the Merger
     Agreement have been satisfied  during calendar year 2003, then  Association
     shall  make  payment  of the Base  Severance  Amount  plus  the  Additional
     Severance  Amount (as defined below) to the Executive on December 31, 2003.
     In the event such closing conditions are not satisfied during calendar year
     2003,  then the payments  contemplated  herein shall be made within 10 days
     after  consummation  of the merger  contemplated  by the Merger  Agreement.
     Notwithstanding  the foregoing,  if the Executive enters into a new written
     employment  agreement  with  Sterling  or  Sterling  Savings  Bank prior to
     December 31, 2003 (but effective upon completion of the merger contemplated
     by  the  Merger  Agreement),  then  the  Severance  Amount  and  Additional
     Severance  Amount  shall not be paid  pursuant to the terms  hereof and any
     severance to be provided to the  Executive,  if any,  shall be set forth in
     such new written employment agreement.  In addition, upon the occurrence of
     a Change in  Control  arising  from or  related  to the  Merger  Agreement,
     Association  shall pay the Executive as additional  severance the amount of
     $5,750 (the "Additional Severance Amount") in lieu of any obligation to pay
     the Executive the value of employer contributions that would have been made
     on the  Executive's  behalf over the remaining term of the agreement to any
     tax-qualified  retirement  plan. The Additional  Severance  Amount shall be
     paid at the time the Base Severance  Amount is paid.  Upon the  Executive's
     termination of service in connection  with or following a Change in Control
     arising from or relating to the Merger Agreement, Sterling Savings Bank, as
     successor-in-interest to the Association,  shall provide the Executive with
     continued life, medical, dental and disability coverage as is then provided
     by Sterling  Savings Bank to its  full-time  employees,  as the same may be
     changed from time to time,  during the 36 month period next  following  the
     Executive's  Date  of  Termination  with  the  cost to be  absorbed  by the
     Executive  being equal to the lesser of (i) the  employee  cost of coverage
     currently  being  borne  by the  Executive  or (ii)  the  employee  cost of
     coverage  borne by full-time  employees of Sterling  Savings Bank receiving
     the same  coverage;  provided  if the cost of  coverage  to be borne by the
     Executive is determined  under subpart (i), then such cost shall be subject
     to pro  rata  adjustment  based  upon the pro  rata  adjustment  in cost of
     coverage  that is borne by  full-time  employees  of Sterling  Savings Bank
     receiving the same coverage after completion of the merger  contemplated by
     the Merger Agreement."

3.   New Section 24 is added to the Employment Agreement as follows:

     "24.  Long  Term  Medical  Care.  The  Executive  shall not have a right to
     participate  in the long term  medical care  program to be  implemented  by
     Association."

4.   The  Employment  Agreement  shall be further  amended by adding  thereto an
     "Exhibit A to the  Employment  Agreement"  in the form  attached  hereto as
     Appendix I.

5.   Except as  specifically  set forth herein,  the Employment  Agreement shall
     continue  in full  force  and  effect.  To the  extent  that any  provision
     contained in this Agreement is  inconsistent  with any of the provisions of
     the  Employment  Agreement,  including  but not  limited to,  Section  8(b)
     thereof, the provisions contained in this Agreement shall be controlling.

6.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

7.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so  executed  shall be deemed an  original  and all of which,
     taken together, shall constitute one and the same agreement.

     The parties have entered this Agreement on July 14, 2003.

                               KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


                               By:   /s/ Craig M Moore
                               Craig M Moore SVP/Chief Auditor


                               By:   /s/ Marshall J. Alexander
                               Marshall J. Alexander EVP/CFO
                               KLAMATH FIRST BANCORP, INC.


                               By:   /s/ Craig M Moore
                               Craig M Moore SVP/Chief Auditor
                               EXECUTIVE:


                               By:   /s/ Kermit K. Houser
                               Kermit K. Houser President/CEO

<PAGE>
                                                                 Exhibit 10(a).3
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
Kermit K. Houser,  an Employee of the Employer  (hereinafter  referred to as the
"Employee"), who resides in the State of Oregon.

                              W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

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

     WHEREAS,  the  Employee'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 Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:
<PAGE>


I.   EMPLOYMENT

     Although  this  Agreement  is  intended  to provide  the  Employee  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  Employee  and the  Employer  nor shall any  provision  of this
     Agreement  restrict or expand the right of the  Employer to  terminate  the
     Employee's  employment.  This Agreement shall have no impact or effect upon
     any separate written Employment  Agreement which the Employee 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 from,  and shall have no effect
     upon,  or be  affected  by,  the terms and  provisions  of said  Employment
     Agreement.

     Except as otherwise set forth in this Agreement,  the term "Employer" shall
     mean Klamath First Federal Savings and Loan Association; provided, further,
     that for purposes of this Agreement, the term "Employer" shall mean Klamath
     First Bancorp, Inc. and its subsidiaries and affiliated entities, including
     any parent holding company and its subsidiaries.


II.  FRINGE BENEFITS

     The salary continuation  benefits provided by this Agreement are granted by
     the  Employer as a fringe  benefit to the  Employee and are not part of any
     salary  reduction  plan or an  arrangement  deferring  a bonus  or a salary
     increase.  The Employee has no option to take any current  payment or bonus
     in  lieu  of  these  salary  continuation  benefits  except  as  set  forth
     hereinafter.


III. retirement date and early retirement date

     A.   Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-five  ("65") years of age and acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.
<PAGE>

     B.   Early Retirement Date:

          The term "Early Retirement Date" shall mean the Retirement, as defined
          above, of the Employee on, or after the Employee  achieves  fifty-five
          (55) years of age,  but has not yet reached  sixty-five  (65) years of
          age.


IV.  retirement benefit and early retirement benefit

     A.   Retirement Benefit:

          If the  Employee  shall  remain in the  continuous  employment  of the
          Employer until  attaining age  sixty-five  (65), the Employee shall be
          entitled  to be paid the  "Normal  Retirement  Benefit"  specified  in
          Schedule A, payable in substantially equal monthly installments on the
          first day of each month,  beginning with the month following the month
          in  which  the  Employee  Retires  (or on  such  later  date as may be
          mutually  agreed upon by the  Employee  and the Employer in advance of
          said  Retirement  date)  payable  until the  Employee's  death.  After
          commencement of payments,  the Normal Retirement Benefit will increase
          by two percent (2%) per year.

     B.   Early Retirement Benefit:

          The  Employee  shall  have  the  right  to  retire  on  a  date  which
          constitutes an Early  Retirement Date as defined in  Subparagraph  III
          (B) above.  In the event the Employee elects to Retire on a date which
          constitutes an Early Retirement Date, and said early retirement is not
          pursuant to a Change in Control as defined in paragraph VI below,  the
          Employee shall be entitled to be paid the "Normal Retirement  Benefit"
          specified  in  Schedule  A for the date  the  Retirement  occurs,  but
          reduced by a factor of  one-half  of one  percent  (.5%) per month for
          each month or portion thereof that the Early  Retirement  occurs prior
          to the Retirement  Date. The benefit shall be payable in substantially
          equal monthly  installments on the first day of each month,  beginning
          with the month following the month in which the Early  Retirement Date
          occurs (or on such later date as may be  mutually  agreed  upon by the
          Employee and the Employer in advance of such Early  Retirement  Date).
          After  commencement  of payments,  the Early  Retirement  benefit will
          increase by two percent (2%) per year.

          Example:  If the Early  Retirement  Date occurs on the Employee's 63rd
          birthday and if the Retirement Date in Section III.A.  above is at age
          65, the Normal Retirement  Benefit specified in Schedule "A" as of the
          Employee's 63rd birthday would be reduced by 12% [.5% x 24 months].


V.   other termination of EMPLOYMENT and DISABILITY

     A.   Payments in the Event Employment Is Terminated Prior to Retirement:

          The  Employer   reserves  the  right  to  terminate   the   Employee's
          employment,   with  or  without  cause  but  subject  to  any  written
          employment  agreement  which may then exist,  at any time prior to the
          Employee's  Retirement.  In  the  event  that  the  employment  of the
          Employee  shall  be  terminated,   other  than  by  reason  of  death,
          Disability or Retirement, prior to the Employee's attaining sixty-five
          (65) years of age, then this Agreement  shall terminate on the date of
          such termination of employment;  provided,  however, that the Employee
          shall be  entitled  to the  following  benefits  as may be  applicable
          depending   upon  the   circumstances   surrounding   the   Employee's
          termination:

          (i)  Termination  for Other  Than  Disability,  Change in  Control  or
               Cause:

          If the  Employee's  employment is terminated by the Employee or by the
          Employer for any reason other than Disability,  "Change in Control" or
          "Termination for Cause," the Employee shall be entitled to be paid the
          "Normal Retirement  Benefit" specified in Schedule A as of the date of
          termination,  payable in substantially  equal monthly  installments on
          the first day of each month,  beginning  with the month  following the
          month in which the Employee  attains  sixty-five (65) years of age (or
          on such later date as may be mutually  agreed upon by the Employee and
          the   Employer   not  less  than  fifteen  (15)  days  prior  to  such
          commencement  date)  payable  until the  Employee's  death,  and shall
          increase by two percent (2%) per year.  Alternatively,  upon achieving
          age  fifty-five  (55) but before  achieving age  sixty-five  (65), the
          Employee may choose to receive the Early  Retirement  Benefit with the
          reductions  from the  "Normal  Retirement  Benefit"  as of the date of
          termination,  and as described in Section IV.B. of this Agreement. The
          benefit shall be payable in substantially  equal monthly  installments
          on the first day of each month, beginning with the month following the
          month in which the Early Retirement Date occurs (or on such later date
          as may be mutually  agreed upon by the  Employee  and the Employer not
          less than fifteen (15) days prior to such  commencement  date) payable
          to the  Employee's  death,  and shall increase by two percent (2%) per
          year.
<PAGE>

          (ii) Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee 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 Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

     B.   Payment in the Event of Disability Prior to Retirement:

          The Employee  shall,  in connection with acceptance of this Agreement,
          elect below  either the "Lump Sum  Payment" or the  "Annuity for Life"
          option in the event the  Employee  becomes  disabled at any time after
          the Effective Date of this Agreement but prior to Retirement. The term
          "Disability"  or  "Disabled"  shall have the same  meaning  given such
          terms in any policy of disability insurance maintained by the Employer
          for the benefit of employees including the Employee. In the absence of
          such a policy,  which extends coverage to the Employee in the event of
          disability,  the terms shall mean bodily injury or disease  (mental or
          physical)  which wholly and  continuously  prevents the performance of
          the Employee's  duties to the Employer for at least one hundred twenty
          (120) days.

          (i)  Lump Sum Payment.

               The  Employee   shall  be  entitled  to  be  paid  the  lump  sum
               "Disability  Benefit"  specified in Schedule A,  determined as of
               the  earlier  of the  date of  disability  or date  the  Employee
               otherwise  terminated  service with the  Employer  other than for
               Cause.  The lump sum shall be  payable  60 days from the date the
               Employer  has  received a written  request to commence  benefits,
               along with  documentation  showing  that the  Employee has become
               disabled.

          (ii) Annuity for Life.

               The  Employee  shall be  entitled  to be paid an annuity  for the
               Employee's life. The Employer shall purchase such an annuity from
               an insurance  company with an A. M. Best or Moody's  rating of no
               less  than  AA and  using  the  amount  of  "Disability  Benefit"
               specified in Schedule A, determined as of the earlier of the date
               of  disability  or the date  the  Employee  otherwise  terminated
               service  with the  Employer  other than for Cause.  The  Employer
               shall  purchase  the  annuity  within  60 days  from the date the
               Employer  has  received a written  request to commence  benefits,
               along with  documentation  showing  that the  Employee has become
               Disabled.   Nevertheless,   if  the  amount  of  the   applicable
               "Disability  Benefit"  specified in Schedule A is  $50,000.00  or
               less,  the payment shall be as a lump sum to the Employee and not
               the purchase of an annuity for life.

          (iii)Employee Election of Disability  Benefit.

               I elect to receive the following  Disability Benefit (Please sign
               on applicable line):

                           ______________________    Lump Sum Benefit.


                           __________X____________   Annuity for Life.


VI.  CHANGE OF CONTROL

     A.   Definition of Change In Control:

          A "Change in Control" of Klamath First Bancorp,  Inc. (the  "Company")
          or  Klamath  First   Federal   Savings  and  Loan   Association   (the
          "Association")  shall be  deemed  to occur if and when (a) an  offeror
          other than the  Company  purchases  shares of the common  stock of the
          Company or the Association  pursuant to a tender or exchange offer for
          such  shares,  (b) any person (as such term is used in Sections  13(d)
          and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes the
          beneficial owner, directly or indirectly, of securities of the Company
          or the  Association  representing  25% or more of the combined  voting
          power  of  the  Company's  or  the   Association's   then  outstanding
          securities,  (c) the  membership  of the  board  of  directors  of the
          Company  or the  Association  changes  as the  result  of a  contested
          election, such that individuals who were directors at the beginning of
          any twenty-four  month period (whether  commencing before or after the
          effective date of this  Agreement) do not constitute a majority of the
          Board at the end of such period, or (d) shareholders of the Company or
          the Association approve a merger,  consolidation,  sale or disposition
          of all or  substantially  all of the  Company's  or the  Association's
          assets, or a plan of partial or complete liquidation.

     B.   Termination  by the  Employer  on  Account  of or  After a  Change  in
          Control:

          In the event the Employee's employment with the Employer is terminated
          by the Employer in connection  with a Change in Control,  the Employee
          shall  be  immediately  vested  in  the  "Normal  Retirement  Benefit"
          specified  in  Schedule  A for the  date  the  Employee  achieves  age
          sixty-five (65). The Employee shall be entitled to be paid the "Change
          in Control Benefit"  specified in Schedule A, in  substantially  equal
          monthly  installments  on the first day of each  month,  beginning  no
          sooner  than the  month  following  the  month in which  the  Employee
          attains age  fifty-five  (55), as requested in writing by the Employee
          and delivered to the Employer or its successor  thirty (30) days prior
          to the commencement of installment payments;  provided,  however, that
          in the event the  Employee  does not  request a  commencement  date as
          specified,  such  installments  shall be paid on the first day of each
          month,  beginning  with the  month  following  the  month in which the
          Employee  attains  sixty-five (65) years of age. Upon the commencement
          of payments,  the  installments  shall be payable until the Employee's
          death, and shall increase by two percent (2%) per year.

          A  termination  shall be deemed to be in  connection  with a Change in
          Control if, within two (2) years  following the occurrence of a Change
          in  Control:  (a) the  Employee's  employment  with  the  Employer  is
          terminated by the Employer other than a Termination  for Cause; or (b)
          by reason of the  Employer's  actions any adverse change occurs in the
          scope  of  the  Employee's  position,  material  responsibilities  and
          duties,  salary,  benefits  or  location  of  employment;  or (c)  the
          Employer  causes an event to occur  which  reasonably  constitutes  or
          results in a demotion,  loss of title,  a  significant  diminution  of
          responsibilities  or  authority,  or a  constructive  termination  (by
          forcing a resignation or otherwise) of the Employee's employment.


VII. benefit accounting

     The Employer shall account for this benefit using the regulatory accounting
     principles of the Employer's primary federal regulator.  The Employer shall
     establish an accrued  liability  retirement  account for the Employee  into
     which appropriate reserves shall be accrued.


VIII. restrictions on funding

     The Employer shall have no obligation to set aside,  earmark or entrust any
     fund or money with which to pay its  obligations  under this Employee Plan.
     The Employee,  her or his  beneficiary  (ies), or any successor in interest
     shall be and remain  simply a general  creditor of the Employer in the same
     manner as any other creditor  having a general claim for matured and unpaid
     compensation.  The  Employer  reserves  the  absolute  right,  at its  sole
     discretion, to either fund the obligations undertaken by this Employee Plan
     or to refrain from funding the same and to determine the extent, nature and
     method of such  funding.  Should the Employer  elect to fund this  Employee
     Plan, in whole or in part,  through the purchase of life insurance,  mutual
     funds, disability policies or annuities, the Employer reserves the absolute
     right,  in its sole  discretion,  to terminate such funding at any time, in
     whole or in part. At no time shall any Employee be deemed to have any lien,
     right,  title or interest in any specific  funding  investment or assets of
     the Employer.

     If the Employer elects to invest in a life insurance, disability or annuity
     policy on the life of the  Employee,  then the  Employee  shall  assist the
     Employer  by  freely  submitting  to a  physical  exam and  supplying  such
     additional information necessary to obtain such insurance or annuities.

     Notwithstanding  anything hereinabove to the contrary, the Employer and the
     Employee  acknowledge  and agree that,  in the event of a Change in Control
     and at the written request of the Employee,  the Employer 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 Employer in its sole discretion deems  appropriate and in
     compliance with applicable provisions of the Internal Revenue Code of 1986,
     as  amended   (the  "Code")  in  order  to  permit  the  Employer  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  Employer  to be  used  exclusively  for  discharge  of  the
     Employer's  obligations pursuant to this Agreement and shall continue to be
     subject to the claims of the Employer's general creditors until paid to the
     Employee or its beneficiaries in such manner and at such times as specified
     in this Agreement


IX.  MISCELLANEOUS

     A.   Alienability and Assignment Prohibition:

          The  Employee  shall  have no  power or  right  to  transfer,  assign,
          anticipate,   hypothecate,  mortgage,  commute,  modify  or  otherwise
          encumber in advance any of the benefits  payable  hereunder  nor shall
          any of said  benefits  be subject to  seizure  for the  payment of any
          debts, judgments, alimony or separate maintenance owed by the Employee
          nor be  transferable  by operation of law in the event of  bankruptcy,
          insolvency   or  otherwise.   In  the  event  the  Employee   attempts
          assignment,  commutation,  hypothecation,  transfer or disposal of the
          benefits hereunder,  the Employer's  liabilities shall forthwith cease
          and terminate.

     B.   Binding Obligation of the Employer and any Successor in Interest:

          The  Employer  shall not  merge or  consolidate  into or with  another
          Employer or sell  substantially all of its assets to another Employer,
          firm or person until such Employer, firm or person expressly agree, in
          writing,  to assume and  discharge the duties and  obligations  of the
          Employer under this Employee Plan. This Employee Plan shall be binding
          upon the parties hereto,  their successors,  beneficiaries,  heirs and
          personal representatives.

     C.   Amendment or Revocation:

          It is agreed by and  between  the  parties  hereto  that,  during  the
          lifetime of the Employee, this Employee Plan may be amended or revoked
          at any time or  times,  in whole or in  part,  by the  mutual  written
          consent of the Employee and the Employer.

     D.   Gender:

          Whenever  in this  Employee  Plan words are used in the  masculine  or
          neuter  gender,  they shall be read and construed as in the masculine,
          feminine or neuter gender, whenever they should so apply.

     E.   Effect on Other Employer Benefit Plans:

          Nothing  contained in this Employee Plan shall affect the right of the
          Employee  to  participate  in  or  be  covered  by  any  qualified  or
          non-qualified   pension,   profit-sharing,   group,   bonus  or  other
          supplemental  compensation or fringe benefit plan  constituting a part
          of the Employer's existing or future compensation structure.

     F.   Headings:

          Headings  and  subheadings  in this  Employee  Plan are  inserted  for
          reference and convenience  only and shall not be deemed a part of this
          Employee Plan.

     G.   Applicable Law:

          The  laws of the  State  of  Oregon  shall  govern  the  validity  and
          interpretation of this Agreement.

     H.   Partial Invalidity:

          If any term,  provision,  covenant, or condition of this Employee Plan
          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  Employee  Plan shall remain in full force and
          effect notwithstanding such partial invalidity.

     I.   Not a Contract of Employment:

          This  Agreement  shall not be  deemed  to  constitute  a  contract  of
          employment  between the parties hereto, nor shall any provision hereof
          restrict  the right of the  Employer to  discharge  the  Employee,  or
          restrict the right of the Employee to terminate employment.

     J.   Notices:

          Any  notice  required  or  permitted  of either  the  Employee  or the
          Employer 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.
<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       Kermit K. Houser
                                            10131 Mourning Dove
                                            Klamath Falls, OR 97601

     K.   Opportunity To Consult With Independent Advisors:

          The Employee  acknowledges  that the  Employee  has been  afforded the
          opportunity  to  consult  with  independent  advisors  of  his  or her
          choosing including,  without  limitation,  accountants or tax advisors
          and counsel  regarding both the benefits granted to the Employee under
          the terms of this Agreement and the (i) terms and conditions which may
          affect the  Employee'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  Employee
          acknowledges  and  agrees  shall  be the  sole  responsibility  of the
          Employee   notwithstanding   any  other  term  or  provision  of  this
          Agreement.  The  Employee  further  acknowledges  and agrees  that the
          Employer  shall  have no  liability  whatsoever  related  to any  such
          personal tax effects or other personal costs, expenses, or liabilities
          applicable to the Employee and further  specifically  waives any right
          for  the  Employee  and  his  or  her  heirs,   beneficiaries,   legal
          representatives,  agents,  successors,  and assigns to claim or assert
          liability on the part of the Employer related to the matters described
          above in this  subparagraph.  The Employee  further  acknowledges  and
          agrees that the Employee has read,  understands and consents to all of
          the terms and  conditions  of this  Agreement,  and that the  Employee
          enters into this Agreement with a full  understanding of its terms and
          conditions.


X.   ADMINISTRATIVE AND CLAIMS PROVISION

     A.   Named Fiduciary and Plan Administrator:

          The "Named  Fiduciary  and Plan  Administrator"  of this Employee Plan
          shall be Klamath First Bancorp, Inc., until its resignation or removal
          by the Board. As Named Fiduciary and Plan Administrator,  the Employer
          shall be responsible for the management, control and administration of
          the Employee Plan. The Named  Fiduciary may delegate to others certain
          aspects  of  the  management  and  operation  responsibilities  of the
          Employee Plan  including the employment of advisors and the delegation
          of ministerial duties to qualified individuals.

     B.   Claims Procedure:

          In the event a dispute  arises over benefits  under this Employee Plan
          and benefits are not paid to the Employee and the claimant feels he is
          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 provisions of this
          Employee  Plan  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 a further review of the claim denial is desired.  A claim
          shall be deemed denied if the Named  Fiduciary and Plan  Administrator
          fail to take any action within the aforesaid forty-five-day period.

          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  Employee
          Plan or any documents  relating  thereto and submit any written issues
          and comments it 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.

     C.   Arbitration:

          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 Employer 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").  In the event JAMS is unable or unwilling to
          conduct  the  arbitration   provided  for  under  the  terms  of  this
          Paragraph,  or has discontinued its business, the parties agree that a
          representative  member,  selected  by  the  mutual  agreement  of  the
          parties,  of  the  American  Arbitration  Association  ("AAA"),  shall
          conduct the binding arbitration referred to in this Paragraph.  Notice
          of the demand for arbitration shall be filed in writing with the other
          party to this  Agreement and with JAMS (or AAA, if  necessary).  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, or if there are none, the
          rules of procedure  used or  established by AAA. Any award rendered by
          JAMS or AAA  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 Klamath Falls,  Oregon,  unless otherwise agreed to by
          the parties.

     D.   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,  the  prevailing  party  shall be  entitled to
          recover from the non-prevailing party reasonable expenses,  attorneys'
          fees and costs incurred in connection  therewith or in the enforcement
          or  collection  of  any  judgment  or  award  rendered  therein.   The
          "prevailing  party" means the party determined by the arbitrator(s) or
          court, as the case may be, to have most nearly prevailed, even if such
          party did not prevail in all matters, not necessarily the one in whose
          favor a judgment is rendered.


XI.  SECTION 280G BENEFITS ADJUSTMENT

     If all or any portion of the  amounts  payable to the  Employee  under this
     Agreement,  either alone or together with other payments which the Employee
     has the right to receive from the Employer,  constitute  "excess  parachute
     payments"  within the meaning of Section 280G of the Code, that are subject
     to the excise  tax  imposed by  Section  4999 of the Code (or  similar  tax
     and/or assessment),  the Employer (and its successor) and the Employee each
     agree to pay their  share of any taxes  that may be  imposed as a result of
     payments made pursuant to this Agreement;  provided, however, that Employer
     and Employee 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 Employee is greater than the amount
     initially so determined, then the Employee 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.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

     Klamath First Federal Savings and Loan Association



/s/ Rodney N. Murray                                          /s/ Nina G. Drake
Rodney Murray                                                 Witness
Chairman of the Board




/s/ Kermit K. Houser                                          /s/ Nina G. Drake
Kermit K. Houser                                              Witness
<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE A
                           EXECUTIVE BENEFIT SCHEDULE
                                  KERMIT HOUSER

                           DATE OF BIRTH: JULY 9, 1943
                           HIRED ON: NOVEMBER 15, 2000

                              NORMAL            CHANGE IN                              DEATH BENEFIT:            DEATH BENEFIT:
      VESTING               RETIREMENT           CONTROL           DISABILITY             DEATH WHILE                  AFTER
      DATE (1)             BENEFIT (2)         BENEFIT (3)         BENEFIT (4)            EMPLOYED (5)          TERMINATION (6)
<S>                           <C>                 <C>              <C>                     <C>                       <C>
  January 1, 2003              $29,390            $113,150                 $0              $1,616,430                  $293,896
  January 1, 2004              $58,779            $122,849           $250,056              $1,616,430                  $587,793
  January 1, 2005              $88,169            $132,546           $530,957              $1,616,430                  $881,689
  January 1, 2006             $117,559            $142,246           $845,558              $1,616,430                $1,175,585
  January 1, 2007             $146,948            $151,944         $1,196,947              $1,616,430                $1,469,482
  January 1, 2008             $161,642            $161,642         $1,588,465              $1,616,430                $1,616,420
   and thereafter             $161,642            $161,642                 na            see #5 below              see #5 below
<FN>

1.  The date that Normal Retirement and Death benefits vest.  See separate footnotes for Change in Control and
     Disability Benefits.
2.  Annual Retirement Benefits payable at age sixty-five (65). Benefits are payable for life and increase by 2% per
     year after Retirement.
3. The Employee is eligible to retire following Termination pursuant to a Change in Control any time after the
     attainment of age fifty five (55).  This is the annual sum the Employee will be paid if the Employee elects to
     receive Retirement Benefits on or after the Employee's birthday, but before the following anniversary. Once
     payments begin, Benefits are payable for life and increase by 2% per year thereafter.
4. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty
     Balance as of disability date.  Disability Benefit value is determined by straight-line interpolation between the
    amounts showing in this column for Jan 1 of the calendar year the disability occurs and Jan 1 of the following
    calendar year.  Benefit is paid as Employee elected in the Agreement.  No post-retirement benefit.
5.  Death benefit equals 10x initial Normal Retirement Benefit to age 70, 7x initial Normal Retirement Benefit to
    Age 80, and 3 x initial Normal Retirement Benefit thereafter.
6.  Unless termination is for Cause, the death benefit is the greater of $100,000 or 10x the vested annual retirement
     benefit at the time of termination.
</FN>
</TABLE>



/s/ Kermit K. Houser  5/9/03   /s/ Rodney N. Murray                       5/9/03
Kermit K. Houser      Date     Rodney N. Murray, Chairman of Board        Date
<PAGE>
                                                                 Exhibit 10(b).1
                              EMPLOYMENT AGREEMENT
                        Amended and Restated May 23, 2003

     THIS  AGREEMENT  is made  effective  as of October 1, 2002,  by and between
KLAMATH FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"),  Klamath
Falls,  Oregon;   KLAMATH  FIRST  BANCORP,  INC.  (the  "Company"),   an  Oregon
corporation; and Marshall J. Alexander (the "Executive").

     WHEREAS,  the  Association  wishes to  assure  itself  of the  services  of
Executive for the period provided in this Agreement; and

     WHEREAS, the Executive is willing to serve in the employ of the Association
on a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1.       POSITION AND RESPONSIBILITIES.

     During the period of his employment hereunder, Executive agrees to serve as
Executive Vice President of the Association.  During said period, Executive also
agrees to serve,  if elected,  as an officer of the Company or any subsidiary or
affiliate of the Company or the Association.

2.       TERMS AND DUTIES.

     (a) The term of this Agreement  shall be deemed to have commenced as of the
date first above  written and shall  continue for a period of  twenty-four  (24)
full calendar months  thereafter.  Commencing on the first anniversary date, and
continuing at each anniversary  date  thereafter,  the Board of Directors of the
Association (the "Board") or its Compensation Committee may extend the Agreement
for an  additional  year.  Prior to the  extension of the  Agreement as provided
herein,  the Board of Directors of the  Association  will review the Executive's
performance  evaluation  for  purposes  of  determining  whether  to extend  the
Agreement,  and the  results  thereof  shall be  included  in the minutes of the
Board's meeting.

     (b) During the period of his  employment  hereunder,  except for periods of
absence  occasioned by illness,  reasonable  vacation  periods,  and  reasonable
leaves of absence,  Executive shall devote  substantially all his business time,
attention,  skill,  and  efforts  to the  faithful  performance  of  his  duties
hereunder  including  activities  and  services  related  to  the  organization,
operation and management of the Association;  provided,  however, that, with the
approval of the Board, as evidenced by a resolution of such Board,  from time to
time,  Executive may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or  organizations,  which,
in such Board's  judgment,  will not present any  conflict of interest  with the
Association, or materially affect the performance of Executive's duties pursuant
to this Agreement.



<PAGE>

3.       COMPENSATION AND REIMBURSEMENT.

     (a) The  compensation  specified under this Agreement shall  constitute the
salary and  benefits  paid for the  duties  described  in  Sections 1 and 2. The
Association  shall pay Executive as  compensation  a salary of $138,000 per year
("Base  Salary")  effective  11/1/2002.  Such Base  Salary  shall be  payable in
accordance with the customary payroll  practices of the Association.  During the
period of this  Agreement,  Executive's  Base Salary  shall be reviewed at least
annually;  the first  such  review  will be made no later than one year from the
date of this  Agreement.  Such  review  shall be  conducted  by the Board or its
Compensation  Committee,  and the Board may increase Executive's Base Salary. In
addition to the Base Salary provided in this Section 3(a), the Association shall
provide  Executive at no cost to Executive  with all such other  benefits as are
provided uniformly to regular salaried employees of the Association.

     (b) The  Association  will provide  Executive with employee  benefit plans,
arrangements  and  perquisites   substantially  equivalent  to  those  in  which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement,  and the  Association  will not,
without  Executive's  prior  written  consent,  make any  changes in such plans,
arrangements or perquisites which would adversely affect  Executive's  rights or
benefits thereunder.  However, changes in Association-sponsored  group insurance
plan  premiums,   deductibles,   co-payments  and  related  coverage  limits  or
conditions  are  excluded  from the prior  sentence for any such change which is
consistently applied to or available to regular salaried Association  employees.
Without  limiting the generality of the foregoing  provisions of this Subsection
(b),  Executive will be entitled to participate in or receive benefits under any
employee  benefit  plans  including,  but  not  limited  to,  retirement  plans,
supplemental   retirement   plans,   pension   plans,    profit-sharing   plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement  made  available  by the  Association  in the  future to its  senior
executives and key management  employees,  subject to, and on a basis consistent
with,  the  terms,  conditions  and  overall  administration  of such  plans and
arrangements.  Executive will be entitled to incentive  compensation and bonuses
as provided in any plan, or pursuant to any arrangement of the  Association,  in
which Executive is eligible to participate.  Nothing paid to the Executive under
any such plan or arrangement will be deemed to be in lieu of other  compensation
to which the  Executive  is entitled  under this  Agreement,  except as provided
under Section 5(e).

     (c) In addition to the Base Salary  provided for by  paragraph  (a) of this
Section 3, the Association  shall pay or reimburse  Executive for all reasonable
travel  and  other  obligations  under  this  Agreement  and  may  provide  such
additional compensation in such form and such amounts as the Board may from time
to time determine.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     (a) Upon the  occurrence  of an Event of  Termination  (as herein  defined)
during the Executive's term of employment  under this Agreement,  the provisions
of  this  Section  shall  apply.  As  used  in  this  Agreement,  an  "Event  of
Termination"  shall mean and include any one or more of the  following:  (i) the
termination by the Association of Executive's full-time employment hereunder for
any reason  other than a Change in Control,  as defined in Section  5(a) hereof;
disability,  as defined in Section 6(a) hereof; death; or retirement, as defined
in Section 7 hereof; (ii) Executive's resignation from the Association's employ,
upon (A) unless consented to by the Executive,  a material change in Executive's
function,  duties,  or  responsibilities,  which change would cause  Executive's
position to become one of lesser responsibility,  importance,  or scope from the
position and attributes  thereof described in Sections 1 and 2, above, (any such
material change shall be deemed a continuing  breach of this  Agreement),  (B) a
relocation of  Executive's  principal  place of employment by more than 35 miles
from  its  location  at the  effective  date of this  Agreement,  or a  material
reduction in the benefits and perquisites to Executive from those being provided
as of the effective date of this  Agreement,  (C) the liquidation or dissolution
of the Association, or (D) any breach of this Agreement by the Association. Upon
the occurrence of any event  described in clauses (A), (B), (C), or (D),  above,
Executive  shall have the right to elect to terminate his employment  under this
Agreement by resignation upon not less than sixty (60) days prior written notice
given  within a  reasonable  period of time not to  exceed,  except in case of a
continuing  breach,  four  calendar  months  after the event giving rise to said
right to elect.

     (b) Upon the occurrence of an Event of Termination  other than for Cause of
for Neglect (as described in Sections 8 and 9 hereof), the Association shall pay
Executive,  or,  in the  event  of his  subsequent  death,  his  beneficiary  or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages,  or both,  a sum equal to the  payments  due to the  Executive  for the
remaining term of the Agreement,  including Base Salary,  bonuses, and any other
cash or  deferred  compensation  paid  or to be paid  (including  the  value  of
employer  contributions that would have been made on the Executive's behalf over
the  remaining  term  of the  agreement  to any  tax-qualified  retirement  plan
sponsored by the  Association as of the Date of  Termination),  to the Executive
for the term of the Agreement provided,  however, that if the Association is not
in compliance  with its minimum  capital  requirements or if such payments would
cause  the  Association's  capital  to be  reduced  below  its  minimum  capital
requirements, such payments shall be deferred until such time as the Association
is in capital compliance.  All payments made pursuant to this Section 4(b) shall
be paid in substantially  equal monthly  installments over the remaining term of
this Agreement following the Executive's termination; provided, however, that if
the remaining term of the Agreement is less than one (1) year  (determined as of
the Executive's Date of  Termination),  such payments and benefits shall be paid
to the Executive in a lump sum within 30 days of the Date of Termination.

     (c) Upon the occurrence of an Event of Termination  other than for Cause or
for Neglect (as  described  in Sections 8 and 9 hereof),  the  Association  will
cause  to  be  continued   life,   medical,   dental  and  disability   coverage
substantially  identical  to the  coverage  maintained  by the  Association  for
Executive  prior  to  his  termination.  Such  coverage  shall  cease  upon  the
expiration of the remaining term of this Agreement.

5.       CHANGE IN CONTROL.

     (a) No benefit  shall be paid under this  Section 5 unless there shall have
occurred a Change in Control of the Company or the Association.  For purposes of
this Agreement, a "Change in Control" of the Company or the Association shall be
deemed to occur if and when (a) an  offeror  other  than the  Company  purchases
shares of the common  stock of the  Company  or the  Association  pursuant  to a
tender or exchange  offer for such shares,  (b) any person (as such term is used
in Sections  13(d) and  14(d)(2) of the  Securities  Exchange Act of 1934) is or
becomes the  beneficial  owner,  directly or  indirectly,  of  securities of the
Company or the Association representing 25% or more of the combined voting power
of the Company's then outstanding securities, (c) the membership of the board of
directors of the Company or the Association changes as the result of a contested
election,  such that  individuals  who were  directors  at the  beginning of any
twenty-four month period (whether  commencing before or after the effective date
of this  Agreement) do not constitute a majority of the Board at the end of such
period, or (d) shareholders of the Company or the Association  approve a merger,
consolidation,  sale or disposition of all or substantially all of the Company's
or the Association's assets, or a plan of partial or complete liquidation.

     (b) If any of the events  described in Section 5(a) hereof  constituting  a
Change in Control have occurred or the Board of the  Association  or the Company
has  determined  that a Change  in  Control  has  occurred,  Executive  shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this Section
5 upon his subsequent  involuntary  termination of employment at any time during
the term of this  Agreement  (or  voluntary  termination  following  a Change of
Control following any demotion,  loss of title, office or significant authority,
reduction in his annual compensation or benefits, or relocation of his principal
place of employment by more than 35 miles from its location immediately prior to
the  Change in  Control),  unless  such  termination  is  because  of his death,
retirement as provided in Section 7,  termination  for Cause, or termination for
Disability.

     (c) Upon the occurrence of a Change in Control  followed by the Executive's
termination of employment,  the Association shall pay Executive, or in the event
of his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, as severance  pay or  liquidated  damages,  or both, a sum equal to
2.00  times the  Executive's  "base  amount,"  within  the  meaning  of  Section
280G(b)(3)  of the Internal  Revenue  Code of 1986  ("Code"),  as amended.  Such
payment shall be made in a lump sum paid within ten (10) days of the Executive's
Date of Termination.

     (d) Upon the occurrence of a Change in Control  followed by the Executive's
termination  of employment,  the  Association  will cause to be continued  life,
medical,  dental and disability coverage substantially identical to the coverage
maintained by the Association for Executive prior to his severance. In addition,
Executive shall be entitled to receive the value of employer  contributions that
would have been made on the  Executive's  behalf over the remaining  term of the
agreement to any  tax-qualified  retirement plan sponsored by the Association as
of the Date of  Termination.  Such  coverage and  payments  shall cease upon the
expiration of thirty-six (36) months.

     (e) Upon the  occurrence  of a Change in Control,  the  Executive  shall be
entitled to receive benefits due him under, or contributed by the Company or the
Association  on his  behalf,  pursuant  to  any  retirement,  incentive,  profit
sharing,  bonus,   performance,   disability  or  other  employee  benefit  plan
maintained by the  Association or the Company on the  Executive's  behalf to the
extent that such benefits are not otherwise  paid to the Executive upon a Change
in Control.

     (f) IRS Section 280G Issues.  If 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 Company or  Association,
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 Company or Association  (and their  successor)  shall be responsible for any
loss of  deductibility  related  thereto;  provided,  however,  that  Company or
Association 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 Company or
Association immediately prior to the change in control or such other independent
accounting  firm  or  advisor  as  may  be  mutually  agreeable  to  Company  or
Association  and  Executive  in the  exercise  of their  reasonable  good  faith
judgment.


6.       TERMINATION FOR DISABILITY.

     (a) If the Executive shall become disabled as defined in the  Association's
then  current  disability  plan (or,  if no such plan is then in effect,  if the
Executive  is  permanently  and totally  disabled  within the meaning of Section
22(e)(3) of the Code as determined by a physician  designated by the Board), the
Association may terminate Executive's employment for "Disability."

     (b) Upon the  Executive's  termination  of employment for  Disability,  the
Association will pay Executive,  as disability pay, a semi-monthly payment equal
to three-quarters  (3/4) of Executive's  semi-monthly rate of Base Salary on the
effective date of such termination.  These disability payments shall commence on
the effective date of Executive's termination and will end on the earlier of (i)
the date Executive returns to the full-time employment of the Association in the
same capacity as he was employed  prior to his  termination  for  Disability and
pursuant to an employment agreement between Executive and the Association;  (ii)
Executive's full-time employment by another employer;  (iii) Executive attaining
the age of 65; or (iv)  Executive's  death; or (v) the expiration of the term of
this Agreement.  The disability pay shall be reduced by the amount, if any, paid
to the Executive under any plan of the Association providing disability benefits
to the Executive.

     (c) The Association  will cause to be continued life,  medical,  dental and
disability  coverage  substantially  identical to the coverage maintained by the
Association for Executive prior to his termination for Disability. This coverage
and payments shall cease upon the earlier of (i) the date  Executive  returns to
the  full-time  employment  of the  Association,  in the same capacity as he was
employed prior to his  termination  for Disability and pursuant to an employment
agreement  between  Executive and the Association;  (ii)  Executive's  full-time
employment by another employer;  (iii)  Executive's  attaining the age of 65; or
(iv) the Executive's death; or (v) the expiration of the term of this Agreement.

     (d)  Notwithstanding  the  foregoing,  there  will be no  reduction  in the
compensation  otherwise  payable to  Executive  during any period  during  which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.

7.       TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.

     Termination by the  Association of Executive  based on  "Retirement"  shall
mean  retirement  at age 65 or in  accordance  with any  retirement  arrangement
established  with  Executive's  consent with respect to him. Upon termination of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement  plan of the  Association  or the  Company  and other  plans to which
Executive is a party.  Upon the death of the  Executive  during the term of this
Agreement,  the Association shall pay to Executive's estate the compensation due
to the Executive  through the last day of the calendar  month in which his death
occurred.


<PAGE>

8.       TERMINATION FOR CAUSE.

     For  purposes of this  Agreement,  "Termination  for Cause"  shall  include
termination  because  of  the  Executive's  personal  dishonesty,  incompetence,
willful misconduct,  breach of fiduciary duty involving personal profit, willful
violation of any law,  rule,  or  regulation  (other than traffic  violations or
similar  offenses) or final  cease-and-desist  order,  or material breach of any
provision of this Agreement. In addition,  "Termination for Cause" shall include
termination  because of the  Executive's  intentional  failure to perform stated
duties, such as the refusal of the Executive to comply with the Association's or
the Company's  instructions,  policies or rules or other willful  conduct of the
Executive  which  materially  adversely  reflects  on the  Association's  or the
Company 's reputation or operation. For purposes of this Section, no act, or the
failure to act, on Executive's  part shall be "willful"  unless done, or omitted
to be done, not in good faith and without  reasonable  belief that the action or
omission  was  in  the  best  interest  of the  Association  or its  affiliates.
Notwithstanding  the  foregoing,  Executive  shall  not be  deemed  to have been
terminated  for Cause unless and until there shall have been  delivered to him a
copy of a  resolution  duly  adopted  by the  affirmative  vote of not less than
three-fourths  of the members of the Board at a meeting of the Board  called and
held for that purpose (after  reasonable  notice to Executive and an opportunity
for him, together with counsel,  to be heard before the Board),  finding that in
the good faith opinion of the Board,  Executive was guilty of conduct justifying
termination  for Cause and specifying the reasons  thereof.  The Executive shall
not have the right to  receive  compensation  or other  benefits  for any period
after  termination  for Cause.  Any stock options granted to Executive under any
stock option plan or any unvested  awards  granted under any other stock benefit
plan of the Association,  the Company,  or any subsidiary or affiliate  thereof,
shall  become  null and void  effective  upon  Executive's  receipt of Notice of
Termination for Cause pursuant to Section 9 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.

9.       TERMINATION FOR NEGLECT.

     The  Association and Company,  or either of them may terminate  Executive's
employment  under this  Agreement at any time for Neglect.  For purposes of this
Agreement,  "Neglect"  means the failure of Executive to give due care to stated
duties or to comply with instructions or directives of the Board of Directors of
the  Association  or  Company or either of them,  but where such  failure is not
determined to be willful or intentional as defined in Section 8. Termination for
Neglect  includes  termination  as the  result  of any  continuing  or  repeated
problems with  Executive's  job  performance  or conduct  after  written  notice
specifying such problem with  performance or conduct,  and where such continuing
and repeated problems were not determined to be willful or intentional, or where
the conduct was not deemed to have a material  adverse impact on the Association
or Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been  terminated  by  Neglect  unless  and until  there  shall have been sent to
Executive  a copy of a  resolution  duly  adopted by a majority  of the Board of
Directors of the  Association  and  Company,  or either of them  (excluding  the
Executive  in counting  the  majority if the  Executive  is then on the board of
directors,  and after  reasonable  notice to Executive  and an  opportunity  for
Executive to be heard before the board of  directors),  finding that in the good
faith  opinion of the board of directors  of the  Association  and  Company,  or
either of them, Executive engaged in conduct justifying  termination for Neglect
and describing  specifically the conduct.  Executive shall not have the right to
receive any salary or bonus for any period after  termination  of employment for
Neglect.  Executive  shall retain any vested  benefits in defined benefit plans,
defined  contribution  plans,  supplemental  executive  retirement plans,  stock
option plans,  restricted stock plans, or other such benefits, but shall forfeit
any rights that have not vested.


10.      REQUIRED PROVISIONS.

     (a) The Association may terminate  Executive's  employment at any time, but
any  termination  by the  Association,  other than as  described in Section 8 or
Section  9  of  this  Agreement,   shall  not  prejudice  Executive's  right  to
compensation  or other benefits under this  Agreement.  Executive shall not have
the  right to  receive  compensation  or other  benefits  for any  period  after
Termination for Cause as defined in Section 8 herein.

     (b)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
participating  in the conduct of the  Association's  affairs by a notice  served
under Section  8(e)(3) or (g)(1) of the Federal  Deposit  Insurance Act ("FDIA")
(12 U.S.C.  1818(e)(3)  and (g)(1)),  the  Association's  obligations  under the
Agreement  shall  be  suspended  as of the date of  service,  unless  stayed  by
appropriate  proceedings.  If the  charges  in the  notice  are  dismissed,  the
Association  may,  in its  discretion,  (i)  pay  Executive  all or  part of the
compensation  withheld  while its contract  obligations  were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.

     (c)  If   Executive  is  removed   and/or   permanently   prohibited   from
participating  in the conduct of the  Association's  affairs by an order  issued
under  Section  8(e)(4) or (g)(1) of the FDIA (12 U.S.C.  1818(e)(4) or (g)(1)),
all obligations of the Association under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting  parties shall
not be affected.

     (d) If the  Association is in default (as defined in Section 3(x)(1) of the
FDIA),  all  obligations  under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.

     (e) All obligations under this Agreement shall be terminated (except to the
extent  determined  that  continuation  of the  Agreement is  necessary  for the
continued  operation of the  Association):  (i) by the Director of the Office of
Thrift  Supervision  (the  "Director")  or his or her  designee  at the time the
Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters
into an agreement to provide assistance to or on behalf of the Association under
the authority contained in Section 13(c) of the FDIA or (ii) by the Director, or
his or her  designee  at the time  the  Director  or such  designee  approves  a
supervisory  merger to resolve  problems related to operation of the Association
or when the  Association  is  determined  by the  Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

     (f)  Any  payments  made  to  Executive  pursuant  to  this  Agreement,  or
otherwise,  are  subject  to and  conditioned  upon  compliance  with 12  U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

11.      NOTICE.

     (a) Any purported  termination by the  Association or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this  Agreement,  a "Notice of  Termination"  shall mean a written  notice which
shall indicate the specific termination  provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances  claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

     (b) "Date of  Termination"  shall  mean (A) if  Executive's  employment  is
terminated  for  Disability,  thirty (30) days after a Notice of  Termination is
given (provided that he shall not have returned to the performance of his duties
on a  full-time  basis  during  such  thirty  (30) day  period),  and (B) if his
employment is terminated for any other reason,  the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

     (c) If, within thirty (30) days after any Notice of  Termination  is given,
the party  receiving such Notice of Termination  notifies the other party that a
dispute  exists  concerning  the  termination,  except upon the  occurrence of a
Change in Control and voluntary  termination  by the Executive in which case the
Date of  Termination  shall be the date  specified  in the  Notice,  the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties,  by a binding  arbitration award, or
by a final judgment,  order or decree of a court of competent  jurisdiction (the
time for appeal there from having  expired and no appeal having been  perfected)
and provided further that the Date of Termination  shall be extended by a notice
of dispute  only if such notice is given in good faith and the party giving such
notice  pursues  the  resolution  of such  dispute  with  reasonable  diligence.
Notwithstanding the pendency of any such dispute,  the Association will continue
to pay Executive his full  compensation in effect when the notice giving rise to
the dispute was given (including,  but not limited to, Base Salary) and continue
him as a participant in all  compensation,  benefit and insurance plans in which
he was participating  when the notice of dispute was given, until the dispute is
finally  resolved in  accordance  with this  Agreement.  Amounts paid under this
Section are in addition to all other amounts due under this  Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.

12.      NON-COMPETITION.

     (a) Upon any termination of Executive's employment hereunder pursuant to an
Event of  Termination as provided in Section 4 hereof,  Executive  agrees not to
compete  with the  Association  and/or the  Company for a period of one (1) year
following such  termination in any city, town or county in which the Association
and/or the  Company  has an office or has filed an  application  for  regulatory
approval to establish an office,  determined  as of the  effective  date of such
termination.  Executive  agrees that during such period and within said  cities,
towns and counties, Executive shall not work for or advise, consult or otherwise
serve  with,  directly  or  indirectly,  any entity  whose  business  materially
competes  with the  depository,  lending  or other  business  activities  of the
Association and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the  Association  and/or the  Company,  its  business  and
property in the event of Executive's  breach of this Subsection 11(a) agree that
in the event of any such breach by Executive, the Association and/or the Company
will be entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive,  Executive's partners,
agents,  servants,  employers,  employees  and all  persons  acting  for or with
Executive.  Executive represents and admits that in the event of the termination
of his  employment  pursuant  to Section 8 hereof,  Executive's  experience  and
capabilities are such that Executive can obtain employment in a business engaged
in other lines  and/or of a different  nature  than the  Association  and/or the
Company,  and that the  enforcement  of a remedy by way of  injunction  will not
prevent Executive from earning a livelihood. Nothing herein will be construed as
prohibiting the Association  and/or the Company from pursuing any other remedies
available to the  Association  and/or the Company for such breach or  threatened
breach, including the recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
business  activities and plans for business  activities of the  Association  and
affiliates  thereof,  as it may exist from time to time, is a valuable,  special
and unique asset of the business of the Association.  Executive will not, during
or  after  the term of his  employment,  disclose  any  knowledge  of the  past,
present,  planned  or  considered  business  activities  of the  Association  or
affiliates  thereof to any person,  firm,  corporation,  or other entity for any
reason or purpose  whatsoever.  Notwithstanding  the  foregoing,  Executive  may
disclose  any  knowledge  of  banking,  financial  and/or  economic  principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Association.  In the event of a breach or threatened
breach by the Executive of the provisions of this Section,  the Association will
be entitled to an injunction restraining Executive from disclosing,  in whole or
in part,  the knowledge of the past,  present,  planned or  considered  business
activities of the  Association  or  affiliates  thereof,  or from  rendering any
services to any person, firm, corporation,  other entity to whom such knowledge,
in whole or in  part,  has been  disclosed  or is  threatened  to be  disclosed.
Nothing herein will be construed as prohibiting  the  Association  from pursuing
any other remedies  available to the  Association  for such breach or threatened
breach, including the recovery of damages from Executive.

13.      SOURCE OF PAYMENTS.

     All  payments  provided in this  Agreement  shall be timely paid in cash or
check  from  the  general  funds  of  the  Association.  The  Company,  however,
guarantees  all  payments  and the  provision  of all amounts and  benefits  due
hereunder to Executive  and, if such payments are not timely paid or provided by
the  Association,  such  amounts and  benefits  shall be paid or provided by the
Company.

14.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior  employment  agreement  between the  Association or any
predecessor of the Association  and Executive,  except that this Agreement shall
not  affect or operate to reduce  any  benefit  or  compensation  inuring to the
Executive of a kind elsewhere provided.  No provision of this Agreement shall be
interpreted to mean that  Executive is subject to receiving  fewer benefits than
those available to him without reference to this Agreement.

15.      NO ATTACHMENT.

     (a) Except as  required  by law,  no right to receive  payments  under this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to affect any such action  shall be null,
void, and of no effect.  (b) This Agreement  shall be binding upon, and inure to
the benefit of,  Executive,  the  Association,  the Company and their respective
successors and assigns.

16.      MODIFICATION AND WAIVER.

     (a) This  Agreement may not be modified or amended  except by an instrument
in writing signed by the parties hereto.

     (b) No term or  condition  of this  Agreement  shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement,  except by written  instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing  waiver
unless specifically  stated therein,  and each such waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.


17.      SEVERABILITY.

     If, for any reason,  any  provision of this  Agreement,  or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this  Agreement or any part of such  provision not held so invalid,  and each
such other  provision and part thereof shall to the full extent  consistent with
law continue in full force and effect.

18.      HEADINGS FOR REFERENCE ONLY.

     The headings of sections  and  paragraphs  herein are  included  solely for
convenience of reference and shall not control the meaning or  interpretation of
any of the provisions of this Agreement.

19.      GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Oregon, unless
otherwise specified herein;  provided,  however, that in the event of a conflict
between the terms of this Agreement and any  applicable  federal or state law or
regulation, the provisions of such law or regulation shall prevail.

20.      ARBITRATION.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three  arbitrators  sitting in a location selected by the employee within one
hundred (100) miles from the location of the Association, 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;  provided,
however,  that Executive  shall be entitled to seek specific  performance of his
right to be paid  until  the Date of  Termination  during  the  pendency  of any
dispute or controversy arising under or in connection with this Agreement.

21.      PAYMENT OF LEGAL FEES.

     All  reasonable  legal fees paid or incurred by  Executive  pursuant to any
dispute or question of  interpretation  relating to this Agreement shall be paid
or reimbursed by the  Association,  if successful  pursuant to a legal judgment,
arbitration or settlement.

22.      INDEMNIFICATION.

     The Association shall provide Executive (including his heirs, executors and
administrators)   with  coverage  under  a  standard  directors'  and  officers'
liability insurance policy at its expense,  or in lieu thereof,  shall indemnify
Executive (and his heirs,  executors and  administrators)  to the fullest extent
permitted under law against all expenses and liabilities  reasonably incurred by
him in  connection  with or arising out of any action,  suite or  proceeding  in
which he may be  involved  by reason of his having been a director or officer of
the Association (whether or not he continues to be a directors or officer at the
time of incurring such expenses or  liabilities),  such expenses and liabilities
to include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.



23.      SUCCESSOR TO THE ASSOCIATION OR THE COMPANY.

     The  Association  and the Company  shall require any successor or assignee,
whether direct or indirect, by purchase, merger,  consolidation or otherwise, to
all or  substantially  all the  business  or  assets of the  Association  or the
Company,  expressly  and  unconditionally  to assume  and agree to  perform  the
Association's  or the Company's  obligations  under this Agreement,  in the same
manner and to the same  extent  that the  Association  or the  Company  would be
required to perform if no such succession or assignment had taken place.


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by a duly  authorized  officer or director of the  Association  and the
Company,  and Executive has signed this  Agreement,  all on the 19th day of May,
2003.

KLAMATH FIRST BANCORP, INC.                 KLAMATH FIRST FEDERAL SAVINGS
                                                      AND LOAN ASSOCIATION


BY: /s/ Kermit K. Houser                    BY: /s/ Kermit K. Houser
    Kermit K. Houser, President & CEO           Kermit K. Houser President & CEO



/s/ Nina G. Drake                               /s/ Marshall J. Alexander
WITNESS:                                        Marshall J. Alexander EVP/CFO


<PAGE>
                                                                 Exhibit 10(b).2
                     FIRST AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This FIRST  AMENDMENT TO AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal  Savings and Loan  Association  ("Association"),  Klamath First Bancorp,
Inc.,  ("Company")  and the  undersigned  executive  officer of Association  and
Company (the "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an Amended and
Restated Employment Agreement dated May 19, 2003, (the "Employment Agreement");

     WHEREAS,  Company has entered into an Agreement and Plan of Merger dated as
of July 14, 2003, (the "Merger  Agreement") with Sterling Financial  Corporation
("Sterling") with respect to a proposed transaction (the "Transaction")  whereby
Sterling will acquire all of the outstanding shares of Company common stock in a
stock merger;

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
the  Transaction  so as to  enable  his  change in  control  of  benefits  to be
triggered under the Employment  Agreement and his Executive Salary  Continuation
Agreement,  and to enhance the value of shares of common stock of Company  owned
by the Executive  and the value of his stock options to acquire  common stock of
Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Capitalized terms used herein, to the extent not defined  otherwise,  shall
     have the meaning ascribed to them in the Employment Agreement.

2.   Section 5(c) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association shall pay the Executive as severance pay or
     liquidated damages, or both (the "Base Severance Amount"),  an amount equal
     to $276,000.  In the event that all  conditions to closing under the Merger
     Agreement have been satisfied  during calendar year 2003, then  Association
     shall  make  payment  of the Base  Severance  Amount  plus  the  Additional
     Severance  Amount (as defined in Section  5(d) below) to the  Executive  on
     December 31, 2003. In the event such closing  conditions  are not satisfied
     during calendar year 2003, then the payments  contemplated  herein shall be
     made within 10 days after  consummation  of the merger  contemplated by the
     Merger Agreement.  Notwithstanding  the foregoing,  if the Executive enters
     into a new written  employment  agreement with Sterling or Sterling Savings
     Bank prior to  December  31, 2003 (but  effective  upon  completion  of the
     merger contemplated by the Merger Agreement), then the Severance Amount and
     Additional  Severance Amount shall not be paid pursuant to the terms hereof
     and any  severance to be provided to the  Executive,  if any,  shall be set
     forth in such new written employment agreement."

     Section 5(d) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association  shall  pay  the  Executive  as  additional
     severance the amount of $5,750 (the "Additional  Severance Amount") in lieu
     of any obligation to pay the Executive the value of employer  contributions
     that would have been made on the Executive's behalf over the remaining term
     of the  agreement to any  tax-qualified  retirement  plan.  The  Additional
     Severance  Amount  shall be paid at the time the Base  Severance  Amount is
     paid pursuant to Section 5(c) above.  Upon the  Executive's  termination of
     service in connection with or following a Change in Control arising from or
     relating   to   the   Merger   Agreement,   Sterling   Savings   Bank,   as
     successor-in-interest to the Association,  shall provide the Executive with
     continued life, medical, dental and disability coverage as is then provided
     by Sterling  Savings Bank to its  full-time  employees,  as the same may be
     changed from time to time,  during the 36 month period next  following  the
     Executive's  Date  of  Termination  with  the  cost to be  absorbed  by the
     Executive  being equal to the lesser of (i) the  employee  cost of coverage
     currently  being  borne  by the  Executive  or (ii)  the  employee  cost of
     coverage  borne by full-time  employees of Sterling  Savings Bank receiving
     the same  coverage;  provided  if the cost of  coverage  to be borne by the
     Executive is determined  under subpart (i), then such cost shall be subject
     to pro  rata  adjustment  based  upon the pro  rata  adjustment  in cost of
     coverage  that is borne by  full-time  employees  of Sterling  Savings Bank
     receiving the same coverage after completion of the merger  contemplated by
     the Merger Agreement."

3.   New Section 24 is added to the Employment Agreement as follows:

     "24.  Long  Term  Medical  Care.  The  Executive  shall  have  a  right  to
     participate  in the long term  medical care  program to be  implemented  by
     Association  if the Executive  meets the  eligibility  requirements  of the
     insurer. If the Executive meets the eligibility requirements of the insurer
     and becomes a participant  in the long term medical care  program,  then in
     that  event,  his Base  Severance  Amount  shall be  reduced  by the single
     premium cost paid by Association  for such long term medical care on behalf
     of the Executive (which is estimated to be $67,000) and the Executive shall
     have no obligation to reimburse  Association  for any premium cost relating
     to such program after the Executive's termination of employment."

4.   The  Employment  Agreement  shall be further  amended by adding  thereto an
     "Exhibit A to the  Employment  Agreement"  in the form  attached  hereto as
     Appendix I.

5.   Except as  specifically  set forth herein,  the Employment  Agreement shall
     continue  in full  force  and  effect.  To the  extent  that any  provision
     contained in this Agreement is  inconsistent  with any of the provisions of
     the  Employment  Agreement,  including  but not  limited to,  Section  5(b)
     thereof, the provisions contained in this Agreement shall be controlling.

6.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

7.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so  executed  shall be deemed an  original  and all of which,
     taken together, shall constitute one and the same agreement.

     The parties have entered this Agreement on July 14, 2003.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


                                                By: /s/ Kermit K. Houser
                                                Kermit K.  Houser
                                                President/CEO
                                                KLAMATH  FIRST BANCORP, INC.


                                                By: /s/ Craig M Moore
                                                Craig M Moore
                                                SVP/Chief Auditor

                                                EXECUTIVE:


                                                By: /s/ Marshall J. Alexander
                                                Marshall J. Alexander EVP/CFO


<PAGE>
                                                                 Exhibit 10(b).3
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
Marshall J. Alexander,  an Employee of the Employer  (hereinafter referred to as
the "Employee"), who resides in the State of Oregon.

                              W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

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

     WHEREAS,  the  Employee'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 Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.       EMPLOYMENT

          Although  this  Agreement is intended to provide the Employee  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 Employee and the Employer nor shall any  provision of this
          Agreement  restrict or expand the right of the  Employer to  terminate
          the  Employee's  employment.  This  Agreement  shall have no impact or
          effect  upon any  separate  written  Employment  Agreement  which  the
          Employee 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 from, and shall have no effect upon, or be affected
          by, the terms and provisions of said Employment Agreement.

          Except as otherwise set forth in this  Agreement,  the term "Employer"
          shall  mean  Klamath  First  Federal  Savings  and  Loan  Association;
          provided,  further,  that for  purposes  of this  Agreement,  the term
          "Employer" shall mean Klamath First Bancorp, Inc. and its subsidiaries
          and affiliated entities,  including any parent holding company and its
          subsidiaries.


II.      FRINGE BENEFITS

          The  salary  continuation  benefits  provided  by this  Agreement  are
          granted by the  Employer as a fringe  benefit to the  Employee and are
          not part of any salary  reduction plan or an  arrangement  deferring a
          bonus or a salary  increase.  The  Employee  has no option to take any
          current payment or bonus in lieu of these salary continuation benefits
          except as set forth hereinafter.


III.     retirement date and early retirement date

         A.       Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-two  ("62") years of age and  acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.

<PAGE>


         B.       Early Retirement Date:

               The term "Early  Retirement  Date" shall mean the Retirement,  as
               defined above, of the Employee on, or after the Employee achieves
               fifty-five  (55) years of age, but has not yet reached  sixty-two
               (62) years of age.


IV.      retirement benefit and early retirement benefit

         A.       Retirement Benefit:

               If the Employee shall remain in the continuous  employment of the
               Employer until  attaining age sixty-two  (62), the Employee shall
               be entitled to be paid the "Normal Retirement  Benefit" specified
               in   Schedule  A,   payable  in   substantially   equal   monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the Employee  Retires (or on
               such later date as may be mutually  agreed  upon by the  Employee
               and the  Employer  in advance of said  Retirement  date)  payable
               until the Employee's death. After  commencement of payments,  the
               Normal  Retirement  Benefit will increase by two percent (2%) per
               year.

         B.       Early Retirement Benefit:

               The  Employee  shall  have the right to  retire  on a date  which
               constitutes an Early  Retirement  Date as defined in Subparagraph
               III (B) above.  In the event the  Employee  elects to Retire on a
               date which  constitutes an Early  Retirement Date, and said early
               retirement  is not  pursuant to a Change in Control as defined in
               paragraph VI below, the Employee shall be entitled to be paid the
               "Normal Retirement  Benefit" specified in Schedule A for the date
               the Retirement occurs, but reduced by a factor of one-half of one
               percent  (.5%) per month for each month or portion  thereof  that
               the Early  Retirement  occurs prior to the  Retirement  Date. The
               benefit   shall  be  payable  in   substantially   equal  monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the  Early  Retirement  Date
               occurs (or on such later date as may be  mutually  agreed upon by
               the Employee and the Employer in advance of such Early Retirement
               Date).  After  commencement  of  payments,  the Early  Retirement
               benefit will increase by two percent (2%) per year.

               Example:  If the Early  Retirement  Date occurs on the Employee's
               60th birthday and if the Retirement Date in Section III.A.  above
               is at age 62, the Normal Retirement Benefit specified in Schedule
               "A" as of the  Employee's  60th birthday  would be reduced by 12%
               [.5% x 24 months].


V.       other termination of EMPLOYMENT and DISABILITY

         A.       Payments in the Event Employment Is Terminated Prior to
                  Retirement:

               The  Employer  reserves  the right to  terminate  the  Employee's
               employment,  with or without  cause but  subject  to any  written
               employment  agreement  which may then exist, at any time prior to
               the  Employee's  Retirement.  In the event that the employment of
               the Employee shall be terminated,  other than by reason of death,
               Disability  or  Retirement,  prior  to the  Employee's  attaining
               sixty-two (62) years of age, then this Agreement  shall terminate
               on the date of such termination of employment; provided, however,
               that the Employee shall be entitled to the following  benefits as
               may be applicable  depending upon the  circumstances  surrounding
               the Employee's termination:

              (i)      Termination for Other Than Disability, Change in Control
                       or Cause:

               If the Employee's  employment is terminated by the Employee or by
               the  Employer for any reason  other than  Disability,  "Change in
               Control"  or  "Termination  for  Cause,"  the  Employee  shall be
               entitled to be paid the "Normal Retirement  Benefit" specified in
               Schedule   A  as  of  the  date  of   termination,   payable   in
               substantially equal monthly installments on the first day of each
               month,  beginning with the month following the month in which the
               Employee  attains  sixty-two  (62) years of age (or on such later
               date  as may be  mutually  agreed  upon by the  Employee  and the
               Employer   not  less  than   fifteen  (15)  days  prior  to  such
               commencement  date) payable until the Employee's death, and shall
               increase  by two  percent  (2%)  per  year.  Alternatively,  upon
               achieving age fifty-five (55) but before  achieving age sixty-two
               (62),  the  Employee  may choose to receive the Early  Retirement
               Benefit with the reductions from the "Normal Retirement  Benefit"
               as of the date of termination,  and as described in Section IV.B.
               of this Agreement.  The benefit shall be payable in substantially
               equal  monthly  installments  on the  first  day of  each  month,
               beginning  with the month  following the month in which the Early
               Retirement  Date occurs (or on such later date as may be mutually
               agreed  upon by the  Employee  and the  Employer  not  less  than
               fifteen (15) days prior to such commencement date) payable to the
               Employee's  death,  and shall  increase by two  percent  (2%) per
               year.

<PAGE>


                   (ii)    Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee 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 Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

         B.       Payment in the Event of Disability Prior to Retirement:

               The  Employee  shall,  in  connection  with  acceptance  of  this
               Agreement,  elect  below  either  the "Lump Sum  Payment"  or the
               "Annuity  for Life"  option in the  event  the  Employee  becomes
               disabled at any time after the Effective  Date of this  Agreement
               but prior to  Retirement.  The term  "Disability"  or  "Disabled"
               shall  have the same  meaning  given  such terms in any policy of
               disability  insurance  maintained by the Employer for the benefit
               of employees  including  the  Employee.  In the absence of such a
               policy,  which  extends  coverage to the Employee in the event of
               disability, the terms shall mean bodily injury or disease (mental
               or  physical)   which  wholly  and   continuously   prevents  the
               performance of the Employee's duties to the Employer for at least
               one hundred twenty (120) days.

(i)      Lump Sum Payment.

                    The  Employee  shall  be  entitled  to be paid  the lump sum
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the  date  of  disability  or  date  the
                    Employee  otherwise  terminated  service  with the  Employer
                    other than for Cause.  The lump sum shall be payable 60 days
                    from the date the Employer has received a written request to
                    commence benefits, along with documentation showing that the
                    Employee has become disabled.

(ii)     Annuity for Life.

                    The Employee shall be entitled to be paid an annuity for the
                    Employee's life. The Employer shall purchase such an annuity
                    from an  insurance  company  with an A. M.  Best or  Moody's
                    rating  of  no  less  than  AA  and  using  the   amount  of
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the date of  disability  or the date the
                    Employee  otherwise  terminated  service  with the  Employer
                    other  than for  Cause.  The  Employer  shall  purchase  the
                    annuity  within  60 days  from  the date  the  Employer  has
                    received a written request to commence benefits,  along with
                    documentation showing that the Employee has become Disabled.
                    Nevertheless,  if the amount of the  applicable  "Disability
                    Benefit"  specified in Schedule A is $50,000.00 or less, the
                    payment  shall be as a lump sum to the  Employee and not the
                    purchase of an annuity for life.

(iii)    Employee  Election of Disability  Benefit.

                    I elect to receive the following  Disability Benefit (Please
                    sign on applicable line):

                           ______________________    Lump Sum Benefit.


                           /s/ Marshall J. Alexander Annuity for Life.



VI.               CHANGE OF CONTROL

         A.       Definition of Change In Control:

                    A "Change in Control" of Klamath  First  Bancorp,  Inc. (the
                    "Company")  or  Klamath  First  Federal   Savings  and  Loan
                    Association (the "Association")  shall be deemed to occur if
                    and when (a) an  offeror  other than the  Company  purchases
                    shares of the common stock of the Company or the Association
                    pursuant to a tender or exchange offer for such shares,  (b)
                    any  person  (as such  term is used in  Sections  13(d)  and
                    14(d)(2)  of the  Securities  Exchange  Act of  1934)  is or
                    becomes the beneficial  owner,  directly or  indirectly,  of
                    securities  of the Company or the  Association  representing
                    25% or more of the combined voting power of the Company's or
                    the  Association's  then  outstanding  securities,  (c)  the
                    membership  of the board of  directors of the Company or the
                    Association  changes as the result of a contested  election,
                    such that individuals who were directors at the beginning of
                    any twenty-four  month period (whether  commencing before or
                    after  the  effective   date  of  this   Agreement)  do  not
                    constitute  a  majority  of the  Board  at the  end of  such
                    period,   or  (d)   shareholders   of  the  Company  or  the
                    Association  approve  a  merger,   consolidation,   sale  or
                    disposition of all or substantially  all of the Company's or
                    the  Association's  assets, or a plan of partial or complete
                    liquidation.

         B.       Termination by the Employer on Account of or After a Change in
                  Control:

                    In the event the Employee's  employment with the Employer is
                    terminated  by the Employer in  connection  with a Change in
                    Control,  the Employee  shall be  immediately  vested in the
                    "Normal Retirement  Benefit" specified in Schedule A for the
                    date the Employee  achieves age sixty-two (62). The Employee
                    shall be entitled to be paid the "Change in Control Benefit"
                    specified  in Schedule  A, in  substantially  equal  monthly
                    installments  on the first day of each month,  beginning  no
                    sooner  than the  month  following  the  month in which  the
                    Employee  attains  age  fifty-five  (55),  as  requested  in
                    writing by the Employee and delivered to the Employer or its
                    successor  thirty  (30) days  prior to the  commencement  of
                    installment payments;  provided,  however, that in the event
                    the  Employee  does  not  request  a  commencement  date  as
                    specified,  such installments shall be paid on the first day
                    of each month,  beginning with the month following the month
                    in which the Employee  attains  sixty-two (62) years of age.
                    Upon the commencement of payments, the installments shall be
                    payable until the  Employee's  death,  and shall increase by
                    two percent (2%) per year.

                    A  termination  shall be deemed to be in  connection  with a
                    Change in Control  if,  within two (2) years  following  the
                    occurrence  of a  Change  in  Control:  (a)  the  Employee's
                    employment  with the Employer is  terminated by the Employer
                    other than a Termination  for Cause; or (b) by reason of the
                    Employer's actions any adverse change occurs in the scope of
                    the  Employee's  position,   material  responsibilities  and
                    duties, salary,  benefits or location of employment;  or (c)
                    the  Employer  causes  an event to  occur  which  reasonably
                    constitutes  or  results  in a  demotion,  loss of title,  a
                    significant diminution of responsibilities or authority,  or
                    a  constructive  termination  (by forcing a  resignation  or
                    otherwise) of the Employee's employment.


VII.     benefit accounting

                    The  Employer  shall  account  for this  benefit  using  the
                    regulatory  accounting  principles of the Employer's primary
                    federal  regulator.  The Employer shall establish an accrued
                    liability  retirement  account for the  Employee  into which
                    appropriate reserves shall be accrued.


VIII.    restrictions on funding

                    The Employer shall have no obligation to set aside,  earmark
                    or  entrust  any  fund  or  money  with  which  to  pay  its
                    obligations  under this Employee Plan. The Employee,  her or
                    his beneficiary (ies), or any successor in interest shall be
                    and remain simply a general  creditor of the Employer in the
                    same manner as any other creditor having a general claim for
                    matured and unpaid  compensation.  The Employer reserves the
                    absolute right, at its sole  discretion,  to either fund the
                    obligations  undertaken  by this Employee Plan or to refrain
                    from  funding the same and to determine  the extent,  nature
                    and method of such  funding.  Should the  Employer  elect to
                    fund this Employee  Plan,  in whole or in part,  through the
                    purchase  of  life  insurance,   mutual  funds,   disability
                    policies or  annuities,  the Employer  reserves the absolute
                    right, in its sole discretion,  to terminate such funding at
                    any time, in whole or in part. At no time shall any Employee
                    be deemed to have any lien, right,  title or interest in any
                    specific funding investment or assets of the Employer.

                    If the  Employer  elects  to  invest  in a  life  insurance,
                    disability  or annuity  policy on the life of the  Employee,
                    then the  Employee  shall  assist  the  Employer  by  freely
                    submitting to a physical exam and supplying such  additional
                    information necessary to obtain such insurance or annuities.

                    Notwithstanding  anything  hereinabove to the contrary,  the
                    Employer and the Employee acknowledge and agree that, in the
                    event of a Change in Control and at the  written  request of
                    the Employee,  the Employer 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 Employer in its sole  discretion
                    deems   appropriate   and  in  compliance   with  applicable
                    provisions of the Internal  Revenue Code of 1986, as amended
                    (the  "Code")  in  order  to  permit  the  Employer  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
                    Employer  to  be  used  exclusively  for  discharge  of  the
                    Employer's  obligations pursuant to this Agreement and shall
                    continue  to be  subject  to the  claims  of the  Employer's
                    general   creditors  until  paid  to  the  Employee  or  its
                    beneficiaries  in such manner and at such times as specified
                    in this Agreement


IX.      MISCELLANEOUS

         A.       Alienability and Assignment Prohibition:

                    The  Employee  shall  have no power  or  right to  transfer,
                    assign, anticipate,  hypothecate,  mortgage, commute, modify
                    or otherwise encumber in advance any of the benefits payable
                    hereunder  nor  shall any of said  benefits  be  subject  to
                    seizure for the payment of any debts, judgments,  alimony or
                    separate   maintenance   owed   by  the   Employee   nor  be
                    transferable by operation of law in the event of bankruptcy,
                    insolvency or otherwise.  In the event the Employee attempts
                    assignment, commutation, hypothecation, transfer or disposal
                    of the benefits hereunder,  the Employer's liabilities shall
                    forthwith cease and terminate.

         B.       Binding Obligation of the Employer and any Successor in
                  Interest:

                    The  Employer  shall not merge or  consolidate  into or with
                    another Employer or sell  substantially all of its assets to
                    another Employer,  firm or person until such Employer,  firm
                    or  person  expressly  agree,  in  writing,  to  assume  and
                    discharge the duties and  obligations  of the Employer under
                    this Employee Plan. This Employee Plan shall be binding upon
                    the parties hereto, their successors,  beneficiaries,  heirs
                    and personal representatives.

         C.       Amendment or Revocation:

                    It is agreed by and between the parties hereto that,  during
                    the  lifetime of the  Employee,  this  Employee  Plan may be
                    amended  or  revoked  at any time or  times,  in whole or in
                    part, by the mutual written  consent of the Employee and the
                    Employer.

         D.       Gender:

                    Whenever  in  this  Employee  Plan  words  are  used  in the
                    masculine or neuter gender, they shall be read and construed
                    as in the  masculine,  feminine or neuter  gender,  whenever
                    they should so apply.

         E.       Effect on Other Employer Benefit Plans:

                    Nothing  contained  in this  Employee  Plan shall affect the
                    right of the Employee to participate in or be covered by any
                    qualified or non-qualified pension,  profit-sharing,  group,
                    bonus or other  supplemental  compensation or fringe benefit
                    plan  constituting  a part  of the  Employer's  existing  or
                    future compensation structure.

         F.       Headings:

                    Headings and  subheadings in this Employee Plan are inserted
                    for reference and convenience only and shall not be deemed a
                    part of this Employee Plan.

         G.       Applicable Law:

                    The laws of the State of Oregon  shall  govern the  validity
                    and interpretation of this Agreement.

         H.       Partial Invalidity:

                    If any  term,  provision,  covenant,  or  condition  of this
                    Employee Plan 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  Employee  Plan  shall  remain in full  force and effect
                    notwithstanding such partial invalidity.

         I.       Not a Contract of Employment:

                    This Agreement  shall not be deemed to constitute a contract
                    of  employment  between  the parties  hereto,  nor shall any
                    provision  hereof  restrict  the  right of the  Employer  to
                    discharge  the  Employee,  or  restrict  the  right  of  the
                    Employee to terminate employment.

         J.       Notices:

                    Any notice  required or  permitted of either the Employee or
                    the Employer  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.

<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       Marshall J. Alexander
                                            P.O. Box 1925
                                            Klamath Falls, OR 97601

         K.       Opportunity To Consult With Independent Advisors:

                    The  Employee   acknowledges  that  the  Employee  has  been
                    afforded  the   opportunity  to  consult  with   independent
                    advisors  of  his  or  her   choosing   including,   without
                    limitation,   accountants   or  tax   advisors  and  counsel
                    regarding  both the benefits  granted to the Employee  under
                    the terms of this Agreement and the (i) terms and conditions
                    which may affect the Employee'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  Employee
                    acknowledges and agrees shall be the sole  responsibility of
                    the Employee  notwithstanding any other term or provision of
                    this Agreement. The Employee further acknowledges and agrees
                    that the Employer shall have no liability whatsoever related
                    to any such  personal tax effects or other  personal  costs,
                    expenses,  or  liabilities  applicable  to the  Employee and
                    further  specifically  waives any right for the Employee and
                    his  or her  heirs,  beneficiaries,  legal  representatives,
                    agents, successors, and assigns to claim or assert liability
                    on the part of the Employer related to the matters described
                    above   in   this   subparagraph.   The   Employee   further
                    acknowledges   and  agrees  that  the   Employee  has  read,
                    understands  and consents to all of the terms and conditions
                    of this  Agreement,  and that the Employee  enters into this
                    Agreement  with  a  full  understanding  of  its  terms  and
                    conditions.


X.       ADMINISTRATIVE AND CLAIMS PROVISION

         A.       Named Fiduciary and Plan Administrator:

                    The  "Named  Fiduciary  and  Plan   Administrator"  of  this
                    Employee Plan shall be Klamath First  Bancorp,  Inc.,  until
                    its  resignation or removal by the Board. As Named Fiduciary
                    and Plan  Administrator,  the Employer  shall be responsible
                    for  the  management,  control  and  administration  of  the
                    Employee  Plan.  The Named  Fiduciary may delegate to others
                    certain    aspects   of   the   management   and   operation
                    responsibilities   of  the  Employee   Plan   including  the
                    employment  of advisors and the  delegation  of  ministerial
                    duties to qualified individuals.

         B.       Claims Procedure:

                    In the event a  dispute  arises  over  benefits  under  this
                    Employee  Plan and benefits are not paid to the Employee and
                    the claimant  feels he is 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
                    provisions  of this  Employee  Plan 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 a
                    further review of the claim denial is desired. A claim shall
                    be  deemed   denied  if  the   Named   Fiduciary   and  Plan
                    Administrator  fail to take any action  within the aforesaid
                    forty-five-day period.

                    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  Employee  Plan or any  documents  relating
                    thereto  and submit any written  issues and  comments it 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.

C.       Arbitration:

                    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  Employer 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").  In the  event  JAMS is unable or
                    unwilling to conduct the arbitration  provided for under the
                    terms of this Paragraph,  or has  discontinued its business,
                    the parties agree that a representative member,  selected by
                    the  mutual  agreement  of  the  parties,  of  the  American
                    Arbitration  Association ("AAA"),  shall conduct the binding
                    arbitration  referred  to in this  Paragraph.  Notice of the
                    demand for  arbitration  shall be filed in writing  with the
                    other  party to this  Agreement  and with  JAMS (or AAA,  if
                    necessary).  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, or if there are
                    none, the rules of procedure used or established by AAA. Any
                    award  rendered  by JAMS or AAA 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
                    Klamath Falls,  Oregon,  unless  otherwise  agreed to by the
                    parties.

         D.       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, the prevailing party
                    shall be entitled to recover from the  non-prevailing  party
                    reasonable  expenses,  attorneys' fees and costs incurred in
                    connection  therewith or in the enforcement or collection of
                    any  judgment or award  rendered  therein.  The  "prevailing
                    party" means the party  determined by the  arbitrator(s)  or
                    court,  as the case may be, to have most  nearly  prevailed,
                    even if such  party  did not  prevail  in all  matters,  not
                    necessarily the one in whose favor a judgment is rendered.


XI.      SECTION 280G BENEFITS ADJUSTMENT

                    If all or any portion of the amounts payable to the Employee
                    under this  Agreement,  either alone or together  with other
                    payments  which the  Employee  has the right to receive from
                    the Employer,  constitute "excess parachute payments" within
                    the meaning of Section 280G of the Code, that are subject to
                    the  excise  tax  imposed  by  Section  4999 of the Code (or
                    similar  tax  and/or  assessment),  the  Employer  (and  its
                    successor) and the Employee each agree to pay their share of
                    any taxes that may be imposed as a result of  payments  made
                    pursuant to this Agreement; provided, however, that Employer
                    and  Employee  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 Employee is greater than the amount initially
                    so  determined,  then the Employee 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.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

  Klamath First Federal Savings and Loan Association



/s/ Kermit K. Houser                                 /s/ Nina G. Drake
Kermit K. Houser                                     Witness
President and CEO




/s/ Marshall J. Alexander                           /s/ Nina G. Drake
Marshall J. Alexander EVP/CFO                       Witness

<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE A
                            EMPLOYEE BENEFIT SCHEDULE

                               MARSHALL ALEXANDER
                         DATE OF BIRTH: January 20, 1951
                           HIRED ON: December 15, 1986

                          NORMAL           CHANGE IN                            DEATH BENEFIT:       DEATH BENEFIT:
      VESTING           RETIREMENT          CONTROL          DISABILITY          DEATH WHILE              AFTER
      DATE (1)          BENEFIT (2)       BENEFIT (3)        BENEFIT (4)         EMPLOYED (5)        TERMINATION (6)
<S>                           <C>               <C>               <C>                  <C>                   <C>
  January 1, 2003              $20,021                NA                  $0           $1,492,090              $200,209
  January 1, 2004              $40,042                NA            $130,124           $1,492,090              $400,417
  January 1, 2005              $60,063                NA            $276,300           $1,492,090              $600,626
  January 1, 2006              $80,083           $86,541            $440,012           $1,492,090              $800,834
  January 1, 2007             $100,104           $95,494            $622,868           $1,492,090            $1,001,043
  January 1, 2008             $120,125          $104,446            $826,606           $1,492,090            $1,201,251
  January 1, 2009             $140,146          $113,398          $1,053,107           $1,492,090            $1,401,460
  January 1, 2010             $142,267          $122,351          $1,304,404           $1,492,090            $1,422,668
  January 1, 2011             $149,209          $131,304          $1,582,693           $1,492,090            $1,492,090
  January 1, 2012             $149,209          $140,256          $1,621,647           $1,492,090            $1,492,090
  January 1, 2013             $149,209          $149,209          $1,648,165           $1,492,090            $1,492,090
   and thereafter             $149,209          $149,209                  NA         see #5 below          see #5 below

<FN>

1.  The date that Normal Retirement and Death benefits vest.  See separate footnotes for Change in Control and
     Disability Benefits.
2.  Annual Retirement Benefits payable at age sixty-two (62). Benefits are payable for life and increase by 2% per
     year after Retirement.
3. The Employee is eligible to retire following Termination pursuant to a Change in Control any time after the
     attainment of age fifty five (55).  This is the annual sum the Employee will be paid if the Employee elects to
     receive Retirement Benefits on or after the Employee's birthday, but before the following anniversary. Once
     payments begin, Benefits are payable for life and increase by 2% per year thereafter.
4. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty
     Balance as of disability date.  Disability Benefit value is determined by straight-line interpolation between the
    amounts showing in this column for Jan 1 of the calendar year the disability occurs and Jan 1 of the following
    calendar year.  Benefit is paid as Employee elected in the Agreement.  No post-retirement benefit.
5.  Death benefit equals 10x initial Normal Retirement Benefit to age 70, 7x initial Normal Retirement Benefit to
    Age 80, and 3 x initial Normal Retirement Benefit thereafter.
6.  Unless termination is for Cause, the death benefit is the greater of $100,000 or 10x the vested annual retirement
     benefit at the time of termination.
</FN>
</TABLE>



/s/ Marshall Alexander  5/23/03   /s/ Kermit K. Houser                   5/29/03
Marshall Alexander      Date      Bank Officer                           Date

<PAGE>
                                                                 Exhibit 10(c).1
                              EMPLOYMENT AGREEMENT
                        Amended and Restated May 14, 2003

     THIS  AGREEMENT  is made  effective  as of October 1, 2002,  by and between
KLAMATH FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"),  Klamath
Falls,  Oregon;   KLAMATH  FIRST  BANCORP,  INC.  (the  "Company"),   an  Oregon
corporation; and Ben A. Gay (the "Executive").

     WHEREAS,  the  Association  wishes to  assure  itself  of the  services  of
Executive for the period provided in this Agreement; and

     WHEREAS, the Executive is willing to serve in the employ of the Association
on a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1.       POSITION AND RESPONSIBILITIES.

     During the period of his employment hereunder, Executive agrees to serve as
Senior Vice  President of the  Association.  During said period,  Executive also
agrees to serve,  if elected,  as an officer of the Company or any subsidiary or
affiliate of the Company or the Association.

2.       TERMS AND DUTIES.

     (a) The term of this Agreement  shall be deemed to have commenced as of the
date first above  written and shall  continue for a period of  twenty-four  (24)
full calendar months  thereafter.  Commencing on the first anniversary date, and
continuing at each anniversary  date  thereafter,  the Board of Directors of the
Association (the "Board") or its Compensation Committee may extend the Agreement
for an  additional  year.  Prior to the  extension of the  Agreement as provided
herein,  the Board of Directors of the  Association  will review the Executive's
performance  evaluation  for  purposes  of  determining  whether  to extend  the
Agreement,  and the  results  thereof  shall be  included  in the minutes of the
Board's meeting.

     (b) During the period of his  employment  hereunder,  except for periods of
absence  occasioned by illness,  reasonable  vacation  periods,  and  reasonable
leaves of absence,  Executive shall devote  substantially all his business time,
attention,  skill,  and  efforts  to the  faithful  performance  of  his  duties
hereunder  including  activities  and  services  related  to  the  organization,
operation and management of the Association;  provided,  however, that, with the
approval of the Board, as evidenced by a resolution of such Board,  from time to
time,  Executive may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or  organizations,  which,
in such Board's  judgment,  will not present any  conflict of interest  with the
Association, or materially affect the performance of Executive's duties pursuant
to this Agreement.



<PAGE>

3.       COMPENSATION AND REIMBURSEMENT.

     (a) The  compensation  specified under this Agreement shall  constitute the
salary and  benefits  paid for the  duties  described  in  Sections 1 and 2. The
Association  shall pay Executive as  compensation  a salary of $138,000 per year
("Base  Salary")  effective  11/1/2002.  Such Base  Salary  shall be  payable in
accordance with the customary payroll  practices of the Association.  During the
period of this  Agreement,  Executive's  Base Salary  shall be reviewed at least
annually;  the first  such  review  will be made no later than one year from the
date of this  Agreement.  Such  review  shall be  conducted  by the Board or its
Compensation  Committee,  and the Board may increase Executive's Base Salary. In
addition to the Base Salary provided in this Section 3(a), the Association shall
provide  Executive at no cost to Executive  with all such other  benefits as are
provided uniformly to regular salaried employees of the Association.

     (b) The  Association  will provide  Executive with employee  benefit plans,
arrangements  and  perquisites   substantially  equivalent  to  those  in  which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement,  and the  Association  will not,
without  Executive's  prior  written  consent,  make any  changes in such plans,
arrangements or perquisites which would adversely affect  Executive's  rights or
benefits thereunder.  However, changes in Association-sponsored  group insurance
plan  premiums,   deductibles,   co-payments  and  related  coverage  limits  or
conditions  are  excluded  from the prior  sentence for any such change which is
consistently applied to or available to regular salaried Association  employees.
Without  limiting the generality of the foregoing  provisions of this Subsection
(b),  Executive will be entitled to participate in or receive benefits under any
employee  benefit  plans  including,  but  not  limited  to,  retirement  plans,
supplemental   retirement   plans,   pension   plans,    profit-sharing   plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement  made  available  by the  Association  in the  future to its  senior
executives and key management  employees,  subject to, and on a basis consistent
with,  the  terms,  conditions  and  overall  administration  of such  plans and
arrangements.  Executive will be entitled to incentive  compensation and bonuses
as provided in any plan, or pursuant to any arrangement of the  Association,  in
which Executive is eligible to participate.  Nothing paid to the Executive under
any such plan or arrangement will be deemed to be in lieu of other  compensation
to which the  Executive  is entitled  under this  Agreement,  except as provided
under Section 5(e).

     (c) In addition to the Base Salary  provided for by  paragraph  (a) of this
Section 3, the Association  shall pay or reimburse  Executive for all reasonable
travel  and  other  obligations  under  this  Agreement  and  may  provide  such
additional compensation in such form and such amounts as the Board may from time
to time determine.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     (a) Upon the  occurrence  of an Event of  Termination  (as herein  defined)
during the Executive's term of employment  under this Agreement,  the provisions
of  this  Section  shall  apply.  As  used  in  this  Agreement,  an  "Event  of
Termination"  shall mean and include any one or more of the  following:  (i) the
termination by the Association of Executive's full-time employment hereunder for
any reason  other than a Change in Control,  as defined in Section  5(a) hereof;
disability,  as defined in Section 6(a) hereof; death; or retirement, as defined
in Section 7 hereof; (ii) Executive's resignation from the Association's employ,
upon (A) unless consented to by the Executive,  a material change in Executive's
function,  duties,  or  responsibilities,  which change would cause  Executive's
position to become one of lesser responsibility,  importance,  or scope from the
position and attributes  thereof described in Sections 1 and 2, above, (any such
material change shall be deemed a continuing  breach of this  Agreement),  (B) a
relocation of  Executive's  principal  place of employment by more than 35 miles
from  its  location  at the  effective  date of this  Agreement,  or a  material
reduction in the benefits and perquisites to Executive from those being provided
as of the effective date of this  Agreement,  (C) the liquidation or dissolution
of the Association, or (D) any breach of this Agreement by the Association. Upon
the occurrence of any event  described in clauses (A), (B), (C), or (D),  above,
Executive  shall have the right to elect to terminate his employment  under this
Agreement by resignation upon not less than sixty (60) days prior written notice
given  within a  reasonable  period of time not to  exceed,  except in case of a
continuing  breach,  four  calendar  months  after the event giving rise to said
right to elect.

     (b) Upon the occurrence of an Event of Termination  other than for Cause of
for Neglect (as described in Sections 8 and 9 hereof), the Association shall pay
Executive,  or,  in the  event  of his  subsequent  death,  his  beneficiary  or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages,  or both,  a sum equal to the  payments  due to the  Executive  for the
remaining term of the Agreement,  including Base Salary,  bonuses, and any other
cash or  deferred  compensation  paid  or to be paid  (including  the  value  of
employer  contributions that would have been made on the Executive's behalf over
the  remaining  term  of the  agreement  to any  tax-qualified  retirement  plan
sponsored by the  Association as of the Date of  Termination),  to the Executive
for the term of the Agreement provided,  however, that if the Association is not
in compliance  with its minimum  capital  requirements or if such payments would
cause  the  Association's  capital  to be  reduced  below  its  minimum  capital
requirements, such payments shall be deferred until such time as the Association
is in capital compliance.  All payments made pursuant to this Section 4(b) shall
be paid in substantially  equal monthly  installments over the remaining term of
this Agreement following the Executive's termination; provided, however, that if
the remaining term of the Agreement is less than one (1) year  (determined as of
the Executive's Date of  Termination),  such payments and benefits shall be paid
to the Executive in a lump sum within 30 days of the Date of Termination.

     (c) Upon the occurrence of an Event of Termination  other than for Cause or
for Neglect (as  described  in Sections 8 and 9 hereof),  the  Association  will
cause  to  be  continued   life,   medical,   dental  and  disability   coverage
substantially  identical  to the  coverage  maintained  by the  Association  for
Executive  prior  to  his  termination.  Such  coverage  shall  cease  upon  the
expiration of the remaining term of this Agreement.

5.       CHANGE IN CONTROL.

     (a) No benefit  shall be paid under this  Section 5 unless there shall have
occurred a Change in Control of the Company or the Association.  For purposes of
this Agreement, a "Change in Control" of the Company or the Association shall be
deemed to occur if and when (a) an  offeror  other  than the  Company  purchases
shares of the common  stock of the  Company  or the  Association  pursuant  to a
tender or exchange  offer for such shares,  (b) any person (as such term is used
in Sections  13(d) and  14(d)(2) of the  Securities  Exchange Act of 1934) is or
becomes the  beneficial  owner,  directly or  indirectly,  of  securities of the
Company or the Association representing 25% or more of the combined voting power
of the Company's then outstanding securities, (c) the membership of the board of
directors of the Company or the Association changes as the result of a contested
election,  such that  individuals  who were  directors  at the  beginning of any
twenty-four month period (whether  commencing before or after the effective date
of this  Agreement) do not constitute a majority of the Board at the end of such
period, or (d) shareholders of the Company or the Association  approve a merger,
consolidation,  sale or disposition of all or substantially all of the Company's
or the Association's assets, or a plan of partial or complete liquidation.

     (b) If any of the events  described in Section 5(a) hereof  constituting  a
Change in Control have occurred or the Board of the  Association  or the Company
has  determined  that a Change  in  Control  has  occurred,  Executive  shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this Section
5 upon his subsequent  involuntary  termination of employment at any time during
the term of this  Agreement  (or  voluntary  termination  following  a Change of
Control following any demotion,  loss of title, office or significant authority,
reduction in his annual compensation or benefits, or relocation of his principal
place of employment by more than 35 miles from its location immediately prior to
the  Change in  Control),  unless  such  termination  is  because  of his death,
retirement as provided in Section 7,  termination  for Cause, or termination for
Disability.

     (c) Upon the occurrence of a Change in Control  followed by the Executive's
termination of employment,  the Association shall pay Executive, or in the event
of his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, as severance  pay or  liquidated  damages,  or both, a sum equal to
2.00  times the  Executive's  "base  amount,"  within  the  meaning  of  Section
280G(b)(3)  of the Internal  Revenue  Code of 1986  ("Code"),  as amended.  Such
payment shall be made in a lump sum paid within ten (10) days of the Executive's
Date of Termination.

     (d) Upon the occurrence of a Change in Control  followed by the Executive's
termination  of employment,  the  Association  will cause to be continued  life,
medical,  dental and disability coverage substantially identical to the coverage
maintained by the Association for Executive prior to his severance. In addition,
Executive shall be entitled to receive the value of employer  contributions that
would have been made on the  Executive's  behalf over the remaining  term of the
agreement to any  tax-qualified  retirement plan sponsored by the Association as
of the Date of  Termination.  Such  coverage and  payments  shall cease upon the
expiration of thirty-six (36) months.

     (e) Upon the  occurrence  of a Change in Control,  the  Executive  shall be
entitled to receive benefits due him under, or contributed by the Company or the
Association  on his  behalf,  pursuant  to  any  retirement,  incentive,  profit
sharing,  bonus,   performance,   disability  or  other  employee  benefit  plan
maintained by the  Association or the Company on the  Executive's  behalf to the
extent that such benefits are not otherwise  paid to the Executive upon a Change
in Control.

     (f) IRS Section 280G Issues.  If 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 Company or  Association,
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 Company or Association  (and their  successor)  shall be responsible for any
loss of  deductibility  related  thereto;  provided,  however,  that  Company or
Association 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 Company or
Association immediately prior to the change in control or such other independent
accounting  firm  or  advisor  as  may  be  mutually  agreeable  to  Company  or
Association  and  Executive  in the  exercise  of their  reasonable  good  faith
judgment.


6.       TERMINATION FOR DISABILITY.

     (a) If the Executive shall become disabled as defined in the  Association's
then  current  disability  plan (or,  if no such plan is then in effect,  if the
Executive  is  permanently  and totally  disabled  within the meaning of Section
22(e)(3) of the Code as determined by a physician  designated by the Board), the
Association may terminate Executive's employment for "Disability."

     (b) Upon the  Executive's  termination  of employment for  Disability,  the
Association will pay Executive,  as disability pay, a semi-monthly payment equal
to three-quarters  (3/4) of Executive's  semi-monthly rate of Base Salary on the
effective date of such termination.  These disability payments shall commence on
the effective date of Executive's termination and will end on the earlier of (i)
the date Executive returns to the full-time employment of the Association in the
same capacity as he was employed  prior to his  termination  for  Disability and
pursuant to an employment agreement between Executive and the Association;  (ii)
Executive's full-time employment by another employer;  (iii) Executive attaining
the age of 65; or (iv)  Executive's  death; or (v) the expiration of the term of
this Agreement.  The disability pay shall be reduced by the amount, if any, paid
to the Executive under any plan of the Association providing disability benefits
to the Executive.

     (c) The Association  will cause to be continued life,  medical,  dental and
disability  coverage  substantially  identical to the coverage maintained by the
Association for Executive prior to his termination for Disability. This coverage
and payments shall cease upon the earlier of (i) the date  Executive  returns to
the  full-time  employment  of the  Association,  in the same capacity as he was
employed prior to his  termination  for Disability and pursuant to an employment
agreement  between  Executive and the Association;  (ii)  Executive's  full-time
employment by another employer;  (iii)  Executive's  attaining the age of 65; or
(iv) the Executive's death; or (v) the expiration of the term of this Agreement.

     (d)  Notwithstanding  the  foregoing,  there  will be no  reduction  in the
compensation  otherwise  payable to  Executive  during any period  during  which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.

7.       TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.

     Termination by the  Association of Executive  based on  "Retirement"  shall
mean  retirement  at age 65 or in  accordance  with any  retirement  arrangement
established  with  Executive's  consent with respect to him. Upon termination of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement  plan of the  Association  or the  Company  and other  plans to which
Executive is a party.  Upon the death of the  Executive  during the term of this
Agreement,  the Association shall pay to Executive's estate the compensation due
to the Executive  through the last day of the calendar  month in which his death
occurred.


<PAGE>

8.       TERMINATION FOR CAUSE.

     For  purposes of this  Agreement,  "Termination  for Cause"  shall  include
termination  because  of  the  Executive's  personal  dishonesty,  incompetence,
willful misconduct,  breach of fiduciary duty involving personal profit, willful
violation of any law,  rule,  or  regulation  (other than traffic  violations or
similar  offenses) or final  cease-and-desist  order,  or material breach of any
provision of this Agreement. In addition,  "Termination for Cause" shall include
termination  because of the  Executive's  intentional  failure to perform stated
duties, such as the refusal of the Executive to comply with the Association's or
the Company's  instructions,  policies or rules or other willful  conduct of the
Executive  which  materially  adversely  reflects  on the  Association's  or the
Company 's reputation or operation. For purposes of this Section, no act, or the
failure to act, on Executive's  part shall be "willful"  unless done, or omitted
to be done, not in good faith and without  reasonable  belief that the action or
omission  was  in  the  best  interest  of the  Association  or its  affiliates.
Notwithstanding  the  foregoing,  Executive  shall  not be  deemed  to have been
terminated  for Cause unless and until there shall have been  delivered to him a
copy of a  resolution  duly  adopted  by the  affirmative  vote of not less than
three-fourths  of the members of the Board at a meeting of the Board  called and
held for that purpose (after  reasonable  notice to Executive and an opportunity
for him, together with counsel,  to be heard before the Board),  finding that in
the good faith opinion of the Board,  Executive was guilty of conduct justifying
termination  for Cause and specifying the reasons  thereof.  The Executive shall
not have the right to  receive  compensation  or other  benefits  for any period
after  termination  for Cause.  Any stock options granted to Executive under any
stock option plan or any unvested  awards  granted under any other stock benefit
plan of the Association,  the Company,  or any subsidiary or affiliate  thereof,
shall  become  null and void  effective  upon  Executive's  receipt of Notice of
Termination for Cause pursuant to Section 9 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.

9.       TERMINATION FOR NEGLECT.

     The  Association and Company,  or either of them may terminate  Executive's
employment  under this  Agreement at any time for Neglect.  For purposes of this
Agreement,  "Neglect"  means the failure of Executive to give due care to stated
duties or to comply with instructions or directives of the Board of Directors of
the  Association  or  Company or either of them,  but where such  failure is not
determined to be willful or intentional as defined in Section 8. Termination for
Neglect  includes  termination  as the  result  of any  continuing  or  repeated
problems with  Executive's  job  performance  or conduct  after  written  notice
specifying such problem with  performance or conduct,  and where such continuing
and repeated problems were not determined to be willful or intentional, or where
the conduct was not deemed to have a material  adverse impact on the Association
or Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been  terminated  by  Neglect  unless  and until  there  shall have been sent to
Executive  a copy of a  resolution  duly  adopted by a majority  of the Board of
Directors of the  Association  and  Company,  or either of them  (excluding  the
Executive  in counting  the  majority if the  Executive  is then on the board of
directors,  and after  reasonable  notice to Executive  and an  opportunity  for
Executive to be heard before the board of  directors),  finding that in the good
faith  opinion of the board of directors  of the  Association  and  Company,  or
either of them, Executive engaged in conduct justifying  termination for Neglect
and describing  specifically the conduct.  Executive shall not have the right to
receive any salary or bonus for any period after  termination  of employment for
Neglect.  Executive  shall retain any vested  benefits in defined benefit plans,
defined  contribution  plans,  supplemental  executive  retirement plans,  stock
option plans,  restricted stock plans, or other such benefits, but shall forfeit
any rights that have not vested.


10.      REQUIRED PROVISIONS.

     (a) The Association may terminate  Executive's  employment at any time, but
any  termination  by the  Association,  other than as  described in Section 8 or
Section  9  of  this  Agreement,   shall  not  prejudice  Executive's  right  to
compensation  or other benefits under this  Agreement.  Executive shall not have
the  right to  receive  compensation  or other  benefits  for any  period  after
Termination for Cause as defined in Section 8 herein.

     (b)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
participating  in the conduct of the  Association's  affairs by a notice  served
under Section  8(e)(3) or (g)(1) of the Federal  Deposit  Insurance Act ("FDIA")
(12 U.S.C.  1818(e)(3)  and (g)(1)),  the  Association's  obligations  under the
Agreement  shall  be  suspended  as of the date of  service,  unless  stayed  by
appropriate  proceedings.  If the  charges  in the  notice  are  dismissed,  the
Association  may,  in its  discretion,  (i)  pay  Executive  all or  part of the
compensation  withheld  while its contract  obligations  were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.

     (c)  If   Executive  is  removed   and/or   permanently   prohibited   from
participating  in the conduct of the  Association's  affairs by an order  issued
under  Section  8(e)(4) or (g)(1) of the FDIA (12 U.S.C.  1818(e)(4) or (g)(1)),
all obligations of the Association under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting  parties shall
not be affected.

     (d) If the  Association is in default (as defined in Section 3(x)(1) of the
FDIA),  all  obligations  under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.

     (e) All obligations under this Agreement shall be terminated (except to the
extent  determined  that  continuation  of the  Agreement is  necessary  for the
continued  operation of the  Association):  (i) by the Director of the Office of
Thrift  Supervision  (the  "Director")  or his or her  designee  at the time the
Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters
into an agreement to provide assistance to or on behalf of the Association under
the authority contained in Section 13(c) of the FDIA or (ii) by the Director, or
his or her  designee  at the time  the  Director  or such  designee  approves  a
supervisory  merger to resolve  problems related to operation of the Association
or when the  Association  is  determined  by the  Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

     (f)  Any  payments  made  to  Executive  pursuant  to  this  Agreement,  or
otherwise,  are  subject  to and  conditioned  upon  compliance  with 12  U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

11.      NOTICE.

     (a) Any purported  termination by the  Association or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this  Agreement,  a "Notice of  Termination"  shall mean a written  notice which
shall indicate the specific termination  provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances  claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

     (b) "Date of  Termination"  shall  mean (A) if  Executive's  employment  is
terminated  for  Disability,  thirty (30) days after a Notice of  Termination is
given (provided that he shall not have returned to the performance of his duties
on a  full-time  basis  during  such  thirty  (30) day  period),  and (B) if his
employment is terminated for any other reason,  the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

     (c) If, within thirty (30) days after any Notice of  Termination  is given,
the party  receiving such Notice of Termination  notifies the other party that a
dispute  exists  concerning  the  termination,  except upon the  occurrence of a
Change in Control and voluntary  termination  by the Executive in which case the
Date of  Termination  shall be the date  specified  in the  Notice,  the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties,  by a binding  arbitration award, or
by a final judgment,  order or decree of a court of competent  jurisdiction (the
time for appeal there from having  expired and no appeal having been  perfected)
and provided further that the Date of Termination  shall be extended by a notice
of dispute  only if such notice is given in good faith and the party giving such
notice  pursues  the  resolution  of such  dispute  with  reasonable  diligence.
Notwithstanding the pendency of any such dispute,  the Association will continue
to pay Executive his full  compensation in effect when the notice giving rise to
the dispute was given (including,  but not limited to, Base Salary) and continue
him as a participant in all  compensation,  benefit and insurance plans in which
he was participating  when the notice of dispute was given, until the dispute is
finally  resolved in  accordance  with this  Agreement.  Amounts paid under this
Section are in addition to all other amounts due under this  Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.

12.      NON-COMPETITION.

     (a) Upon any termination of Executive's employment hereunder pursuant to an
Event of  Termination as provided in Section 4 hereof,  Executive  agrees not to
compete  with the  Association  and/or the  Company for a period of one (1) year
following such  termination in any city, town or county in which the Association
and/or the  Company  has an office or has filed an  application  for  regulatory
approval to establish an office,  determined  as of the  effective  date of such
termination.  Executive  agrees that during such period and within said  cities,
towns and counties, Executive shall not work for or advise, consult or otherwise
serve  with,  directly  or  indirectly,  any entity  whose  business  materially
competes  with the  depository,  lending  or other  business  activities  of the
Association and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the  Association  and/or the  Company,  its  business  and
property in the event of Executive's  breach of this Subsection 11(a) agree that
in the event of any such breach by Executive, the Association and/or the Company
will be entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive,  Executive's partners,
agents,  servants,  employers,  employees  and all  persons  acting  for or with
Executive.  Executive represents and admits that in the event of the termination
of his  employment  pursuant  to Section 8 hereof,  Executive's  experience  and
capabilities are such that Executive can obtain employment in a business engaged
in other lines  and/or of a different  nature  than the  Association  and/or the
Company,  and that the  enforcement  of a remedy by way of  injunction  will not
prevent Executive from earning a livelihood. Nothing herein will be construed as
prohibiting the Association  and/or the Company from pursuing any other remedies
available to the  Association  and/or the Company for such breach or  threatened
breach, including the recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
business  activities and plans for business  activities of the  Association  and
affiliates  thereof,  as it may exist from time to time, is a valuable,  special
and unique asset of the business of the Association.  Executive will not, during
or  after  the term of his  employment,  disclose  any  knowledge  of the  past,
present,  planned  or  considered  business  activities  of the  Association  or
affiliates  thereof to any person,  firm,  corporation,  or other entity for any
reason or purpose  whatsoever.  Notwithstanding  the  foregoing,  Executive  may
disclose  any  knowledge  of  banking,  financial  and/or  economic  principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Association.  In the event of a breach or threatened
breach by the Executive of the provisions of this Section,  the Association will
be entitled to an injunction restraining Executive from disclosing,  in whole or
in part,  the knowledge of the past,  present,  planned or  considered  business
activities of the  Association  or  affiliates  thereof,  or from  rendering any
services to any person, firm, corporation,  other entity to whom such knowledge,
in whole or in  part,  has been  disclosed  or is  threatened  to be  disclosed.
Nothing herein will be construed as prohibiting  the  Association  from pursuing
any other remedies  available to the  Association  for such breach or threatened
breach, including the recovery of damages from Executive.

13.      SOURCE OF PAYMENTS.

     All  payments  provided in this  Agreement  shall be timely paid in cash or
check  from  the  general  funds  of  the  Association.  The  Company,  however,
guarantees  all  payments  and the  provision  of all amounts and  benefits  due
hereunder to Executive  and, if such payments are not timely paid or provided by
the  Association,  such  amounts and  benefits  shall be paid or provided by the
Company.

14.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior  employment  agreement  between the  Association or any
predecessor of the Association  and Executive,  except that this Agreement shall
not  affect or operate to reduce  any  benefit  or  compensation  inuring to the
Executive of a kind elsewhere provided.  No provision of this Agreement shall be
interpreted to mean that  Executive is subject to receiving  fewer benefits than
those available to him without reference to this Agreement.

15.      NO ATTACHMENT.

     (a) Except as  required  by law,  no right to receive  payments  under this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to affect any such action  shall be null,
void, and of no effect.  (b) This Agreement  shall be binding upon, and inure to
the benefit of,  Executive,  the  Association,  the Company and their respective
successors and assigns.

16.      MODIFICATION AND WAIVER.

     (a) This  Agreement may not be modified or amended  except by an instrument
in writing signed by the parties hereto.

     (b) No term or  condition  of this  Agreement  shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement,  except by written  instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing  waiver
unless specifically  stated therein,  and each such waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.


17.      SEVERABILITY.

     If, for any reason,  any  provision of this  Agreement,  or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this  Agreement or any part of such  provision not held so invalid,  and each
such other  provision and part thereof shall to the full extent  consistent with
law continue in full force and effect.

18.      HEADINGS FOR REFERENCE ONLY.

     The headings of sections  and  paragraphs  herein are  included  solely for
convenience of reference and shall not control the meaning or  interpretation of
any of the provisions of this Agreement.

19.      GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Oregon, unless
otherwise specified herein;  provided,  however, that in the event of a conflict
between the terms of this Agreement and any  applicable  federal or state law or
regulation, the provisions of such law or regulation shall prevail.

20.      ARBITRATION.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three  arbitrators  sitting in a location selected by the employee within one
hundred (100) miles from the location of the Association, 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;  provided,
however,  that Executive  shall be entitled to seek specific  performance of his
right to be paid  until  the Date of  Termination  during  the  pendency  of any
dispute or controversy arising under or in connection with this Agreement.

21.      PAYMENT OF LEGAL FEES.

     All  reasonable  legal fees paid or incurred by  Executive  pursuant to any
dispute or question of  interpretation  relating to this Agreement shall be paid
or reimbursed by the  Association,  if successful  pursuant to a legal judgment,
arbitration or settlement.

22.      INDEMNIFICATION.

     The Association shall provide Executive (including his heirs, executors and
administrators)   with  coverage  under  a  standard  directors'  and  officers'
liability insurance policy at its expense,  or in lieu thereof,  shall indemnify
Executive (and his heirs,  executors and  administrators)  to the fullest extent
permitted under law against all expenses and liabilities  reasonably incurred by
him in  connection  with or arising out of any action,  suite or  proceeding  in
which he may be  involved  by reason of his having been a director or officer of
the Association (whether or not he continues to be a directors or officer at the
time of incurring such expenses or  liabilities),  such expenses and liabilities
to include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.



23.      SUCCESSOR TO THE ASSOCIATION OR THE COMPANY.

     The  Association  and the Company  shall require any successor or assignee,
whether direct or indirect, by purchase, merger,  consolidation or otherwise, to
all or  substantially  all the  business  or  assets of the  Association  or the
Company,  expressly  and  unconditionally  to assume  and agree to  perform  the
Association's  or the Company's  obligations  under this Agreement,  in the same
manner and to the same  extent  that the  Association  or the  Company  would be
required to perform if no such succession or assignment had taken place.


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by a duly  authorized  officer or director of the  Association  and the
Company,  and Executive has signed this  Agreement,  all on the 19th day of May,
2003.

KLAMATH FIRST BANCORP, INC.                 KLAMATH FIRST FEDERAL SAVINGS
                                                      AND LOAN ASSOCIATION


BY: /s/ Kermit K. Houser                    BY: /s/ Kermit K. Houser
    Kermit K. Houser, President & CEO           Kermit K. Houser President & CEO



/s/ Nina G. Drake                               /s/ Ben A. Gay
WITNESS:                                        Ben A. Gay EVP/CCO


<PAGE>
                                                                 Exhibit 10(c).2
                     FIRST AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This FIRST  AMENDMENT TO AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal  Savings and Loan  Association  ("Association"),  Klamath First Bancorp,
Inc.,  ("Company")  and the  undersigned  executive  officer of Association  and
Company (the "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an Amended and
Restated Employment Agreement dated May 19, 2003, (the "Employment Agreement");

     WHEREAS,  Company has entered into an Agreement and Plan of Merger dated as
of July 14, 2003, (the "Merger  Agreement") with Sterling Financial  Corporation
("Sterling") with respect to a proposed transaction (the "Transaction")  whereby
Sterling will acquire all of the outstanding shares of Company common stock in a
stock merger;

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
the  Transaction  so as to  enable  his  change in  control  of  benefits  to be
triggered under the Employment  Agreement and his Executive Salary  Continuation
Agreement,  and to enhance the value of shares of common stock of Company  owned
by the Executive  and the value of his stock options to acquire  common stock of
Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Capitalized terms used herein, to the extent not defined  otherwise,  shall
     have the meaning ascribed to them in the Employment Agreement.

2.   Section 5(c) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association shall pay the Executive as severance pay or
     liquidated damages, or both (the "Base Severance Amount"),  an amount equal
     to $276,000.  In the event that all  conditions to closing under the Merger
     Agreement have been satisfied  during calendar year 2003, then  Association
     shall  make  payment  of the Base  Severance  Amount  plus  the  Additional
     Severance  Amount (as defined in Section  5(d) below) to the  Executive  on
     December 31, 2003. In the event such closing  conditions  are not satisfied
     during calendar year 2003, then the payments  contemplated  herein shall be
     made within 10 days after  consummation  of the merger  contemplated by the
     Merger Agreement.  Notwithstanding  the foregoing,  if the Executive enters
     into a new written  employment  agreement with Sterling or Sterling Savings
     Bank prior to  December  31, 2003 (but  effective  upon  completion  of the
     merger contemplated by the Merger Agreement), then the Severance Amount and
     Additional  Severance Amount shall not be paid pursuant to the terms hereof
     and any  severance to be provided to the  Executive,  if any,  shall be set
     forth in such new written employment agreement."

     Section 5(d) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association  shall  pay  the  Executive  as  additional
     severance the amount of $5,750 (the "Additional  Severance Amount") in lieu
     of any obligation to pay the Executive the value of employer  contributions
     that would have been made on the Executive's behalf over the remaining term
     of the  agreement to any  tax-qualified  retirement  plan.  The  Additional
     Severance  Amount  shall be paid at the time the Base  Severance  Amount is
     paid pursuant to Section 5(c) above.  Upon the  Executive's  termination of
     service in connection with or following a Change in Control arising from or
     relating   to   the   Merger   Agreement,   Sterling   Savings   Bank,   as
     successor-in-interest to the Association,  shall provide the Executive with
     continued life, medical, dental and disability coverage as is then provided
     by Sterling  Savings Bank to its  full-time  employees,  as the same may be
     changed from time to time,  during the 36 month period next  following  the
     Executive's  Date  of  Termination  with  the  cost to be  absorbed  by the
     Executive  being equal to the lesser of (i) the  employee  cost of coverage
     currently  being  borne  by the  Executive  or (ii)  the  employee  cost of
     coverage  borne by full-time  employees of Sterling  Savings Bank receiving
     the same  coverage;  provided  if the cost of  coverage  to be borne by the
     Executive is determined  under subpart (i), then such cost shall be subject
     to pro  rata  adjustment  based  upon the pro  rata  adjustment  in cost of
     coverage  that is borne by  full-time  employees  of Sterling  Savings Bank
     receiving the same coverage after completion of the merger  contemplated by
     the Merger Agreement."

3.   New Section 24 is added to the Employment Agreement as follows:

     "24.  Long  Term  Medical  Care.  The  Executive  shall  have  a  right  to
     participate  in the long term  medical care  program to be  implemented  by
     Association  if the Executive  meets the  eligibility  requirements  of the
     insurer. If the Executive meets the eligibility requirements of the insurer
     and becomes a participant  in the long term medical care  program,  then in
     that  event,  his Base  Severance  Amount  shall be  reduced  by the single
     premium cost paid by Association  for such long term medical care on behalf
     of the Executive (which is estimated to be $54,500) and the Executive shall
     have no obligation to reimburse  Association  for any premium cost relating
     to such program after the Executive's termination of employment."

4.   The  Employment  Agreement  shall be further  amended by adding  thereto an
     "Exhibit A to the  Employment  Agreement"  in the form  attached  hereto as
     Appendix I.

5.   Except as  specifically  set forth herein,  the Employment  Agreement shall
     continue  in full  force  and  effect.  To the  extent  that any  provision
     contained in this Agreement is  inconsistent  with any of the provisions of
     the  Employment  Agreement,  including  but not  limited to,  Section  5(b)
     thereof, the provisions contained in this Agreement shall be controlling.

6.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

7.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so  executed  shall be deemed an  original  and all of which,
     taken together, shall constitute one and the same agreement.

     The parties have entered this Agreement on July 14, 2003.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


                                                By: /s/ Kermit K. Houser
                                                Kermit K.  Houser
                                                President/CEO
                                                KLAMATH  FIRST BANCORP, INC.


                                                By: /s/ Craig M Moore
                                                Craig M Moore
                                                SVP/Chief Auditor

                                                EXECUTIVE:


                                                By: /s/ Ben A. Gay
                                                Ben A. Gay EVP/CCO


<PAGE>
                                                                 Exhibit 10(c).3
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
Ben A. Gay,  an Employee of the Employer (hereinafter referred to as the
"Employee"), who resides in the State of Oregon.

                              W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

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

     WHEREAS,  the  Employee'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 Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.       EMPLOYMENT

          Although  this  Agreement is intended to provide the Employee  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 Employee and the Employer nor shall any  provision of this
          Agreement  restrict or expand the right of the  Employer to  terminate
          the  Employee's  employment.  This  Agreement  shall have no impact or
          effect  upon any  separate  written  Employment  Agreement  which  the
          Employee 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 from, and shall have no effect upon, or be affected
          by, the terms and provisions of said Employment Agreement.

          Except as otherwise set forth in this  Agreement,  the term "Employer"
          shall  mean  Klamath  First  Federal  Savings  and  Loan  Association;
          provided,  further,  that for  purposes  of this  Agreement,  the term
          "Employer" shall mean Klamath First Bancorp, Inc. and its subsidiaries
          and affiliated entities,  including any parent holding company and its
          subsidiaries.


II.      FRINGE BENEFITS

          The  salary  continuation  benefits  provided  by this  Agreement  are
          granted by the  Employer as a fringe  benefit to the  Employee and are
          not part of any salary  reduction plan or an  arrangement  deferring a
          bonus or a salary  increase.  The  Employee  has no option to take any
          current payment or bonus in lieu of these salary continuation benefits
          except as set forth hereinafter.


III.     retirement date and early retirement date

         A.       Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-two  ("62") years of age and  acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.

<PAGE>


         B.       Early Retirement Date:

               The term "Early  Retirement  Date" shall mean the Retirement,  as
               defined above, of the Employee on, or after the Employee achieves
               fifty-five  (55) years of age, but has not yet reached  sixty-two
               (62) years of age.


IV.      retirement benefit and early retirement benefit

         A.       Retirement Benefit:

               If the Employee shall remain in the continuous  employment of the
               Employer until  attaining age sixty-two  (62), the Employee shall
               be entitled to be paid the "Normal Retirement  Benefit" specified
               in   Schedule  A,   payable  in   substantially   equal   monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the Employee  Retires (or on
               such later date as may be mutually  agreed  upon by the  Employee
               and the  Employer  in advance of said  Retirement  date)  payable
               until the Employee's death. After  commencement of payments,  the
               Normal  Retirement  Benefit will increase by two percent (2%) per
               year.

         B.       Early Retirement Benefit:

               The  Employee  shall  have the right to  retire  on a date  which
               constitutes an Early  Retirement  Date as defined in Subparagraph
               III (B) above.  In the event the  Employee  elects to Retire on a
               date which  constitutes an Early  Retirement Date, and said early
               retirement  is not  pursuant to a Change in Control as defined in
               paragraph VI below, the Employee shall be entitled to be paid the
               "Normal Retirement  Benefit" specified in Schedule A for the date
               the Retirement occurs, but reduced by a factor of one-half of one
               percent  (.5%) per month for each month or portion  thereof  that
               the Early  Retirement  occurs prior to the  Retirement  Date. The
               benefit   shall  be  payable  in   substantially   equal  monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the  Early  Retirement  Date
               occurs (or on such later date as may be  mutually  agreed upon by
               the Employee and the Employer in advance of such Early Retirement
               Date).  After  commencement  of  payments,  the Early  Retirement
               benefit will increase by two percent (2%) per year.

               Example:  If the Early  Retirement  Date occurs on the Employee's
               60th birthday and if the Retirement Date in Section III.A.  above
               is at age 62, the Normal Retirement Benefit specified in Schedule
               "A" as of the  Employee's  60th birthday  would be reduced by 12%
               [.5% x 24 months].


V.       other termination of EMPLOYMENT and DISABILITY

         A.       Payments in the Event Employment Is Terminated Prior to
                  Retirement:

               The  Employer  reserves  the right to  terminate  the  Employee's
               employment,  with or without  cause but  subject  to any  written
               employment  agreement  which may then exist, at any time prior to
               the  Employee's  Retirement.  In the event that the employment of
               the Employee shall be terminated,  other than by reason of death,
               Disability  or  Retirement,  prior  to the  Employee's  attaining
               sixty-two (62) years of age, then this Agreement  shall terminate
               on the date of such termination of employment; provided, however,
               that the Employee shall be entitled to the following  benefits as
               may be applicable  depending upon the  circumstances  surrounding
               the Employee's termination:

              (i)      Termination for Other Than Disability, Change in Control
                       or Cause:

               If the Employee's  employment is terminated by the Employee or by
               the  Employer for any reason  other than  Disability,  "Change in
               Control"  or  "Termination  for  Cause,"  the  Employee  shall be
               entitled to be paid the "Normal Retirement  Benefit" specified in
               Schedule   A  as  of  the  date  of   termination,   payable   in
               substantially equal monthly installments on the first day of each
               month,  beginning with the month following the month in which the
               Employee  attains  sixty-two  (62) years of age (or on such later
               date  as may be  mutually  agreed  upon by the  Employee  and the
               Employer   not  less  than   fifteen  (15)  days  prior  to  such
               commencement  date) payable until the Employee's death, and shall
               increase  by two  percent  (2%)  per  year.  Alternatively,  upon
               achieving age fifty-five (55) but before  achieving age sixty-two
               (62),  the  Employee  may choose to receive the Early  Retirement
               Benefit with the reductions from the "Normal Retirement  Benefit"
               as of the date of termination,  and as described in Section IV.B.
               of this Agreement.  The benefit shall be payable in substantially
               equal  monthly  installments  on the  first  day of  each  month,
               beginning  with the month  following the month in which the Early
               Retirement  Date occurs (or on such later date as may be mutually
               agreed  upon by the  Employee  and the  Employer  not  less  than
               fifteen (15) days prior to such commencement date) payable to the
               Employee's  death,  and shall  increase by two  percent  (2%) per
               year.

<PAGE>


                   (ii)    Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee 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 Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

         B.       Payment in the Event of Disability Prior to Retirement:

               The  Employee  shall,  in  connection  with  acceptance  of  this
               Agreement,  elect  below  either  the "Lump Sum  Payment"  or the
               "Annuity  for Life"  option in the  event  the  Employee  becomes
               disabled at any time after the Effective  Date of this  Agreement
               but prior to  Retirement.  The term  "Disability"  or  "Disabled"
               shall  have the same  meaning  given  such terms in any policy of
               disability  insurance  maintained by the Employer for the benefit
               of employees  including  the  Employee.  In the absence of such a
               policy,  which  extends  coverage to the Employee in the event of
               disability, the terms shall mean bodily injury or disease (mental
               or  physical)   which  wholly  and   continuously   prevents  the
               performance of the Employee's duties to the Employer for at least
               one hundred twenty (120) days.

(i)      Lump Sum Payment.

                    The  Employee  shall  be  entitled  to be paid  the lump sum
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the  date  of  disability  or  date  the
                    Employee  otherwise  terminated  service  with the  Employer
                    other than for Cause.  The lump sum shall be payable 60 days
                    from the date the Employer has received a written request to
                    commence benefits, along with documentation showing that the
                    Employee has become disabled.

(ii)     Annuity for Life.

                    The Employee shall be entitled to be paid an annuity for the
                    Employee's life. The Employer shall purchase such an annuity
                    from an  insurance  company  with an A. M.  Best or  Moody's
                    rating  of  no  less  than  AA  and  using  the   amount  of
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the date of  disability  or the date the
                    Employee  otherwise  terminated  service  with the  Employer
                    other  than for  Cause.  The  Employer  shall  purchase  the
                    annuity  within  60 days  from  the date  the  Employer  has
                    received a written request to commence benefits,  along with
                    documentation showing that the Employee has become Disabled.
                    Nevertheless,  if the amount of the  applicable  "Disability
                    Benefit"  specified in Schedule A is $50,000.00 or less, the
                    payment  shall be as a lump sum to the  Employee and not the
                    purchase of an annuity for life.

(iii)    Employee  Election of Disability  Benefit.

                    I elect to receive the following  Disability Benefit (Please
                    sign on applicable line):

                           /s/ Ben A. Gay           Lump Sum Benefit.


                           _______________          Annuity for Life.



VI.               CHANGE OF CONTROL

         A.       Definition of Change In Control:

                    A "Change in Control" of Klamath  First  Bancorp,  Inc. (the
                    "Company")  or  Klamath  First  Federal   Savings  and  Loan
                    Association (the "Association")  shall be deemed to occur if
                    and when (a) an  offeror  other than the  Company  purchases
                    shares of the common stock of the Company or the Association
                    pursuant to a tender or exchange offer for such shares,  (b)
                    any  person  (as such  term is used in  Sections  13(d)  and
                    14(d)(2)  of the  Securities  Exchange  Act of  1934)  is or
                    becomes the beneficial  owner,  directly or  indirectly,  of
                    securities  of the Company or the  Association  representing
                    25% or more of the combined voting power of the Company's or
                    the  Association's  then  outstanding  securities,  (c)  the
                    membership  of the board of  directors of the Company or the
                    Association  changes as the result of a contested  election,
                    such that individuals who were directors at the beginning of
                    any twenty-four  month period (whether  commencing before or
                    after  the  effective   date  of  this   Agreement)  do  not
                    constitute  a  majority  of the  Board  at the  end of  such
                    period,   or  (d)   shareholders   of  the  Company  or  the
                    Association  approve  a  merger,   consolidation,   sale  or
                    disposition of all or substantially  all of the Company's or
                    the  Association's  assets, or a plan of partial or complete
                    liquidation.

         B.       Termination by the Employer on Account of or After a Change in
                  Control:

                    In the event the Employee's  employment with the Employer is
                    terminated  by the Employer in  connection  with a Change in
                    Control,  the Employee  shall be  immediately  vested in the
                    "Normal Retirement  Benefit" specified in Schedule A for the
                    date the Employee  achieves age sixty-two (62). The Employee
                    shall be entitled to be paid the "Change in Control Benefit"
                    specified  in Schedule  A, in  substantially  equal  monthly
                    installments  on the first day of each month,  beginning  no
                    sooner  than the  month  following  the  month in which  the
                    Employee  attains  age  fifty-five  (55),  as  requested  in
                    writing by the Employee and delivered to the Employer or its
                    successor  thirty  (30) days  prior to the  commencement  of
                    installment payments;  provided,  however, that in the event
                    the  Employee  does  not  request  a  commencement  date  as
                    specified,  such installments shall be paid on the first day
                    of each month,  beginning with the month following the month
                    in which the Employee  attains  sixty-two (62) years of age.
                    Upon the commencement of payments, the installments shall be
                    payable until the  Employee's  death,  and shall increase by
                    two percent (2%) per year.

                    A  termination  shall be deemed to be in  connection  with a
                    Change in Control  if,  within two (2) years  following  the
                    occurrence  of a  Change  in  Control:  (a)  the  Employee's
                    employment  with the Employer is  terminated by the Employer
                    other than a Termination  for Cause; or (b) by reason of the
                    Employer's actions any adverse change occurs in the scope of
                    the  Employee's  position,   material  responsibilities  and
                    duties, salary,  benefits or location of employment;  or (c)
                    the  Employer  causes  an event to  occur  which  reasonably
                    constitutes  or  results  in a  demotion,  loss of title,  a
                    significant diminution of responsibilities or authority,  or
                    a  constructive  termination  (by forcing a  resignation  or
                    otherwise) of the Employee's employment.


VII.     benefit accounting

                    The  Employer  shall  account  for this  benefit  using  the
                    regulatory  accounting  principles of the Employer's primary
                    federal  regulator.  The Employer shall establish an accrued
                    liability  retirement  account for the  Employee  into which
                    appropriate reserves shall be accrued.


VIII.    restrictions on funding

                    The Employer shall have no obligation to set aside,  earmark
                    or  entrust  any  fund  or  money  with  which  to  pay  its
                    obligations  under this Employee Plan. The Employee,  her or
                    his beneficiary (ies), or any successor in interest shall be
                    and remain simply a general  creditor of the Employer in the
                    same manner as any other creditor having a general claim for
                    matured and unpaid  compensation.  The Employer reserves the
                    absolute right, at its sole  discretion,  to either fund the
                    obligations  undertaken  by this Employee Plan or to refrain
                    from  funding the same and to determine  the extent,  nature
                    and method of such  funding.  Should the  Employer  elect to
                    fund this Employee  Plan,  in whole or in part,  through the
                    purchase  of  life  insurance,   mutual  funds,   disability
                    policies or  annuities,  the Employer  reserves the absolute
                    right, in its sole discretion,  to terminate such funding at
                    any time, in whole or in part. At no time shall any Employee
                    be deemed to have any lien, right,  title or interest in any
                    specific funding investment or assets of the Employer.

                    If the  Employer  elects  to  invest  in a  life  insurance,
                    disability  or annuity  policy on the life of the  Employee,
                    then the  Employee  shall  assist  the  Employer  by  freely
                    submitting to a physical exam and supplying such  additional
                    information necessary to obtain such insurance or annuities.

                    Notwithstanding  anything  hereinabove to the contrary,  the
                    Employer and the Employee acknowledge and agree that, in the
                    event of a Change in Control and at the  written  request of
                    the Employee,  the Employer 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 Employer in its sole  discretion
                    deems   appropriate   and  in  compliance   with  applicable
                    provisions of the Internal  Revenue Code of 1986, as amended
                    (the  "Code")  in  order  to  permit  the  Employer  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
                    Employer  to  be  used  exclusively  for  discharge  of  the
                    Employer's  obligations pursuant to this Agreement and shall
                    continue  to be  subject  to the  claims  of the  Employer's
                    general   creditors  until  paid  to  the  Employee  or  its
                    beneficiaries  in such manner and at such times as specified
                    in this Agreement


IX.      MISCELLANEOUS

         A.       Alienability and Assignment Prohibition:

                    The  Employee  shall  have no power  or  right to  transfer,
                    assign, anticipate,  hypothecate,  mortgage, commute, modify
                    or otherwise encumber in advance any of the benefits payable
                    hereunder  nor  shall any of said  benefits  be  subject  to
                    seizure for the payment of any debts, judgments,  alimony or
                    separate   maintenance   owed   by  the   Employee   nor  be
                    transferable by operation of law in the event of bankruptcy,
                    insolvency or otherwise.  In the event the Employee attempts
                    assignment, commutation, hypothecation, transfer or disposal
                    of the benefits hereunder,  the Employer's liabilities shall
                    forthwith cease and terminate.

         B.       Binding Obligation of the Employer and any Successor in
                  Interest:

                    The  Employer  shall not merge or  consolidate  into or with
                    another Employer or sell  substantially all of its assets to
                    another Employer,  firm or person until such Employer,  firm
                    or  person  expressly  agree,  in  writing,  to  assume  and
                    discharge the duties and  obligations  of the Employer under
                    this Employee Plan. This Employee Plan shall be binding upon
                    the parties hereto, their successors,  beneficiaries,  heirs
                    and personal representatives.

         C.       Amendment or Revocation:

                    It is agreed by and between the parties hereto that,  during
                    the  lifetime of the  Employee,  this  Employee  Plan may be
                    amended  or  revoked  at any time or  times,  in whole or in
                    part, by the mutual written  consent of the Employee and the
                    Employer.

         D.       Gender:

                    Whenever  in  this  Employee  Plan  words  are  used  in the
                    masculine or neuter gender, they shall be read and construed
                    as in the  masculine,  feminine or neuter  gender,  whenever
                    they should so apply.

         E.       Effect on Other Employer Benefit Plans:

                    Nothing  contained  in this  Employee  Plan shall affect the
                    right of the Employee to participate in or be covered by any
                    qualified or non-qualified pension,  profit-sharing,  group,
                    bonus or other  supplemental  compensation or fringe benefit
                    plan  constituting  a part  of the  Employer's  existing  or
                    future compensation structure.

         F.       Headings:

                    Headings and  subheadings in this Employee Plan are inserted
                    for reference and convenience only and shall not be deemed a
                    part of this Employee Plan.

         G.       Applicable Law:

                    The laws of the State of Oregon  shall  govern the  validity
                    and interpretation of this Agreement.

         H.       Partial Invalidity:

                    If any  term,  provision,  covenant,  or  condition  of this
                    Employee Plan 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  Employee  Plan  shall  remain in full  force and effect
                    notwithstanding such partial invalidity.

         I.       Not a Contract of Employment:

                    This Agreement  shall not be deemed to constitute a contract
                    of  employment  between  the parties  hereto,  nor shall any
                    provision  hereof  restrict  the  right of the  Employer  to
                    discharge  the  Employee,  or  restrict  the  right  of  the
                    Employee to terminate employment.

         J.       Notices:

                    Any notice  required or  permitted of either the Employee or
                    the Employer  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.

<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       Ben A. Gay
                                            23019 SE 41st PL
                                            Sammamish, WA 98075

         K.       Opportunity To Consult With Independent Advisors:

                    The  Employee   acknowledges  that  the  Employee  has  been
                    afforded  the   opportunity  to  consult  with   independent
                    advisors  of  his  or  her   choosing   including,   without
                    limitation,   accountants   or  tax   advisors  and  counsel
                    regarding  both the benefits  granted to the Employee  under
                    the terms of this Agreement and the (i) terms and conditions
                    which may affect the Employee'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  Employee
                    acknowledges and agrees shall be the sole  responsibility of
                    the Employee  notwithstanding any other term or provision of
                    this Agreement. The Employee further acknowledges and agrees
                    that the Employer shall have no liability whatsoever related
                    to any such  personal tax effects or other  personal  costs,
                    expenses,  or  liabilities  applicable  to the  Employee and
                    further  specifically  waives any right for the Employee and
                    his  or her  heirs,  beneficiaries,  legal  representatives,
                    agents, successors, and assigns to claim or assert liability
                    on the part of the Employer related to the matters described
                    above   in   this   subparagraph.   The   Employee   further
                    acknowledges   and  agrees  that  the   Employee  has  read,
                    understands  and consents to all of the terms and conditions
                    of this  Agreement,  and that the Employee  enters into this
                    Agreement  with  a  full  understanding  of  its  terms  and
                    conditions.


X.       ADMINISTRATIVE AND CLAIMS PROVISION

         A.       Named Fiduciary and Plan Administrator:

                    The  "Named  Fiduciary  and  Plan   Administrator"  of  this
                    Employee Plan shall be Klamath First  Bancorp,  Inc.,  until
                    its  resignation or removal by the Board. As Named Fiduciary
                    and Plan  Administrator,  the Employer  shall be responsible
                    for  the  management,  control  and  administration  of  the
                    Employee  Plan.  The Named  Fiduciary may delegate to others
                    certain    aspects   of   the   management   and   operation
                    responsibilities   of  the  Employee   Plan   including  the
                    employment  of advisors and the  delegation  of  ministerial
                    duties to qualified individuals.

         B.       Claims Procedure:

                    In the event a  dispute  arises  over  benefits  under  this
                    Employee  Plan and benefits are not paid to the Employee and
                    the claimant  feels he is 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
                    provisions  of this  Employee  Plan 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 a
                    further review of the claim denial is desired. A claim shall
                    be  deemed   denied  if  the   Named   Fiduciary   and  Plan
                    Administrator  fail to take any action  within the aforesaid
                    forty-five-day period.

                    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  Employee  Plan or any  documents  relating
                    thereto  and submit any written  issues and  comments it 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.

C.       Arbitration:

                    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  Employer 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").  In the  event  JAMS is unable or
                    unwilling to conduct the arbitration  provided for under the
                    terms of this Paragraph,  or has  discontinued its business,
                    the parties agree that a representative member,  selected by
                    the  mutual  agreement  of  the  parties,  of  the  American
                    Arbitration  Association ("AAA"),  shall conduct the binding
                    arbitration  referred  to in this  Paragraph.  Notice of the
                    demand for  arbitration  shall be filed in writing  with the
                    other  party to this  Agreement  and with  JAMS (or AAA,  if
                    necessary).  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, or if there are
                    none, the rules of procedure used or established by AAA. Any
                    award  rendered  by JAMS or AAA 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
                    Klamath Falls,  Oregon,  unless  otherwise  agreed to by the
                    parties.

         D.       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, the prevailing party
                    shall be entitled to recover from the  non-prevailing  party
                    reasonable  expenses,  attorneys' fees and costs incurred in
                    connection  therewith or in the enforcement or collection of
                    any  judgment or award  rendered  therein.  The  "prevailing
                    party" means the party  determined by the  arbitrator(s)  or
                    court,  as the case may be, to have most  nearly  prevailed,
                    even if such  party  did not  prevail  in all  matters,  not
                    necessarily the one in whose favor a judgment is rendered.


XI.      SECTION 280G BENEFITS ADJUSTMENT

                    If all or any portion of the amounts payable to the Employee
                    under this  Agreement,  either alone or together  with other
                    payments  which the  Employee  has the right to receive from
                    the Employer,  constitute "excess parachute payments" within
                    the meaning of Section 280G of the Code, that are subject to
                    the  excise  tax  imposed  by  Section  4999 of the Code (or
                    similar  tax  and/or  assessment),  the  Employer  (and  its
                    successor) and the Employee each agree to pay their share of
                    any taxes that may be imposed as a result of  payments  made
                    pursuant to this Agreement; provided, however, that Employer
                    and  Employee  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 Employee is greater than the amount initially
                    so  determined,  then the Employee 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.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

  Klamath First Federal Savings and Loan Association



/s/ Kermit K. Houser                                 /s/ Nina G. Drake
Kermit K. Houser                                     Witness
President and CEO




/s/ Ben A. Gay                                       /s/ Nina G. Drake
Ben A. Gay EVP/CCO                                   Witness
<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE A
                            EMPLOYEE BENEFIT SCHEDULE
                                     BEN GAY
                        DATE OF BIRTH: DECEMBER 24, 1946
                          HIRED ON: SEPTEMBER 24, 2001

                                 NORMAL           CHANGE IN                            DEATH BENEFIT:       DEATH BENEFIT:
       VESTING               RETIREMENT             CONTROL         DISABILITY            DEATH WHILE                AFTER
      DATE (1)               BENEFIT (2)         BENEFIT (3)        BENEFIT (4)           EMPLOYED (5)      TERMINATION (6)
<S>                            <C>                 <C>                <C>                  <C>                  <C>
   January 1, 2003              $17,408             $73,112                 $0             $1,044,460             $174,077
   January 1, 2004              $34,815             $79,379           $144,462             $1,044,460             $348,153
   January 1, 2005              $52,223             $85,646           $306,743             $1,044,460             $522,230
   January 1, 2006              $69,631             $91,912           $488,494             $1,044,460             $696,307
   January 1, 2007              $87,038             $98,179           $691,498             $1,044,460             $870,383
   January 1, 2008             $104,446            $104,446           $917,685             $1,044,460           $1,044,460
   and thereafter              $104,446            $104,446                 NA           see #5 below         see #5 below
<FN>

1.  The date that Normal Retirement and Death benefits vest.  See separate footnotes for Change in Control and
     Disability Benefits.
2.  Annual Retirement Benefits payable at age sixty-two (62). Benefits are payable for life and increase by 2% per
     year after Retirement.
3. The Employee is eligible to retire following Termination pursuant to a Change in Control any time after the
     attainment of age fifty five (55).  This is the annual sum the Employee will be paid if the Employee elects to
     receive Retirement Benefits on or after the Employee's birthday, but before the following anniversary. Once
     payments begin, Benefits are payable for life and increase by 2% per year thereafter.
4. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty
     Balance as of disability date.  Disability Benefit value is determined by straight-line interpolation between the
    amounts showing in this column for Jan 1 of the calendar year the disability occurs and Jan 1 of the following
    calendar year.  Benefit is paid as Employee elected in the Agreement.  No post-retirement benefit.
5.  Death benefit equals 10x initial Normal Retirement Benefit to age 70, 7x initial Normal Retirement Benefit to
    Age 80, and 3 x initial Normal Retirement Benefit thereafter.
6.  Unless termination is for Cause, the death benefit is the greater of $100,000 or 10x the vested annual retirement
     benefit at the time of termination.
</FN>
</TABLE>


/s/ Ben A. Gay   5/14/03   /s/ Nina G. Drake                         5/16/03
Ben A. Gay       Date      Bank Officer                              Date


<PAGE>
                                                                 Exhibit 10(d).1
                              EMPLOYMENT AGREEMENT
                        Amended and Restated May 19, 2003

     THIS  AGREEMENT  is made  effective  as of October 1, 2002,  by and between
KLAMATH FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"),  Klamath
Falls,  Oregon;   KLAMATH  FIRST  BANCORP,  INC.  (the  "Company"),   an  Oregon
corporation; and Frank X. Hernandez (the "Executive").

     WHEREAS,  the  Association  wishes to  assure  itself  of the  services  of
Executive for the period provided in this Agreement; and

     WHEREAS, the Executive is willing to serve in the employ of the Association
on a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1.       POSITION AND RESPONSIBILITIES.

     During the period of his employment hereunder, Executive agrees to serve as
Senior Vice  President of the  Association.  During said period,  Executive also
agrees to serve,  if elected,  as an officer of the Company or any subsidiary or
affiliate of the Company or the Association.

2.       TERMS AND DUTIES.

     (a) The term of this Agreement  shall be deemed to have commenced as of the
date first above  written and shall  continue for a period of  twenty-four  (24)
full calendar months  thereafter.  Commencing on the first anniversary date, and
continuing at each anniversary  date  thereafter,  the Board of Directors of the
Association (the "Board") or its Compensation Committee may extend the Agreement
for an  additional  year.  Prior to the  extension of the  Agreement as provided
herein,  the Board of Directors of the  Association  will review the Executive's
performance  evaluation  for  purposes  of  determining  whether  to extend  the
Agreement,  and the  results  thereof  shall be  included  in the minutes of the
Board's meeting.

     (b) During the period of his  employment  hereunder,  except for periods of
absence  occasioned by illness,  reasonable  vacation  periods,  and  reasonable
leaves of absence,  Executive shall devote  substantially all his business time,
attention,  skill,  and  efforts  to the  faithful  performance  of  his  duties
hereunder  including  activities  and  services  related  to  the  organization,
operation and management of the Association;  provided,  however, that, with the
approval of the Board, as evidenced by a resolution of such Board,  from time to
time,  Executive may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or  organizations,  which,
in such Board's  judgment,  will not present any  conflict of interest  with the
Association, or materially affect the performance of Executive's duties pursuant
to this Agreement.



<PAGE>

3.       COMPENSATION AND REIMBURSEMENT.

     (a) The  compensation  specified under this Agreement shall  constitute the
salary and  benefits  paid for the  duties  described  in  Sections 1 and 2. The
Association  shall pay Executive as  compensation  a salary of $108,000 per year
("Base  Salary")  effective  11/1/2002.  Such Base  Salary  shall be  payable in
accordance with the customary payroll  practices of the Association.  During the
period of this  Agreement,  Executive's  Base Salary  shall be reviewed at least
annually;  the first  such  review  will be made no later than one year from the
date of this  Agreement.  Such  review  shall be  conducted  by the Board or its
Compensation  Committee,  and the Board may increase Executive's Base Salary. In
addition to the Base Salary provided in this Section 3(a), the Association shall
provide  Executive at no cost to Executive  with all such other  benefits as are
provided uniformly to regular salaried employees of the Association.

     (b) The  Association  will provide  Executive with employee  benefit plans,
arrangements  and  perquisites   substantially  equivalent  to  those  in  which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement,  and the  Association  will not,
without  Executive's  prior  written  consent,  make any  changes in such plans,
arrangements or perquisites which would adversely affect  Executive's  rights or
benefits thereunder.  However, changes in Association-sponsored  group insurance
plan  premiums,   deductibles,   co-payments  and  related  coverage  limits  or
conditions  are  excluded  from the prior  sentence for any such change which is
consistently applied to or available to regular salaried Association  employees.
Without  limiting the generality of the foregoing  provisions of this Subsection
(b),  Executive will be entitled to participate in or receive benefits under any
employee  benefit  plans  including,  but  not  limited  to,  retirement  plans,
supplemental   retirement   plans,   pension   plans,    profit-sharing   plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement  made  available  by the  Association  in the  future to its  senior
executives and key management  employees,  subject to, and on a basis consistent
with,  the  terms,  conditions  and  overall  administration  of such  plans and
arrangements.  Executive will be entitled to incentive  compensation and bonuses
as provided in any plan, or pursuant to any arrangement of the  Association,  in
which Executive is eligible to participate.  Nothing paid to the Executive under
any such plan or arrangement will be deemed to be in lieu of other  compensation
to which the  Executive  is entitled  under this  Agreement,  except as provided
under Section 5(e).

     (c) In addition to the Base Salary  provided for by  paragraph  (a) of this
Section 3, the Association  shall pay or reimburse  Executive for all reasonable
travel  and  other  obligations  under  this  Agreement  and  may  provide  such
additional compensation in such form and such amounts as the Board may from time
to time determine.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     (a) Upon the  occurrence  of an Event of  Termination  (as herein  defined)
during the Executive's term of employment  under this Agreement,  the provisions
of  this  Section  shall  apply.  As  used  in  this  Agreement,  an  "Event  of
Termination"  shall mean and include any one or more of the  following:  (i) the
termination by the Association of Executive's full-time employment hereunder for
any reason  other than a Change in Control,  as defined in Section  5(a) hereof;
disability,  as defined in Section 6(a) hereof; death; or retirement, as defined
in Section 7 hereof; (ii) Executive's resignation from the Association's employ,
upon (A) unless consented to by the Executive,  a material change in Executive's
function,  duties,  or  responsibilities,  which change would cause  Executive's
position to become one of lesser responsibility,  importance,  or scope from the
position and attributes  thereof described in Sections 1 and 2, above, (any such
material change shall be deemed a continuing  breach of this  Agreement),  (B) a
relocation of  Executive's  principal  place of employment by more than 35 miles
from  its  location  at the  effective  date of this  Agreement,  or a  material
reduction in the benefits and perquisites to Executive from those being provided
as of the effective date of this  Agreement,  (C) the liquidation or dissolution
of the Association, or (D) any breach of this Agreement by the Association. Upon
the occurrence of any event  described in clauses (A), (B), (C), or (D),  above,
Executive  shall have the right to elect to terminate his employment  under this
Agreement by resignation upon not less than sixty (60) days prior written notice
given  within a  reasonable  period of time not to  exceed,  except in case of a
continuing  breach,  four  calendar  months  after the event giving rise to said
right to elect.

     (b) Upon the occurrence of an Event of Termination  other than for Cause of
for Neglect (as described in Sections 8 and 9 hereof), the Association shall pay
Executive,  or,  in the  event  of his  subsequent  death,  his  beneficiary  or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages,  or both,  a sum equal to the  payments  due to the  Executive  for the
remaining term of the Agreement,  including Base Salary,  bonuses, and any other
cash or  deferred  compensation  paid  or to be paid  (including  the  value  of
employer  contributions that would have been made on the Executive's behalf over
the  remaining  term  of the  agreement  to any  tax-qualified  retirement  plan
sponsored by the  Association as of the Date of  Termination),  to the Executive
for the term of the Agreement provided,  however, that if the Association is not
in compliance  with its minimum  capital  requirements or if such payments would
cause  the  Association's  capital  to be  reduced  below  its  minimum  capital
requirements, such payments shall be deferred until such time as the Association
is in capital compliance.  All payments made pursuant to this Section 4(b) shall
be paid in substantially  equal monthly  installments over the remaining term of
this Agreement following the Executive's termination; provided, however, that if
the remaining term of the Agreement is less than one (1) year  (determined as of
the Executive's Date of  Termination),  such payments and benefits shall be paid
to the Executive in a lump sum within 30 days of the Date of Termination.

     (c) Upon the occurrence of an Event of Termination  other than for Cause or
for Neglect (as  described  in Sections 8 and 9 hereof),  the  Association  will
cause  to  be  continued   life,   medical,   dental  and  disability   coverage
substantially  identical  to the  coverage  maintained  by the  Association  for
Executive  prior  to  his  termination.  Such  coverage  shall  cease  upon  the
expiration of the remaining term of this Agreement.

5.       CHANGE IN CONTROL.

     (a) No benefit  shall be paid under this  Section 5 unless there shall have
occurred a Change in Control of the Company or the Association.  For purposes of
this Agreement, a "Change in Control" of the Company or the Association shall be
deemed to occur if and when (a) an  offeror  other  than the  Company  purchases
shares of the common  stock of the  Company  or the  Association  pursuant  to a
tender or exchange  offer for such shares,  (b) any person (as such term is used
in Sections  13(d) and  14(d)(2) of the  Securities  Exchange Act of 1934) is or
becomes the  beneficial  owner,  directly or  indirectly,  of  securities of the
Company or the Association representing 25% or more of the combined voting power
of the Company's then outstanding securities, (c) the membership of the board of
directors of the Company or the Association changes as the result of a contested
election,  such that  individuals  who were  directors  at the  beginning of any
twenty-four month period (whether  commencing before or after the effective date
of this  Agreement) do not constitute a majority of the Board at the end of such
period, or (d) shareholders of the Company or the Association  approve a merger,
consolidation,  sale or disposition of all or substantially all of the Company's
or the Association's assets, or a plan of partial or complete liquidation.

     (b) If any of the events  described in Section 5(a) hereof  constituting  a
Change in Control have occurred or the Board of the  Association  or the Company
has  determined  that a Change  in  Control  has  occurred,  Executive  shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this Section
5 upon his subsequent  involuntary  termination of employment at any time during
the term of this  Agreement  (or  voluntary  termination  following  a Change of
Control following any demotion,  loss of title, office or significant authority,
reduction in his annual compensation or benefits, or relocation of his principal
place of employment by more than 35 miles from its location immediately prior to
the  Change in  Control),  unless  such  termination  is  because  of his death,
retirement as provided in Section 7,  termination  for Cause, or termination for
Disability.

     (c) Upon the occurrence of a Change in Control  followed by the Executive's
termination of employment,  the Association shall pay Executive, or in the event
of his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, as severance  pay or  liquidated  damages,  or both, a sum equal to
1.50  times the  Executive's  "base  amount,"  within  the  meaning  of  Section
280G(b)(3)  of the Internal  Revenue  Code of 1986  ("Code"),  as amended.  Such
payment shall be made in a lump sum paid within ten (10) days of the Executive's
Date of Termination.

     (d) Upon the occurrence of a Change in Control  followed by the Executive's
termination  of employment,  the  Association  will cause to be continued  life,
medical,  dental and disability coverage substantially identical to the coverage
maintained by the Association for Executive prior to his severance. In addition,
Executive shall be entitled to receive the value of employer  contributions that
would have been made on the  Executive's  behalf over the remaining  term of the
agreement to any  tax-qualified  retirement plan sponsored by the Association as
of the Date of  Termination.  Such  coverage and  payments  shall cease upon the
expiration of thirty-six (36) months.

     (e) Upon the  occurrence  of a Change in Control,  the  Executive  shall be
entitled to receive benefits due him under, or contributed by the Company or the
Association  on his  behalf,  pursuant  to  any  retirement,  incentive,  profit
sharing,  bonus,   performance,   disability  or  other  employee  benefit  plan
maintained by the  Association or the Company on the  Executive's  behalf to the
extent that such benefits are not otherwise  paid to the Executive upon a Change
in Control.

     (f) IRS Section 280G Issues.  If 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 Company or  Association,
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 Company or Association  (and their  successor)  shall be responsible for any
loss of  deductibility  related  thereto;  provided,  however,  that  Company or
Association 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 Company or
Association immediately prior to the change in control or such other independent
accounting  firm  or  advisor  as  may  be  mutually  agreeable  to  Company  or
Association  and  Executive  in the  exercise  of their  reasonable  good  faith
judgment.


6.       TERMINATION FOR DISABILITY.

     (a) If the Executive shall become disabled as defined in the  Association's
then  current  disability  plan (or,  if no such plan is then in effect,  if the
Executive  is  permanently  and totally  disabled  within the meaning of Section
22(e)(3) of the Code as determined by a physician  designated by the Board), the
Association may terminate Executive's employment for "Disability."

     (b) Upon the  Executive's  termination  of employment for  Disability,  the
Association will pay Executive,  as disability pay, a semi-monthly payment equal
to three-quarters  (3/4) of Executive's  semi-monthly rate of Base Salary on the
effective date of such termination.  These disability payments shall commence on
the effective date of Executive's termination and will end on the earlier of (i)
the date Executive returns to the full-time employment of the Association in the
same capacity as he was employed  prior to his  termination  for  Disability and
pursuant to an employment agreement between Executive and the Association;  (ii)
Executive's full-time employment by another employer;  (iii) Executive attaining
the age of 65; or (iv)  Executive's  death; or (v) the expiration of the term of
this Agreement.  The disability pay shall be reduced by the amount, if any, paid
to the Executive under any plan of the Association providing disability benefits
to the Executive.

     (c) The Association  will cause to be continued life,  medical,  dental and
disability  coverage  substantially  identical to the coverage maintained by the
Association for Executive prior to his termination for Disability. This coverage
and payments shall cease upon the earlier of (i) the date  Executive  returns to
the  full-time  employment  of the  Association,  in the same capacity as he was
employed prior to his  termination  for Disability and pursuant to an employment
agreement  between  Executive and the Association;  (ii)  Executive's  full-time
employment by another employer;  (iii)  Executive's  attaining the age of 65; or
(iv) the Executive's death; or (v) the expiration of the term of this Agreement.

     (d)  Notwithstanding  the  foregoing,  there  will be no  reduction  in the
compensation  otherwise  payable to  Executive  during any period  during  which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.

7.       TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.

     Termination by the  Association of Executive  based on  "Retirement"  shall
mean  retirement  at age 65 or in  accordance  with any  retirement  arrangement
established  with  Executive's  consent with respect to him. Upon termination of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement  plan of the  Association  or the  Company  and other  plans to which
Executive is a party.  Upon the death of the  Executive  during the term of this
Agreement,  the Association shall pay to Executive's estate the compensation due
to the Executive  through the last day of the calendar  month in which his death
occurred.


<PAGE>

8.       TERMINATION FOR CAUSE.

     For  purposes of this  Agreement,  "Termination  for Cause"  shall  include
termination  because  of  the  Executive's  personal  dishonesty,  incompetence,
willful misconduct,  breach of fiduciary duty involving personal profit, willful
violation of any law,  rule,  or  regulation  (other than traffic  violations or
similar  offenses) or final  cease-and-desist  order,  or material breach of any
provision of this Agreement. In addition,  "Termination for Cause" shall include
termination  because of the  Executive's  intentional  failure to perform stated
duties, such as the refusal of the Executive to comply with the Association's or
the Company's  instructions,  policies or rules or other willful  conduct of the
Executive  which  materially  adversely  reflects  on the  Association's  or the
Company 's reputation or operation. For purposes of this Section, no act, or the
failure to act, on Executive's  part shall be "willful"  unless done, or omitted
to be done, not in good faith and without  reasonable  belief that the action or
omission  was  in  the  best  interest  of the  Association  or its  affiliates.
Notwithstanding  the  foregoing,  Executive  shall  not be  deemed  to have been
terminated  for Cause unless and until there shall have been  delivered to him a
copy of a  resolution  duly  adopted  by the  affirmative  vote of not less than
three-fourths  of the members of the Board at a meeting of the Board  called and
held for that purpose (after  reasonable  notice to Executive and an opportunity
for him, together with counsel,  to be heard before the Board),  finding that in
the good faith opinion of the Board,  Executive was guilty of conduct justifying
termination  for Cause and specifying the reasons  thereof.  The Executive shall
not have the right to  receive  compensation  or other  benefits  for any period
after  termination  for Cause.  Any stock options granted to Executive under any
stock option plan or any unvested  awards  granted under any other stock benefit
plan of the Association,  the Company,  or any subsidiary or affiliate  thereof,
shall  become  null and void  effective  upon  Executive's  receipt of Notice of
Termination for Cause pursuant to Section 9 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.

9.       TERMINATION FOR NEGLECT.

     The  Association and Company,  or either of them may terminate  Executive's
employment  under this  Agreement at any time for Neglect.  For purposes of this
Agreement,  "Neglect"  means the failure of Executive to give due care to stated
duties or to comply with instructions or directives of the Board of Directors of
the  Association  or  Company or either of them,  but where such  failure is not
determined to be willful or intentional as defined in Section 8. Termination for
Neglect  includes  termination  as the  result  of any  continuing  or  repeated
problems with  Executive's  job  performance  or conduct  after  written  notice
specifying such problem with  performance or conduct,  and where such continuing
and repeated problems were not determined to be willful or intentional, or where
the conduct was not deemed to have a material  adverse impact on the Association
or Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been  terminated  by  Neglect  unless  and until  there  shall have been sent to
Executive  a copy of a  resolution  duly  adopted by a majority  of the Board of
Directors of the  Association  and  Company,  or either of them  (excluding  the
Executive  in counting  the  majority if the  Executive  is then on the board of
directors,  and after  reasonable  notice to Executive  and an  opportunity  for
Executive to be heard before the board of  directors),  finding that in the good
faith  opinion of the board of directors  of the  Association  and  Company,  or
either of them, Executive engaged in conduct justifying  termination for Neglect
and describing  specifically the conduct.  Executive shall not have the right to
receive any salary or bonus for any period after  termination  of employment for
Neglect.  Executive  shall retain any vested  benefits in defined benefit plans,
defined  contribution  plans,  supplemental  executive  retirement plans,  stock
option plans,  restricted stock plans, or other such benefits, but shall forfeit
any rights that have not vested.


10.      REQUIRED PROVISIONS.

     (a) The Association may terminate  Executive's  employment at any time, but
any  termination  by the  Association,  other than as  described in Section 8 or
Section  9  of  this  Agreement,   shall  not  prejudice  Executive's  right  to
compensation  or other benefits under this  Agreement.  Executive shall not have
the  right to  receive  compensation  or other  benefits  for any  period  after
Termination for Cause as defined in Section 8 herein.

     (b)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
participating  in the conduct of the  Association's  affairs by a notice  served
under Section  8(e)(3) or (g)(1) of the Federal  Deposit  Insurance Act ("FDIA")
(12 U.S.C.  1818(e)(3)  and (g)(1)),  the  Association's  obligations  under the
Agreement  shall  be  suspended  as of the date of  service,  unless  stayed  by
appropriate  proceedings.  If the  charges  in the  notice  are  dismissed,  the
Association  may,  in its  discretion,  (i)  pay  Executive  all or  part of the
compensation  withheld  while its contract  obligations  were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.

     (c)  If   Executive  is  removed   and/or   permanently   prohibited   from
participating  in the conduct of the  Association's  affairs by an order  issued
under  Section  8(e)(4) or (g)(1) of the FDIA (12 U.S.C.  1818(e)(4) or (g)(1)),
all obligations of the Association under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting  parties shall
not be affected.

     (d) If the  Association is in default (as defined in Section 3(x)(1) of the
FDIA),  all  obligations  under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.

     (e) All obligations under this Agreement shall be terminated (except to the
extent  determined  that  continuation  of the  Agreement is  necessary  for the
continued  operation of the  Association):  (i) by the Director of the Office of
Thrift  Supervision  (the  "Director")  or his or her  designee  at the time the
Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters
into an agreement to provide assistance to or on behalf of the Association under
the authority contained in Section 13(c) of the FDIA or (ii) by the Director, or
his or her  designee  at the time  the  Director  or such  designee  approves  a
supervisory  merger to resolve  problems related to operation of the Association
or when the  Association  is  determined  by the  Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

     (f)  Any  payments  made  to  Executive  pursuant  to  this  Agreement,  or
otherwise,  are  subject  to and  conditioned  upon  compliance  with 12  U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

11.      NOTICE.

     (a) Any purported  termination by the  Association or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this  Agreement,  a "Notice of  Termination"  shall mean a written  notice which
shall indicate the specific termination  provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances  claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

     (b) "Date of  Termination"  shall  mean (A) if  Executive's  employment  is
terminated  for  Disability,  thirty (30) days after a Notice of  Termination is
given (provided that he shall not have returned to the performance of his duties
on a  full-time  basis  during  such  thirty  (30) day  period),  and (B) if his
employment is terminated for any other reason,  the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

     (c) If, within thirty (30) days after any Notice of  Termination  is given,
the party  receiving such Notice of Termination  notifies the other party that a
dispute  exists  concerning  the  termination,  except upon the  occurrence of a
Change in Control and voluntary  termination  by the Executive in which case the
Date of  Termination  shall be the date  specified  in the  Notice,  the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties,  by a binding  arbitration award, or
by a final judgment,  order or decree of a court of competent  jurisdiction (the
time for appeal there from having  expired and no appeal having been  perfected)
and provided further that the Date of Termination  shall be extended by a notice
of dispute  only if such notice is given in good faith and the party giving such
notice  pursues  the  resolution  of such  dispute  with  reasonable  diligence.
Notwithstanding the pendency of any such dispute,  the Association will continue
to pay Executive his full  compensation in effect when the notice giving rise to
the dispute was given (including,  but not limited to, Base Salary) and continue
him as a participant in all  compensation,  benefit and insurance plans in which
he was participating  when the notice of dispute was given, until the dispute is
finally  resolved in  accordance  with this  Agreement.  Amounts paid under this
Section are in addition to all other amounts due under this  Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.

12.      NON-COMPETITION.

     (a) Upon any termination of Executive's employment hereunder pursuant to an
Event of  Termination as provided in Section 4 hereof,  Executive  agrees not to
compete  with the  Association  and/or the  Company for a period of one (1) year
following such  termination in any city, town or county in which the Association
and/or the  Company  has an office or has filed an  application  for  regulatory
approval to establish an office,  determined  as of the  effective  date of such
termination.  Executive  agrees that during such period and within said  cities,
towns and counties, Executive shall not work for or advise, consult or otherwise
serve  with,  directly  or  indirectly,  any entity  whose  business  materially
competes  with the  depository,  lending  or other  business  activities  of the
Association and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the  Association  and/or the  Company,  its  business  and
property in the event of Executive's  breach of this Subsection 11(a) agree that
in the event of any such breach by Executive, the Association and/or the Company
will be entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive,  Executive's partners,
agents,  servants,  employers,  employees  and all  persons  acting  for or with
Executive.  Executive represents and admits that in the event of the termination
of his  employment  pursuant  to Section 8 hereof,  Executive's  experience  and
capabilities are such that Executive can obtain employment in a business engaged
in other lines  and/or of a different  nature  than the  Association  and/or the
Company,  and that the  enforcement  of a remedy by way of  injunction  will not
prevent Executive from earning a livelihood. Nothing herein will be construed as
prohibiting the Association  and/or the Company from pursuing any other remedies
available to the  Association  and/or the Company for such breach or  threatened
breach, including the recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
business  activities and plans for business  activities of the  Association  and
affiliates  thereof,  as it may exist from time to time, is a valuable,  special
and unique asset of the business of the Association.  Executive will not, during
or  after  the term of his  employment,  disclose  any  knowledge  of the  past,
present,  planned  or  considered  business  activities  of the  Association  or
affiliates  thereof to any person,  firm,  corporation,  or other entity for any
reason or purpose  whatsoever.  Notwithstanding  the  foregoing,  Executive  may
disclose  any  knowledge  of  banking,  financial  and/or  economic  principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Association.  In the event of a breach or threatened
breach by the Executive of the provisions of this Section,  the Association will
be entitled to an injunction restraining Executive from disclosing,  in whole or
in part,  the knowledge of the past,  present,  planned or  considered  business
activities of the  Association  or  affiliates  thereof,  or from  rendering any
services to any person, firm, corporation,  other entity to whom such knowledge,
in whole or in  part,  has been  disclosed  or is  threatened  to be  disclosed.
Nothing herein will be construed as prohibiting  the  Association  from pursuing
any other remedies  available to the  Association  for such breach or threatened
breach, including the recovery of damages from Executive.

13.      SOURCE OF PAYMENTS.

     All  payments  provided in this  Agreement  shall be timely paid in cash or
check  from  the  general  funds  of  the  Association.  The  Company,  however,
guarantees  all  payments  and the  provision  of all amounts and  benefits  due
hereunder to Executive  and, if such payments are not timely paid or provided by
the  Association,  such  amounts and  benefits  shall be paid or provided by the
Company.

14.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior  employment  agreement  between the  Association or any
predecessor of the Association  and Executive,  except that this Agreement shall
not  affect or operate to reduce  any  benefit  or  compensation  inuring to the
Executive of a kind elsewhere provided.  No provision of this Agreement shall be
interpreted to mean that  Executive is subject to receiving  fewer benefits than
those available to him without reference to this Agreement.

15.      NO ATTACHMENT.

     (a) Except as  required  by law,  no right to receive  payments  under this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to affect any such action  shall be null,
void, and of no effect.  (b) This Agreement  shall be binding upon, and inure to
the benefit of,  Executive,  the  Association,  the Company and their respective
successors and assigns.

16.      MODIFICATION AND WAIVER.

     (a) This  Agreement may not be modified or amended  except by an instrument
in writing signed by the parties hereto.

     (b) No term or  condition  of this  Agreement  shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement,  except by written  instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing  waiver
unless specifically  stated therein,  and each such waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.


17.      SEVERABILITY.

     If, for any reason,  any  provision of this  Agreement,  or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this  Agreement or any part of such  provision not held so invalid,  and each
such other  provision and part thereof shall to the full extent  consistent with
law continue in full force and effect.

18.      HEADINGS FOR REFERENCE ONLY.

     The headings of sections  and  paragraphs  herein are  included  solely for
convenience of reference and shall not control the meaning or  interpretation of
any of the provisions of this Agreement.

19.      GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Oregon, unless
otherwise specified herein;  provided,  however, that in the event of a conflict
between the terms of this Agreement and any  applicable  federal or state law or
regulation, the provisions of such law or regulation shall prevail.

20.      ARBITRATION.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three  arbitrators  sitting in a location selected by the employee within one
hundred (100) miles from the location of the Association, 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;  provided,
however,  that Executive  shall be entitled to seek specific  performance of his
right to be paid  until  the Date of  Termination  during  the  pendency  of any
dispute or controversy arising under or in connection with this Agreement.

21.      PAYMENT OF LEGAL FEES.

     All  reasonable  legal fees paid or incurred by  Executive  pursuant to any
dispute or question of  interpretation  relating to this Agreement shall be paid
or reimbursed by the  Association,  if successful  pursuant to a legal judgment,
arbitration or settlement.

22.      INDEMNIFICATION.

     The Association shall provide Executive (including his heirs, executors and
administrators)   with  coverage  under  a  standard  directors'  and  officers'
liability insurance policy at its expense,  or in lieu thereof,  shall indemnify
Executive (and his heirs,  executors and  administrators)  to the fullest extent
permitted under law against all expenses and liabilities  reasonably incurred by
him in  connection  with or arising out of any action,  suite or  proceeding  in
which he may be  involved  by reason of his having been a director or officer of
the Association (whether or not he continues to be a directors or officer at the
time of incurring such expenses or  liabilities),  such expenses and liabilities
to include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.



23.      SUCCESSOR TO THE ASSOCIATION OR THE COMPANY.

     The  Association  and the Company  shall require any successor or assignee,
whether direct or indirect, by purchase, merger,  consolidation or otherwise, to
all or  substantially  all the  business  or  assets of the  Association  or the
Company,  expressly  and  unconditionally  to assume  and agree to  perform  the
Association's  or the Company's  obligations  under this Agreement,  in the same
manner and to the same  extent  that the  Association  or the  Company  would be
required to perform if no such succession or assignment had taken place.


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by a duly  authorized  officer or director of the  Association  and the
Company,  and Executive has signed this  Agreement,  all on the 19th day of May,
2003.

KLAMATH FIRST BANCORP, INC.                 KLAMATH FIRST FEDERAL SAVINGS
                                                      AND LOAN ASSOCIATION


BY:  /s/ Kermit K. Houser                   BY:  /s/ Kermit K. Houser
    Kermit K. Houser, President & CEO           Kermit K. Houser President & CEO



/s/ Nina G. Drake                                    /s/ Frank X. Hernandez
WITNESS:                                             Frank X. Hernandez

<PAGE>
                                                                 Exhibit 10(d).2
                     FIRST AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This FIRST  AMENDMENT TO AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal  Savings and Loan  Association  ("Association"),  Klamath First Bancorp,
Inc.,  ("Company")  and the  undersigned  executive  officer of Association  and
Company (the "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an Amended and
Restated Employment Agreement dated May 19, 2003, (the "Employment Agreement");

     WHEREAS,  Company has entered into an Agreement and Plan of Merger dated as
of July 14, 2003, (the "Merger  Agreement") with Sterling Financial  Corporation
("Sterling") with respect to a proposed transaction (the "Transaction")  whereby
Sterling will acquire all of the outstanding shares of Company common stock in a
stock merger;

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
the  Transaction  so as to  enable  his  change in  control  of  benefits  to be
triggered under the Employment  Agreement and his Executive Salary  Continuation
Agreement,  and to enhance the value of shares of common stock of Company  owned
by the Executive  and the value of his stock options to acquire  common stock of
Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Capitalized terms used herein, to the extent not defined  otherwise,  shall
     have the meaning ascribed to them in the Employment Agreement.

2.   Section 5(c) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association shall pay the Executive as severance pay or
     liquidated damages, or both (the "Base Severance Amount"),  an amount equal
     to $162,000.  In the event that all  conditions to closing under the Merger
     Agreement have been satisfied  during calendar year 2003, then  Association
     shall  make  payment  of the Base  Severance  Amount  plus  the  Additional
     Severance  Amount (as defined in Section  5(d) below) to the  Executive  on
     December 31, 2003. In the event such closing  conditions  are not satisfied
     during calendar year 2003, then the payments  contemplated  herein shall be
     made within 10 days after  consummation  of the merger  contemplated by the
     Merger Agreement.  Notwithstanding  the foregoing,  if the Executive enters
     into a new written  employment  agreement with Sterling or Sterling Savings
     Bank prior to  December  31, 2003 (but  effective  upon  completion  of the
     merger contemplated by the Merger Agreement), then the Severance Amount and
     Additional  Severance Amount shall not be paid pursuant to the terms hereof
     and any  severance to be provided to the  Executive,  if any,  shall be set
     forth in such new written employment agreement."

     Section 5(d) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association  shall  pay  the  Executive  as  additional
     severance the amount of $5,750 (the "Additional  Severance Amount") in lieu
     of any obligation to pay the Executive the value of employer  contributions
     that would have been made on the Executive's behalf over the remaining term
     of the  agreement to any  tax-qualified  retirement  plan.  The  Additional
     Severance  Amount  shall be paid at the time the Base  Severance  Amount is
     paid pursuant to Section 5(c) above.  Upon the  Executive's  termination of
     service in connection with or following a Change in Control arising from or
     relating   to   the   Merger   Agreement,   Sterling   Savings   Bank,   as
     successor-in-interest to the Association,  shall provide the Executive with
     continued life, medical, dental and disability coverage as is then provided
     by Sterling  Savings Bank to its  full-time  employees,  as the same may be
     changed from time to time,  during the 36 month period next  following  the
     Executive's  Date  of  Termination  with  the  cost to be  absorbed  by the
     Executive  being equal to the lesser of (i) the  employee  cost of coverage
     currently  being  borne  by the  Executive  or (ii)  the  employee  cost of
     coverage  borne by full-time  employees of Sterling  Savings Bank receiving
     the same  coverage;  provided  if the cost of  coverage  to be borne by the
     Executive is determined  under subpart (i), then such cost shall be subject
     to pro  rata  adjustment  based  upon the pro  rata  adjustment  in cost of
     coverage  that is borne by  full-time  employees  of Sterling  Savings Bank
     receiving the same coverage after completion of the merger  contemplated by
     the Merger Agreement."

3.   New Section 24 is added to the Employment Agreement as follows:

     "24.  Long  Term  Medical  Care.  The  Executive  shall  have  a  right  to
     participate  in the long term  medical care  program to be  implemented  by
     Association  if the Executive  meets the  eligibility  requirements  of the
     insurer. If the Executive meets the eligibility requirements of the insurer
     and becomes a participant  in the long term medical care  program,  then in
     that  event,  his Base  Severance  Amount  shall be  reduced  by the single
     premium cost paid by Association  for such long term medical care on behalf
     of the Executive (which is estimated to be $50,000) and the Executive shall
     have no obligation to reimburse  Association  for any premium cost relating
     to such program after the Executive's termination of employment."

4.   The  Employment  Agreement  shall be further  amended by adding  thereto an
     "Exhibit A to the  Employment  Agreement"  in the form  attached  hereto as
     Appendix I.

5.   Except as  specifically  set forth herein,  the Employment  Agreement shall
     continue  in full  force  and  effect.  To the  extent  that any  provision
     contained in this Agreement is  inconsistent  with any of the provisions of
     the  Employment  Agreement,  including  but not  limited to,  Section  5(b)
     thereof, the provisions contained in this Agreement shall be controlling.

6.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

7.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so  executed  shall be deemed an  original  and all of which,
     taken together, shall constitute one and the same agreement.

     The parties have entered this Agreement on July 14, 2003.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


                                                By: /s/ Kermit K.  Houser
                                                Kermit K.  Houser
                                                President/CEO
                                                KLAMATH  FIRST BANCORP, INC.


                                                By: /s/ Craig M Moore
                                                Craig M Moore
                                                SVP/Chief Auditor

                                                EXECUTIVE:


                                                By: /s/ Frank X Hernandez
                                                Frank X. Hernandez
                                                SVP/COO

<PAGE>
                                                                 Exhibit 10(d).3
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
Frank X. Hernandez,  an Employee of the Employer (hereinafter referred to as the
"Employee"), who resides in the State of Oregon.

                                               W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

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

     WHEREAS,  the  Employee'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 Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.       EMPLOYMENT

          Although  this  Agreement is intended to provide the Employee  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 Employee and the Employer nor shall any  provision of this
          Agreement  restrict or expand the right of the  Employer to  terminate
          the  Employee's  employment.  This  Agreement  shall have no impact or
          effect  upon any  separate  written  Employment  Agreement  which  the
          Employee 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 from, and shall have no effect upon, or be affected
          by, the terms and provisions of said Employment Agreement.

          Except as otherwise set forth in this  Agreement,  the term "Employer"
          shall  mean  Klamath  First  Federal  Savings  and  Loan  Association;
          provided,  further,  that for  purposes  of this  Agreement,  the term
          "Employer" shall mean Klamath First Bancorp, Inc. and its subsidiaries
          and affiliated entities,  including any parent holding company and its
          subsidiaries.


II.      FRINGE BENEFITS

          The  salary  continuation  benefits  provided  by this  Agreement  are
          granted by the  Employer as a fringe  benefit to the  Employee and are
          not part of any salary  reduction plan or an  arrangement  deferring a
          bonus or a salary  increase.  The  Employee  has no option to take any
          current payment or bonus in lieu of these salary continuation benefits
          except as set forth hereinafter.


III.     retirement date and early retirement date

         A.       Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-two  ("62") years of age and  acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.

<PAGE>


         B.       Early Retirement Date:

               The term "Early  Retirement  Date" shall mean the Retirement,  as
               defined above, of the Employee on, or after the Employee achieves
               fifty-five  (55) years of age, but has not yet reached  sixty-two
               (62) years of age.


IV.      retirement benefit and early retirement benefit

         A.       Retirement Benefit:

               If the Employee shall remain in the continuous  employment of the
               Employer until  attaining age sixty-two  (62), the Employee shall
               be entitled to be paid the "Normal Retirement  Benefit" specified
               in   Schedule  A,   payable  in   substantially   equal   monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the Employee  Retires (or on
               such later date as may be mutually  agreed  upon by the  Employee
               and the  Employer  in advance of said  Retirement  date)  payable
               until the Employee's death. After  commencement of payments,  the
               Normal  Retirement  Benefit will increase by two percent (2%) per
               year.

         B.       Early Retirement Benefit:

               The  Employee  shall  have the right to  retire  on a date  which
               constitutes an Early  Retirement  Date as defined in Subparagraph
               III (B) above.  In the event the  Employee  elects to Retire on a
               date which  constitutes an Early  Retirement Date, and said early
               retirement  is not  pursuant to a Change in Control as defined in
               paragraph VI below, the Employee shall be entitled to be paid the
               "Normal Retirement  Benefit" specified in Schedule A for the date
               the Retirement occurs, but reduced by a factor of one-half of one
               percent  (.5%) per month for each month or portion  thereof  that
               the Early  Retirement  occurs prior to the  Retirement  Date. The
               benefit   shall  be  payable  in   substantially   equal  monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the  Early  Retirement  Date
               occurs (or on such later date as may be  mutually  agreed upon by
               the Employee and the Employer in advance of such Early Retirement
               Date).  After  commencement  of  payments,  the Early  Retirement
               benefit will increase by two percent (2%) per year.

               Example:  If the Early  Retirement  Date occurs on the Employee's
               60th birthday and if the Retirement Date in Section III.A.  above
               is at age 62, the Normal Retirement Benefit specified in Schedule
               "A" as of the  Employee's  60th birthday  would be reduced by 12%
               [.5% x 24 months].


V.       other termination of EMPLOYMENT and DISABILITY

         A.       Payments in the Event Employment Is Terminated Prior to
                  Retirement:

               The  Employer  reserves  the right to  terminate  the  Employee's
               employment,  with or without  cause but  subject  to any  written
               employment  agreement  which may then exist, at any time prior to
               the  Employee's  Retirement.  In the event that the employment of
               the Employee shall be terminated,  other than by reason of death,
               Disability  or  Retirement,  prior  to the  Employee's  attaining
               sixty-two (62) years of age, then this Agreement  shall terminate
               on the date of such termination of employment; provided, however,
               that the Employee shall be entitled to the following  benefits as
               may be applicable  depending upon the  circumstances  surrounding
               the Employee's termination:

              (i)      Termination for Other Than Disability, Change in Control
                       or Cause:

               If the Employee's  employment is terminated by the Employee or by
               the  Employer for any reason  other than  Disability,  "Change in
               Control"  or  "Termination  for  Cause,"  the  Employee  shall be
               entitled to be paid the "Normal Retirement  Benefit" specified in
               Schedule   A  as  of  the  date  of   termination,   payable   in
               substantially equal monthly installments on the first day of each
               month,  beginning with the month following the month in which the
               Employee  attains  sixty-two  (62) years of age (or on such later
               date  as may be  mutually  agreed  upon by the  Employee  and the
               Employer   not  less  than   fifteen  (15)  days  prior  to  such
               commencement  date) payable until the Employee's death, and shall
               increase  by two  percent  (2%)  per  year.  Alternatively,  upon
               achieving age fifty-five (55) but before  achieving age sixty-two
               (62),  the  Employee  may choose to receive the Early  Retirement
               Benefit with the reductions from the "Normal Retirement  Benefit"
               as of the date of termination,  and as described in Section IV.B.
               of this Agreement.  The benefit shall be payable in substantially
               equal  monthly  installments  on the  first  day of  each  month,
               beginning  with the month  following the month in which the Early
               Retirement  Date occurs (or on such later date as may be mutually
               agreed  upon by the  Employee  and the  Employer  not  less  than
               fifteen (15) days prior to such commencement date) payable to the
               Employee's  death,  and shall  increase by two  percent  (2%) per
               year.

<PAGE>


                   (ii)    Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee 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 Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

         B.       Payment in the Event of Disability Prior to Retirement:

               The  Employee  shall,  in  connection  with  acceptance  of  this
               Agreement,  elect  below  either  the "Lump Sum  Payment"  or the
               "Annuity  for Life"  option in the  event  the  Employee  becomes
               disabled at any time after the Effective  Date of this  Agreement
               but prior to  Retirement.  The term  "Disability"  or  "Disabled"
               shall  have the same  meaning  given  such terms in any policy of
               disability  insurance  maintained by the Employer for the benefit
               of employees  including  the  Employee.  In the absence of such a
               policy,  which  extends  coverage to the Employee in the event of
               disability, the terms shall mean bodily injury or disease (mental
               or  physical)   which  wholly  and   continuously   prevents  the
               performance of the Employee's duties to the Employer for at least
               one hundred twenty (120) days.

(i)      Lump Sum Payment.

                    The  Employee  shall  be  entitled  to be paid  the lump sum
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the  date  of  disability  or  date  the
                    Employee  otherwise  terminated  service  with the  Employer
                    other than for Cause.  The lump sum shall be payable 60 days
                    from the date the Employer has received a written request to
                    commence benefits, along with documentation showing that the
                    Employee has become disabled.

(ii)     Annuity for Life.

                    The Employee shall be entitled to be paid an annuity for the
                    Employee's life. The Employer shall purchase such an annuity
                    from an  insurance  company  with an A. M.  Best or  Moody's
                    rating  of  no  less  than  AA  and  using  the   amount  of
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the date of  disability  or the date the
                    Employee  otherwise  terminated  service  with the  Employer
                    other  than for  Cause.  The  Employer  shall  purchase  the
                    annuity  within  60 days  from  the date  the  Employer  has
                    received a written request to commence benefits,  along with
                    documentation showing that the Employee has become Disabled.
                    Nevertheless,  if the amount of the  applicable  "Disability
                    Benefit"  specified in Schedule A is $50,000.00 or less, the
                    payment  shall be as a lump sum to the  Employee and not the
                    purchase of an annuity for life.

(iii)    Employee  Election of Disability  Benefit.

                    I elect to receive the following  Disability Benefit (Please
                    sign on applicable line):

                           ______________________    Lump Sum Benefit.


                           /s/ Frank X. Hernandez    Annuity for Life.


VI.               CHANGE OF CONTROL

         A.       Definition of Change In Control:

                    A "Change in Control" of Klamath  First  Bancorp,  Inc. (the
                    "Company")  or  Klamath  First  Federal   Savings  and  Loan
                    Association (the "Association")  shall be deemed to occur if
                    and when (a) an  offeror  other than the  Company  purchases
                    shares of the common stock of the Company or the Association
                    pursuant to a tender or exchange offer for such shares,  (b)
                    any  person  (as such  term is used in  Sections  13(d)  and
                    14(d)(2)  of the  Securities  Exchange  Act of  1934)  is or
                    becomes the beneficial  owner,  directly or  indirectly,  of
                    securities  of the Company or the  Association  representing
                    25% or more of the combined voting power of the Company's or
                    the  Association's  then  outstanding  securities,  (c)  the
                    membership  of the board of  directors of the Company or the
                    Association  changes as the result of a contested  election,
                    such that individuals who were directors at the beginning of
                    any twenty-four  month period (whether  commencing before or
                    after  the  effective   date  of  this   Agreement)  do  not
                    constitute  a  majority  of the  Board  at the  end of  such
                    period,   or  (d)   shareholders   of  the  Company  or  the
                    Association  approve  a  merger,   consolidation,   sale  or
                    disposition of all or substantially  all of the Company's or
                    the  Association's  assets, or a plan of partial or complete
                    liquidation.

         B.       Termination by the Employer on Account of or After a Change in
                  Control:

                    In the event the Employee's  employment with the Employer is
                    terminated  by the Employer in  connection  with a Change in
                    Control,  the Employee  shall be  immediately  vested in the
                    "Normal Retirement  Benefit" specified in Schedule A for the
                    date the Employee  achieves age sixty-two (62). The Employee
                    shall be entitled to be paid the "Change in Control Benefit"
                    specified  in Schedule  A, in  substantially  equal  monthly
                    installments  on the first day of each month,  beginning  no
                    sooner  than the  month  following  the  month in which  the
                    Employee  attains  age  fifty-five  (55),  as  requested  in
                    writing by the Employee and delivered to the Employer or its
                    successor  thirty  (30) days  prior to the  commencement  of
                    installment payments;  provided,  however, that in the event
                    the  Employee  does  not  request  a  commencement  date  as
                    specified,  such installments shall be paid on the first day
                    of each month,  beginning with the month following the month
                    in which the Employee  attains  sixty-two (62) years of age.
                    Upon the commencement of payments, the installments shall be
                    payable until the  Employee's  death,  and shall increase by
                    two percent (2%) per year.

                    A  termination  shall be deemed to be in  connection  with a
                    Change in Control  if,  within two (2) years  following  the
                    occurrence  of a  Change  in  Control:  (a)  the  Employee's
                    employment  with the Employer is  terminated by the Employer
                    other than a Termination  for Cause; or (b) by reason of the
                    Employer's actions any adverse change occurs in the scope of
                    the  Employee's  position,   material  responsibilities  and
                    duties, salary,  benefits or location of employment;  or (c)
                    the  Employer  causes  an event to  occur  which  reasonably
                    constitutes  or  results  in a  demotion,  loss of title,  a
                    significant diminution of responsibilities or authority,  or
                    a  constructive  termination  (by forcing a  resignation  or
                    otherwise) of the Employee's employment.


VII.     benefit accounting

                    The  Employer  shall  account  for this  benefit  using  the
                    regulatory  accounting  principles of the Employer's primary
                    federal  regulator.  The Employer shall establish an accrued
                    liability  retirement  account for the  Employee  into which
                    appropriate reserves shall be accrued.


VIII.    restrictions on funding

                    The Employer shall have no obligation to set aside,  earmark
                    or  entrust  any  fund  or  money  with  which  to  pay  its
                    obligations  under this Employee Plan. The Employee,  her or
                    his beneficiary (ies), or any successor in interest shall be
                    and remain simply a general  creditor of the Employer in the
                    same manner as any other creditor having a general claim for
                    matured and unpaid  compensation.  The Employer reserves the
                    absolute right, at its sole  discretion,  to either fund the
                    obligations  undertaken  by this Employee Plan or to refrain
                    from  funding the same and to determine  the extent,  nature
                    and method of such  funding.  Should the  Employer  elect to
                    fund this Employee  Plan,  in whole or in part,  through the
                    purchase  of  life  insurance,   mutual  funds,   disability
                    policies or  annuities,  the Employer  reserves the absolute
                    right, in its sole discretion,  to terminate such funding at
                    any time, in whole or in part. At no time shall any Employee
                    be deemed to have any lien, right,  title or interest in any
                    specific funding investment or assets of the Employer.

                    If the  Employer  elects  to  invest  in a  life  insurance,
                    disability  or annuity  policy on the life of the  Employee,
                    then the  Employee  shall  assist  the  Employer  by  freely
                    submitting to a physical exam and supplying such  additional
                    information necessary to obtain such insurance or annuities.

                    Notwithstanding  anything  hereinabove to the contrary,  the
                    Employer and the Employee acknowledge and agree that, in the
                    event of a Change in Control and at the  written  request of
                    the Employee,  the Employer 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 Employer in its sole  discretion
                    deems   appropriate   and  in  compliance   with  applicable
                    provisions of the Internal  Revenue Code of 1986, as amended
                    (the  "Code")  in  order  to  permit  the  Employer  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
                    Employer  to  be  used  exclusively  for  discharge  of  the
                    Employer's  obligations pursuant to this Agreement and shall
                    continue  to be  subject  to the  claims  of the  Employer's
                    general   creditors  until  paid  to  the  Employee  or  its
                    beneficiaries  in such manner and at such times as specified
                    in this Agreement


IX.      MISCELLANEOUS

         A.       Alienability and Assignment Prohibition:

                    The  Employee  shall  have no power  or  right to  transfer,
                    assign, anticipate,  hypothecate,  mortgage, commute, modify
                    or otherwise encumber in advance any of the benefits payable
                    hereunder  nor  shall any of said  benefits  be  subject  to
                    seizure for the payment of any debts, judgments,  alimony or
                    separate   maintenance   owed   by  the   Employee   nor  be
                    transferable by operation of law in the event of bankruptcy,
                    insolvency or otherwise.  In the event the Employee attempts
                    assignment, commutation, hypothecation, transfer or disposal
                    of the benefits hereunder,  the Employer's liabilities shall
                    forthwith cease and terminate.

         B.       Binding Obligation of the Employer and any Successor in
                  Interest:

                    The  Employer  shall not merge or  consolidate  into or with
                    another Employer or sell  substantially all of its assets to
                    another Employer,  firm or person until such Employer,  firm
                    or  person  expressly  agree,  in  writing,  to  assume  and
                    discharge the duties and  obligations  of the Employer under
                    this Employee Plan. This Employee Plan shall be binding upon
                    the parties hereto, their successors,  beneficiaries,  heirs
                    and personal representatives.

         C.       Amendment or Revocation:

                    It is agreed by and between the parties hereto that,  during
                    the  lifetime of the  Employee,  this  Employee  Plan may be
                    amended  or  revoked  at any time or  times,  in whole or in
                    part, by the mutual written  consent of the Employee and the
                    Employer.

         D.       Gender:

                    Whenever  in  this  Employee  Plan  words  are  used  in the
                    masculine or neuter gender, they shall be read and construed
                    as in the  masculine,  feminine or neuter  gender,  whenever
                    they should so apply.

         E.       Effect on Other Employer Benefit Plans:

                    Nothing  contained  in this  Employee  Plan shall affect the
                    right of the Employee to participate in or be covered by any
                    qualified or non-qualified pension,  profit-sharing,  group,
                    bonus or other  supplemental  compensation or fringe benefit
                    plan  constituting  a part  of the  Employer's  existing  or
                    future compensation structure.

         F.       Headings:

                    Headings and  subheadings in this Employee Plan are inserted
                    for reference and convenience only and shall not be deemed a
                    part of this Employee Plan.

         G.       Applicable Law:

                    The laws of the State of Oregon  shall  govern the  validity
                    and interpretation of this Agreement.

         H.       Partial Invalidity:

                    If any  term,  provision,  covenant,  or  condition  of this
                    Employee Plan 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  Employee  Plan  shall  remain in full  force and effect
                    notwithstanding such partial invalidity.

         I.       Not a Contract of Employment:

                    This Agreement  shall not be deemed to constitute a contract
                    of  employment  between  the parties  hereto,  nor shall any
                    provision  hereof  restrict  the  right of the  Employer  to
                    discharge  the  Employee,  or  restrict  the  right  of  the
                    Employee to terminate employment.

         J.       Notices:

                    Any notice  required or  permitted of either the Employee or
                    the Employer  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.

<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       Frank X. Hernandez
                                            316 West Oregon Avenue
                                            Klamath Falls, OR 97601

         K.       Opportunity To Consult With Independent Advisors:

                    The  Employee   acknowledges  that  the  Employee  has  been
                    afforded  the   opportunity  to  consult  with   independent
                    advisors  of  his  or  her   choosing   including,   without
                    limitation,   accountants   or  tax   advisors  and  counsel
                    regarding  both the benefits  granted to the Employee  under
                    the terms of this Agreement and the (i) terms and conditions
                    which may affect the Employee'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  Employee
                    acknowledges and agrees shall be the sole  responsibility of
                    the Employee  notwithstanding any other term or provision of
                    this Agreement. The Employee further acknowledges and agrees
                    that the Employer shall have no liability whatsoever related
                    to any such  personal tax effects or other  personal  costs,
                    expenses,  or  liabilities  applicable  to the  Employee and
                    further  specifically  waives any right for the Employee and
                    his  or her  heirs,  beneficiaries,  legal  representatives,
                    agents, successors, and assigns to claim or assert liability
                    on the part of the Employer related to the matters described
                    above   in   this   subparagraph.   The   Employee   further
                    acknowledges   and  agrees  that  the   Employee  has  read,
                    understands  and consents to all of the terms and conditions
                    of this  Agreement,  and that the Employee  enters into this
                    Agreement  with  a  full  understanding  of  its  terms  and
                    conditions.


X.       ADMINISTRATIVE AND CLAIMS PROVISION

         A.       Named Fiduciary and Plan Administrator:

                    The  "Named  Fiduciary  and  Plan   Administrator"  of  this
                    Employee Plan shall be Klamath First  Bancorp,  Inc.,  until
                    its  resignation or removal by the Board. As Named Fiduciary
                    and Plan  Administrator,  the Employer  shall be responsible
                    for  the  management,  control  and  administration  of  the
                    Employee  Plan.  The Named  Fiduciary may delegate to others
                    certain    aspects   of   the   management   and   operation
                    responsibilities   of  the  Employee   Plan   including  the
                    employment  of advisors and the  delegation  of  ministerial
                    duties to qualified individuals.

         B.       Claims Procedure:

                    In the event a  dispute  arises  over  benefits  under  this
                    Employee  Plan and benefits are not paid to the Employee and
                    the claimant  feels he is 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
                    provisions  of this  Employee  Plan 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 a
                    further review of the claim denial is desired. A claim shall
                    be  deemed   denied  if  the   Named   Fiduciary   and  Plan
                    Administrator  fail to take any action  within the aforesaid
                    forty-five-day period.

                    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  Employee  Plan or any  documents  relating
                    thereto  and submit any written  issues and  comments it 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.

C.       Arbitration:

                    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  Employer 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").  In the  event  JAMS is unable or
                    unwilling to conduct the arbitration  provided for under the
                    terms of this Paragraph,  or has  discontinued its business,
                    the parties agree that a representative member,  selected by
                    the  mutual  agreement  of  the  parties,  of  the  American
                    Arbitration  Association ("AAA"),  shall conduct the binding
                    arbitration  referred  to in this  Paragraph.  Notice of the
                    demand for  arbitration  shall be filed in writing  with the
                    other  party to this  Agreement  and with  JAMS (or AAA,  if
                    necessary).  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, or if there are
                    none, the rules of procedure used or established by AAA. Any
                    award  rendered  by JAMS or AAA 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
                    Klamath Falls,  Oregon,  unless  otherwise  agreed to by the
                    parties.

         D.       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, the prevailing party
                    shall be entitled to recover from the  non-prevailing  party
                    reasonable  expenses,  attorneys' fees and costs incurred in
                    connection  therewith or in the enforcement or collection of
                    any  judgment or award  rendered  therein.  The  "prevailing
                    party" means the party  determined by the  arbitrator(s)  or
                    court,  as the case may be, to have most  nearly  prevailed,
                    even if such  party  did not  prevail  in all  matters,  not
                    necessarily the one in whose favor a judgment is rendered.


XI.      SECTION 280G BENEFITS ADJUSTMENT

                    If all or any portion of the amounts payable to the Employee
                    under this  Agreement,  either alone or together  with other
                    payments  which the  Employee  has the right to receive from
                    the Employer,  constitute "excess parachute payments" within
                    the meaning of Section 280G of the Code, that are subject to
                    the  excise  tax  imposed  by  Section  4999 of the Code (or
                    similar  tax  and/or  assessment),  the  Employer  (and  its
                    successor) and the Employee each agree to pay their share of
                    any taxes that may be imposed as a result of  payments  made
                    pursuant to this Agreement; provided, however, that Employer
                    and  Employee  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 Employee is greater than the amount initially
                    so  determined,  then the Employee 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.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

  Klamath First Federal Savings and Loan Association



/s/ Kermit K. Houser                                          /s/ Nina G. Drake
Kermit K. Houser                                              Witness
President and CEO




/s/ Frank X. Hernandez                               /s/ Nina G. Drake
Frank X. Hernandez                                            Witness
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE A
                            EMPLOYEE BENEFIT SCHEDULE

                                 FRANK HERNANDEZ
                          DATE OF BIRTH: MARCH 28, 1955
                             HIRED ON: JULY 1, 1992

                               NORMAL         CHANGE IN                          DEATH BENEFIT:      DEATH BENEFIT:
      VESTING              RETIREMENT           CONTROL         DISABILITY          DEATH WHILE               AFTER
      DATE (1)             BENEFIT (2)       BENEFIT (3)        BENEFIT (4)         EMPLOYED (5)     TERMINATION (6)
<S>                          <C>               <C>              <C>                  <C>                 <C>
  January 1, 2003              $1,495                NA                 $0           $1,064,980            $100,000
  January 1, 2004              $4,484                NA             $7,571           $1,064,980            $100,000
  January 1, 2005              $8,968                NA            $24,113           $1,064,980            $100,000
  January 1, 2006             $14,947                NA            $51,199           $1,064,980            $149,471
  January 1, 2007             $22,421                NA            $90,596           $1,064,980            $224,206
  January 1, 2008             $31,389                NA           $144,275           $1,064,980            $313,889
  January 1, 2009             $41,852                NA           $214,443           $1,064,980            $418,518
  January 1, 2010             $53,810           $61,769           $303,559           $1,064,980            $538,095
  January 1, 2011             $67,262           $68,159           $414,362           $1,064,980            $672,619
  January 1, 2012             $74,735           $74,549           $549,899           $1,064,980            $747,354
  January 1, 2013             $82,209           $80,938           $648,684           $1,064,980            $822,090
  January 1, 2014             $89,683           $87,328           $757,563           $1,064,980            $896,825
  January 1, 2015             $97,156           $93,718           $877,405           $1,064,980            $971,561
  January 1, 2016            $104,630          $100,108         $1,009,148           $1,064,980          $1,046,296
  January 1, 2017            $106,498          $106,498         $1,153,804           $1,064,980          $1,064,980
   and thereafter            $106,498          $106,498                 NA         see #5 below        see #5 below
<FN>

1.  The date that Normal Retirement and Death benefits vest.  See separate footnotes for Change in Control and
     Disability Benefits.
2.  Annual Retirement Benefits payable at age sixty-two (62). Benefits are payable for life and increase by 2% per
     year after Retirement.
3. The Employee is eligible to retire following Termination pursuant to a Change in Control any time after the
     attainment of age fifty five (55).  This is the annual sum the Employee will be paid if the Employee elects to
     receive Retirement Benefits on or after the Employee's birthday, but before the following anniversary. Once
     payments begin, Benefits are payable for life and increase by 2% per year thereafter.
4. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty
     Balance as of disability date.  Disability Benefit value is determined by straight-line interpolation between the
    amounts showing in this column for Jan 1 of the calendar year the disability occurs and Jan 1 of the following
    calendar year.  Benefit is paid as Employee elected in the Agreement.  No post-retirement benefit.
5.  Death benefit equals 10x initial Normal Retirement Benefit to age 70, 7x initial Normal Retirement Benefit to
    Age 80, and 3 x initial Normal Retirement Benefit thereafter.
6.  Unless termination is for Cause, the death benefit is the greater of $100,000 or 10x the vested annual retirement
     benefit at the time of termination.
</FN>
</TABLE>


/s/ Frank X. Hernandez  5/19/03  /s/ Kermit K. Houser                    5/19/03
Frank X. Hernandez      Date     Bank Officer                            Date
                                       1
<PAGE>

                                                                 Exhibit 10(d).4

           FIRST AMENDMENT TO executive salary continuation AGREEMENT

     This FIRST  AMENDMENT  TO EXECUTIVE  SALARY  CONTINUATION  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal Savings and Loan Association  ("Employer") and the undersigned executive
officer of Employer ("Employee").

     WHEREAS,   Employer   and  Employee   entered  into  an  Executive   Salary
Continuation Agreement (the "SCA") effective January 1, 2003;

     WHEREAS,  Klamath First Bancorp,  Inc.  ("Company"),  the parent company of
Employer,  has entered into an Agreement and Plan of Merger dated as of July 14,
2003, (the "Merger Agreement") with Sterling Financial Corporation  ("Sterling")
with respect to a proposed transaction (the "Transaction") whereby Sterling will
acquire all of the outstanding shares of Company common stock in a stock merger;

     WHEREAS,  Employer  desire to enter into this  Agreement to facilitate  the
Transaction; and

     WHEREAS,  Employee  desires to enter into this  Agreement to facilitate the
Transaction  so as to enable  Employee (a) to receive a cash-out of his benefits
under the SCA as  provided  herein,  (b) to receive  change in control  benefits
under his employment  agreement and (c) to enhance the value of shares of common
stock of Company owned by Employee and the value of his stock options to acquire
common stock of Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Notwithstanding  anything  contained in the SCA to the  contrary,  Employer
     shall  have the  right to pay  Employee  at any time  from the date  hereof
     through  December 31, 2003 the amount of $548,847 less all tax  withholding
     obligations  with  respect  thereto  (the  "Cash-Out  Amount")  in full and
     complete  satisfaction of all obligations of Employer under the SCA and all
     rights of  Employee  under the SCA.  Upon  Employer  making  payment of the
     Cash-Out Amount to Employee as provided herein, the SCA shall terminate and
     shall have no further force or effect.

2.   Upon payment of the Cash-Out  Amount to Employee by Employer as provided in
     paragraph  1 above,  Employee  does hereby  release  and forever  discharge
     Employer,  its  affiliates,   and  their  respective  assigns,   directors,
     officers,  employees and agents from any and all claims, demands, causes of
     action and rights that Employee has or might have under the SCA of any kind
     or character whatsoever, whether known or unknown.

3.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

4.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so executed  shall be deemed an  original  and both of which,
     taken together, shall constitute one and the same agreement.

     The parties have  executed  this  Agreement on the day and year first above
     written.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION

                                        By:   /s/ Kermit K. Houser
                                               Kermit K. Houser
                                               President/CEO


                                     EMPLOYEE:


                                        By:   /s/ Frank X. Hernandez
                                               Frank X. Hernandez
                                               SVP/COO


<PAGE>
                                                                 Exhibit 10(e).1
                              EMPLOYMENT AGREEMENT
                        Amended and Restated May 14, 2003

     THIS  AGREEMENT  is made  effective  as of October 1, 2002,  by and between
KLAMATH FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"),  Klamath
Falls,  Oregon;   KLAMATH  FIRST  BANCORP,  INC.  (the  "Company"),   an  Oregon
corporation; and Craig M Moore (the "Executive").

     WHEREAS,  the  Association  wishes to  assure  itself  of the  services  of
Executive for the period provided in this Agreement; and

     WHEREAS, the Executive is willing to serve in the employ of the Association
on a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1.       POSITION AND RESPONSIBILITIES.

     During the period of his employment hereunder, Executive agrees to serve as
Senior Vice  President of the  Association.  During said period,  Executive also
agrees to serve,  if elected,  as an officer of the Company or any subsidiary or
affiliate of the Company or the Association.

2.       TERMS AND DUTIES.

     (a) The term of this Agreement  shall be deemed to have commenced as of the
date first above  written and shall  continue for a period of  twenty-four  (24)
full calendar months  thereafter.  Commencing on the first anniversary date, and
continuing at each anniversary  date  thereafter,  the Board of Directors of the
Association (the "Board") or its Compensation Committee may extend the Agreement
for an  additional  year.  Prior to the  extension of the  Agreement as provided
herein,  the Board of Directors of the  Association  will review the Executive's
performance  evaluation  for  purposes  of  determining  whether  to extend  the
Agreement,  and the  results  thereof  shall be  included  in the minutes of the
Board's meeting.

     (b) During the period of his  employment  hereunder,  except for periods of
absence  occasioned by illness,  reasonable  vacation  periods,  and  reasonable
leaves of absence,  Executive shall devote  substantially all his business time,
attention,  skill,  and  efforts  to the  faithful  performance  of  his  duties
hereunder  including  activities  and  services  related  to  the  organization,
operation and management of the Association;  provided,  however, that, with the
approval of the Board, as evidenced by a resolution of such Board,  from time to
time,  Executive may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or  organizations,  which,
in such Board's  judgment,  will not present any  conflict of interest  with the
Association, or materially affect the performance of Executive's duties pursuant
to this Agreement.



<PAGE>

3.       COMPENSATION AND REIMBURSEMENT.

     (a) The  compensation  specified under this Agreement shall  constitute the
salary and  benefits  paid for the  duties  described  in  Sections 1 and 2. The
Association  shall pay Executive as  compensation  a salary of $117,000 per year
("Base  Salary")  effective  11/1/2002.  Such Base  Salary  shall be  payable in
accordance with the customary payroll  practices of the Association.  During the
period of this  Agreement,  Executive's  Base Salary  shall be reviewed at least
annually;  the first  such  review  will be made no later than one year from the
date of this  Agreement.  Such  review  shall be  conducted  by the Board or its
Compensation  Committee,  and the Board may increase Executive's Base Salary. In
addition to the Base Salary provided in this Section 3(a), the Association shall
provide  Executive at no cost to Executive  with all such other  benefits as are
provided uniformly to regular salaried employees of the Association.

     (b) The  Association  will provide  Executive with employee  benefit plans,
arrangements  and  perquisites   substantially  equivalent  to  those  in  which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement,  and the  Association  will not,
without  Executive's  prior  written  consent,  make any  changes in such plans,
arrangements or perquisites which would adversely affect  Executive's  rights or
benefits thereunder.  However, changes in Association-sponsored  group insurance
plan  premiums,   deductibles,   co-payments  and  related  coverage  limits  or
conditions  are  excluded  from the prior  sentence for any such change which is
consistently applied to or available to regular salaried Association  employees.
Without  limiting the generality of the foregoing  provisions of this Subsection
(b),  Executive will be entitled to participate in or receive benefits under any
employee  benefit  plans  including,  but  not  limited  to,  retirement  plans,
supplemental   retirement   plans,   pension   plans,    profit-sharing   plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement  made  available  by the  Association  in the  future to its  senior
executives and key management  employees,  subject to, and on a basis consistent
with,  the  terms,  conditions  and  overall  administration  of such  plans and
arrangements.  Executive will be entitled to incentive  compensation and bonuses
as provided in any plan, or pursuant to any arrangement of the  Association,  in
which Executive is eligible to participate.  Nothing paid to the Executive under
any such plan or arrangement will be deemed to be in lieu of other  compensation
to which the  Executive  is entitled  under this  Agreement,  except as provided
under Section 5(e).

     (c) In addition to the Base Salary  provided for by  paragraph  (a) of this
Section 3, the Association  shall pay or reimburse  Executive for all reasonable
travel  and  other  obligations  under  this  Agreement  and  may  provide  such
additional compensation in such form and such amounts as the Board may from time
to time determine.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     (a) Upon the  occurrence  of an Event of  Termination  (as herein  defined)
during the Executive's term of employment  under this Agreement,  the provisions
of  this  Section  shall  apply.  As  used  in  this  Agreement,  an  "Event  of
Termination"  shall mean and include any one or more of the  following:  (i) the
termination by the Association of Executive's full-time employment hereunder for
any reason  other than a Change in Control,  as defined in Section  5(a) hereof;
disability,  as defined in Section 6(a) hereof; death; or retirement, as defined
in Section 7 hereof; (ii) Executive's resignation from the Association's employ,
upon (A) unless consented to by the Executive,  a material change in Executive's
function,  duties,  or  responsibilities,  which change would cause  Executive's
position to become one of lesser responsibility,  importance,  or scope from the
position and attributes  thereof described in Sections 1 and 2, above, (any such
material change shall be deemed a continuing  breach of this  Agreement),  (B) a
relocation of  Executive's  principal  place of employment by more than 35 miles
from  its  location  at the  effective  date of this  Agreement,  or a  material
reduction in the benefits and perquisites to Executive from those being provided
as of the effective date of this  Agreement,  (C) the liquidation or dissolution
of the Association, or (D) any breach of this Agreement by the Association. Upon
the occurrence of any event  described in clauses (A), (B), (C), or (D),  above,
Executive  shall have the right to elect to terminate his employment  under this
Agreement by resignation upon not less than sixty (60) days prior written notice
given  within a  reasonable  period of time not to  exceed,  except in case of a
continuing  breach,  four  calendar  months  after the event giving rise to said
right to elect.

     (b) Upon the occurrence of an Event of Termination  other than for Cause of
for Neglect (as described in Sections 8 and 9 hereof), the Association shall pay
Executive,  or,  in the  event  of his  subsequent  death,  his  beneficiary  or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages,  or both,  a sum equal to the  payments  due to the  Executive  for the
remaining term of the Agreement,  including Base Salary,  bonuses, and any other
cash or  deferred  compensation  paid  or to be paid  (including  the  value  of
employer  contributions that would have been made on the Executive's behalf over
the  remaining  term  of the  agreement  to any  tax-qualified  retirement  plan
sponsored by the  Association as of the Date of  Termination),  to the Executive
for the term of the Agreement provided,  however, that if the Association is not
in compliance  with its minimum  capital  requirements or if such payments would
cause  the  Association's  capital  to be  reduced  below  its  minimum  capital
requirements, such payments shall be deferred until such time as the Association
is in capital compliance.  All payments made pursuant to this Section 4(b) shall
be paid in substantially  equal monthly  installments over the remaining term of
this Agreement following the Executive's termination; provided, however, that if
the remaining term of the Agreement is less than one (1) year  (determined as of
the Executive's Date of  Termination),  such payments and benefits shall be paid
to the Executive in a lump sum within 30 days of the Date of Termination.

     (c) Upon the occurrence of an Event of Termination  other than for Cause or
for Neglect (as  described  in Sections 8 and 9 hereof),  the  Association  will
cause  to  be  continued   life,   medical,   dental  and  disability   coverage
substantially  identical  to the  coverage  maintained  by the  Association  for
Executive  prior  to  his  termination.  Such  coverage  shall  cease  upon  the
expiration of the remaining term of this Agreement.

5.       CHANGE IN CONTROL.

     (a) No benefit  shall be paid under this  Section 5 unless there shall have
occurred a Change in Control of the Company or the Association.  For purposes of
this Agreement, a "Change in Control" of the Company or the Association shall be
deemed to occur if and when (a) an  offeror  other  than the  Company  purchases
shares of the common  stock of the  Company  or the  Association  pursuant  to a
tender or exchange  offer for such shares,  (b) any person (as such term is used
in Sections  13(d) and  14(d)(2) of the  Securities  Exchange Act of 1934) is or
becomes the  beneficial  owner,  directly or  indirectly,  of  securities of the
Company or the Association representing 25% or more of the combined voting power
of the Company's then outstanding securities, (c) the membership of the board of
directors of the Company or the Association changes as the result of a contested
election,  such that  individuals  who were  directors  at the  beginning of any
twenty-four month period (whether  commencing before or after the effective date
of this  Agreement) do not constitute a majority of the Board at the end of such
period, or (d) shareholders of the Company or the Association  approve a merger,
consolidation,  sale or disposition of all or substantially all of the Company's
or the Association's assets, or a plan of partial or complete liquidation.

     (b) If any of the events  described in Section 5(a) hereof  constituting  a
Change in Control have occurred or the Board of the  Association  or the Company
has  determined  that a Change  in  Control  has  occurred,  Executive  shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this Section
5 upon his subsequent  involuntary  termination of employment at any time during
the term of this  Agreement  (or  voluntary  termination  following  a Change of
Control following any demotion,  loss of title, office or significant authority,
reduction in his annual compensation or benefits, or relocation of his principal
place of employment by more than 35 miles from its location immediately prior to
the  Change in  Control),  unless  such  termination  is  because  of his death,
retirement as provided in Section 7,  termination  for Cause, or termination for
Disability.

     (c) Upon the occurrence of a Change in Control  followed by the Executive's
termination of employment,  the Association shall pay Executive, or in the event
of his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, as severance  pay or  liquidated  damages,  or both, a sum equal to
1.50  times the  Executive's  "base  amount,"  within  the  meaning  of  Section
280G(b)(3)  of the Internal  Revenue  Code of 1986  ("Code"),  as amended.  Such
payment shall be made in a lump sum paid within ten (10) days of the Executive's
Date of Termination.

     (d) Upon the occurrence of a Change in Control  followed by the Executive's
termination  of employment,  the  Association  will cause to be continued  life,
medical,  dental and disability coverage substantially identical to the coverage
maintained by the Association for Executive prior to his severance. In addition,
Executive shall be entitled to receive the value of employer  contributions that
would have been made on the  Executive's  behalf over the remaining  term of the
agreement to any  tax-qualified  retirement plan sponsored by the Association as
of the Date of  Termination.  Such  coverage and  payments  shall cease upon the
expiration of thirty-six (36) months.

     (e) Upon the  occurrence  of a Change in Control,  the  Executive  shall be
entitled to receive benefits due him under, or contributed by the Company or the
Association  on his  behalf,  pursuant  to  any  retirement,  incentive,  profit
sharing,  bonus,   performance,   disability  or  other  employee  benefit  plan
maintained by the  Association or the Company on the  Executive's  behalf to the
extent that such benefits are not otherwise  paid to the Executive upon a Change
in Control.

     (f) IRS Section 280G Issues.  If 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 Company or  Association,
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 Company or Association  (and their  successor)  shall be responsible for any
loss of  deductibility  related  thereto;  provided,  however,  that  Company or
Association 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 Company or
Association immediately prior to the change in control or such other independent
accounting  firm  or  advisor  as  may  be  mutually  agreeable  to  Company  or
Association  and  Executive  in the  exercise  of their  reasonable  good  faith
judgment.


6.       TERMINATION FOR DISABILITY.

     (a) If the Executive shall become disabled as defined in the  Association's
then  current  disability  plan (or,  if no such plan is then in effect,  if the
Executive  is  permanently  and totally  disabled  within the meaning of Section
22(e)(3) of the Code as determined by a physician  designated by the Board), the
Association may terminate Executive's employment for "Disability."

     (b) Upon the  Executive's  termination  of employment for  Disability,  the
Association will pay Executive,  as disability pay, a semi-monthly payment equal
to three-quarters  (3/4) of Executive's  semi-monthly rate of Base Salary on the
effective date of such termination.  These disability payments shall commence on
the effective date of Executive's termination and will end on the earlier of (i)
the date Executive returns to the full-time employment of the Association in the
same capacity as he was employed  prior to his  termination  for  Disability and
pursuant to an employment agreement between Executive and the Association;  (ii)
Executive's full-time employment by another employer;  (iii) Executive attaining
the age of 65; or (iv)  Executive's  death; or (v) the expiration of the term of
this Agreement.  The disability pay shall be reduced by the amount, if any, paid
to the Executive under any plan of the Association providing disability benefits
to the Executive.

     (c) The Association  will cause to be continued life,  medical,  dental and
disability  coverage  substantially  identical to the coverage maintained by the
Association for Executive prior to his termination for Disability. This coverage
and payments shall cease upon the earlier of (i) the date  Executive  returns to
the  full-time  employment  of the  Association,  in the same capacity as he was
employed prior to his  termination  for Disability and pursuant to an employment
agreement  between  Executive and the Association;  (ii)  Executive's  full-time
employment by another employer;  (iii)  Executive's  attaining the age of 65; or
(iv) the Executive's death; or (v) the expiration of the term of this Agreement.

     (d)  Notwithstanding  the  foregoing,  there  will be no  reduction  in the
compensation  otherwise  payable to  Executive  during any period  during  which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.

7.       TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.

     Termination by the  Association of Executive  based on  "Retirement"  shall
mean  retirement  at age 65 or in  accordance  with any  retirement  arrangement
established  with  Executive's  consent with respect to him. Upon termination of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement  plan of the  Association  or the  Company  and other  plans to which
Executive is a party.  Upon the death of the  Executive  during the term of this
Agreement,  the Association shall pay to Executive's estate the compensation due
to the Executive  through the last day of the calendar  month in which his death
occurred.


<PAGE>

8.       TERMINATION FOR CAUSE.

     For  purposes of this  Agreement,  "Termination  for Cause"  shall  include
termination  because  of  the  Executive's  personal  dishonesty,  incompetence,
willful misconduct,  breach of fiduciary duty involving personal profit, willful
violation of any law,  rule,  or  regulation  (other than traffic  violations or
similar  offenses) or final  cease-and-desist  order,  or material breach of any
provision of this Agreement. In addition,  "Termination for Cause" shall include
termination  because of the  Executive's  intentional  failure to perform stated
duties, such as the refusal of the Executive to comply with the Association's or
the Company's  instructions,  policies or rules or other willful  conduct of the
Executive  which  materially  adversely  reflects  on the  Association's  or the
Company 's reputation or operation. For purposes of this Section, no act, or the
failure to act, on Executive's  part shall be "willful"  unless done, or omitted
to be done, not in good faith and without  reasonable  belief that the action or
omission  was  in  the  best  interest  of the  Association  or its  affiliates.
Notwithstanding  the  foregoing,  Executive  shall  not be  deemed  to have been
terminated  for Cause unless and until there shall have been  delivered to him a
copy of a  resolution  duly  adopted  by the  affirmative  vote of not less than
three-fourths  of the members of the Board at a meeting of the Board  called and
held for that purpose (after  reasonable  notice to Executive and an opportunity
for him, together with counsel,  to be heard before the Board),  finding that in
the good faith opinion of the Board,  Executive was guilty of conduct justifying
termination  for Cause and specifying the reasons  thereof.  The Executive shall
not have the right to  receive  compensation  or other  benefits  for any period
after  termination  for Cause.  Any stock options granted to Executive under any
stock option plan or any unvested  awards  granted under any other stock benefit
plan of the Association,  the Company,  or any subsidiary or affiliate  thereof,
shall  become  null and void  effective  upon  Executive's  receipt of Notice of
Termination for Cause pursuant to Section 9 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.

9.       TERMINATION FOR NEGLECT.

     The  Association and Company,  or either of them may terminate  Executive's
employment  under this  Agreement at any time for Neglect.  For purposes of this
Agreement,  "Neglect"  means the failure of Executive to give due care to stated
duties or to comply with instructions or directives of the Board of Directors of
the  Association  or  Company or either of them,  but where such  failure is not
determined to be willful or intentional as defined in Section 8. Termination for
Neglect  includes  termination  as the  result  of any  continuing  or  repeated
problems with  Executive's  job  performance  or conduct  after  written  notice
specifying such problem with  performance or conduct,  and where such continuing
and repeated problems were not determined to be willful or intentional, or where
the conduct was not deemed to have a material  adverse impact on the Association
or Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been  terminated  by  Neglect  unless  and until  there  shall have been sent to
Executive  a copy of a  resolution  duly  adopted by a majority  of the Board of
Directors of the  Association  and  Company,  or either of them  (excluding  the
Executive  in counting  the  majority if the  Executive  is then on the board of
directors,  and after  reasonable  notice to Executive  and an  opportunity  for
Executive to be heard before the board of  directors),  finding that in the good
faith  opinion of the board of directors  of the  Association  and  Company,  or
either of them, Executive engaged in conduct justifying  termination for Neglect
and describing  specifically the conduct.  Executive shall not have the right to
receive any salary or bonus for any period after  termination  of employment for
Neglect.  Executive  shall retain any vested  benefits in defined benefit plans,
defined  contribution  plans,  supplemental  executive  retirement plans,  stock
option plans,  restricted stock plans, or other such benefits, but shall forfeit
any rights that have not vested.


10.      REQUIRED PROVISIONS.

     (a) The Association may terminate  Executive's  employment at any time, but
any  termination  by the  Association,  other than as  described in Section 8 or
Section  9  of  this  Agreement,   shall  not  prejudice  Executive's  right  to
compensation  or other benefits under this  Agreement.  Executive shall not have
the  right to  receive  compensation  or other  benefits  for any  period  after
Termination for Cause as defined in Section 8 herein.

     (b)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
participating  in the conduct of the  Association's  affairs by a notice  served
under Section  8(e)(3) or (g)(1) of the Federal  Deposit  Insurance Act ("FDIA")
(12 U.S.C.  1818(e)(3)  and (g)(1)),  the  Association's  obligations  under the
Agreement  shall  be  suspended  as of the date of  service,  unless  stayed  by
appropriate  proceedings.  If the  charges  in the  notice  are  dismissed,  the
Association  may,  in its  discretion,  (i)  pay  Executive  all or  part of the
compensation  withheld  while its contract  obligations  were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.

     (c)  If   Executive  is  removed   and/or   permanently   prohibited   from
participating  in the conduct of the  Association's  affairs by an order  issued
under  Section  8(e)(4) or (g)(1) of the FDIA (12 U.S.C.  1818(e)(4) or (g)(1)),
all obligations of the Association under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting  parties shall
not be affected.

     (d) If the  Association is in default (as defined in Section 3(x)(1) of the
FDIA),  all  obligations  under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.

     (e) All obligations under this Agreement shall be terminated (except to the
extent  determined  that  continuation  of the  Agreement is  necessary  for the
continued  operation of the  Association):  (i) by the Director of the Office of
Thrift  Supervision  (the  "Director")  or his or her  designee  at the time the
Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters
into an agreement to provide assistance to or on behalf of the Association under
the authority contained in Section 13(c) of the FDIA or (ii) by the Director, or
his or her  designee  at the time  the  Director  or such  designee  approves  a
supervisory  merger to resolve  problems related to operation of the Association
or when the  Association  is  determined  by the  Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

     (f)  Any  payments  made  to  Executive  pursuant  to  this  Agreement,  or
otherwise,  are  subject  to and  conditioned  upon  compliance  with 12  U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

11.      NOTICE.

     (a) Any purported  termination by the  Association or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this  Agreement,  a "Notice of  Termination"  shall mean a written  notice which
shall indicate the specific termination  provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances  claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

     (b) "Date of  Termination"  shall  mean (A) if  Executive's  employment  is
terminated  for  Disability,  thirty (30) days after a Notice of  Termination is
given (provided that he shall not have returned to the performance of his duties
on a  full-time  basis  during  such  thirty  (30) day  period),  and (B) if his
employment is terminated for any other reason,  the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

     (c) If, within thirty (30) days after any Notice of  Termination  is given,
the party  receiving such Notice of Termination  notifies the other party that a
dispute  exists  concerning  the  termination,  except upon the  occurrence of a
Change in Control and voluntary  termination  by the Executive in which case the
Date of  Termination  shall be the date  specified  in the  Notice,  the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties,  by a binding  arbitration award, or
by a final judgment,  order or decree of a court of competent  jurisdiction (the
time for appeal there from having  expired and no appeal having been  perfected)
and provided further that the Date of Termination  shall be extended by a notice
of dispute  only if such notice is given in good faith and the party giving such
notice  pursues  the  resolution  of such  dispute  with  reasonable  diligence.
Notwithstanding the pendency of any such dispute,  the Association will continue
to pay Executive his full  compensation in effect when the notice giving rise to
the dispute was given (including,  but not limited to, Base Salary) and continue
him as a participant in all  compensation,  benefit and insurance plans in which
he was participating  when the notice of dispute was given, until the dispute is
finally  resolved in  accordance  with this  Agreement.  Amounts paid under this
Section are in addition to all other amounts due under this  Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.

12.      NON-COMPETITION.

     (a) Upon any termination of Executive's employment hereunder pursuant to an
Event of  Termination as provided in Section 4 hereof,  Executive  agrees not to
compete  with the  Association  and/or the  Company for a period of one (1) year
following such  termination in any city, town or county in which the Association
and/or the  Company  has an office or has filed an  application  for  regulatory
approval to establish an office,  determined  as of the  effective  date of such
termination.  Executive  agrees that during such period and within said  cities,
towns and counties, Executive shall not work for or advise, consult or otherwise
serve  with,  directly  or  indirectly,  any entity  whose  business  materially
competes  with the  depository,  lending  or other  business  activities  of the
Association and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the  Association  and/or the  Company,  its  business  and
property in the event of Executive's  breach of this Subsection 11(a) agree that
in the event of any such breach by Executive, the Association and/or the Company
will be entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive,  Executive's partners,
agents,  servants,  employers,  employees  and all  persons  acting  for or with
Executive.  Executive represents and admits that in the event of the termination
of his  employment  pursuant  to Section 8 hereof,  Executive's  experience  and
capabilities are such that Executive can obtain employment in a business engaged
in other lines  and/or of a different  nature  than the  Association  and/or the
Company,  and that the  enforcement  of a remedy by way of  injunction  will not
prevent Executive from earning a livelihood. Nothing herein will be construed as
prohibiting the Association  and/or the Company from pursuing any other remedies
available to the  Association  and/or the Company for such breach or  threatened
breach, including the recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
business  activities and plans for business  activities of the  Association  and
affiliates  thereof,  as it may exist from time to time, is a valuable,  special
and unique asset of the business of the Association.  Executive will not, during
or  after  the term of his  employment,  disclose  any  knowledge  of the  past,
present,  planned  or  considered  business  activities  of the  Association  or
affiliates  thereof to any person,  firm,  corporation,  or other entity for any
reason or purpose  whatsoever.  Notwithstanding  the  foregoing,  Executive  may
disclose  any  knowledge  of  banking,  financial  and/or  economic  principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Association.  In the event of a breach or threatened
breach by the Executive of the provisions of this Section,  the Association will
be entitled to an injunction restraining Executive from disclosing,  in whole or
in part,  the knowledge of the past,  present,  planned or  considered  business
activities of the  Association  or  affiliates  thereof,  or from  rendering any
services to any person, firm, corporation,  other entity to whom such knowledge,
in whole or in  part,  has been  disclosed  or is  threatened  to be  disclosed.
Nothing herein will be construed as prohibiting  the  Association  from pursuing
any other remedies  available to the  Association  for such breach or threatened
breach, including the recovery of damages from Executive.

13.      SOURCE OF PAYMENTS.

     All  payments  provided in this  Agreement  shall be timely paid in cash or
check  from  the  general  funds  of  the  Association.  The  Company,  however,
guarantees  all  payments  and the  provision  of all amounts and  benefits  due
hereunder to Executive  and, if such payments are not timely paid or provided by
the  Association,  such  amounts and  benefits  shall be paid or provided by the
Company.

14.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior  employment  agreement  between the  Association or any
predecessor of the Association  and Executive,  except that this Agreement shall
not  affect or operate to reduce  any  benefit  or  compensation  inuring to the
Executive of a kind elsewhere provided.  No provision of this Agreement shall be
interpreted to mean that  Executive is subject to receiving  fewer benefits than
those available to him without reference to this Agreement.

15.      NO ATTACHMENT.

     (a) Except as  required  by law,  no right to receive  payments  under this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to affect any such action  shall be null,
void, and of no effect.  (b) This Agreement  shall be binding upon, and inure to
the benefit of,  Executive,  the  Association,  the Company and their respective
successors and assigns.

16.      MODIFICATION AND WAIVER.

     (a) This  Agreement may not be modified or amended  except by an instrument
in writing signed by the parties hereto.

     (b) No term or  condition  of this  Agreement  shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement,  except by written  instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing  waiver
unless specifically  stated therein,  and each such waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.


17.      SEVERABILITY.

     If, for any reason,  any  provision of this  Agreement,  or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this  Agreement or any part of such  provision not held so invalid,  and each
such other  provision and part thereof shall to the full extent  consistent with
law continue in full force and effect.

18.      HEADINGS FOR REFERENCE ONLY.

     The headings of sections  and  paragraphs  herein are  included  solely for
convenience of reference and shall not control the meaning or  interpretation of
any of the provisions of this Agreement.

19.      GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Oregon, unless
otherwise specified herein;  provided,  however, that in the event of a conflict
between the terms of this Agreement and any  applicable  federal or state law or
regulation, the provisions of such law or regulation shall prevail.

20.      ARBITRATION.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three  arbitrators  sitting in a location selected by the employee within one
hundred (100) miles from the location of the Association, 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;  provided,
however,  that Executive  shall be entitled to seek specific  performance of his
right to be paid  until  the Date of  Termination  during  the  pendency  of any
dispute or controversy arising under or in connection with this Agreement.

21.      PAYMENT OF LEGAL FEES.

     All  reasonable  legal fees paid or incurred by  Executive  pursuant to any
dispute or question of  interpretation  relating to this Agreement shall be paid
or reimbursed by the  Association,  if successful  pursuant to a legal judgment,
arbitration or settlement.

22.      INDEMNIFICATION.

     The Association shall provide Executive (including his heirs, executors and
administrators)   with  coverage  under  a  standard  directors'  and  officers'
liability insurance policy at its expense,  or in lieu thereof,  shall indemnify
Executive (and his heirs,  executors and  administrators)  to the fullest extent
permitted under law against all expenses and liabilities  reasonably incurred by
him in  connection  with or arising out of any action,  suite or  proceeding  in
which he may be  involved  by reason of his having been a director or officer of
the Association (whether or not he continues to be a directors or officer at the
time of incurring such expenses or  liabilities),  such expenses and liabilities
to include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.



23.      SUCCESSOR TO THE ASSOCIATION OR THE COMPANY.

     The  Association  and the Company  shall require any successor or assignee,
whether direct or indirect, by purchase, merger,  consolidation or otherwise, to
all or  substantially  all the  business  or  assets of the  Association  or the
Company,  expressly  and  unconditionally  to assume  and agree to  perform  the
Association's  or the Company's  obligations  under this Agreement,  in the same
manner and to the same  extent  that the  Association  or the  Company  would be
required to perform if no such succession or assignment had taken place.


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by a duly  authorized  officer or director of the  Association  and the
Company,  and Executive has signed this  Agreement,  all on the 19th day of May,
2003.

KLAMATH FIRST BANCORP, INC.                 KLAMATH FIRST FEDERAL SAVINGS
                                                      AND LOAN ASSOCIATION


BY: /s/ Kermit K. Houser                    BY: /s/ Kermit K. Houser
    Kermit K. Houser, President & CEO           Kermit K. Houser President & CEO



/s/ Kathryn Rutledge                            /s/ Craig M Moore
WITNESS:                                        Craig M Moore SVP/Chief Auditor


<PAGE>
                                                                 Exhibit 10(e).2
                     FIRST AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This FIRST  AMENDMENT TO AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal  Savings and Loan  Association  ("Association"),  Klamath First Bancorp,
Inc.,  ("Company")  and the  undersigned  executive  officer of Association  and
Company (the "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an Amended and
Restated Employment Agreement dated May 19, 2003, (the "Employment Agreement");

     WHEREAS,  Company has entered into an Agreement and Plan of Merger dated as
of July 14, 2003, (the "Merger  Agreement") with Sterling Financial  Corporation
("Sterling") with respect to a proposed transaction (the "Transaction")  whereby
Sterling will acquire all of the outstanding shares of Company common stock in a
stock merger;

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
the  Transaction  so as to  enable  his  change in  control  of  benefits  to be
triggered under the Employment  Agreement and his Executive Salary  Continuation
Agreement,  and to enhance the value of shares of common stock of Company  owned
by the Executive  and the value of his stock options to acquire  common stock of
Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Capitalized terms used herein, to the extent not defined  otherwise,  shall
     have the meaning ascribed to them in the Employment Agreement.

2.   Section 5(c) of the Employment Agreement is amended in full as follows:

     "During the period of July,  2003 through  December 2003,  the  Association
     shall pay the Executive $8,333 per month as additional compensation for the
     extra  services to be performed by the  Executive on behalf of  Association
     and Company to faciliate the transactions  contemplated under the Agreement
     and Plan of  Merger  dated  July 14,  2003  between  Company  and  Sterling
     Financial Corporation.  The payments provided in the preceding sentence are
     not contingent upon completion of the transactions  contemplated  under the
     Agreement  and Plan of Merger,  and such  payments  are being  provided  to
     compensate the Executive for additional  services  actually being performed
     by him."

3.   Section 5(c) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association shall pay the Executive as severance pay or
     liquidated damages, or both (the "Base Severance Amount"),  an amount equal
     to $125,500.  In the event that all  conditions to closing under the Merger
     Agreement have been satisfied  during calendar year 2003, then  Association
     shall  make  payment  of the Base  Severance  Amount  plus  the  Additional
     Severance  Amount (as defined in Section  5(d) below) to the  Executive  on
     December 31, 2003. In the event such closing  conditions  are not satisfied
     during calendar year 2003, then the payments  contemplated  herein shall be
     made within 10 days after  consummation  of the merger  contemplated by the
     Merger Agreement.  Notwithstanding  the foregoing,  if the Executive enters
     into a new written  employment  agreement with Sterling or Sterling Savings
     Bank prior to  December  31, 2003 (but  effective  upon  completion  of the
     merger contemplated by the Merger Agreement), then the Severance Amount and
     Additional  Severance Amount shall not be paid pursuant to the terms hereof
     and any  severance to be provided to the  Executive,  if any,  shall be set
     forth in such new written employment agreement."

     Section 5(d) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association  shall  pay  the  Executive  as  additional
     severance the amount of $5,750 (the "Additional  Severance Amount") in lieu
     of any obligation to pay the Executive the value of employer  contributions
     that would have been made on the Executive's behalf over the remaining term
     of the  agreement to any  tax-qualified  retirement  plan.  The  Additional
     Severance  Amount  shall be paid at the time the Base  Severance  Amount is
     paid pursuant to Section 5(c) above.  Upon the  Executive's  termination of
     service in connection with or following a Change in Control arising from or
     relating   to   the   Merger   Agreement,   Sterling   Savings   Bank,   as
     successor-in-interest to the Association,  shall provide the Executive with
     continued life, medical, dental and disability coverage as is then provided
     by Sterling  Savings Bank to its  full-time  employees,  as the same may be
     changed from time to time,  during the 36 month period next  following  the
     Executive's  Date  of  Termination  with  the  cost to be  absorbed  by the
     Executive  being equal to the lesser of (i) the  employee  cost of coverage
     currently  being  borne  by the  Executive  or (ii)  the  employee  cost of
     coverage  borne by full-time  employees of Sterling  Savings Bank receiving
     the same  coverage;  provided  if the cost of  coverage  to be borne by the
     Executive is determined  under subpart (i), then such cost shall be subject
     to pro  rata  adjustment  based  upon the pro  rata  adjustment  in cost of
     coverage  that is borne by  full-time  employees  of Sterling  Savings Bank
     receiving the same coverage after completion of the merger  contemplated by
     the Merger Agreement."

4.   New Section 24 is added to the Employment Agreement as follows:

     "24.  Long  Term  Medical  Care.  The  Executive  shall  have  a  right  to
     participate  in the long term  medical care  program to be  implemented  by
     Association  if the Executive  meets the  eligibility  requirements  of the
     insurer. If the Executive meets the eligibility requirements of the insurer
     and becomes a participant  in the long term medical care  program,  then in
     that  event,  his Base  Severance  Amount  shall be  reduced  by the single
     premium cost paid by Association  for such long term medical care on behalf
     of the Executive (which is estimated to be $33,000) and the Executive shall
     have no obligation to reimburse  Association  for any premium cost relating
     to such program after the Executive's termination of employment."

5.   The  Employment  Agreement  shall be further  amended by adding  thereto an
     "Exhibit A to the  Employment  Agreement"  in the form  attached  hereto as
     Appendix I.

6.   Except as  specifically  set forth herein,  the Employment  Agreement shall
     continue  in full  force  and  effect.  To the  extent  that any  provision
     contained in this Agreement is  inconsistent  with any of the provisions of
     the  Employment  Agreement,  including  but not  limited to,  Section  5(b)
     thereof, the provisions contained in this Agreement shall be controlling.

7.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

8.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so  executed  shall be deemed an  original  and all of which,
     taken together, shall constitute one and the same agreement.

     The parties have entered this Agreement on July 14, 2003.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


                                                By: /s/ Kermit K. Houser
                                                Kermit K.  Houser
                                                President/CEO
                                                KLAMATH  FIRST BANCORP, INC.


                                                By: /s/ Marshall J. Alexander
                                                Marshall J. Alexander
                                                EVP/Chief Financial Officer

                                                EXECUTIVE:


                                                By: /s/ Craig M Moore
                                                Craig M Moore SVP/Chief Auditor


<PAGE>
                                                                 Exhibit 10(e).3
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
Craig M Moore,  an Employee of the Employer (hereinafter referred to as the
"Employee"), who resides in the State of Oregon.

                              W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

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

     WHEREAS,  the  Employee'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 Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.       EMPLOYMENT

          Although  this  Agreement is intended to provide the Employee  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 Employee and the Employer nor shall any  provision of this
          Agreement  restrict or expand the right of the  Employer to  terminate
          the  Employee's  employment.  This  Agreement  shall have no impact or
          effect  upon any  separate  written  Employment  Agreement  which  the
          Employee 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 from, and shall have no effect upon, or be affected
          by, the terms and provisions of said Employment Agreement.

          Except as otherwise set forth in this  Agreement,  the term "Employer"
          shall  mean  Klamath  First  Federal  Savings  and  Loan  Association;
          provided,  further,  that for  purposes  of this  Agreement,  the term
          "Employer" shall mean Klamath First Bancorp, Inc. and its subsidiaries
          and affiliated entities,  including any parent holding company and its
          subsidiaries.


II.      FRINGE BENEFITS

          The  salary  continuation  benefits  provided  by this  Agreement  are
          granted by the  Employer as a fringe  benefit to the  Employee and are
          not part of any salary  reduction plan or an  arrangement  deferring a
          bonus or a salary  increase.  The  Employee  has no option to take any
          current payment or bonus in lieu of these salary continuation benefits
          except as set forth hereinafter.


III.     retirement date and early retirement date

         A.       Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-two  ("62") years of age and  acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.

<PAGE>


         B.       Early Retirement Date:

               The term "Early  Retirement  Date" shall mean the Retirement,  as
               defined above, of the Employee on, or after the Employee achieves
               fifty-five  (55) years of age, but has not yet reached  sixty-two
               (62) years of age.


IV.      retirement benefit and early retirement benefit

         A.       Retirement Benefit:

               If the Employee shall remain in the continuous  employment of the
               Employer until  attaining age sixty-two  (62), the Employee shall
               be entitled to be paid the "Normal Retirement  Benefit" specified
               in   Schedule  A,   payable  in   substantially   equal   monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the Employee  Retires (or on
               such later date as may be mutually  agreed  upon by the  Employee
               and the  Employer  in advance of said  Retirement  date)  payable
               until the Employee's death. After  commencement of payments,  the
               Normal  Retirement  Benefit will increase by two percent (2%) per
               year.

         B.       Early Retirement Benefit:

               The  Employee  shall  have the right to  retire  on a date  which
               constitutes an Early  Retirement  Date as defined in Subparagraph
               III (B) above.  In the event the  Employee  elects to Retire on a
               date which  constitutes an Early  Retirement Date, and said early
               retirement  is not  pursuant to a Change in Control as defined in
               paragraph VI below, the Employee shall be entitled to be paid the
               "Normal Retirement  Benefit" specified in Schedule A for the date
               the Retirement occurs, but reduced by a factor of one-half of one
               percent  (.5%) per month for each month or portion  thereof  that
               the Early  Retirement  occurs prior to the  Retirement  Date. The
               benefit   shall  be  payable  in   substantially   equal  monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the  Early  Retirement  Date
               occurs (or on such later date as may be  mutually  agreed upon by
               the Employee and the Employer in advance of such Early Retirement
               Date).  After  commencement  of  payments,  the Early  Retirement
               benefit will increase by two percent (2%) per year.

               Example:  If the Early  Retirement  Date occurs on the Employee's
               60th birthday and if the Retirement Date in Section III.A.  above
               is at age 62, the Normal Retirement Benefit specified in Schedule
               "A" as of the  Employee's  60th birthday  would be reduced by 12%
               [.5% x 24 months].


V.       other termination of EMPLOYMENT and DISABILITY

         A.       Payments in the Event Employment Is Terminated Prior to
                  Retirement:

               The  Employer  reserves  the right to  terminate  the  Employee's
               employment,  with or without  cause but  subject  to any  written
               employment  agreement  which may then exist, at any time prior to
               the  Employee's  Retirement.  In the event that the employment of
               the Employee shall be terminated,  other than by reason of death,
               Disability  or  Retirement,  prior  to the  Employee's  attaining
               sixty-two (62) years of age, then this Agreement  shall terminate
               on the date of such termination of employment; provided, however,
               that the Employee shall be entitled to the following  benefits as
               may be applicable  depending upon the  circumstances  surrounding
               the Employee's termination:

              (i)      Termination for Other Than Disability, Change in Control
                       or Cause:

               If the Employee's  employment is terminated by the Employee or by
               the  Employer for any reason  other than  Disability,  "Change in
               Control"  or  "Termination  for  Cause,"  the  Employee  shall be
               entitled to be paid the "Normal Retirement  Benefit" specified in
               Schedule   A  as  of  the  date  of   termination,   payable   in
               substantially equal monthly installments on the first day of each
               month,  beginning with the month following the month in which the
               Employee  attains  sixty-two  (62) years of age (or on such later
               date  as may be  mutually  agreed  upon by the  Employee  and the
               Employer   not  less  than   fifteen  (15)  days  prior  to  such
               commencement  date) payable until the Employee's death, and shall
               increase  by two  percent  (2%)  per  year.  Alternatively,  upon
               achieving age fifty-five (55) but before  achieving age sixty-two
               (62),  the  Employee  may choose to receive the Early  Retirement
               Benefit with the reductions from the "Normal Retirement  Benefit"
               as of the date of termination,  and as described in Section IV.B.
               of this Agreement.  The benefit shall be payable in substantially
               equal  monthly  installments  on the  first  day of  each  month,
               beginning  with the month  following the month in which the Early
               Retirement  Date occurs (or on such later date as may be mutually
               agreed  upon by the  Employee  and the  Employer  not  less  than
               fifteen (15) days prior to such commencement date) payable to the
               Employee's  death,  and shall  increase by two  percent  (2%) per
               year.

<PAGE>


                   (ii)    Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee 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 Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

         B.       Payment in the Event of Disability Prior to Retirement:

               The  Employee  shall,  in  connection  with  acceptance  of  this
               Agreement,  elect  below  either  the "Lump Sum  Payment"  or the
               "Annuity  for Life"  option in the  event  the  Employee  becomes
               disabled at any time after the Effective  Date of this  Agreement
               but prior to  Retirement.  The term  "Disability"  or  "Disabled"
               shall  have the same  meaning  given  such terms in any policy of
               disability  insurance  maintained by the Employer for the benefit
               of employees  including  the  Employee.  In the absence of such a
               policy,  which  extends  coverage to the Employee in the event of
               disability, the terms shall mean bodily injury or disease (mental
               or  physical)   which  wholly  and   continuously   prevents  the
               performance of the Employee's duties to the Employer for at least
               one hundred twenty (120) days.

(i)      Lump Sum Payment.

                    The  Employee  shall  be  entitled  to be paid  the lump sum
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the  date  of  disability  or  date  the
                    Employee  otherwise  terminated  service  with the  Employer
                    other than for Cause.  The lump sum shall be payable 60 days
                    from the date the Employer has received a written request to
                    commence benefits, along with documentation showing that the
                    Employee has become disabled.

(ii)     Annuity for Life.

                    The Employee shall be entitled to be paid an annuity for the
                    Employee's life. The Employer shall purchase such an annuity
                    from an  insurance  company  with an A. M.  Best or  Moody's
                    rating  of  no  less  than  AA  and  using  the   amount  of
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the date of  disability  or the date the
                    Employee  otherwise  terminated  service  with the  Employer
                    other  than for  Cause.  The  Employer  shall  purchase  the
                    annuity  within  60 days  from  the date  the  Employer  has
                    received a written request to commence benefits,  along with
                    documentation showing that the Employee has become Disabled.
                    Nevertheless,  if the amount of the  applicable  "Disability
                    Benefit"  specified in Schedule A is $50,000.00 or less, the
                    payment  shall be as a lump sum to the  Employee and not the
                    purchase of an annuity for life.

(iii)    Employee  Election of Disability  Benefit.

                    I elect to receive the following  Disability Benefit (Please
                    sign on applicable line):

                           ______________________    Lump Sum Benefit.


                           /s/ Craig M Moore         Annuity for Life.



VI.               CHANGE OF CONTROL

         A.       Definition of Change In Control:

                    A "Change in Control" of Klamath  First  Bancorp,  Inc. (the
                    "Company")  or  Klamath  First  Federal   Savings  and  Loan
                    Association (the "Association")  shall be deemed to occur if
                    and when (a) an  offeror  other than the  Company  purchases
                    shares of the common stock of the Company or the Association
                    pursuant to a tender or exchange offer for such shares,  (b)
                    any  person  (as such  term is used in  Sections  13(d)  and
                    14(d)(2)  of the  Securities  Exchange  Act of  1934)  is or
                    becomes the beneficial  owner,  directly or  indirectly,  of
                    securities  of the Company or the  Association  representing
                    25% or more of the combined voting power of the Company's or
                    the  Association's  then  outstanding  securities,  (c)  the
                    membership  of the board of  directors of the Company or the
                    Association  changes as the result of a contested  election,
                    such that individuals who were directors at the beginning of
                    any twenty-four  month period (whether  commencing before or
                    after  the  effective   date  of  this   Agreement)  do  not
                    constitute  a  majority  of the  Board  at the  end of  such
                    period,   or  (d)   shareholders   of  the  Company  or  the
                    Association  approve  a  merger,   consolidation,   sale  or
                    disposition of all or substantially  all of the Company's or
                    the  Association's  assets, or a plan of partial or complete
                    liquidation.

         B.       Termination by the Employer on Account of or After a Change in
                  Control:

                    In the event the Employee's  employment with the Employer is
                    terminated  by the Employer in  connection  with a Change in
                    Control,  the Employee  shall be  immediately  vested in the
                    "Normal Retirement  Benefit" specified in Schedule A for the
                    date the Employee  achieves age sixty-two (62). The Employee
                    shall be entitled to be paid the "Change in Control Benefit"
                    specified  in Schedule  A, in  substantially  equal  monthly
                    installments  on the first day of each month,  beginning  no
                    sooner  than the  month  following  the  month in which  the
                    Employee  attains  age  fifty-five  (55),  as  requested  in
                    writing by the Employee and delivered to the Employer or its
                    successor  thirty  (30) days  prior to the  commencement  of
                    installment payments;  provided,  however, that in the event
                    the  Employee  does  not  request  a  commencement  date  as
                    specified,  such installments shall be paid on the first day
                    of each month,  beginning with the month following the month
                    in which the Employee  attains  sixty-two (62) years of age.
                    Upon the commencement of payments, the installments shall be
                    payable until the  Employee's  death,  and shall increase by
                    two percent (2%) per year.

                    A  termination  shall be deemed to be in  connection  with a
                    Change in Control  if,  within two (2) years  following  the
                    occurrence  of a  Change  in  Control:  (a)  the  Employee's
                    employment  with the Employer is  terminated by the Employer
                    other than a Termination  for Cause; or (b) by reason of the
                    Employer's actions any adverse change occurs in the scope of
                    the  Employee's  position,   material  responsibilities  and
                    duties, salary,  benefits or location of employment;  or (c)
                    the  Employer  causes  an event to  occur  which  reasonably
                    constitutes  or  results  in a  demotion,  loss of title,  a
                    significant diminution of responsibilities or authority,  or
                    a  constructive  termination  (by forcing a  resignation  or
                    otherwise) of the Employee's employment.


VII.     benefit accounting

                    The  Employer  shall  account  for this  benefit  using  the
                    regulatory  accounting  principles of the Employer's primary
                    federal  regulator.  The Employer shall establish an accrued
                    liability  retirement  account for the  Employee  into which
                    appropriate reserves shall be accrued.


VIII.    restrictions on funding

                    The Employer shall have no obligation to set aside,  earmark
                    or  entrust  any  fund  or  money  with  which  to  pay  its
                    obligations  under this Employee Plan. The Employee,  her or
                    his beneficiary (ies), or any successor in interest shall be
                    and remain simply a general  creditor of the Employer in the
                    same manner as any other creditor having a general claim for
                    matured and unpaid  compensation.  The Employer reserves the
                    absolute right, at its sole  discretion,  to either fund the
                    obligations  undertaken  by this Employee Plan or to refrain
                    from  funding the same and to determine  the extent,  nature
                    and method of such  funding.  Should the  Employer  elect to
                    fund this Employee  Plan,  in whole or in part,  through the
                    purchase  of  life  insurance,   mutual  funds,   disability
                    policies or  annuities,  the Employer  reserves the absolute
                    right, in its sole discretion,  to terminate such funding at
                    any time, in whole or in part. At no time shall any Employee
                    be deemed to have any lien, right,  title or interest in any
                    specific funding investment or assets of the Employer.

                    If the  Employer  elects  to  invest  in a  life  insurance,
                    disability  or annuity  policy on the life of the  Employee,
                    then the  Employee  shall  assist  the  Employer  by  freely
                    submitting to a physical exam and supplying such  additional
                    information necessary to obtain such insurance or annuities.

                    Notwithstanding  anything  hereinabove to the contrary,  the
                    Employer and the Employee acknowledge and agree that, in the
                    event of a Change in Control and at the  written  request of
                    the Employee,  the Employer 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 Employer in its sole  discretion
                    deems   appropriate   and  in  compliance   with  applicable
                    provisions of the Internal  Revenue Code of 1986, as amended
                    (the  "Code")  in  order  to  permit  the  Employer  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
                    Employer  to  be  used  exclusively  for  discharge  of  the
                    Employer's  obligations pursuant to this Agreement and shall
                    continue  to be  subject  to the  claims  of the  Employer's
                    general   creditors  until  paid  to  the  Employee  or  its
                    beneficiaries  in such manner and at such times as specified
                    in this Agreement


IX.      MISCELLANEOUS

         A.       Alienability and Assignment Prohibition:

                    The  Employee  shall  have no power  or  right to  transfer,
                    assign, anticipate,  hypothecate,  mortgage, commute, modify
                    or otherwise encumber in advance any of the benefits payable
                    hereunder  nor  shall any of said  benefits  be  subject  to
                    seizure for the payment of any debts, judgments,  alimony or
                    separate   maintenance   owed   by  the   Employee   nor  be
                    transferable by operation of law in the event of bankruptcy,
                    insolvency or otherwise.  In the event the Employee attempts
                    assignment, commutation, hypothecation, transfer or disposal
                    of the benefits hereunder,  the Employer's liabilities shall
                    forthwith cease and terminate.

         B.       Binding Obligation of the Employer and any Successor in
                  Interest:

                    The  Employer  shall not merge or  consolidate  into or with
                    another Employer or sell  substantially all of its assets to
                    another Employer,  firm or person until such Employer,  firm
                    or  person  expressly  agree,  in  writing,  to  assume  and
                    discharge the duties and  obligations  of the Employer under
                    this Employee Plan. This Employee Plan shall be binding upon
                    the parties hereto, their successors,  beneficiaries,  heirs
                    and personal representatives.

         C.       Amendment or Revocation:

                    It is agreed by and between the parties hereto that,  during
                    the  lifetime of the  Employee,  this  Employee  Plan may be
                    amended  or  revoked  at any time or  times,  in whole or in
                    part, by the mutual written  consent of the Employee and the
                    Employer.

         D.       Gender:

                    Whenever  in  this  Employee  Plan  words  are  used  in the
                    masculine or neuter gender, they shall be read and construed
                    as in the  masculine,  feminine or neuter  gender,  whenever
                    they should so apply.

         E.       Effect on Other Employer Benefit Plans:

                    Nothing  contained  in this  Employee  Plan shall affect the
                    right of the Employee to participate in or be covered by any
                    qualified or non-qualified pension,  profit-sharing,  group,
                    bonus or other  supplemental  compensation or fringe benefit
                    plan  constituting  a part  of the  Employer's  existing  or
                    future compensation structure.

         F.       Headings:

                    Headings and  subheadings in this Employee Plan are inserted
                    for reference and convenience only and shall not be deemed a
                    part of this Employee Plan.

         G.       Applicable Law:

                    The laws of the State of Oregon  shall  govern the  validity
                    and interpretation of this Agreement.

         H.       Partial Invalidity:

                    If any  term,  provision,  covenant,  or  condition  of this
                    Employee Plan 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  Employee  Plan  shall  remain in full  force and effect
                    notwithstanding such partial invalidity.

         I.       Not a Contract of Employment:

                    This Agreement  shall not be deemed to constitute a contract
                    of  employment  between  the parties  hereto,  nor shall any
                    provision  hereof  restrict  the  right of the  Employer  to
                    discharge  the  Employee,  or  restrict  the  right  of  the
                    Employee to terminate employment.

         J.       Notices:

                    Any notice  required or  permitted of either the Employee or
                    the Employer  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.

<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       Craig M Moore
                                            7808 Hilyard Avenue
                                            Klamath Falls, OR 97603

         K.       Opportunity To Consult With Independent Advisors:

                    The  Employee   acknowledges  that  the  Employee  has  been
                    afforded  the   opportunity  to  consult  with   independent
                    advisors  of  his  or  her   choosing   including,   without
                    limitation,   accountants   or  tax   advisors  and  counsel
                    regarding  both the benefits  granted to the Employee  under
                    the terms of this Agreement and the (i) terms and conditions
                    which may affect the Employee'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  Employee
                    acknowledges and agrees shall be the sole  responsibility of
                    the Employee  notwithstanding any other term or provision of
                    this Agreement. The Employee further acknowledges and agrees
                    that the Employer shall have no liability whatsoever related
                    to any such  personal tax effects or other  personal  costs,
                    expenses,  or  liabilities  applicable  to the  Employee and
                    further  specifically  waives any right for the Employee and
                    his  or her  heirs,  beneficiaries,  legal  representatives,
                    agents, successors, and assigns to claim or assert liability
                    on the part of the Employer related to the matters described
                    above   in   this   subparagraph.   The   Employee   further
                    acknowledges   and  agrees  that  the   Employee  has  read,
                    understands  and consents to all of the terms and conditions
                    of this  Agreement,  and that the Employee  enters into this
                    Agreement  with  a  full  understanding  of  its  terms  and
                    conditions.


X.       ADMINISTRATIVE AND CLAIMS PROVISION

         A.       Named Fiduciary and Plan Administrator:

                    The  "Named  Fiduciary  and  Plan   Administrator"  of  this
                    Employee Plan shall be Klamath First  Bancorp,  Inc.,  until
                    its  resignation or removal by the Board. As Named Fiduciary
                    and Plan  Administrator,  the Employer  shall be responsible
                    for  the  management,  control  and  administration  of  the
                    Employee  Plan.  The Named  Fiduciary may delegate to others
                    certain    aspects   of   the   management   and   operation
                    responsibilities   of  the  Employee   Plan   including  the
                    employment  of advisors and the  delegation  of  ministerial
                    duties to qualified individuals.

         B.       Claims Procedure:

                    In the event a  dispute  arises  over  benefits  under  this
                    Employee  Plan and benefits are not paid to the Employee and
                    the claimant  feels he is 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
                    provisions  of this  Employee  Plan 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 a
                    further review of the claim denial is desired. A claim shall
                    be  deemed   denied  if  the   Named   Fiduciary   and  Plan
                    Administrator  fail to take any action  within the aforesaid
                    forty-five-day period.

                    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  Employee  Plan or any  documents  relating
                    thereto  and submit any written  issues and  comments it 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.

C.       Arbitration:

                    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  Employer 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").  In the  event  JAMS is unable or
                    unwilling to conduct the arbitration  provided for under the
                    terms of this Paragraph,  or has  discontinued its business,
                    the parties agree that a representative member,  selected by
                    the  mutual  agreement  of  the  parties,  of  the  American
                    Arbitration  Association ("AAA"),  shall conduct the binding
                    arbitration  referred  to in this  Paragraph.  Notice of the
                    demand for  arbitration  shall be filed in writing  with the
                    other  party to this  Agreement  and with  JAMS (or AAA,  if
                    necessary).  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, or if there are
                    none, the rules of procedure used or established by AAA. Any
                    award  rendered  by JAMS or AAA 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
                    Klamath Falls,  Oregon,  unless  otherwise  agreed to by the
                    parties.

         D.       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, the prevailing party
                    shall be entitled to recover from the  non-prevailing  party
                    reasonable  expenses,  attorneys' fees and costs incurred in
                    connection  therewith or in the enforcement or collection of
                    any  judgment or award  rendered  therein.  The  "prevailing
                    party" means the party  determined by the  arbitrator(s)  or
                    court,  as the case may be, to have most  nearly  prevailed,
                    even if such  party  did not  prevail  in all  matters,  not
                    necessarily the one in whose favor a judgment is rendered.


XI.      SECTION 280G BENEFITS ADJUSTMENT

                    If all or any portion of the amounts payable to the Employee
                    under this  Agreement,  either alone or together  with other
                    payments  which the  Employee  has the right to receive from
                    the Employer,  constitute "excess parachute payments" within
                    the meaning of Section 280G of the Code, that are subject to
                    the  excise  tax  imposed  by  Section  4999 of the Code (or
                    similar  tax  and/or  assessment),  the  Employer  (and  its
                    successor) and the Employee each agree to pay their share of
                    any taxes that may be imposed as a result of  payments  made
                    pursuant to this Agreement; provided, however, that Employer
                    and  Employee  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 Employee is greater than the amount initially
                    so  determined,  then the Employee 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.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

  Klamath First Federal Savings and Loan Association



/s/ Kermit K. Houser                                /s/ Nin G. Drake
Kermit K. Houser                                    Witness
President and CEO




/s/ Craig M Moore                                  /s/ Kathryn Rutledge
Craig M. Moore SVP/Chief Auditor                  Witness
<PAGE>
<TABLE>
<CAPTION>
                            EMPLOYEE BENEFIT SCHEDULE

                                   CRAIG MOORE
                          DATE OF BIRTH: APRIL 3, 1957
                             HIRED ON: JUNE 16, 1997

                                   NORMAL            CHANGE IN                                DEATH BENEFIT:         DEATH BENEFIT:
       VESTING                 RETIREMENT              CONTROL           DISABILITY              DEATH WHILE                  AFTER
      DATE (1)                 BENEFIT (2)          BENEFIT (3)          BENEFIT (4)             EMPLOYED (5)        TERMINATION (6)
<S>                              <C>                  <C>                <C>                      <C>                    <C>
   January 1, 2003                 $1,637                   NA                   $0               $1,329,820               $100,000
   January 1, 2004                 $4,910                   NA               $7,318               $1,329,820               $100,000
   January 1, 2005                 $9,820                   NA              $23,308               $1,329,820               $100,000
   January 1, 2006                $16,367                   NA              $49,491               $1,329,820               $163,670
   January 1, 2007                $24,551                   NA              $87,573               $1,329,820               $245,505
   January 1, 2008                $34,371                   NA             $139,461               $1,329,820               $343,707
   January 1, 2009                $45,828                   NA             $207,287               $1,329,820               $458,276
   January 1, 2010                $58,921                   NA             $293,430               $1,329,820               $589,213
   January 1, 2011                $73,652                   NA             $400,536               $1,329,820               $736,516
   January 1, 2012                $81,835              $77,130             $531,550               $1,329,820               $818,351
   January 1, 2013                $90,019              $85,108             $627,039               $1,329,820               $900,186
   January 1, 2014                $98,202              $93,087             $732,285               $1,329,820               $982,021
   January 1, 2015               $106,386             $101,066             $848,128               $1,329,820             $1,063,856
   January 1, 2016               $114,569             $109,045             $975,475               $1,329,820             $1,145,691
   January 1, 2017               $122,753             $117,024           $1,115,305               $1,329,820             $1,227,526
   January 1, 2018               $130,936             $125,003           $1,268,673               $1,329,820             $1,309,361
   January 1, 2019               $132,982             $132,982           $1,436,716               $1,329,820             $1,329,820
   and thereafter                $132,982             $132,982                   NA             see #5 below           see #5 below
<FN>

1.  The date that Normal Retirement and Death benefits vest.  See separate footnotes for Change in Control and
     Disability Benefits.
2.  Annual Retirement Benefits payable at age sixty-two (62). Benefits are payable for life and increase by 2% per
     year after Retirement.
3. The Employee is eligible to retire following Termination pursuant to a Change in Control any time after the
     attainment of age fifty five (55).  This is the annual sum the Employee will be paid if the Employee elects to
     receive Retirement Benefits on or after the Employee's birthday, but before the following anniversary. Once
     payments begin, Benefits are payable for life and increase by 2% per year thereafter.
4. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty
     Balance as of disability date.  Disability Benefit value is determined by straight-line interpolation between the
    amounts showing in this column for Jan 1 of the calendar year the disability occurs and Jan 1 of the following
    calendar year.  Benefit is paid as Employee elected in the Agreement.  No post-retirement benefit.
5.  Death benefit equals 10x initial Normal Retirement Benefit to age 70, 7x initial Normal Retirement Benefit to
    Age 80, and 3 x initial Normal Retirement Benefit thereafter.
6.  Unless termination is for Cause, the death benefit is the greater of $100,000 or 10x the vested annual retirement
     benefit at the time of termination.
</FN>
</TABLE>


/s/ Craig M Moore  5/14/03   /s/ Kermit K. Houser                5/19/03
Craig M Moore      Date      Bank Officer                        Date


<PAGE>
                                                                 Exhibit 10(e).4
           FIRST AMENDMENT TO executive salary continuation AGREEMENT

     This FIRST  AMENDMENT  TO EXECUTIVE  SALARY  CONTINUATION  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal Savings and Loan Association  ("Employer") and the undersigned executive
officer of Employer ("Employee").

     WHEREAS,   Employer   and  Employee   entered  into  an  Executive   Salary
Continuation Agreement (the "SCA") effective January 1, 2003;

     WHEREAS,  Klamath First Bancorp,  Inc.  ("Company"),  the parent company of
Employer,  has entered into an Agreement and Plan of Merger dated as of July 14,
2003, (the "Merger Agreement") with Sterling Financial Corporation  ("Sterling")
with respect to a proposed transaction (the "Transaction") whereby Sterling will
acquire all of the outstanding shares of Company common stock in a stock merger;

     WHEREAS,  Employer  desire to enter into this  Agreement to facilitate  the
Transaction; and

     WHEREAS,  Employee  desires to enter into this  Agreement to facilitate the
Transaction  so as to enable  Employee (a) to receive a cash-out of his benefits
under the SCA as  provided  herein,  (b) to receive  change in control  benefits
under his employment  agreement and (c) to enhance the value of shares of common
stock of Company owned by Employee and the value of his stock options to acquire
common stock of Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Notwithstanding  anything  contained in the SCA to the  contrary,  Employer
     shall  have the  right to pay  Employee  at any time  from the date  hereof
     through   December  31,  2003  the  amount  of  $606,309  less  all  tax
     withholding  obligations  with respect  thereto (the "Cash-Out  Amount") in
     full and complete satisfaction of all obligations of Employer under the SCA
     and all rights of Employee  under the SCA. Upon Employer  making payment of
     the Cash-Out Amount to Employee as provided herein, the SCA shall terminate
     and shall have no further force or effect.

2.   Upon payment of the Cash-Out  Amount to Employee by Employer as provided in
     paragraph  1 above,  Employee  does hereby  release  and forever  discharge
     Employer,  its  affiliates,   and  their  respective  assigns,   directors,
     officers,  employees and agents from any and all claims, demands, causes of
     action and rights that Employee has or might have under the SCA of any kind
     or character whatsoever, whether known or unknown.

3.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

4.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so executed  shall be deemed an  original  and both of which,
     taken together, shall constitute one and the same agreement.

     The parties have  executed  this  Agreement on the day and year first above
     written.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION

                                        By:   /s/ Kermit K. Houser
                                               Kermit K. Houser
                                               President/CEO


                                     EMPLOYEE:


                                        By:   /s/ Craig M Moore
                                              Craig M Moore SVP/Chief Auditor



<PAGE>
                                                                 Exhibit 10(f).1
                              EMPLOYMENT AGREEMENT
                        Amended and Restated May 13, 2003

     THIS  AGREEMENT  is made  effective  as of October 1, 2002,  by and between
KLAMATH FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"),  Klamath
Falls,  Oregon;   KLAMATH  FIRST  BANCORP,  INC.  (the  "Company"),   an  Oregon
corporation; and James E. Essany (the "Executive").

     WHEREAS,  the  Association  wishes to  assure  itself  of the  services  of
Executive for the period provided in this Agreement; and

     WHEREAS, the Executive is willing to serve in the employ of the Association
on a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1.       POSITION AND RESPONSIBILITIES.

     During the period of his employment hereunder, Executive agrees to serve as
Senior Vice  President of the  Association.  During said period,  Executive also
agrees to serve,  if elected,  as an officer of the Company or any subsidiary or
affiliate of the Company or the Association.

2.       TERMS AND DUTIES.

     (a) The term of this Agreement  shall be deemed to have commenced as of the
date first above  written and shall  continue for a period of  twenty-four  (24)
full calendar months  thereafter.  Commencing on the first anniversary date, and
continuing at each anniversary  date  thereafter,  the Board of Directors of the
Association (the "Board") or its Compensation Committee may extend the Agreement
for an  additional  year.  Prior to the  extension of the  Agreement as provided
herein,  the Board of Directors of the  Association  will review the Executive's
performance  evaluation  for  purposes  of  determining  whether  to extend  the
Agreement,  and the  results  thereof  shall be  included  in the minutes of the
Board's meeting.

     (b) During the period of his  employment  hereunder,  except for periods of
absence  occasioned by illness,  reasonable  vacation  periods,  and  reasonable
leaves of absence,  Executive shall devote  substantially all his business time,
attention,  skill,  and  efforts  to the  faithful  performance  of  his  duties
hereunder  including  activities  and  services  related  to  the  organization,
operation and management of the Association;  provided,  however, that, with the
approval of the Board, as evidenced by a resolution of such Board,  from time to
time,  Executive may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or  organizations,  which,
in such Board's  judgment,  will not present any  conflict of interest  with the
Association, or materially affect the performance of Executive's duties pursuant
to this Agreement.



<PAGE>

3.       COMPENSATION AND REIMBURSEMENT.

     (a) The  compensation  specified under this Agreement shall  constitute the
salary and  benefits  paid for the  duties  described  in  Sections 1 and 2. The
Association  shall pay  Executive as  compensation  a salary of $95,000 per year
("Base  Salary")  effective  11/1/2002.  Such Base  Salary  shall be  payable in
accordance with the customary payroll  practices of the Association.  During the
period of this  Agreement,  Executive's  Base Salary  shall be reviewed at least
annually;  the first  such  review  will be made no later than one year from the
date of this  Agreement.  Such  review  shall be  conducted  by the Board or its
Compensation  Committee,  and the Board may increase Executive's Base Salary. In
addition to the Base Salary provided in this Section 3(a), the Association shall
provide  Executive at no cost to Executive  with all such other  benefits as are
provided uniformly to regular salaried employees of the Association.

     (b) The  Association  will provide  Executive with employee  benefit plans,
arrangements  and  perquisites   substantially  equivalent  to  those  in  which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement,  and the  Association  will not,
without  Executive's  prior  written  consent,  make any  changes in such plans,
arrangements or perquisites which would adversely affect  Executive's  rights or
benefits thereunder.  However, changes in Association-sponsored  group insurance
plan  premiums,   deductibles,   co-payments  and  related  coverage  limits  or
conditions  are  excluded  from the prior  sentence for any such change which is
consistently applied to or available to regular salaried Association  employees.
Without  limiting the generality of the foregoing  provisions of this Subsection
(b),  Executive will be entitled to participate in or receive benefits under any
employee  benefit  plans  including,  but  not  limited  to,  retirement  plans,
supplemental   retirement   plans,   pension   plans,    profit-sharing   plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement  made  available  by the  Association  in the  future to its  senior
executives and key management  employees,  subject to, and on a basis consistent
with,  the  terms,  conditions  and  overall  administration  of such  plans and
arrangements.  Executive will be entitled to incentive  compensation and bonuses
as provided in any plan, or pursuant to any arrangement of the  Association,  in
which Executive is eligible to participate.  Nothing paid to the Executive under
any such plan or arrangement will be deemed to be in lieu of other  compensation
to which the  Executive  is entitled  under this  Agreement,  except as provided
under Section 5(e).

     (c) In addition to the Base Salary  provided for by  paragraph  (a) of this
Section 3, the Association  shall pay or reimburse  Executive for all reasonable
travel  and  other  obligations  under  this  Agreement  and  may  provide  such
additional compensation in such form and such amounts as the Board may from time
to time determine.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     (a) Upon the  occurrence  of an Event of  Termination  (as herein  defined)
during the Executive's term of employment  under this Agreement,  the provisions
of  this  Section  shall  apply.  As  used  in  this  Agreement,  an  "Event  of
Termination"  shall mean and include any one or more of the  following:  (i) the
termination by the Association of Executive's full-time employment hereunder for
any reason  other than a Change in Control,  as defined in Section  5(a) hereof;
disability,  as defined in Section 6(a) hereof; death; or retirement, as defined
in Section 7 hereof; (ii) Executive's resignation from the Association's employ,
upon (A) unless consented to by the Executive,  a material change in Executive's
function,  duties,  or  responsibilities,  which change would cause  Executive's
position to become one of lesser responsibility,  importance,  or scope from the
position and attributes  thereof described in Sections 1 and 2, above, (any such
material change shall be deemed a continuing  breach of this  Agreement),  (B) a
relocation of  Executive's  principal  place of employment by more than 35 miles
from  its  location  at the  effective  date of this  Agreement,  or a  material
reduction in the benefits and perquisites to Executive from those being provided
as of the effective date of this  Agreement,  (C) the liquidation or dissolution
of the Association, or (D) any breach of this Agreement by the Association. Upon
the occurrence of any event  described in clauses (A), (B), (C), or (D),  above,
Executive  shall have the right to elect to terminate his employment  under this
Agreement by resignation upon not less than sixty (60) days prior written notice
given  within a  reasonable  period of time not to  exceed,  except in case of a
continuing  breach,  four  calendar  months  after the event giving rise to said
right to elect.

     (b) Upon the occurrence of an Event of Termination  other than for Cause of
for Neglect (as described in Sections 8 and 9 hereof), the Association shall pay
Executive,  or,  in the  event  of his  subsequent  death,  his  beneficiary  or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages,  or both,  a sum equal to the  payments  due to the  Executive  for the
remaining term of the Agreement,  including Base Salary,  bonuses, and any other
cash or  deferred  compensation  paid  or to be paid  (including  the  value  of
employer  contributions that would have been made on the Executive's behalf over
the  remaining  term  of the  agreement  to any  tax-qualified  retirement  plan
sponsored by the  Association as of the Date of  Termination),  to the Executive
for the term of the Agreement provided,  however, that if the Association is not
in compliance  with its minimum  capital  requirements or if such payments would
cause  the  Association's  capital  to be  reduced  below  its  minimum  capital
requirements, such payments shall be deferred until such time as the Association
is in capital compliance.  All payments made pursuant to this Section 4(b) shall
be paid in substantially  equal monthly  installments over the remaining term of
this Agreement following the Executive's termination; provided, however, that if
the remaining term of the Agreement is less than one (1) year  (determined as of
the Executive's Date of  Termination),  such payments and benefits shall be paid
to the Executive in a lump sum within 30 days of the Date of Termination.

     (c) Upon the occurrence of an Event of Termination  other than for Cause or
for Neglect (as  described  in Sections 8 and 9 hereof),  the  Association  will
cause  to  be  continued   life,   medical,   dental  and  disability   coverage
substantially  identical  to the  coverage  maintained  by the  Association  for
Executive  prior  to  his  termination.  Such  coverage  shall  cease  upon  the
expiration of the remaining term of this Agreement.

5.       CHANGE IN CONTROL.

     (a) No benefit  shall be paid under this  Section 5 unless there shall have
occurred a Change in Control of the Company or the Association.  For purposes of
this Agreement, a "Change in Control" of the Company or the Association shall be
deemed to occur if and when (a) an  offeror  other  than the  Company  purchases
shares of the common  stock of the  Company  or the  Association  pursuant  to a
tender or exchange  offer for such shares,  (b) any person (as such term is used
in Sections  13(d) and  14(d)(2) of the  Securities  Exchange Act of 1934) is or
becomes the  beneficial  owner,  directly or  indirectly,  of  securities of the
Company or the Association representing 25% or more of the combined voting power
of the Company's then outstanding securities, (c) the membership of the board of
directors of the Company or the Association changes as the result of a contested
election,  such that  individuals  who were  directors  at the  beginning of any
twenty-four month period (whether  commencing before or after the effective date
of this  Agreement) do not constitute a majority of the Board at the end of such
period, or (d) shareholders of the Company or the Association  approve a merger,
consolidation,  sale or disposition of all or substantially all of the Company's
or the Association's assets, or a plan of partial or complete liquidation.

     (b) If any of the events  described in Section 5(a) hereof  constituting  a
Change in Control have occurred or the Board of the  Association  or the Company
has  determined  that a Change  in  Control  has  occurred,  Executive  shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this Section
5 upon his subsequent  involuntary  termination of employment at any time during
the term of this  Agreement  (or  voluntary  termination  following  a Change of
Control following any demotion,  loss of title, office or significant authority,
reduction in his annual compensation or benefits, or relocation of his principal
place of employment by more than 35 miles from its location immediately prior to
the  Change in  Control),  unless  such  termination  is  because  of his death,
retirement as provided in Section 7,  termination  for Cause, or termination for
Disability.

     (c) Upon the occurrence of a Change in Control  followed by the Executive's
termination of employment,  the Association shall pay Executive, or in the event
of his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, as severance  pay or  liquidated  damages,  or both, a sum equal to
1.50  times the  Executive's  "base  amount,"  within  the  meaning  of  Section
280G(b)(3)  of the Internal  Revenue  Code of 1986  ("Code"),  as amended.  Such
payment shall be made in a lump sum paid within ten (10) days of the Executive's
Date of Termination.

     (d) Upon the occurrence of a Change in Control  followed by the Executive's
termination  of employment,  the  Association  will cause to be continued  life,
medical,  dental and disability coverage substantially identical to the coverage
maintained by the Association for Executive prior to his severance. In addition,
Executive shall be entitled to receive the value of employer  contributions that
would have been made on the  Executive's  behalf over the remaining  term of the
agreement to any  tax-qualified  retirement plan sponsored by the Association as
of the Date of  Termination.  Such  coverage and  payments  shall cease upon the
expiration of thirty-six (36) months.

     (e) Upon the  occurrence  of a Change in Control,  the  Executive  shall be
entitled to receive benefits due him under, or contributed by the Company or the
Association  on his  behalf,  pursuant  to  any  retirement,  incentive,  profit
sharing,  bonus,   performance,   disability  or  other  employee  benefit  plan
maintained by the  Association or the Company on the  Executive's  behalf to the
extent that such benefits are not otherwise  paid to the Executive upon a Change
in Control.

     (f) IRS Section 280G Issues.  If 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 Company or  Association,
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 Company or Association  (and their  successor)  shall be responsible for any
loss of  deductibility  related  thereto;  provided,  however,  that  Company or
Association 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 Company or
Association immediately prior to the change in control or such other independent
accounting  firm  or  advisor  as  may  be  mutually  agreeable  to  Company  or
Association  and  Executive  in the  exercise  of their  reasonable  good  faith
judgment.


6.       TERMINATION FOR DISABILITY.

     (a) If the Executive shall become disabled as defined in the  Association's
then  current  disability  plan (or,  if no such plan is then in effect,  if the
Executive  is  permanently  and totally  disabled  within the meaning of Section
22(e)(3) of the Code as determined by a physician  designated by the Board), the
Association may terminate Executive's employment for "Disability."

     (b) Upon the  Executive's  termination  of employment for  Disability,  the
Association will pay Executive,  as disability pay, a semi-monthly payment equal
to three-quarters  (3/4) of Executive's  semi-monthly rate of Base Salary on the
effective date of such termination.  These disability payments shall commence on
the effective date of Executive's termination and will end on the earlier of (i)
the date Executive returns to the full-time employment of the Association in the
same capacity as he was employed  prior to his  termination  for  Disability and
pursuant to an employment agreement between Executive and the Association;  (ii)
Executive's full-time employment by another employer;  (iii) Executive attaining
the age of 65; or (iv)  Executive's  death; or (v) the expiration of the term of
this Agreement.  The disability pay shall be reduced by the amount, if any, paid
to the Executive under any plan of the Association providing disability benefits
to the Executive.

     (c) The Association  will cause to be continued life,  medical,  dental and
disability  coverage  substantially  identical to the coverage maintained by the
Association for Executive prior to his termination for Disability. This coverage
and payments shall cease upon the earlier of (i) the date  Executive  returns to
the  full-time  employment  of the  Association,  in the same capacity as he was
employed prior to his  termination  for Disability and pursuant to an employment
agreement  between  Executive and the Association;  (ii)  Executive's  full-time
employment by another employer;  (iii)  Executive's  attaining the age of 65; or
(iv) the Executive's death; or (v) the expiration of the term of this Agreement.

     (d)  Notwithstanding  the  foregoing,  there  will be no  reduction  in the
compensation  otherwise  payable to  Executive  during any period  during  which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.

7.       TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.

     Termination by the  Association of Executive  based on  "Retirement"  shall
mean  retirement  at age 65 or in  accordance  with any  retirement  arrangement
established  with  Executive's  consent with respect to him. Upon termination of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement  plan of the  Association  or the  Company  and other  plans to which
Executive is a party.  Upon the death of the  Executive  during the term of this
Agreement,  the Association shall pay to Executive's estate the compensation due
to the Executive  through the last day of the calendar  month in which his death
occurred.


<PAGE>

8.       TERMINATION FOR CAUSE.

     For  purposes of this  Agreement,  "Termination  for Cause"  shall  include
termination  because  of  the  Executive's  personal  dishonesty,  incompetence,
willful misconduct,  breach of fiduciary duty involving personal profit, willful
violation of any law,  rule,  or  regulation  (other than traffic  violations or
similar  offenses) or final  cease-and-desist  order,  or material breach of any
provision of this Agreement. In addition,  "Termination for Cause" shall include
termination  because of the  Executive's  intentional  failure to perform stated
duties, such as the refusal of the Executive to comply with the Association's or
the Company's  instructions,  policies or rules or other willful  conduct of the
Executive  which  materially  adversely  reflects  on the  Association's  or the
Company 's reputation or operation. For purposes of this Section, no act, or the
failure to act, on Executive's  part shall be "willful"  unless done, or omitted
to be done, not in good faith and without  reasonable  belief that the action or
omission  was  in  the  best  interest  of the  Association  or its  affiliates.
Notwithstanding  the  foregoing,  Executive  shall  not be  deemed  to have been
terminated  for Cause unless and until there shall have been  delivered to him a
copy of a  resolution  duly  adopted  by the  affirmative  vote of not less than
three-fourths  of the members of the Board at a meeting of the Board  called and
held for that purpose (after  reasonable  notice to Executive and an opportunity
for him, together with counsel,  to be heard before the Board),  finding that in
the good faith opinion of the Board,  Executive was guilty of conduct justifying
termination  for Cause and specifying the reasons  thereof.  The Executive shall
not have the right to  receive  compensation  or other  benefits  for any period
after  termination  for Cause.  Any stock options granted to Executive under any
stock option plan or any unvested  awards  granted under any other stock benefit
plan of the Association,  the Company,  or any subsidiary or affiliate  thereof,
shall  become  null and void  effective  upon  Executive's  receipt of Notice of
Termination for Cause pursuant to Section 9 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.

9.       TERMINATION FOR NEGLECT.

     The  Association and Company,  or either of them may terminate  Executive's
employment  under this  Agreement at any time for Neglect.  For purposes of this
Agreement,  "Neglect"  means the failure of Executive to give due care to stated
duties or to comply with instructions or directives of the Board of Directors of
the  Association  or  Company or either of them,  but where such  failure is not
determined to be willful or intentional as defined in Section 8. Termination for
Neglect  includes  termination  as the  result  of any  continuing  or  repeated
problems with  Executive's  job  performance  or conduct  after  written  notice
specifying such problem with  performance or conduct,  and where such continuing
and repeated problems were not determined to be willful or intentional, or where
the conduct was not deemed to have a material  adverse impact on the Association
or Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been  terminated  by  Neglect  unless  and until  there  shall have been sent to
Executive  a copy of a  resolution  duly  adopted by a majority  of the Board of
Directors of the  Association  and  Company,  or either of them  (excluding  the
Executive  in counting  the  majority if the  Executive  is then on the board of
directors,  and after  reasonable  notice to Executive  and an  opportunity  for
Executive to be heard before the board of  directors),  finding that in the good
faith  opinion of the board of directors  of the  Association  and  Company,  or
either of them, Executive engaged in conduct justifying  termination for Neglect
and describing  specifically the conduct.  Executive shall not have the right to
receive any salary or bonus for any period after  termination  of employment for
Neglect.  Executive  shall retain any vested  benefits in defined benefit plans,
defined  contribution  plans,  supplemental  executive  retirement plans,  stock
option plans,  restricted stock plans, or other such benefits, but shall forfeit
any rights that have not vested.


10.      REQUIRED PROVISIONS.

     (a) The Association may terminate  Executive's  employment at any time, but
any  termination  by the  Association,  other than as  described in Section 8 or
Section  9  of  this  Agreement,   shall  not  prejudice  Executive's  right  to
compensation  or other benefits under this  Agreement.  Executive shall not have
the  right to  receive  compensation  or other  benefits  for any  period  after
Termination for Cause as defined in Section 8 herein.

     (b)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
participating  in the conduct of the  Association's  affairs by a notice  served
under Section  8(e)(3) or (g)(1) of the Federal  Deposit  Insurance Act ("FDIA")
(12 U.S.C.  1818(e)(3)  and (g)(1)),  the  Association's  obligations  under the
Agreement  shall  be  suspended  as of the date of  service,  unless  stayed  by
appropriate  proceedings.  If the  charges  in the  notice  are  dismissed,  the
Association  may,  in its  discretion,  (i)  pay  Executive  all or  part of the
compensation  withheld  while its contract  obligations  were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.

     (c)  If   Executive  is  removed   and/or   permanently   prohibited   from
participating  in the conduct of the  Association's  affairs by an order  issued
under  Section  8(e)(4) or (g)(1) of the FDIA (12 U.S.C.  1818(e)(4) or (g)(1)),
all obligations of the Association under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting  parties shall
not be affected.

     (d) If the  Association is in default (as defined in Section 3(x)(1) of the
FDIA),  all  obligations  under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.

     (e) All obligations under this Agreement shall be terminated (except to the
extent  determined  that  continuation  of the  Agreement is  necessary  for the
continued  operation of the  Association):  (i) by the Director of the Office of
Thrift  Supervision  (the  "Director")  or his or her  designee  at the time the
Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters
into an agreement to provide assistance to or on behalf of the Association under
the authority contained in Section 13(c) of the FDIA or (ii) by the Director, or
his or her  designee  at the time  the  Director  or such  designee  approves  a
supervisory  merger to resolve  problems related to operation of the Association
or when the  Association  is  determined  by the  Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

     (f)  Any  payments  made  to  Executive  pursuant  to  this  Agreement,  or
otherwise,  are  subject  to and  conditioned  upon  compliance  with 12  U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

11.      NOTICE.

     (a) Any purported  termination by the  Association or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this  Agreement,  a "Notice of  Termination"  shall mean a written  notice which
shall indicate the specific termination  provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances  claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

     (b) "Date of  Termination"  shall  mean (A) if  Executive's  employment  is
terminated  for  Disability,  thirty (30) days after a Notice of  Termination is
given (provided that he shall not have returned to the performance of his duties
on a  full-time  basis  during  such  thirty  (30) day  period),  and (B) if his
employment is terminated for any other reason,  the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

     (c) If, within thirty (30) days after any Notice of  Termination  is given,
the party  receiving such Notice of Termination  notifies the other party that a
dispute  exists  concerning  the  termination,  except upon the  occurrence of a
Change in Control and voluntary  termination  by the Executive in which case the
Date of  Termination  shall be the date  specified  in the  Notice,  the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties,  by a binding  arbitration award, or
by a final judgment,  order or decree of a court of competent  jurisdiction (the
time for appeal there from having  expired and no appeal having been  perfected)
and provided further that the Date of Termination  shall be extended by a notice
of dispute  only if such notice is given in good faith and the party giving such
notice  pursues  the  resolution  of such  dispute  with  reasonable  diligence.
Notwithstanding the pendency of any such dispute,  the Association will continue
to pay Executive his full  compensation in effect when the notice giving rise to
the dispute was given (including,  but not limited to, Base Salary) and continue
him as a participant in all  compensation,  benefit and insurance plans in which
he was participating  when the notice of dispute was given, until the dispute is
finally  resolved in  accordance  with this  Agreement.  Amounts paid under this
Section are in addition to all other amounts due under this  Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.

12.      NON-COMPETITION.

     (a) Upon any termination of Executive's employment hereunder pursuant to an
Event of  Termination as provided in Section 4 hereof,  Executive  agrees not to
compete  with the  Association  and/or the  Company for a period of one (1) year
following such  termination in any city, town or county in which the Association
and/or the  Company  has an office or has filed an  application  for  regulatory
approval to establish an office,  determined  as of the  effective  date of such
termination.  Executive  agrees that during such period and within said  cities,
towns and counties, Executive shall not work for or advise, consult or otherwise
serve  with,  directly  or  indirectly,  any entity  whose  business  materially
competes  with the  depository,  lending  or other  business  activities  of the
Association and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the  Association  and/or the  Company,  its  business  and
property in the event of Executive's  breach of this Subsection 11(a) agree that
in the event of any such breach by Executive, the Association and/or the Company
will be entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive,  Executive's partners,
agents,  servants,  employers,  employees  and all  persons  acting  for or with
Executive.  Executive represents and admits that in the event of the termination
of his  employment  pursuant  to Section 8 hereof,  Executive's  experience  and
capabilities are such that Executive can obtain employment in a business engaged
in other lines  and/or of a different  nature  than the  Association  and/or the
Company,  and that the  enforcement  of a remedy by way of  injunction  will not
prevent Executive from earning a livelihood. Nothing herein will be construed as
prohibiting the Association  and/or the Company from pursuing any other remedies
available to the  Association  and/or the Company for such breach or  threatened
breach, including the recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
business  activities and plans for business  activities of the  Association  and
affiliates  thereof,  as it may exist from time to time, is a valuable,  special
and unique asset of the business of the Association.  Executive will not, during
or  after  the term of his  employment,  disclose  any  knowledge  of the  past,
present,  planned  or  considered  business  activities  of the  Association  or
affiliates  thereof to any person,  firm,  corporation,  or other entity for any
reason or purpose  whatsoever.  Notwithstanding  the  foregoing,  Executive  may
disclose  any  knowledge  of  banking,  financial  and/or  economic  principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Association.  In the event of a breach or threatened
breach by the Executive of the provisions of this Section,  the Association will
be entitled to an injunction restraining Executive from disclosing,  in whole or
in part,  the knowledge of the past,  present,  planned or  considered  business
activities of the  Association  or  affiliates  thereof,  or from  rendering any
services to any person, firm, corporation,  other entity to whom such knowledge,
in whole or in  part,  has been  disclosed  or is  threatened  to be  disclosed.
Nothing herein will be construed as prohibiting  the  Association  from pursuing
any other remedies  available to the  Association  for such breach or threatened
breach, including the recovery of damages from Executive.

13.      SOURCE OF PAYMENTS.

     All  payments  provided in this  Agreement  shall be timely paid in cash or
check  from  the  general  funds  of  the  Association.  The  Company,  however,
guarantees  all  payments  and the  provision  of all amounts and  benefits  due
hereunder to Executive  and, if such payments are not timely paid or provided by
the  Association,  such  amounts and  benefits  shall be paid or provided by the
Company.

14.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior  employment  agreement  between the  Association or any
predecessor of the Association  and Executive,  except that this Agreement shall
not  affect or operate to reduce  any  benefit  or  compensation  inuring to the
Executive of a kind elsewhere provided.  No provision of this Agreement shall be
interpreted to mean that  Executive is subject to receiving  fewer benefits than
those available to him without reference to this Agreement.

15.      NO ATTACHMENT.

     (a) Except as  required  by law,  no right to receive  payments  under this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to affect any such action  shall be null,
void, and of no effect.  (b) This Agreement  shall be binding upon, and inure to
the benefit of,  Executive,  the  Association,  the Company and their respective
successors and assigns.

16.      MODIFICATION AND WAIVER.

     (a) This  Agreement may not be modified or amended  except by an instrument
in writing signed by the parties hereto.

     (b) No term or  condition  of this  Agreement  shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement,  except by written  instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing  waiver
unless specifically  stated therein,  and each such waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.


17.      SEVERABILITY.

     If, for any reason,  any  provision of this  Agreement,  or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this  Agreement or any part of such  provision not held so invalid,  and each
such other  provision and part thereof shall to the full extent  consistent with
law continue in full force and effect.

18.      HEADINGS FOR REFERENCE ONLY.

     The headings of sections  and  paragraphs  herein are  included  solely for
convenience of reference and shall not control the meaning or  interpretation of
any of the provisions of this Agreement.

19.      GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Oregon, unless
otherwise specified herein;  provided,  however, that in the event of a conflict
between the terms of this Agreement and any  applicable  federal or state law or
regulation, the provisions of such law or regulation shall prevail.

20.      ARBITRATION.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three  arbitrators  sitting in a location selected by the employee within one
hundred (100) miles from the location of the Association, 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;  provided,
however,  that Executive  shall be entitled to seek specific  performance of his
right to be paid  until  the Date of  Termination  during  the  pendency  of any
dispute or controversy arising under or in connection with this Agreement.

21.      PAYMENT OF LEGAL FEES.

     All  reasonable  legal fees paid or incurred by  Executive  pursuant to any
dispute or question of  interpretation  relating to this Agreement shall be paid
or reimbursed by the  Association,  if successful  pursuant to a legal judgment,
arbitration or settlement.

22.      INDEMNIFICATION.

     The Association shall provide Executive (including his heirs, executors and
administrators)   with  coverage  under  a  standard  directors'  and  officers'
liability insurance policy at its expense,  or in lieu thereof,  shall indemnify
Executive (and his heirs,  executors and  administrators)  to the fullest extent
permitted under law against all expenses and liabilities  reasonably incurred by
him in  connection  with or arising out of any action,  suite or  proceeding  in
which he may be  involved  by reason of his having been a director or officer of
the Association (whether or not he continues to be a directors or officer at the
time of incurring such expenses or  liabilities),  such expenses and liabilities
to include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.



23.      SUCCESSOR TO THE ASSOCIATION OR THE COMPANY.

     The  Association  and the Company  shall require any successor or assignee,
whether direct or indirect, by purchase, merger,  consolidation or otherwise, to
all or  substantially  all the  business  or  assets of the  Association  or the
Company,  expressly  and  unconditionally  to assume  and agree to  perform  the
Association's  or the Company's  obligations  under this Agreement,  in the same
manner and to the same  extent  that the  Association  or the  Company  would be
required to perform if no such succession or assignment had taken place.


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by a duly  authorized  officer or director of the  Association  and the
Company,  and Executive has signed this  Agreement,  all on the 19th day of May,
2003.

KLAMATH FIRST BANCORP, INC.                 KLAMATH FIRST FEDERAL SAVINGS
                                                      AND LOAN ASSOCIATION


BY: /s/ Kermit K. Houser                        BY: /s/ Kermit Houser
    Kermit K. Houser, President & CEO           Kermit K. Houser President & CEO



/s/ Kathryn Rutledge                            /s/ James E. Essany
WITNESS:                                        James E. Essany SVP/Marketing


<PAGE>
                                                                 Exhibit 10(f).2
                     FIRST AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This FIRST  AMENDMENT TO AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal  Savings and Loan  Association  ("Association"),  Klamath First Bancorp,
Inc.,  ("Company")  and the  undersigned  executive  officer of Association  and
Company (the "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an Amended and
Restated Employment Agreement dated May 19, 2003, (the "Employment Agreement");

     WHEREAS,  Company has entered into an Agreement and Plan of Merger dated as
of July 14, 2003, (the "Merger  Agreement") with Sterling Financial  Corporation
("Sterling") with respect to a proposed transaction (the "Transaction")  whereby
Sterling will acquire all of the outstanding shares of Company common stock in a
stock merger;

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
the  Transaction  so as to  enable  his  change in  control  of  benefits  to be
triggered under the Employment  Agreement and his Executive Salary  Continuation
Agreement,  and to enhance the value of shares of common stock of Company  owned
by the Executive  and the value of his stock options to acquire  common stock of
Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Capitalized terms used herein, to the extent not defined  otherwise,  shall
     have the meaning ascribed to them in the Employment Agreement.

2.   Section 5(c) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association shall pay the Executive as severance pay or
     liquidated damages, or both (the "Base Severance Amount"),  an amount equal
     to $142,500.  In the event that all  conditions to closing under the Merger
     Agreement have been satisfied  during calendar year 2003, then  Association
     shall  make  payment  of the Base  Severance  Amount  plus  the  Additional
     Severance  Amount (as defined in Section  5(d) below) to the  Executive  on
     December 31, 2003. In the event such closing  conditions  are not satisfied
     during calendar year 2003, then the payments  contemplated  herein shall be
     made within 10 days after  consummation  of the merger  contemplated by the
     Merger Agreement.  Notwithstanding  the foregoing,  if the Executive enters
     into a new written  employment  agreement with Sterling or Sterling Savings
     Bank prior to  December  31, 2003 (but  effective  upon  completion  of the
     merger contemplated by the Merger Agreement), then the Severance Amount and
     Additional  Severance Amount shall not be paid pursuant to the terms hereof
     and any  severance to be provided to the  Executive,  if any,  shall be set
     forth in such new written employment agreement."

     Section 5(d) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association  shall  pay  the  Executive  as  additional
     severance the amount of $5,750 (the "Additional  Severance Amount") in lieu
     of any obligation to pay the Executive the value of employer  contributions
     that would have been made on the Executive's behalf over the remaining term
     of the  agreement to any  tax-qualified  retirement  plan.  The  Additional
     Severance  Amount  shall be paid at the time the Base  Severance  Amount is
     paid pursuant to Section 5(c) above.  Upon the  Executive's  termination of
     service in connection with or following a Change in Control arising from or
     relating   to   the   Merger   Agreement,   Sterling   Savings   Bank,   as
     successor-in-interest to the Association,  shall provide the Executive with
     continued life, medical, dental and disability coverage as is then provided
     by Sterling  Savings Bank to its  full-time  employees,  as the same may be
     changed from time to time,  during the 36 month period next  following  the
     Executive's  Date  of  Termination  with  the  cost to be  absorbed  by the
     Executive  being equal to the lesser of (i) the  employee  cost of coverage
     currently  being  borne  by the  Executive  or (ii)  the  employee  cost of
     coverage  borne by full-time  employees of Sterling  Savings Bank receiving
     the same  coverage;  provided  if the cost of  coverage  to be borne by the
     Executive is determined  under subpart (i), then such cost shall be subject
     to pro  rata  adjustment  based  upon the pro  rata  adjustment  in cost of
     coverage  that is borne by  full-time  employees  of Sterling  Savings Bank
     receiving the same coverage after completion of the merger  contemplated by
     the Merger Agreement."

3.   New Section 24 is added to the Employment Agreement as follows:

     "24.  Long  Term  Medical  Care.  The  Executive  shall not have a right to
     participate  in the long term  medical care  program to be  implemented  by
     Association."

4.   The  Employment  Agreement  shall be further  amended by adding  thereto an
     "Exhibit A to the  Employment  Agreement"  in the form  attached  hereto as
     Appendix I.

5.   Except as  specifically  set forth herein,  the Employment  Agreement shall
     continue  in full  force  and  effect.  To the  extent  that any  provision
     contained in this Agreement is  inconsistent  with any of the provisions of
     the  Employment  Agreement,  including  but not  limited to,  Section  5(b)
     thereof, the provisions contained in this Agreement shall be controlling.

6.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

7.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so  executed  shall be deemed an  original  and all of which,
     taken together, shall constitute one and the same agreement.

     The parties have entered this Agreement on July 14, 2003.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


                                                By: /s/ Kermit K. Houser
                                                Kermit K.  Houser
                                                President/CEO
                                                KLAMATH  FIRST BANCORP, INC.


                                                By: /s/ Craig M Moore
                                                Craig M Moore
                                                SVP/Chief Auditor

                                                EXECUTIVE:


                                                By: /s/ James E. Essany
                                                James E. Essany SVP/Marketing


<PAGE>
                                                                 Exhibit 10(f).3
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
James E. Essany,  an Employee of the Employer (hereinafter referred to as the
"Employee"), who resides in the State of Oregon.

                              W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

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

     WHEREAS,  the  Employee'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 Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.       EMPLOYMENT

          Although  this  Agreement is intended to provide the Employee  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 Employee and the Employer nor shall any  provision of this
          Agreement  restrict or expand the right of the  Employer to  terminate
          the  Employee's  employment.  This  Agreement  shall have no impact or
          effect  upon any  separate  written  Employment  Agreement  which  the
          Employee 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 from, and shall have no effect upon, or be affected
          by, the terms and provisions of said Employment Agreement.

          Except as otherwise set forth in this  Agreement,  the term "Employer"
          shall  mean  Klamath  First  Federal  Savings  and  Loan  Association;
          provided,  further,  that for  purposes  of this  Agreement,  the term
          "Employer" shall mean Klamath First Bancorp, Inc. and its subsidiaries
          and affiliated entities,  including any parent holding company and its
          subsidiaries.


II.      FRINGE BENEFITS

          The  salary  continuation  benefits  provided  by this  Agreement  are
          granted by the  Employer as a fringe  benefit to the  Employee and are
          not part of any salary  reduction plan or an  arrangement  deferring a
          bonus or a salary  increase.  The  Employee  has no option to take any
          current payment or bonus in lieu of these salary continuation benefits
          except as set forth hereinafter.


III.     retirement date and early retirement date

         A.       Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-two  ("62") years of age and  acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.

<PAGE>


         B.       Early Retirement Date:

               The term "Early  Retirement  Date" shall mean the Retirement,  as
               defined above, of the Employee on, or after the Employee achieves
               fifty-five  (55) years of age, but has not yet reached  sixty-two
               (62) years of age.


IV.      retirement benefit and early retirement benefit

         A.       Retirement Benefit:

               If the Employee shall remain in the continuous  employment of the
               Employer until  attaining age sixty-two  (62), the Employee shall
               be entitled to be paid the "Normal Retirement  Benefit" specified
               in   Schedule  A,   payable  in   substantially   equal   monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the Employee  Retires (or on
               such later date as may be mutually  agreed  upon by the  Employee
               and the  Employer  in advance of said  Retirement  date)  payable
               until the Employee's death. After  commencement of payments,  the
               Normal  Retirement  Benefit will increase by two percent (2%) per
               year.

         B.       Early Retirement Benefit:

               The  Employee  shall  have the right to  retire  on a date  which
               constitutes an Early  Retirement  Date as defined in Subparagraph
               III (B) above.  In the event the  Employee  elects to Retire on a
               date which  constitutes an Early  Retirement Date, and said early
               retirement  is not  pursuant to a Change in Control as defined in
               paragraph VI below, the Employee shall be entitled to be paid the
               "Normal Retirement  Benefit" specified in Schedule A for the date
               the Retirement occurs, but reduced by a factor of one-half of one
               percent  (.5%) per month for each month or portion  thereof  that
               the Early  Retirement  occurs prior to the  Retirement  Date. The
               benefit   shall  be  payable  in   substantially   equal  monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the  Early  Retirement  Date
               occurs (or on such later date as may be  mutually  agreed upon by
               the Employee and the Employer in advance of such Early Retirement
               Date).  After  commencement  of  payments,  the Early  Retirement
               benefit will increase by two percent (2%) per year.

               Example:  If the Early  Retirement  Date occurs on the Employee's
               60th birthday and if the Retirement Date in Section III.A.  above
               is at age 62, the Normal Retirement Benefit specified in Schedule
               "A" as of the  Employee's  60th birthday  would be reduced by 12%
               [.5% x 24 months].


V.       other termination of EMPLOYMENT and DISABILITY

         A.       Payments in the Event Employment Is Terminated Prior to
                  Retirement:

               The  Employer  reserves  the right to  terminate  the  Employee's
               employment,  with or without  cause but  subject  to any  written
               employment  agreement  which may then exist, at any time prior to
               the  Employee's  Retirement.  In the event that the employment of
               the Employee shall be terminated,  other than by reason of death,
               Disability  or  Retirement,  prior  to the  Employee's  attaining
               sixty-two (62) years of age, then this Agreement  shall terminate
               on the date of such termination of employment; provided, however,
               that the Employee shall be entitled to the following  benefits as
               may be applicable  depending upon the  circumstances  surrounding
               the Employee's termination:

              (i)      Termination for Other Than Disability, Change in Control
                       or Cause:

               If the Employee's  employment is terminated by the Employee or by
               the  Employer for any reason  other than  Disability,  "Change in
               Control"  or  "Termination  for  Cause,"  the  Employee  shall be
               entitled to be paid the "Normal Retirement  Benefit" specified in
               Schedule   A  as  of  the  date  of   termination,   payable   in
               substantially equal monthly installments on the first day of each
               month,  beginning with the month following the month in which the
               Employee  attains  sixty-two  (62) years of age (or on such later
               date  as may be  mutually  agreed  upon by the  Employee  and the
               Employer   not  less  than   fifteen  (15)  days  prior  to  such
               commencement  date) payable until the Employee's death, and shall
               increase  by two  percent  (2%)  per  year.  Alternatively,  upon
               achieving age fifty-five (55) but before  achieving age sixty-two
               (62),  the  Employee  may choose to receive the Early  Retirement
               Benefit with the reductions from the "Normal Retirement  Benefit"
               as of the date of termination,  and as described in Section IV.B.
               of this Agreement.  The benefit shall be payable in substantially
               equal  monthly  installments  on the  first  day of  each  month,
               beginning  with the month  following the month in which the Early
               Retirement  Date occurs (or on such later date as may be mutually
               agreed  upon by the  Employee  and the  Employer  not  less  than
               fifteen (15) days prior to such commencement date) payable to the
               Employee's  death,  and shall  increase by two  percent  (2%) per
               year.

<PAGE>


                   (ii)    Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee 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 Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

         B.       Payment in the Event of Disability Prior to Retirement:

               The  Employee  shall,  in  connection  with  acceptance  of  this
               Agreement,  elect  below  either  the "Lump Sum  Payment"  or the
               "Annuity  for Life"  option in the  event  the  Employee  becomes
               disabled at any time after the Effective  Date of this  Agreement
               but prior to  Retirement.  The term  "Disability"  or  "Disabled"
               shall  have the same  meaning  given  such terms in any policy of
               disability  insurance  maintained by the Employer for the benefit
               of employees  including  the  Employee.  In the absence of such a
               policy,  which  extends  coverage to the Employee in the event of
               disability, the terms shall mean bodily injury or disease (mental
               or  physical)   which  wholly  and   continuously   prevents  the
               performance of the Employee's duties to the Employer for at least
               one hundred twenty (120) days.

(i)      Lump Sum Payment.

                    The  Employee  shall  be  entitled  to be paid  the lump sum
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the  date  of  disability  or  date  the
                    Employee  otherwise  terminated  service  with the  Employer
                    other than for Cause.  The lump sum shall be payable 60 days
                    from the date the Employer has received a written request to
                    commence benefits, along with documentation showing that the
                    Employee has become disabled.

(ii)     Annuity for Life.

                    The Employee shall be entitled to be paid an annuity for the
                    Employee's life. The Employer shall purchase such an annuity
                    from an  insurance  company  with an A. M.  Best or  Moody's
                    rating  of  no  less  than  AA  and  using  the   amount  of
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the date of  disability  or the date the
                    Employee  otherwise  terminated  service  with the  Employer
                    other  than for  Cause.  The  Employer  shall  purchase  the
                    annuity  within  60 days  from  the date  the  Employer  has
                    received a written request to commence benefits,  along with
                    documentation showing that the Employee has become Disabled.
                    Nevertheless,  if the amount of the  applicable  "Disability
                    Benefit"  specified in Schedule A is $50,000.00 or less, the
                    payment  shall be as a lump sum to the  Employee and not the
                    purchase of an annuity for life.

(iii)    Employee  Election of Disability  Benefit.

                    I elect to receive the following  Disability Benefit (Please
                    sign on applicable line):

                           /s/ James E. Essany      Lump Sum Benefit.


                           ___________________     Annuity for Life.



VI.               CHANGE OF CONTROL

         A.       Definition of Change In Control:

                    A "Change in Control" of Klamath  First  Bancorp,  Inc. (the
                    "Company")  or  Klamath  First  Federal   Savings  and  Loan
                    Association (the "Association")  shall be deemed to occur if
                    and when (a) an  offeror  other than the  Company  purchases
                    shares of the common stock of the Company or the Association
                    pursuant to a tender or exchange offer for such shares,  (b)
                    any  person  (as such  term is used in  Sections  13(d)  and
                    14(d)(2)  of the  Securities  Exchange  Act of  1934)  is or
                    becomes the beneficial  owner,  directly or  indirectly,  of
                    securities  of the Company or the  Association  representing
                    25% or more of the combined voting power of the Company's or
                    the  Association's  then  outstanding  securities,  (c)  the
                    membership  of the board of  directors of the Company or the
                    Association  changes as the result of a contested  election,
                    such that individuals who were directors at the beginning of
                    any twenty-four  month period (whether  commencing before or
                    after  the  effective   date  of  this   Agreement)  do  not
                    constitute  a  majority  of the  Board  at the  end of  such
                    period,   or  (d)   shareholders   of  the  Company  or  the
                    Association  approve  a  merger,   consolidation,   sale  or
                    disposition of all or substantially  all of the Company's or
                    the  Association's  assets, or a plan of partial or complete
                    liquidation.

         B.       Termination by the Employer on Account of or After a Change in
                  Control:

                    In the event the Employee's  employment with the Employer is
                    terminated  by the Employer in  connection  with a Change in
                    Control,  the Employee  shall be  immediately  vested in the
                    "Normal Retirement  Benefit" specified in Schedule A for the
                    date the Employee  achieves age sixty-two (62). The Employee
                    shall be entitled to be paid the "Change in Control Benefit"
                    specified  in Schedule  A, in  substantially  equal  monthly
                    installments  on the first day of each month,  beginning  no
                    sooner  than the  month  following  the  month in which  the
                    Employee  attains  age  fifty-five  (55),  as  requested  in
                    writing by the Employee and delivered to the Employer or its
                    successor  thirty  (30) days  prior to the  commencement  of
                    installment payments;  provided,  however, that in the event
                    the  Employee  does  not  request  a  commencement  date  as
                    specified,  such installments shall be paid on the first day
                    of each month,  beginning with the month following the month
                    in which the Employee  attains  sixty-two (62) years of age.
                    Upon the commencement of payments, the installments shall be
                    payable until the  Employee's  death,  and shall increase by
                    two percent (2%) per year.

                    A  termination  shall be deemed to be in  connection  with a
                    Change in Control  if,  within two (2) years  following  the
                    occurrence  of a  Change  in  Control:  (a)  the  Employee's
                    employment  with the Employer is  terminated by the Employer
                    other than a Termination  for Cause; or (b) by reason of the
                    Employer's actions any adverse change occurs in the scope of
                    the  Employee's  position,   material  responsibilities  and
                    duties, salary,  benefits or location of employment;  or (c)
                    the  Employer  causes  an event to  occur  which  reasonably
                    constitutes  or  results  in a  demotion,  loss of title,  a
                    significant diminution of responsibilities or authority,  or
                    a  constructive  termination  (by forcing a  resignation  or
                    otherwise) of the Employee's employment.


VII.     benefit accounting

                    The  Employer  shall  account  for this  benefit  using  the
                    regulatory  accounting  principles of the Employer's primary
                    federal  regulator.  The Employer shall establish an accrued
                    liability  retirement  account for the  Employee  into which
                    appropriate reserves shall be accrued.


VIII.    restrictions on funding

                    The Employer shall have no obligation to set aside,  earmark
                    or  entrust  any  fund  or  money  with  which  to  pay  its
                    obligations  under this Employee Plan. The Employee,  her or
                    his beneficiary (ies), or any successor in interest shall be
                    and remain simply a general  creditor of the Employer in the
                    same manner as any other creditor having a general claim for
                    matured and unpaid  compensation.  The Employer reserves the
                    absolute right, at its sole  discretion,  to either fund the
                    obligations  undertaken  by this Employee Plan or to refrain
                    from  funding the same and to determine  the extent,  nature
                    and method of such  funding.  Should the  Employer  elect to
                    fund this Employee  Plan,  in whole or in part,  through the
                    purchase  of  life  insurance,   mutual  funds,   disability
                    policies or  annuities,  the Employer  reserves the absolute
                    right, in its sole discretion,  to terminate such funding at
                    any time, in whole or in part. At no time shall any Employee
                    be deemed to have any lien, right,  title or interest in any
                    specific funding investment or assets of the Employer.

                    If the  Employer  elects  to  invest  in a  life  insurance,
                    disability  or annuity  policy on the life of the  Employee,
                    then the  Employee  shall  assist  the  Employer  by  freely
                    submitting to a physical exam and supplying such  additional
                    information necessary to obtain such insurance or annuities.

                    Notwithstanding  anything  hereinabove to the contrary,  the
                    Employer and the Employee acknowledge and agree that, in the
                    event of a Change in Control and at the  written  request of
                    the Employee,  the Employer 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 Employer in its sole  discretion
                    deems   appropriate   and  in  compliance   with  applicable
                    provisions of the Internal  Revenue Code of 1986, as amended
                    (the  "Code")  in  order  to  permit  the  Employer  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
                    Employer  to  be  used  exclusively  for  discharge  of  the
                    Employer's  obligations pursuant to this Agreement and shall
                    continue  to be  subject  to the  claims  of the  Employer's
                    general   creditors  until  paid  to  the  Employee  or  its
                    beneficiaries  in such manner and at such times as specified
                    in this Agreement


IX.      MISCELLANEOUS

         A.       Alienability and Assignment Prohibition:

                    The  Employee  shall  have no power  or  right to  transfer,
                    assign, anticipate,  hypothecate,  mortgage, commute, modify
                    or otherwise encumber in advance any of the benefits payable
                    hereunder  nor  shall any of said  benefits  be  subject  to
                    seizure for the payment of any debts, judgments,  alimony or
                    separate   maintenance   owed   by  the   Employee   nor  be
                    transferable by operation of law in the event of bankruptcy,
                    insolvency or otherwise.  In the event the Employee attempts
                    assignment, commutation, hypothecation, transfer or disposal
                    of the benefits hereunder,  the Employer's liabilities shall
                    forthwith cease and terminate.

         B.       Binding Obligation of the Employer and any Successor in
                  Interest:

                    The  Employer  shall not merge or  consolidate  into or with
                    another Employer or sell  substantially all of its assets to
                    another Employer,  firm or person until such Employer,  firm
                    or  person  expressly  agree,  in  writing,  to  assume  and
                    discharge the duties and  obligations  of the Employer under
                    this Employee Plan. This Employee Plan shall be binding upon
                    the parties hereto, their successors,  beneficiaries,  heirs
                    and personal representatives.

         C.       Amendment or Revocation:

                    It is agreed by and between the parties hereto that,  during
                    the  lifetime of the  Employee,  this  Employee  Plan may be
                    amended  or  revoked  at any time or  times,  in whole or in
                    part, by the mutual written  consent of the Employee and the
                    Employer.

         D.       Gender:

                    Whenever  in  this  Employee  Plan  words  are  used  in the
                    masculine or neuter gender, they shall be read and construed
                    as in the  masculine,  feminine or neuter  gender,  whenever
                    they should so apply.

         E.       Effect on Other Employer Benefit Plans:

                    Nothing  contained  in this  Employee  Plan shall affect the
                    right of the Employee to participate in or be covered by any
                    qualified or non-qualified pension,  profit-sharing,  group,
                    bonus or other  supplemental  compensation or fringe benefit
                    plan  constituting  a part  of the  Employer's  existing  or
                    future compensation structure.

         F.       Headings:

                    Headings and  subheadings in this Employee Plan are inserted
                    for reference and convenience only and shall not be deemed a
                    part of this Employee Plan.

         G.       Applicable Law:

                    The laws of the State of Oregon  shall  govern the  validity
                    and interpretation of this Agreement.

         H.       Partial Invalidity:

                    If any  term,  provision,  covenant,  or  condition  of this
                    Employee Plan 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  Employee  Plan  shall  remain in full  force and effect
                    notwithstanding such partial invalidity.

         I.       Not a Contract of Employment:

                    This Agreement  shall not be deemed to constitute a contract
                    of  employment  between  the parties  hereto,  nor shall any
                    provision  hereof  restrict  the  right of the  Employer  to
                    discharge  the  Employee,  or  restrict  the  right  of  the
                    Employee to terminate employment.

         J.       Notices:

                    Any notice  required or  permitted of either the Employee or
                    the Employer  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.

<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       James E. Essany
                                            6133 Coopers Hawk Road
                                            Klamath Falls, OR 97601

         K.       Opportunity To Consult With Independent Advisors:

                    The  Employee   acknowledges  that  the  Employee  has  been
                    afforded  the   opportunity  to  consult  with   independent
                    advisors  of  his  or  her   choosing   including,   without
                    limitation,   accountants   or  tax   advisors  and  counsel
                    regarding  both the benefits  granted to the Employee  under
                    the terms of this Agreement and the (i) terms and conditions
                    which may affect the Employee'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  Employee
                    acknowledges and agrees shall be the sole  responsibility of
                    the Employee  notwithstanding any other term or provision of
                    this Agreement. The Employee further acknowledges and agrees
                    that the Employer shall have no liability whatsoever related
                    to any such  personal tax effects or other  personal  costs,
                    expenses,  or  liabilities  applicable  to the  Employee and
                    further  specifically  waives any right for the Employee and
                    his  or her  heirs,  beneficiaries,  legal  representatives,
                    agents, successors, and assigns to claim or assert liability
                    on the part of the Employer related to the matters described
                    above   in   this   subparagraph.   The   Employee   further
                    acknowledges   and  agrees  that  the   Employee  has  read,
                    understands  and consents to all of the terms and conditions
                    of this  Agreement,  and that the Employee  enters into this
                    Agreement  with  a  full  understanding  of  its  terms  and
                    conditions.


X.       ADMINISTRATIVE AND CLAIMS PROVISION

         A.       Named Fiduciary and Plan Administrator:

                    The  "Named  Fiduciary  and  Plan   Administrator"  of  this
                    Employee Plan shall be Klamath First  Bancorp,  Inc.,  until
                    its  resignation or removal by the Board. As Named Fiduciary
                    and Plan  Administrator,  the Employer  shall be responsible
                    for  the  management,  control  and  administration  of  the
                    Employee  Plan.  The Named  Fiduciary may delegate to others
                    certain    aspects   of   the   management   and   operation
                    responsibilities   of  the  Employee   Plan   including  the
                    employment  of advisors and the  delegation  of  ministerial
                    duties to qualified individuals.

         B.       Claims Procedure:

                    In the event a  dispute  arises  over  benefits  under  this
                    Employee  Plan and benefits are not paid to the Employee and
                    the claimant  feels he is 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
                    provisions  of this  Employee  Plan 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 a
                    further review of the claim denial is desired. A claim shall
                    be  deemed   denied  if  the   Named   Fiduciary   and  Plan
                    Administrator  fail to take any action  within the aforesaid
                    forty-five-day period.

                    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  Employee  Plan or any  documents  relating
                    thereto  and submit any written  issues and  comments it 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.

C.       Arbitration:

                    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  Employer 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").  In the  event  JAMS is unable or
                    unwilling to conduct the arbitration  provided for under the
                    terms of this Paragraph,  or has  discontinued its business,
                    the parties agree that a representative member,  selected by
                    the  mutual  agreement  of  the  parties,  of  the  American
                    Arbitration  Association ("AAA"),  shall conduct the binding
                    arbitration  referred  to in this  Paragraph.  Notice of the
                    demand for  arbitration  shall be filed in writing  with the
                    other  party to this  Agreement  and with  JAMS (or AAA,  if
                    necessary).  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, or if there are
                    none, the rules of procedure used or established by AAA. Any
                    award  rendered  by JAMS or AAA 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
                    Klamath Falls,  Oregon,  unless  otherwise  agreed to by the
                    parties.

         D.       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, the prevailing party
                    shall be entitled to recover from the  non-prevailing  party
                    reasonable  expenses,  attorneys' fees and costs incurred in
                    connection  therewith or in the enforcement or collection of
                    any  judgment or award  rendered  therein.  The  "prevailing
                    party" means the party  determined by the  arbitrator(s)  or
                    court,  as the case may be, to have most  nearly  prevailed,
                    even if such  party  did not  prevail  in all  matters,  not
                    necessarily the one in whose favor a judgment is rendered.


XI.      SECTION 280G BENEFITS ADJUSTMENT

                    If all or any portion of the amounts payable to the Employee
                    under this  Agreement,  either alone or together  with other
                    payments  which the  Employee  has the right to receive from
                    the Employer,  constitute "excess parachute payments" within
                    the meaning of Section 280G of the Code, that are subject to
                    the  excise  tax  imposed  by  Section  4999 of the Code (or
                    similar  tax  and/or  assessment),  the  Employer  (and  its
                    successor) and the Employee each agree to pay their share of
                    any taxes that may be imposed as a result of  payments  made
                    pursuant to this Agreement; provided, however, that Employer
                    and  Employee  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 Employee is greater than the amount initially
                    so  determined,  then the Employee 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.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

  Klamath First Federal Savings and Loan Association



/s/ Kermit K. Houser                             /s/ Nina G. Drake
Kermit K. Houser                                 Witness
President and CEO




/s/ James E. Essany                              /s/ Kathryn Rutledge
James E. Essany SVP/Marketing                    Witness
<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE A
                            EMPLOYEE BENEFIT SCHEDULE

                                  JAMES ESSANY
                        DATE OF BIRTH: SEPTEMBER 20, 1954
                             HIRED ON: MAY 15, 2000

                               NORMAL         CHANGE IN                          DEATH BENEFIT:      DEATH BENEFIT:
      VESTING              RETIREMENT           CONTROL         DISABILITY          DEATH WHILE               AFTER
      DATE (1)             BENEFIT (2)       BENEFIT (3)        BENEFIT (4)         EMPLOYED (5)     TERMINATION (6)
<S>                           <C>               <C>               <C>                  <C>                 <C>
  January 1, 2003              $1,393                NA                 $0             $957,420            $100,000
  January 1, 2004              $4,178                NA             $7,268             $957,420            $100,000
  January 1, 2005              $8,356                NA            $23,148             $957,420            $100,000
  January 1, 2006             $13,926                NA            $49,151             $957,420            $139,261
  January 1, 2007             $20,889                NA            $86,971             $957,420            $208,892
  January 1, 2008             $29,245                NA           $138,503             $957,420            $292,448
  January 1, 2009             $38,993           $55,530           $205,864             $957,420            $389,931
  January 1, 2010             $50,134           $61,275           $291,415             $957,420            $501,340
  January 1, 2011             $62,667           $67,019           $397,786             $957,420            $626,675
  January 1, 2012             $69,631           $72,764           $527,901             $957,420            $696,305
  January 1, 2013             $76,594           $78,508           $622,734             $957,420            $765,936
  January 1, 2014             $83,557           $84,253           $727,258             $957,420            $835,567
  January 1, 2015             $90,520           $89,997           $842,305             $957,420            $905,197
  January 1, 2016             $95,742           $95,742           $968,778             $957,420            $957,420
   and thereafter             $95,742           $95,742                 NA         see #5 below        see #5 below
<FN>

1.  The date that Normal Retirement and Death benefits vest.  See separate footnotes for Change in Control and
     Disability Benefits.
2.  Annual Retirement Benefits payable at age sixty-two (62). Benefits are payable for life and increase by 2% per
     year after Retirement.
3. The Employee is eligible to retire following Termination pursuant to a Change in Control any time after the
     attainment of age fifty five (55).  This is the annual sum the Employee will be paid if the Employee elects to
     receive Retirement Benefits on or after the Employee's birthday, but before the following anniversary. Once
     payments begin, Benefits are payable for life and increase by 2% per year thereafter.
4. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty
     Balance as of disability date.  Disability Benefit value is determined by straight-line interpolation between the
    amounts showing in this column for Jan 1 of the calendar year the disability occurs and Jan 1 of the following
    calendar year.  Benefit is paid as Employee elected in the Agreement.  No post-retirement benefit.
5.  Death benefit equals 10x initial Normal Retirement Benefit to age 70, 7x initial Normal Retirement Benefit to
    Age 80, and 3 x initial Normal Retirement Benefit thereafter.
6.  Unless termination is for Cause, the death benefit is the greater of $100,000 or 10x the vested annual retirement
     benefit at the time of termination.
</FN>
</TABLE>


/s/ James E. Essany    5/13/03    /s/ Kermit K. Houser                 5/19/03
James E. Essany        Date       Bank Officer                         Date

<PAGE>

                                                                 Exhibit 10(f).4
           FIRST AMENDMENT TO executive salary continuation AGREEMENT

     This FIRST  AMENDMENT  TO EXECUTIVE  SALARY  CONTINUATION  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal Savings and Loan Association  ("Employer") and the undersigned executive
officer of Employer ("Employee").

     WHEREAS,   Employer   and  Employee   entered  into  an  Executive   Salary
Continuation Agreement (the "SCA") effective January 1, 2003;

     WHEREAS,  Klamath First Bancorp,  Inc.  ("Company"),  the parent company of
Employer,  has entered into an Agreement and Plan of Merger dated as of July 14,
2003, (the "Merger Agreement") with Sterling Financial Corporation  ("Sterling")
with respect to a proposed transaction (the "Transaction") whereby Sterling will
acquire all of the outstanding shares of Company common stock in a stock merger;

     WHEREAS,  Employer  desire to enter into this  Agreement to facilitate  the
Transaction; and

     WHEREAS,  Employee  desires to enter into this  Agreement to facilitate the
Transaction  so as to enable  Employee (a) to receive a cash-out of his benefits
under the SCA as  provided  herein,  (b) to receive  change in control  benefits
under his employment  agreement and (c) to enhance the value of shares of common
stock of Company owned by Employee and the value of his stock options to acquire
common stock of Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Notwithstanding  anything  contained in the SCA to the  contrary,  Employer
     shall  have the  right to pay  Employee  at any time  from the date  hereof
     through   December  31,  2003  the  amount  of  $524,293  less  all  tax
     withholding  obligations  with respect  thereto (the "Cash-Out  Amount") in
     full and complete satisfaction of all obligations of Employer under the SCA
     and all rights of Employee  under the SCA. Upon Employer  making payment of
     the Cash-Out Amount to Employee as provided herein, the SCA shall terminate
     and shall have no further force or effect.

2.   Upon payment of the Cash-Out  Amount to Employee by Employer as provided in
     paragraph  1 above,  Employee  does hereby  release  and forever  discharge
     Employer,  its  affiliates,   and  their  respective  assigns,   directors,
     officers,  employees and agents from any and all claims, demands, causes of
     action and rights that Employee has or might have under the SCA of any kind
     or character whatsoever, whether known or unknown.

3.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

4.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so executed  shall be deemed an  original  and both of which,
     taken together, shall constitute one and the same agreement.

     The parties have  executed  this  Agreement on the day and year first above
     written.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION

                                        By:   /s/ Kermit K. Houser
                                               Kermit K. Houser
                                               President/CEO


                                     EMPLOYEE:


                                        By:   James E. Essany
                                              James E. Essany SVP/Marketing



<PAGE>
                                                                 Exhibit 10(g).1
                              EMPLOYMENT AGREEMENT
                        Amended and Restated May 21, 2003

     THIS  AGREEMENT  is made  effective  as of January 2, 2003,  by and between
KLAMATH FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"),  Klamath
Falls,  Oregon;   KLAMATH  FIRST  BANCORP,  INC.  (the  "Company"),   an  Oregon
corporation; and Walter F. Dodrill (the "Executive").

     WHEREAS,  the  Association  wishes to  assure  itself  of the  services  of
Executive for the period provided in this Agreement; and

     WHEREAS, the Executive is willing to serve in the employ of the Association
on a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1.       POSITION AND RESPONSIBILITIES.

     During the period of his employment hereunder, Executive agrees to serve as
Senior Vice  President of the  Association.  During said period,  Executive also
agrees to serve,  if elected,  as an officer of the Company or any subsidiary or
affiliate of the Company or the Association.

2.       TERMS AND DUTIES.

     (a) The term of this Agreement  shall be deemed to have commenced as of the
date first above  written and shall  continue for a period of  twenty-four  (24)
full calendar months  thereafter.  Commencing on the first anniversary date, and
continuing at each anniversary  date  thereafter,  the Board of Directors of the
Association (the "Board") or its Compensation Committee may extend the Agreement
for an  additional  year.  Prior to the  extension of the  Agreement as provided
herein,  the Board of Directors of the  Association  will review the Executive's
performance  evaluation  for  purposes  of  determining  whether  to extend  the
Agreement,  and the  results  thereof  shall be  included  in the minutes of the
Board's meeting.

     (b) During the period of his  employment  hereunder,  except for periods of
absence  occasioned by illness,  reasonable  vacation  periods,  and  reasonable
leaves of absence,  Executive shall devote  substantially all his business time,
attention,  skill,  and  efforts  to the  faithful  performance  of  his  duties
hereunder  including  activities  and  services  related  to  the  organization,
operation and management of the Association;  provided,  however, that, with the
approval of the Board, as evidenced by a resolution of such Board,  from time to
time,  Executive may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or  organizations,  which,
in such Board's  judgment,  will not present any  conflict of interest  with the
Association, or materially affect the performance of Executive's duties pursuant
to this Agreement.



<PAGE>

3.       COMPENSATION AND REIMBURSEMENT.

     (a) The  compensation  specified under this Agreement shall  constitute the
salary and  benefits  paid for the  duties  described  in  Sections 1 and 2. The
Association  shall pay Executive as  compensation  a salary of $119,000 per year
("Base  Salary").  Such Base  Salary  shall be  payable in  accordance  with the
customary  payroll  practices  of the  Association.  During  the  period of this
Agreement,  Executive's  Base Salary  shall be reviewed at least  annually;  the
first  such  review  will be made no later  than one year  from the date of this
Agreement.  Such  review  shall be  conducted  by the Board or its  Compensation
Committee,  and the Board may increase  Executive's Base Salary.  In addition to
the Base Salary  provided in this Section 3(a),  the  Association  shall provide
Executive at no cost to Executive  with all such other  benefits as are provided
uniformly to regular salaried employees of the Association.

     (b) The  Association  will provide  Executive with employee  benefit plans,
arrangements  and  perquisites   substantially  equivalent  to  those  in  which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement,  and the  Association  will not,
without  Executive's  prior  written  consent,  make any  changes in such plans,
arrangements or perquisites which would adversely affect  Executive's  rights or
benefits thereunder.  However, changes in Association-sponsored  group insurance
plan  premiums,   deductibles,   co-payments  and  related  coverage  limits  or
conditions  are  excluded  from the prior  sentence for any such change which is
consistently applied to or available to regular salaried Association  employees.
Without  limiting the generality of the foregoing  provisions of this Subsection
(b),  Executive will be entitled to participate in or receive benefits under any
employee  benefit  plans  including,  but  not  limited  to,  retirement  plans,
supplemental   retirement   plans,   pension   plans,    profit-sharing   plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement  made  available  by the  Association  in the  future to its  senior
executives and key management  employees,  subject to, and on a basis consistent
with,  the  terms,  conditions  and  overall  administration  of such  plans and
arrangements.  Executive will be entitled to incentive  compensation and bonuses
as provided in any plan, or pursuant to any arrangement of the  Association,  in
which Executive is eligible to participate.  Nothing paid to the Executive under
any such plan or arrangement will be deemed to be in lieu of other  compensation
to which the  Executive  is entitled  under this  Agreement,  except as provided
under Section 5(e).

     (c) In addition to the Base Salary  provided for by  paragraph  (a) of this
Section 3, the Association  shall pay or reimburse  Executive for all reasonable
travel  and  other  obligations  under  this  Agreement  and  may  provide  such
additional compensation in such form and such amounts as the Board may from time
to time determine.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     (a) Upon the  occurrence  of an Event of  Termination  (as herein  defined)
during the Executive's term of employment  under this Agreement,  the provisions
of  this  Section  shall  apply.  As  used  in  this  Agreement,  an  "Event  of
Termination"  shall mean and include any one or more of the  following:  (i) the
termination by the Association of Executive's full-time employment hereunder for
any reason  other than a Change in Control,  as defined in Section  5(a) hereof;
disability,  as defined in Section 6(a) hereof; death; or retirement, as defined
in Section 7 hereof; (ii) Executive's resignation from the Association's employ,
upon (A) unless consented to by the Executive,  a material change in Executive's
function,  duties,  or  responsibilities,  which change would cause  Executive's
position to become one of lesser responsibility,  importance,  or scope from the
position and attributes  thereof described in Sections 1 and 2, above, (any such
material change shall be deemed a continuing  breach of this  Agreement),  (B) a
relocation of  Executive's  principal  place of employment by more than 35 miles
from  its  location  at the  effective  date of this  Agreement,  or a  material
reduction in the benefits and perquisites to Executive from those being provided
as of the effective date of this  Agreement,  (C) the liquidation or dissolution
of the Association, or (D) any breach of this Agreement by the Association. Upon
the occurrence of any event  described in clauses (A), (B), (C), or (D),  above,
Executive  shall have the right to elect to terminate his employment  under this
Agreement by resignation upon not less than sixty (60) days prior written notice
given  within a  reasonable  period of time not to  exceed,  except in case of a
continuing  breach,  four  calendar  months  after the event giving rise to said
right to elect.

     (b) Upon the occurrence of an Event of Termination  other than for Cause of
for Neglect (as described in Sections 8 and 9 hereof), the Association shall pay
Executive,  or,  in the  event  of his  subsequent  death,  his  beneficiary  or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages,  or both,  a sum equal to the  payments  due to the  Executive  for the
remaining term of the Agreement,  including Base Salary,  bonuses, and any other
cash or  deferred  compensation  paid  or to be paid  (including  the  value  of
employer  contributions that would have been made on the Executive's behalf over
the  remaining  term  of the  agreement  to any  tax-qualified  retirement  plan
sponsored by the  Association as of the Date of  Termination),  to the Executive
for the term of the Agreement provided,  however, that if the Association is not
in compliance  with its minimum  capital  requirements or if such payments would
cause  the  Association's  capital  to be  reduced  below  its  minimum  capital
requirements, such payments shall be deferred until such time as the Association
is in capital compliance.  All payments made pursuant to this Section 4(b) shall
be paid in substantially  equal monthly  installments over the remaining term of
this Agreement following the Executive's termination; provided, however, that if
the remaining term of the Agreement is less than one (1) year  (determined as of
the Executive's Date of  Termination),  such payments and benefits shall be paid
to the Executive in a lump sum within 30 days of the Date of Termination.

     (c) Upon the occurrence of an Event of Termination  other than for Cause or
for Neglect (as  described  in Sections 8 and 9 hereof),  the  Association  will
cause  to  be  continued   life,   medical,   dental  and  disability   coverage
substantially  identical  to the  coverage  maintained  by the  Association  for
Executive  prior  to  his  termination.  Such  coverage  shall  cease  upon  the
expiration of the remaining term of this Agreement.

5.       CHANGE IN CONTROL.

     (a) No benefit  shall be paid under this  Section 5 unless there shall have
occurred a Change in Control of the Company or the Association.  For purposes of
this Agreement, a "Change in Control" of the Company or the Association shall be
deemed to occur if and when (a) an  offeror  other  than the  Company  purchases
shares of the common  stock of the  Company  or the  Association  pursuant  to a
tender or exchange  offer for such shares,  (b) any person (as such term is used
in Sections  13(d) and  14(d)(2) of the  Securities  Exchange Act of 1934) is or
becomes the  beneficial  owner,  directly or  indirectly,  of  securities of the
Company or the Association representing 25% or more of the combined voting power
of the Company's then outstanding securities, (c) the membership of the board of
directors of the Company or the Association changes as the result of a contested
election,  such that  individuals  who were  directors  at the  beginning of any
twenty-four month period (whether  commencing before or after the effective date
of this  Agreement) do not constitute a majority of the Board at the end of such
period, or (d) shareholders of the Company or the Association  approve a merger,
consolidation,  sale or disposition of all or substantially all of the Company's
or the Association's assets, or a plan of partial or complete liquidation.

     (b) If any of the events  described in Section 5(a) hereof  constituting  a
Change in Control have occurred or the Board of the  Association  or the Company
has  determined  that a Change  in  Control  has  occurred,  Executive  shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this Section
5 upon his subsequent  involuntary  termination of employment at any time during
the term of this  Agreement  (or  voluntary  termination  following  a Change of
Control following any demotion,  loss of title, office or significant authority,
reduction in his annual compensation or benefits, or relocation of his principal
place of employment by more than 35 miles from its location immediately prior to
the  Change in  Control),  unless  such  termination  is  because  of his death,
retirement as provided in Section 7,  termination  for Cause, or termination for
Disability.

     (c) Upon the occurrence of a Change in Control  followed by the Executive's
termination of employment,  the Association shall pay Executive, or in the event
of his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, as severance  pay or  liquidated  damages,  or both, a sum equal to
1.50  times the  Executive's  "base  amount,"  within  the  meaning  of  Section
280G(b)(3)  of the Internal  Revenue  Code of 1986  ("Code"),  as amended.  Such
payment shall be made in a lump sum paid within ten (10) days of the Executive's
Date of Termination.

     (d) Upon the occurrence of a Change in Control  followed by the Executive's
termination  of employment,  the  Association  will cause to be continued  life,
medical,  dental and disability coverage substantially identical to the coverage
maintained by the Association for Executive prior to his severance. In addition,
Executive shall be entitled to receive the value of employer  contributions that
would have been made on the  Executive's  behalf over the remaining  term of the
agreement to any  tax-qualified  retirement plan sponsored by the Association as
of the Date of  Termination.  Such  coverage and  payments  shall cease upon the
expiration of thirty-six (36) months.

     (e) Upon the  occurrence  of a Change in Control,  the  Executive  shall be
entitled to receive benefits due him under, or contributed by the Company or the
Association  on his  behalf,  pursuant  to  any  retirement,  incentive,  profit
sharing,  bonus,   performance,   disability  or  other  employee  benefit  plan
maintained by the  Association or the Company on the  Executive's  behalf to the
extent that such benefits are not otherwise  paid to the Executive upon a Change
in Control.

     (f) IRS Section 280G Issues.  If 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 Company or  Association,
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 Company or Association  (and their  successor)  shall be responsible for any
loss of  deductibility  related  thereto;  provided,  however,  that  Company or
Association 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 Company or
Association immediately prior to the change in control or such other independent
accounting  firm  or  advisor  as  may  be  mutually  agreeable  to  Company  or
Association  and  Executive  in the  exercise  of their  reasonable  good  faith
judgment.


6.       TERMINATION FOR DISABILITY.

     (a) If the Executive shall become disabled as defined in the  Association's
then  current  disability  plan (or,  if no such plan is then in effect,  if the
Executive  is  permanently  and totally  disabled  within the meaning of Section
22(e)(3) of the Code as determined by a physician  designated by the Board), the
Association may terminate Executive's employment for "Disability."

     (b) Upon the  Executive's  termination  of employment for  Disability,  the
Association will pay Executive,  as disability pay, a semi-monthly payment equal
to three-quarters  (3/4) of Executive's  semi-monthly rate of Base Salary on the
effective date of such termination.  These disability payments shall commence on
the effective date of Executive's termination and will end on the earlier of (i)
the date Executive returns to the full-time employment of the Association in the
same capacity as he was employed  prior to his  termination  for  Disability and
pursuant to an employment agreement between Executive and the Association;  (ii)
Executive's full-time employment by another employer;  (iii) Executive attaining
the age of 65; or (iv)  Executive's  death; or (v) the expiration of the term of
this Agreement.  The disability pay shall be reduced by the amount, if any, paid
to the Executive under any plan of the Association providing disability benefits
to the Executive.

     (c) The Association  will cause to be continued life,  medical,  dental and
disability  coverage  substantially  identical to the coverage maintained by the
Association for Executive prior to his termination for Disability. This coverage
and payments shall cease upon the earlier of (i) the date  Executive  returns to
the  full-time  employment  of the  Association,  in the same capacity as he was
employed prior to his  termination  for Disability and pursuant to an employment
agreement  between  Executive and the Association;  (ii)  Executive's  full-time
employment by another employer;  (iii)  Executive's  attaining the age of 65; or
(iv) the Executive's death; or (v) the expiration of the term of this Agreement.

     (d)  Notwithstanding  the  foregoing,  there  will be no  reduction  in the
compensation  otherwise  payable to  Executive  during any period  during  which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.

7.       TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.

     Termination by the  Association of Executive  based on  "Retirement"  shall
mean  retirement  at age 65 or in  accordance  with any  retirement  arrangement
established  with  Executive's  consent with respect to him. Upon termination of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement  plan of the  Association  or the  Company  and other  plans to which
Executive is a party.  Upon the death of the  Executive  during the term of this
Agreement,  the Association shall pay to Executive's estate the compensation due
to the Executive  through the last day of the calendar  month in which his death
occurred.


<PAGE>

8.       TERMINATION FOR CAUSE.

     For  purposes of this  Agreement,  "Termination  for Cause"  shall  include
termination  because  of  the  Executive's  personal  dishonesty,  incompetence,
willful misconduct,  breach of fiduciary duty involving personal profit, willful
violation of any law,  rule,  or  regulation  (other than traffic  violations or
similar  offenses) or final  cease-and-desist  order,  or material breach of any
provision of this Agreement. In addition,  "Termination for Cause" shall include
termination  because of the  Executive's  intentional  failure to perform stated
duties, such as the refusal of the Executive to comply with the Association's or
the Company's  instructions,  policies or rules or other willful  conduct of the
Executive  which  materially  adversely  reflects  on the  Association's  or the
Company 's reputation or operation. For purposes of this Section, no act, or the
failure to act, on Executive's  part shall be "willful"  unless done, or omitted
to be done, not in good faith and without  reasonable  belief that the action or
omission  was  in  the  best  interest  of the  Association  or its  affiliates.
Notwithstanding  the  foregoing,  Executive  shall  not be  deemed  to have been
terminated  for Cause unless and until there shall have been  delivered to him a
copy of a  resolution  duly  adopted  by the  affirmative  vote of not less than
three-fourths  of the members of the Board at a meeting of the Board  called and
held for that purpose (after  reasonable  notice to Executive and an opportunity
for him, together with counsel,  to be heard before the Board),  finding that in
the good faith opinion of the Board,  Executive was guilty of conduct justifying
termination  for Cause and specifying the reasons  thereof.  The Executive shall
not have the right to  receive  compensation  or other  benefits  for any period
after  termination  for Cause.  Any stock options granted to Executive under any
stock option plan or any unvested  awards  granted under any other stock benefit
plan of the Association,  the Company,  or any subsidiary or affiliate  thereof,
shall  become  null and void  effective  upon  Executive's  receipt of Notice of
Termination for Cause pursuant to Section 9 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.

9.       TERMINATION FOR NEGLECT.

     The  Association and Company,  or either of them may terminate  Executive's
employment  under this  Agreement at any time for Neglect.  For purposes of this
Agreement,  "Neglect"  means the failure of Executive to give due care to stated
duties or to comply with instructions or directives of the Board of Directors of
the  Association  or  Company or either of them,  but where such  failure is not
determined to be willful or intentional as defined in Section 8. Termination for
Neglect  includes  termination  as the  result  of any  continuing  or  repeated
problems with  Executive's  job  performance  or conduct  after  written  notice
specifying such problem with  performance or conduct,  and where such continuing
and repeated problems were not determined to be willful or intentional, or where
the conduct was not deemed to have a material  adverse impact on the Association
or Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been  terminated  by  Neglect  unless  and until  there  shall have been sent to
Executive  a copy of a  resolution  duly  adopted by a majority  of the Board of
Directors of the  Association  and  Company,  or either of them  (excluding  the
Executive  in counting  the  majority if the  Executive  is then on the board of
directors,  and after  reasonable  notice to Executive  and an  opportunity  for
Executive to be heard before the board of  directors),  finding that in the good
faith  opinion of the board of directors  of the  Association  and  Company,  or
either of them, Executive engaged in conduct justifying  termination for Neglect
and describing  specifically the conduct.  Executive shall not have the right to
receive any salary or bonus for any period after  termination  of employment for
Neglect.  Executive  shall retain any vested  benefits in defined benefit plans,
defined  contribution  plans,  supplemental  executive  retirement plans,  stock
option plans,  restricted stock plans, or other such benefits, but shall forfeit
any rights that have not vested.


10.      REQUIRED PROVISIONS.

     (a) The Association may terminate  Executive's  employment at any time, but
any  termination  by the  Association,  other than as  described in Section 8 or
Section  9  of  this  Agreement,   shall  not  prejudice  Executive's  right  to
compensation  or other benefits under this  Agreement.  Executive shall not have
the  right to  receive  compensation  or other  benefits  for any  period  after
Termination for Cause as defined in Section 8 herein.

     (b)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
participating  in the conduct of the  Association's  affairs by a notice  served
under Section  8(e)(3) or (g)(1) of the Federal  Deposit  Insurance Act ("FDIA")
(12 U.S.C.  1818(e)(3)  and (g)(1)),  the  Association's  obligations  under the
Agreement  shall  be  suspended  as of the date of  service,  unless  stayed  by
appropriate  proceedings.  If the  charges  in the  notice  are  dismissed,  the
Association  may,  in its  discretion,  (i)  pay  Executive  all or  part of the
compensation  withheld  while its contract  obligations  were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.

     (c)  If   Executive  is  removed   and/or   permanently   prohibited   from
participating  in the conduct of the  Association's  affairs by an order  issued
under  Section  8(e)(4) or (g)(1) of the FDIA (12 U.S.C.  1818(e)(4) or (g)(1)),
all obligations of the Association under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting  parties shall
not be affected.

     (d) If the  Association is in default (as defined in Section 3(x)(1) of the
FDIA),  all  obligations  under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.

     (e) All obligations under this Agreement shall be terminated (except to the
extent  determined  that  continuation  of the  Agreement is  necessary  for the
continued  operation of the  Association):  (i) by the Director of the Office of
Thrift  Supervision  (the  "Director")  or his or her  designee  at the time the
Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters
into an agreement to provide assistance to or on behalf of the Association under
the authority contained in Section 13(c) of the FDIA or (ii) by the Director, or
his or her  designee  at the time  the  Director  or such  designee  approves  a
supervisory  merger to resolve  problems related to operation of the Association
or when the  Association  is  determined  by the  Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

     (f)  Any  payments  made  to  Executive  pursuant  to  this  Agreement,  or
otherwise,  are  subject  to and  conditioned  upon  compliance  with 12  U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

11.      NOTICE.

     (a) Any purported  termination by the  Association or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this  Agreement,  a "Notice of  Termination"  shall mean a written  notice which
shall indicate the specific termination  provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances  claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

     (b) "Date of  Termination"  shall  mean (A) if  Executive's  employment  is
terminated  for  Disability,  thirty (30) days after a Notice of  Termination is
given (provided that he shall not have returned to the performance of his duties
on a  full-time  basis  during  such  thirty  (30) day  period),  and (B) if his
employment is terminated for any other reason,  the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

     (c) If, within thirty (30) days after any Notice of  Termination  is given,
the party  receiving such Notice of Termination  notifies the other party that a
dispute  exists  concerning  the  termination,  except upon the  occurrence of a
Change in Control and voluntary  termination  by the Executive in which case the
Date of  Termination  shall be the date  specified  in the  Notice,  the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties,  by a binding  arbitration award, or
by a final judgment,  order or decree of a court of competent  jurisdiction (the
time for appeal there from having  expired and no appeal having been  perfected)
and provided further that the Date of Termination  shall be extended by a notice
of dispute  only if such notice is given in good faith and the party giving such
notice  pursues  the  resolution  of such  dispute  with  reasonable  diligence.
Notwithstanding the pendency of any such dispute,  the Association will continue
to pay Executive his full  compensation in effect when the notice giving rise to
the dispute was given (including,  but not limited to, Base Salary) and continue
him as a participant in all  compensation,  benefit and insurance plans in which
he was participating  when the notice of dispute was given, until the dispute is
finally  resolved in  accordance  with this  Agreement.  Amounts paid under this
Section are in addition to all other amounts due under this  Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.

12.      NON-COMPETITION.

     (a) Upon any termination of Executive's employment hereunder pursuant to an
Event of  Termination as provided in Section 4 hereof,  Executive  agrees not to
compete  with the  Association  and/or the  Company for a period of one (1) year
following such  termination in any city, town or county in which the Association
and/or the  Company  has an office or has filed an  application  for  regulatory
approval to establish an office,  determined  as of the  effective  date of such
termination.  Executive  agrees that during such period and within said  cities,
towns and counties, Executive shall not work for or advise, consult or otherwise
serve  with,  directly  or  indirectly,  any entity  whose  business  materially
competes  with the  depository,  lending  or other  business  activities  of the
Association and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the  Association  and/or the  Company,  its  business  and
property in the event of Executive's  breach of this Subsection 11(a) agree that
in the event of any such breach by Executive, the Association and/or the Company
will be entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive,  Executive's partners,
agents,  servants,  employers,  employees  and all  persons  acting  for or with
Executive.  Executive represents and admits that in the event of the termination
of his  employment  pursuant  to Section 8 hereof,  Executive's  experience  and
capabilities are such that Executive can obtain employment in a business engaged
in other lines  and/or of a different  nature  than the  Association  and/or the
Company,  and that the  enforcement  of a remedy by way of  injunction  will not
prevent Executive from earning a livelihood. Nothing herein will be construed as
prohibiting the Association  and/or the Company from pursuing any other remedies
available to the  Association  and/or the Company for such breach or  threatened
breach, including the recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
business  activities and plans for business  activities of the  Association  and
affiliates  thereof,  as it may exist from time to time, is a valuable,  special
and unique asset of the business of the Association.  Executive will not, during
or  after  the term of his  employment,  disclose  any  knowledge  of the  past,
present,  planned  or  considered  business  activities  of the  Association  or
affiliates  thereof to any person,  firm,  corporation,  or other entity for any
reason or purpose  whatsoever.  Notwithstanding  the  foregoing,  Executive  may
disclose  any  knowledge  of  banking,  financial  and/or  economic  principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Association.  In the event of a breach or threatened
breach by the Executive of the provisions of this Section,  the Association will
be entitled to an injunction restraining Executive from disclosing,  in whole or
in part,  the knowledge of the past,  present,  planned or  considered  business
activities of the  Association  or  affiliates  thereof,  or from  rendering any
services to any person, firm, corporation,  other entity to whom such knowledge,
in whole or in  part,  has been  disclosed  or is  threatened  to be  disclosed.
Nothing herein will be construed as prohibiting  the  Association  from pursuing
any other remedies  available to the  Association  for such breach or threatened
breach, including the recovery of damages from Executive.

13.      SOURCE OF PAYMENTS.

     All  payments  provided in this  Agreement  shall be timely paid in cash or
check  from  the  general  funds  of  the  Association.  The  Company,  however,
guarantees  all  payments  and the  provision  of all amounts and  benefits  due
hereunder to Executive  and, if such payments are not timely paid or provided by
the  Association,  such  amounts and  benefits  shall be paid or provided by the
Company.

14.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior  employment  agreement  between the  Association or any
predecessor of the Association  and Executive,  except that this Agreement shall
not  affect or operate to reduce  any  benefit  or  compensation  inuring to the
Executive of a kind elsewhere provided.  No provision of this Agreement shall be
interpreted to mean that  Executive is subject to receiving  fewer benefits than
those available to him without reference to this Agreement.

15.      NO ATTACHMENT.

     (a) Except as  required  by law,  no right to receive  payments  under this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to affect any such action  shall be null,
void, and of no effect.  (b) This Agreement  shall be binding upon, and inure to
the benefit of,  Executive,  the  Association,  the Company and their respective
successors and assigns.

16.      MODIFICATION AND WAIVER.

     (a) This  Agreement may not be modified or amended  except by an instrument
in writing signed by the parties hereto.

     (b) No term or  condition  of this  Agreement  shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement,  except by written  instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing  waiver
unless specifically  stated therein,  and each such waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.


17.      SEVERABILITY.

     If, for any reason,  any  provision of this  Agreement,  or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this  Agreement or any part of such  provision not held so invalid,  and each
such other  provision and part thereof shall to the full extent  consistent with
law continue in full force and effect.

18.      HEADINGS FOR REFERENCE ONLY.

     The headings of sections  and  paragraphs  herein are  included  solely for
convenience of reference and shall not control the meaning or  interpretation of
any of the provisions of this Agreement.

19.      GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Oregon, unless
otherwise specified herein;  provided,  however, that in the event of a conflict
between the terms of this Agreement and any  applicable  federal or state law or
regulation, the provisions of such law or regulation shall prevail.

20.      ARBITRATION.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three  arbitrators  sitting in a location selected by the employee within one
hundred (100) miles from the location of the Association, 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;  provided,
however,  that Executive  shall be entitled to seek specific  performance of his
right to be paid  until  the Date of  Termination  during  the  pendency  of any
dispute or controversy arising under or in connection with this Agreement.

21.      PAYMENT OF LEGAL FEES.

     All  reasonable  legal fees paid or incurred by  Executive  pursuant to any
dispute or question of  interpretation  relating to this Agreement shall be paid
or reimbursed by the  Association,  if successful  pursuant to a legal judgment,
arbitration or settlement.

22.      INDEMNIFICATION.

     The Association shall provide Executive (including his heirs, executors and
administrators)   with  coverage  under  a  standard  directors'  and  officers'
liability insurance policy at its expense,  or in lieu thereof,  shall indemnify
Executive (and his heirs,  executors and  administrators)  to the fullest extent
permitted under law against all expenses and liabilities  reasonably incurred by
him in  connection  with or arising out of any action,  suite or  proceeding  in
which he may be  involved  by reason of his having been a director or officer of
the Association (whether or not he continues to be a directors or officer at the
time of incurring such expenses or  liabilities),  such expenses and liabilities
to include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.



23.      SUCCESSOR TO THE ASSOCIATION OR THE COMPANY.

     The  Association  and the Company  shall require any successor or assignee,
whether direct or indirect, by purchase, merger,  consolidation or otherwise, to
all or  substantially  all the  business  or  assets of the  Association  or the
Company,  expressly  and  unconditionally  to assume  and agree to  perform  the
Association's  or the Company's  obligations  under this Agreement,  in the same
manner and to the same  extent  that the  Association  or the  Company  would be
required to perform if no such succession or assignment had taken place.


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by a duly  authorized  officer or director of the  Association  and the
Company,  and Executive has signed this  Agreement,  all on the 19th day of May,
2003.

KLAMATH FIRST BANCORP, INC.                 KLAMATH FIRST FEDERAL SAVINGS
                                                      AND LOAN ASSOCIATION


BY: /s/ Kermit K. Houser                 BY: /s/ Kermit K. Houser
    Kermit K. Houser, President & CEO    Kermit K. Houser President & CEO



/s/ Kathryn Rutledge                     /s/ Walter F. Dodrill
WITNESS:                                 Walter F. Dodrill SVP/Business Banking


<PAGE>
                                                                 Exhibit 10(g).2
                     FIRST AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This FIRST  AMENDMENT TO AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal  Savings and Loan  Association  ("Association"),  Klamath First Bancorp,
Inc.,  ("Company")  and the  undersigned  executive  officer of Association  and
Company (the "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an Amended and
Restated Employment Agreement dated May 19, 2003, (the "Employment Agreement");

     WHEREAS,  Company has entered into an Agreement and Plan of Merger dated as
of July 14, 2003, (the "Merger  Agreement") with Sterling Financial  Corporation
("Sterling") with respect to a proposed transaction (the "Transaction")  whereby
Sterling will acquire all of the outstanding shares of Company common stock in a
stock merger;

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
the  Transaction  so as to  enable  his  change in  control  of  benefits  to be
triggered under the Employment  Agreement and his Executive Salary  Continuation
Agreement,  and to enhance the value of shares of common stock of Company  owned
by the Executive  and the value of his stock options to acquire  common stock of
Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Capitalized terms used herein, to the extent not defined  otherwise,  shall
     have the meaning ascribed to them in the Employment Agreement.

2.   Section 5(c) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association shall pay the Executive as severance pay or
     liquidated damages, or both (the "Base Severance Amount"),  an amount equal
     to $178,500.  In the event that all  conditions to closing under the Merger
     Agreement have been satisfied  during calendar year 2003, then  Association
     shall  make  payment  of the Base  Severance  Amount  plus  the  Additional
     Severance  Amount (as defined in Section  5(d) below) to the  Executive  on
     December 31, 2003. In the event such closing  conditions  are not satisfied
     during calendar year 2003, then the payments  contemplated  herein shall be
     made within 10 days after  consummation  of the merger  contemplated by the
     Merger Agreement.  Notwithstanding  the foregoing,  if the Executive enters
     into a new written  employment  agreement with Sterling or Sterling Savings
     Bank prior to  December  31, 2003 (but  effective  upon  completion  of the
     merger contemplated by the Merger Agreement), then the Severance Amount and
     Additional  Severance Amount shall not be paid pursuant to the terms hereof
     and any  severance to be provided to the  Executive,  if any,  shall be set
     forth in such new written employment agreement."

3.     Section 5(d) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association  shall  pay  the  Executive  as  additional
     severance the amount of $18,338 (the "Additional Severance Amount") in lieu
     of any obligation to pay the Executive the value of employer  contributions
     that would have been made on the Executive's behalf over the remaining term
     of the  agreement  to  any  tax-qualified  retirement  plan  or to  provide
     continuing  insurance  coverage  under the Employment  Agreement  after his
     termination of employment. The Additional Severance Amount shall be paid at
     the time the Base Severance Amount is paid pursuant to Section 5(c) above."

4.   New Section 24 is added to the Employment Agreement as follows:

     "24.  Long  Term  Medical  Care.  The  Executive  shall not have a right to
     participate  in the long term  medical care  program to be  implemented  by
     Association."

5.   The  Employment  Agreement  shall be further  amended by adding  thereto an
     "Exhibit A to the  Employment  Agreement"  in the form  attached  hereto as
     Appendix I.

6.   Except as  specifically  set forth herein,  the Employment  Agreement shall
     continue  in full  force  and  effect.  To the  extent  that any  provision
     contained in this Agreement is  inconsistent  with any of the provisions of
     the  Employment  Agreement,  including  but not  limited to,  Section  5(b)
     thereof, the provisions contained in this Agreement shall be controlling.

7.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

8.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so  executed  shall be deemed an  original  and all of which,
     taken together, shall constitute one and the same agreement.

     The parties have entered this Agreement on July 14, 2003.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


                                          By: /s/ Kermit K. Houser
                                          Kermit K.  Houser
                                          President/CEO
                                          KLAMATH  FIRST BANCORP, INC.


                                          By: /s/ Craig M Moore
                                          Craig M Moore
                                          SVP/Chief Auditor

                                          EXECUTIVE:


                                          By: Walter F. Dodrill
                                          Walter F. Dodrill SVP/Business Banking


<PAGE>
                                                                 Exhibit 10(g).3
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
Walter F. Dodrill,  an Employee of the Employer (hereinafter referred to as the
"Employee"), who resides in the State of Oregon.

                              W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

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

     WHEREAS,  the  Employee'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 Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.       EMPLOYMENT

          Although  this  Agreement is intended to provide the Employee  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 Employee and the Employer nor shall any  provision of this
          Agreement  restrict or expand the right of the  Employer to  terminate
          the  Employee's  employment.  This  Agreement  shall have no impact or
          effect  upon any  separate  written  Employment  Agreement  which  the
          Employee 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 from, and shall have no effect upon, or be affected
          by, the terms and provisions of said Employment Agreement.

          Except as otherwise set forth in this  Agreement,  the term "Employer"
          shall  mean  Klamath  First  Federal  Savings  and  Loan  Association;
          provided,  further,  that for  purposes  of this  Agreement,  the term
          "Employer" shall mean Klamath First Bancorp, Inc. and its subsidiaries
          and affiliated entities,  including any parent holding company and its
          subsidiaries.


II.      FRINGE BENEFITS

          The  salary  continuation  benefits  provided  by this  Agreement  are
          granted by the  Employer as a fringe  benefit to the  Employee and are
          not part of any salary  reduction plan or an  arrangement  deferring a
          bonus or a salary  increase.  The  Employee  has no option to take any
          current payment or bonus in lieu of these salary continuation benefits
          except as set forth hereinafter.


III.     retirement date and early retirement date

         A.       Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-two  ("62") years of age and  acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.

<PAGE>


         B.       Early Retirement Date:

               The term "Early  Retirement  Date" shall mean the Retirement,  as
               defined above, of the Employee on, or after the Employee achieves
               fifty-five  (55) years of age, but has not yet reached  sixty-two
               (62) years of age.


IV.      retirement benefit and early retirement benefit

         A.       Retirement Benefit:

               If the Employee shall remain in the continuous  employment of the
               Employer until  attaining age sixty-two  (62), the Employee shall
               be entitled to be paid the "Normal Retirement  Benefit" specified
               in   Schedule  A,   payable  in   substantially   equal   monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the Employee  Retires (or on
               such later date as may be mutually  agreed  upon by the  Employee
               and the  Employer  in advance of said  Retirement  date)  payable
               until the Employee's death. After  commencement of payments,  the
               Normal  Retirement  Benefit will increase by two percent (2%) per
               year.

         B.       Early Retirement Benefit:

               The  Employee  shall  have the right to  retire  on a date  which
               constitutes an Early  Retirement  Date as defined in Subparagraph
               III (B) above.  In the event the  Employee  elects to Retire on a
               date which  constitutes an Early  Retirement Date, and said early
               retirement  is not  pursuant to a Change in Control as defined in
               paragraph VI below, the Employee shall be entitled to be paid the
               "Normal Retirement  Benefit" specified in Schedule A for the date
               the Retirement occurs, but reduced by a factor of one-half of one
               percent  (.5%) per month for each month or portion  thereof  that
               the Early  Retirement  occurs prior to the  Retirement  Date. The
               benefit   shall  be  payable  in   substantially   equal  monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the  Early  Retirement  Date
               occurs (or on such later date as may be  mutually  agreed upon by
               the Employee and the Employer in advance of such Early Retirement
               Date).  After  commencement  of  payments,  the Early  Retirement
               benefit will increase by two percent (2%) per year.

               Example:  If the Early  Retirement  Date occurs on the Employee's
               60th birthday and if the Retirement Date in Section III.A.  above
               is at age 62, the Normal Retirement Benefit specified in Schedule
               "A" as of the  Employee's  60th birthday  would be reduced by 12%
               [.5% x 24 months].


V.       other termination of EMPLOYMENT and DISABILITY

         A.       Payments in the Event Employment Is Terminated Prior to
                  Retirement:

               The  Employer  reserves  the right to  terminate  the  Employee's
               employment,  with or without  cause but  subject  to any  written
               employment  agreement  which may then exist, at any time prior to
               the  Employee's  Retirement.  In the event that the employment of
               the Employee shall be terminated,  other than by reason of death,
               Disability  or  Retirement,  prior  to the  Employee's  attaining
               sixty-two (62) years of age, then this Agreement  shall terminate
               on the date of such termination of employment; provided, however,
               that the Employee shall be entitled to the following  benefits as
               may be applicable  depending upon the  circumstances  surrounding
               the Employee's termination:

              (i)      Termination for Other Than Disability, Change in Control
                       or Cause:

               If the Employee's  employment is terminated by the Employee or by
               the  Employer for any reason  other than  Disability,  "Change in
               Control"  or  "Termination  for  Cause,"  the  Employee  shall be
               entitled to be paid the "Normal Retirement  Benefit" specified in
               Schedule   A  as  of  the  date  of   termination,   payable   in
               substantially equal monthly installments on the first day of each
               month,  beginning with the month following the month in which the
               Employee  attains  sixty-two  (62) years of age (or on such later
               date  as may be  mutually  agreed  upon by the  Employee  and the
               Employer   not  less  than   fifteen  (15)  days  prior  to  such
               commencement  date) payable until the Employee's death, and shall
               increase  by two  percent  (2%)  per  year.  Alternatively,  upon
               achieving age fifty-five (55) but before  achieving age sixty-two
               (62),  the  Employee  may choose to receive the Early  Retirement
               Benefit with the reductions from the "Normal Retirement  Benefit"
               as of the date of termination,  and as described in Section IV.B.
               of this Agreement.  The benefit shall be payable in substantially
               equal  monthly  installments  on the  first  day of  each  month,
               beginning  with the month  following the month in which the Early
               Retirement  Date occurs (or on such later date as may be mutually
               agreed  upon by the  Employee  and the  Employer  not  less  than
               fifteen (15) days prior to such commencement date) payable to the
               Employee's  death,  and shall  increase by two  percent  (2%) per
               year.

<PAGE>


                   (ii)    Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee 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 Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

         B.       Payment in the Event of Disability Prior to Retirement:

               The  Employee  shall,  in  connection  with  acceptance  of  this
               Agreement,  elect  below  either  the "Lump Sum  Payment"  or the
               "Annuity  for Life"  option in the  event  the  Employee  becomes
               disabled at any time after the Effective  Date of this  Agreement
               but prior to  Retirement.  The term  "Disability"  or  "Disabled"
               shall  have the same  meaning  given  such terms in any policy of
               disability  insurance  maintained by the Employer for the benefit
               of employees  including  the  Employee.  In the absence of such a
               policy,  which  extends  coverage to the Employee in the event of
               disability, the terms shall mean bodily injury or disease (mental
               or  physical)   which  wholly  and   continuously   prevents  the
               performance of the Employee's duties to the Employer for at least
               one hundred twenty (120) days.

(i)      Lump Sum Payment.

                    The  Employee  shall  be  entitled  to be paid  the lump sum
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the  date  of  disability  or  date  the
                    Employee  otherwise  terminated  service  with the  Employer
                    other than for Cause.  The lump sum shall be payable 60 days
                    from the date the Employer has received a written request to
                    commence benefits, along with documentation showing that the
                    Employee has become disabled.

(ii)     Annuity for Life.

                    The Employee shall be entitled to be paid an annuity for the
                    Employee's life. The Employer shall purchase such an annuity
                    from an  insurance  company  with an A. M.  Best or  Moody's
                    rating  of  no  less  than  AA  and  using  the   amount  of
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the date of  disability  or the date the
                    Employee  otherwise  terminated  service  with the  Employer
                    other  than for  Cause.  The  Employer  shall  purchase  the
                    annuity  within  60 days  from  the date  the  Employer  has
                    received a written request to commence benefits,  along with
                    documentation showing that the Employee has become Disabled.
                    Nevertheless,  if the amount of the  applicable  "Disability
                    Benefit"  specified in Schedule A is $50,000.00 or less, the
                    payment  shall be as a lump sum to the  Employee and not the
                    purchase of an annuity for life.

(iii)    Employee  Election of Disability  Benefit.

                    I elect to receive the following  Disability Benefit (Please
                    sign on applicable line):

                           ______________________    Lump Sum Benefit.


                           /s/ Walter F. Dodrill     Annuity for Life.



VI.               CHANGE OF CONTROL

         A.       Definition of Change In Control:

                    A "Change in Control" of Klamath  First  Bancorp,  Inc. (the
                    "Company")  or  Klamath  First  Federal   Savings  and  Loan
                    Association (the "Association")  shall be deemed to occur if
                    and when (a) an  offeror  other than the  Company  purchases
                    shares of the common stock of the Company or the Association
                    pursuant to a tender or exchange offer for such shares,  (b)
                    any  person  (as such  term is used in  Sections  13(d)  and
                    14(d)(2)  of the  Securities  Exchange  Act of  1934)  is or
                    becomes the beneficial  owner,  directly or  indirectly,  of
                    securities  of the Company or the  Association  representing
                    25% or more of the combined voting power of the Company's or
                    the  Association's  then  outstanding  securities,  (c)  the
                    membership  of the board of  directors of the Company or the
                    Association  changes as the result of a contested  election,
                    such that individuals who were directors at the beginning of
                    any twenty-four  month period (whether  commencing before or
                    after  the  effective   date  of  this   Agreement)  do  not
                    constitute  a  majority  of the  Board  at the  end of  such
                    period,   or  (d)   shareholders   of  the  Company  or  the
                    Association  approve  a  merger,   consolidation,   sale  or
                    disposition of all or substantially  all of the Company's or
                    the  Association's  assets, or a plan of partial or complete
                    liquidation.

         B.       Termination by the Employer on Account of or After a Change in
                  Control:

                    In the event the Employee's  employment with the Employer is
                    terminated  by the Employer in  connection  with a Change in
                    Control,  the Employee  shall be  immediately  vested in the
                    "Normal Retirement  Benefit" specified in Schedule A for the
                    date the Employee  achieves age sixty-two (62). The Employee
                    shall be entitled to be paid the "Change in Control Benefit"
                    specified  in Schedule  A, in  substantially  equal  monthly
                    installments  on the first day of each month,  beginning  no
                    sooner  than the  month  following  the  month in which  the
                    Employee  attains  age  fifty-five  (55),  as  requested  in
                    writing by the Employee and delivered to the Employer or its
                    successor  thirty  (30) days  prior to the  commencement  of
                    installment payments;  provided,  however, that in the event
                    the  Employee  does  not  request  a  commencement  date  as
                    specified,  such installments shall be paid on the first day
                    of each month,  beginning with the month following the month
                    in which the Employee  attains  sixty-two (62) years of age.
                    Upon the commencement of payments, the installments shall be
                    payable until the  Employee's  death,  and shall increase by
                    two percent (2%) per year.

                    A  termination  shall be deemed to be in  connection  with a
                    Change in Control  if,  within two (2) years  following  the
                    occurrence  of a  Change  in  Control:  (a)  the  Employee's
                    employment  with the Employer is  terminated by the Employer
                    other than a Termination  for Cause; or (b) by reason of the
                    Employer's actions any adverse change occurs in the scope of
                    the  Employee's  position,   material  responsibilities  and
                    duties, salary,  benefits or location of employment;  or (c)
                    the  Employer  causes  an event to  occur  which  reasonably
                    constitutes  or  results  in a  demotion,  loss of title,  a
                    significant diminution of responsibilities or authority,  or
                    a  constructive  termination  (by forcing a  resignation  or
                    otherwise) of the Employee's employment.


VII.     benefit accounting

                    The  Employer  shall  account  for this  benefit  using  the
                    regulatory  accounting  principles of the Employer's primary
                    federal  regulator.  The Employer shall establish an accrued
                    liability  retirement  account for the  Employee  into which
                    appropriate reserves shall be accrued.


VIII.    restrictions on funding

                    The Employer shall have no obligation to set aside,  earmark
                    or  entrust  any  fund  or  money  with  which  to  pay  its
                    obligations  under this Employee Plan. The Employee,  her or
                    his beneficiary (ies), or any successor in interest shall be
                    and remain simply a general  creditor of the Employer in the
                    same manner as any other creditor having a general claim for
                    matured and unpaid  compensation.  The Employer reserves the
                    absolute right, at its sole  discretion,  to either fund the
                    obligations  undertaken  by this Employee Plan or to refrain
                    from  funding the same and to determine  the extent,  nature
                    and method of such  funding.  Should the  Employer  elect to
                    fund this Employee  Plan,  in whole or in part,  through the
                    purchase  of  life  insurance,   mutual  funds,   disability
                    policies or  annuities,  the Employer  reserves the absolute
                    right, in its sole discretion,  to terminate such funding at
                    any time, in whole or in part. At no time shall any Employee
                    be deemed to have any lien, right,  title or interest in any
                    specific funding investment or assets of the Employer.

                    If the  Employer  elects  to  invest  in a  life  insurance,
                    disability  or annuity  policy on the life of the  Employee,
                    then the  Employee  shall  assist  the  Employer  by  freely
                    submitting to a physical exam and supplying such  additional
                    information necessary to obtain such insurance or annuities.

                    Notwithstanding  anything  hereinabove to the contrary,  the
                    Employer and the Employee acknowledge and agree that, in the
                    event of a Change in Control and at the  written  request of
                    the Employee,  the Employer 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 Employer in its sole  discretion
                    deems   appropriate   and  in  compliance   with  applicable
                    provisions of the Internal  Revenue Code of 1986, as amended
                    (the  "Code")  in  order  to  permit  the  Employer  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
                    Employer  to  be  used  exclusively  for  discharge  of  the
                    Employer's  obligations pursuant to this Agreement and shall
                    continue  to be  subject  to the  claims  of the  Employer's
                    general   creditors  until  paid  to  the  Employee  or  its
                    beneficiaries  in such manner and at such times as specified
                    in this Agreement


IX.      MISCELLANEOUS

         A.       Alienability and Assignment Prohibition:

                    The  Employee  shall  have no power  or  right to  transfer,
                    assign, anticipate,  hypothecate,  mortgage, commute, modify
                    or otherwise encumber in advance any of the benefits payable
                    hereunder  nor  shall any of said  benefits  be  subject  to
                    seizure for the payment of any debts, judgments,  alimony or
                    separate   maintenance   owed   by  the   Employee   nor  be
                    transferable by operation of law in the event of bankruptcy,
                    insolvency or otherwise.  In the event the Employee attempts
                    assignment, commutation, hypothecation, transfer or disposal
                    of the benefits hereunder,  the Employer's liabilities shall
                    forthwith cease and terminate.

         B.       Binding Obligation of the Employer and any Successor in
                  Interest:

                    The  Employer  shall not merge or  consolidate  into or with
                    another Employer or sell  substantially all of its assets to
                    another Employer,  firm or person until such Employer,  firm
                    or  person  expressly  agree,  in  writing,  to  assume  and
                    discharge the duties and  obligations  of the Employer under
                    this Employee Plan. This Employee Plan shall be binding upon
                    the parties hereto, their successors,  beneficiaries,  heirs
                    and personal representatives.

         C.       Amendment or Revocation:

                    It is agreed by and between the parties hereto that,  during
                    the  lifetime of the  Employee,  this  Employee  Plan may be
                    amended  or  revoked  at any time or  times,  in whole or in
                    part, by the mutual written  consent of the Employee and the
                    Employer.

         D.       Gender:

                    Whenever  in  this  Employee  Plan  words  are  used  in the
                    masculine or neuter gender, they shall be read and construed
                    as in the  masculine,  feminine or neuter  gender,  whenever
                    they should so apply.

         E.       Effect on Other Employer Benefit Plans:

                    Nothing  contained  in this  Employee  Plan shall affect the
                    right of the Employee to participate in or be covered by any
                    qualified or non-qualified pension,  profit-sharing,  group,
                    bonus or other  supplemental  compensation or fringe benefit
                    plan  constituting  a part  of the  Employer's  existing  or
                    future compensation structure.

         F.       Headings:

                    Headings and  subheadings in this Employee Plan are inserted
                    for reference and convenience only and shall not be deemed a
                    part of this Employee Plan.

         G.       Applicable Law:

                    The laws of the State of Oregon  shall  govern the  validity
                    and interpretation of this Agreement.

         H.       Partial Invalidity:

                    If any  term,  provision,  covenant,  or  condition  of this
                    Employee Plan 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  Employee  Plan  shall  remain in full  force and effect
                    notwithstanding such partial invalidity.

         I.       Not a Contract of Employment:

                    This Agreement  shall not be deemed to constitute a contract
                    of  employment  between  the parties  hereto,  nor shall any
                    provision  hereof  restrict  the  right of the  Employer  to
                    discharge  the  Employee,  or  restrict  the  right  of  the
                    Employee to terminate employment.

         J.       Notices:

                    Any notice  required or  permitted of either the Employee or
                    the Employer  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.

<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       Walter F. Dodrill
                                            P.O. Box 1529
                                            Bandon, OR 97411

         K.       Opportunity To Consult With Independent Advisors:

                    The  Employee   acknowledges  that  the  Employee  has  been
                    afforded  the   opportunity  to  consult  with   independent
                    advisors  of  his  or  her   choosing   including,   without
                    limitation,   accountants   or  tax   advisors  and  counsel
                    regarding  both the benefits  granted to the Employee  under
                    the terms of this Agreement and the (i) terms and conditions
                    which may affect the Employee'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  Employee
                    acknowledges and agrees shall be the sole  responsibility of
                    the Employee  notwithstanding any other term or provision of
                    this Agreement. The Employee further acknowledges and agrees
                    that the Employer shall have no liability whatsoever related
                    to any such  personal tax effects or other  personal  costs,
                    expenses,  or  liabilities  applicable  to the  Employee and
                    further  specifically  waives any right for the Employee and
                    his  or her  heirs,  beneficiaries,  legal  representatives,
                    agents, successors, and assigns to claim or assert liability
                    on the part of the Employer related to the matters described
                    above   in   this   subparagraph.   The   Employee   further
                    acknowledges   and  agrees  that  the   Employee  has  read,
                    understands  and consents to all of the terms and conditions
                    of this  Agreement,  and that the Employee  enters into this
                    Agreement  with  a  full  understanding  of  its  terms  and
                    conditions.


X.       ADMINISTRATIVE AND CLAIMS PROVISION

         A.       Named Fiduciary and Plan Administrator:

                    The  "Named  Fiduciary  and  Plan   Administrator"  of  this
                    Employee Plan shall be Klamath First  Bancorp,  Inc.,  until
                    its  resignation or removal by the Board. As Named Fiduciary
                    and Plan  Administrator,  the Employer  shall be responsible
                    for  the  management,  control  and  administration  of  the
                    Employee  Plan.  The Named  Fiduciary may delegate to others
                    certain    aspects   of   the   management   and   operation
                    responsibilities   of  the  Employee   Plan   including  the
                    employment  of advisors and the  delegation  of  ministerial
                    duties to qualified individuals.

         B.       Claims Procedure:

                    In the event a  dispute  arises  over  benefits  under  this
                    Employee  Plan and benefits are not paid to the Employee and
                    the claimant  feels he is 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
                    provisions  of this  Employee  Plan 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 a
                    further review of the claim denial is desired. A claim shall
                    be  deemed   denied  if  the   Named   Fiduciary   and  Plan
                    Administrator  fail to take any action  within the aforesaid
                    forty-five-day period.

                    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  Employee  Plan or any  documents  relating
                    thereto  and submit any written  issues and  comments it 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.

C.       Arbitration:

                    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  Employer 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").  In the  event  JAMS is unable or
                    unwilling to conduct the arbitration  provided for under the
                    terms of this Paragraph,  or has  discontinued its business,
                    the parties agree that a representative member,  selected by
                    the  mutual  agreement  of  the  parties,  of  the  American
                    Arbitration  Association ("AAA"),  shall conduct the binding
                    arbitration  referred  to in this  Paragraph.  Notice of the
                    demand for  arbitration  shall be filed in writing  with the
                    other  party to this  Agreement  and with  JAMS (or AAA,  if
                    necessary).  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, or if there are
                    none, the rules of procedure used or established by AAA. Any
                    award  rendered  by JAMS or AAA 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
                    Klamath Falls,  Oregon,  unless  otherwise  agreed to by the
                    parties.

         D.       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, the prevailing party
                    shall be entitled to recover from the  non-prevailing  party
                    reasonable  expenses,  attorneys' fees and costs incurred in
                    connection  therewith or in the enforcement or collection of
                    any  judgment or award  rendered  therein.  The  "prevailing
                    party" means the party  determined by the  arbitrator(s)  or
                    court,  as the case may be, to have most  nearly  prevailed,
                    even if such  party  did not  prevail  in all  matters,  not
                    necessarily the one in whose favor a judgment is rendered.


XI.      SECTION 280G BENEFITS ADJUSTMENT

                    If all or any portion of the amounts payable to the Employee
                    under this  Agreement,  either alone or together  with other
                    payments  which the  Employee  has the right to receive from
                    the Employer,  constitute "excess parachute payments" within
                    the meaning of Section 280G of the Code, that are subject to
                    the  excise  tax  imposed  by  Section  4999 of the Code (or
                    similar  tax  and/or  assessment),  the  Employer  (and  its
                    successor) and the Employee each agree to pay their share of
                    any taxes that may be imposed as a result of  payments  made
                    pursuant to this Agreement; provided, however, that Employer
                    and  Employee  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 Employee is greater than the amount initially
                    so  determined,  then the Employee 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.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

  Klamath First Federal Savings and Loan Association



/s/ Kermit K. Houser                                /s/ Nina G. Drake
Kermit K. Houser                                    Witness
President and CEO




/s/ Walter F. Dodrill                               /s/ Kathryn Rutledge
Walter F. Dodrill SVP/Business Banking              Witness

<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE A
                            EMPLOYEE BENEFIT SCHEDULE

                                 WALTER DODRILL
                          DATE OF BIRTH: JULY 20, 1951
                            HIRED ON: JANUARY 2, 2002

                                 NORMAL           CHANGE IN                            DEATH BENEFIT:       DEATH BENEFIT:
       VESTING               RETIREMENT             CONTROL         DISABILITY            DEATH WHILE                AFTER
      DATE (1)               BENEFIT (2)         BENEFIT (3)        BENEFIT (4)           EMPLOYED (5)      TERMINATION (6)
<S>                             <C>                 <C>               <C>                    <C>                  <C>
   January 1, 2003                   $0                  NA                 $0               $882,230             $100,000
   January 1, 2004               $3,334                  NA                 $0               $882,230             $100,000
   January 1, 2005               $7,502                  NA            $22,330               $882,230             $100,000
   January 1, 2006              $13,338             $51,169            $53,342               $882,230             $133,377
   January 1, 2007              $20,840             $56,473           $100,678               $882,230             $208,401
   January 1, 2008              $30,010             $61,756           $167,013               $882,230             $300,097
   January 1, 2009              $40,847             $67,049           $255,331               $882,230             $408,466
   January 1, 2010              $53,351             $72,343           $368,970               $882,230             $533,506
   January 1, 2011              $67,522             $77,636           $511,643               $882,230             $675,219
   January 1, 2012              $83,360             $82,930           $687,488               $882,230             $833,603
   January 1, 2013              $88,223             $88,223           $901,099               $882,230             $882,230
   and thereafter               $88,223             $88,223                 NA           see #5 below         see #5 below
<FN>

1.  The date that Normal Retirement and Death benefits vest.  See separate footnotes for Change in Control and
     Disability Benefits.
2.  Annual Retirement Benefits payable at age sixty-two (62). Benefits are payable for life and increase by 2% per
     year after Retirement.
3. The Employee is eligible to retire following Termination pursuant to a Change in Control any time after the
     attainment of age fifty five (55).  This is the annual sum the Employee will be paid if the Employee elects to
     receive Retirement Benefits on or after the Employee's birthday, but before the following anniversary. Once
     payments begin, Benefits are payable for life and increase by 2% per year thereafter.
4. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty
     Balance as of disability date.  Disability Benefit value is determined by straight-line interpolation between the
    amounts showing in this column for Jan 1 of the calendar year the disability occurs and Jan 1 of the following
    calendar year.  Benefit is paid as Employee elected in the Agreement.  No post-retirement benefit.
5.  Death benefit equals 10x initial Normal Retirement Benefit to age 70, 7x initial Normal Retirement Benefit to
    Age 80, and 3 x initial Normal Retirement Benefit thereafter.
6.  Unless termination is for Cause, the death benefit is the greater of $100,000 or 10x the vested annual retirement
     benefit at the time of termination.
</FN>
</TABLE>


/s/ Walter F Dodrill   5/21/03     /s/ Kermit K. Houser              5/29/03
Walter F. Dodrill      Date        Bank Officer                      Date


<PAGE>

                                                                 Exhibit 10(g).4
           FIRST AMENDMENT TO executive salary continuation AGREEMENT

     This FIRST  AMENDMENT  TO EXECUTIVE  SALARY  CONTINUATION  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal Savings and Loan Association  ("Employer") and the undersigned executive
officer of Employer ("Employee").

     WHEREAS,   Employer   and  Employee   entered  into  an  Executive   Salary
Continuation Agreement (the "SCA") effective January 1, 2003;

     WHEREAS,  Klamath First Bancorp,  Inc.  ("Company"),  the parent company of
Employer,  has entered into an Agreement and Plan of Merger dated as of July 14,
2003, (the "Merger Agreement") with Sterling Financial Corporation  ("Sterling")
with respect to a proposed transaction (the "Transaction") whereby Sterling will
acquire all of the outstanding shares of Company common stock in a stock merger;

     WHEREAS,  Employer  desire to enter into this  Agreement to facilitate  the
Transaction; and

     WHEREAS,  Employee  desires to enter into this  Agreement to facilitate the
Transaction  so as to enable  Employee (a) to receive a cash-out of his benefits
under the SCA as  provided  herein,  (b) to receive  change in control  benefits
under his employment  agreement and (c) to enhance the value of shares of common
stock of Company owned by Employee and the value of his stock options to acquire
common stock of Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Notwithstanding  anything  contained in the SCA to the  contrary,  Employer
     shall  have the  right to pay  Employee  at any time  from the date  hereof
     through   December  31,  2003  the  amount  of  $582,214  less  all  tax
     withholding  obligations  with respect  thereto (the "Cash-Out  Amount") in
     full and complete satisfaction of all obligations of Employer under the SCA
     and all rights of Employee  under the SCA. Upon Employer  making payment of
     the Cash-Out Amount to Employee as provided herein, the SCA shall terminate
     and shall have no further force or effect.

2.   Upon payment of the Cash-Out  Amount to Employee by Employer as provided in
     paragraph  1 above,  Employee  does hereby  release  and forever  discharge
     Employer,  its  affiliates,   and  their  respective  assigns,   directors,
     officers,  employees and agents from any and all claims, demands, causes of
     action and rights that Employee has or might have under the SCA of any kind
     or character whatsoever, whether known or unknown.

3.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

4.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so executed  shall be deemed an  original  and both of which,
     taken together, shall constitute one and the same agreement.

     The parties have  executed  this  Agreement on the day and year first above
     written.

                                  KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION

                                   By:   /s/ Kermit K. Houser
                                         Kermit K. Houser
                                         President/CEO


                                  EMPLOYEE:


                                   By:   Walter F. Dodrill
                                         Walter F. Dodrill SVP/Business Banking



<PAGE>
                                                                 Exhibit 10(h).1
                              EMPLOYMENT AGREEMENT
                        Amended and Restated May 14, 2003

     THIS  AGREEMENT  is made  effective  as of October 1, 2002,  by and between
KLAMATH FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"),  Klamath
Falls,  Oregon;   KLAMATH  FIRST  BANCORP,  INC.  (the  "Company"),   an  Oregon
corporation; and Nina G. Drake (the "Executive").

     WHEREAS,  the  Association  wishes to  assure  itself  of the  services  of
Executive for the period provided in this Agreement; and

     WHEREAS, the Executive is willing to serve in the employ of the Association
on a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1.       POSITION AND RESPONSIBILITIES.

     During the period of her employment hereunder, Executive agrees to serve as
Vice President of the Association.  During said period, Executive also agrees to
serve,  if elected,  as an officer of the Company or any subsidiary or affiliate
of the Company or the Association.

2.       TERMS AND DUTIES.

     (a) The term of this Agreement  shall be deemed to have commenced as of the
date first above  written and shall  continue for a period of  twenty-four  (24)
full calendar months  thereafter.  Commencing on the first anniversary date, and
continuing at each anniversary  date  thereafter,  the Board of Directors of the
Association (the "Board") or its Compensation Committee may extend the Agreement
for an  additional  year.  Prior to the  extension of the  Agreement as provided
herein,  the Board of Directors of the  Association  will review the Executive's
performance  evaluation  for  purposes  of  determining  whether  to extend  the
Agreement,  and the  results  thereof  shall be  included  in the minutes of the
Board's meeting.

     (b) During the period of her employment  hereunder,  except for periods of
absence  occasioned by illness,  reasonable  vacation  periods,  and  reasonable
leaves of absence,  Executive shall devote  substantially all her business time,
attention,  skill,  and  efforts  to the  faithful  performance  of  her duties
hereunder  including  activities  and  services  related  to  the  organization,
operation and management of the Association;  provided,  however, that, with the
approval of the Board, as evidenced by a resolution of such Board,  from time to
time,  Executive may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or  organizations,  which,
in such Board's  judgment,  will not present any  conflict of interest  with the
Association, or materially affect the performance of Executive's duties pursuant
to this Agreement.



<PAGE>

3.       COMPENSATION AND REIMBURSEMENT.

     (a) The  compensation  specified under this Agreement shall  constitute the
salary and  benefits  paid for the  duties  described  in  Sections 1 and 2. The
Association  shall pay  Executive as  compensation  a salary of $99,000 per year
("Base Salary") effective December 1, 2002. Such Base Salary shall be payable in
accordance with the customary payroll  practices of the Association.  During the
period of this  Agreement,  Executive's  Base Salary  shall be reviewed at least
annually;  the first  such  review  will be made no later than one year from the
date of this  Agreement.  Such  review  shall be  conducted  by the Board or its
Compensation  Committee,  and the Board may increase Executive's Base Salary. In
addition to the Base Salary provided in this Section 3(a), the Association shall
provide  Executive at no cost to Executive  with all such other  benefits as are
provided uniformly to regular salaried employees of the Association.

     (b) The  Association  will provide  Executive with employee  benefit plans,
arrangements  and  perquisites   substantially  equivalent  to  those  in  which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement,  and the  Association  will not,
without  Executive's  prior  written  consent,  make any  changes in such plans,
arrangements or perquisites which would adversely affect  Executive's  rights or
benefits thereunder.  However, changes in Association-sponsored  group insurance
plan  premiums,   deductibles,   co-payments  and  related  coverage  limits  or
conditions  are  excluded  from the prior  sentence for any such change which is
consistently applied to or available to regular salaried Association  employees.
Without  limiting the generality of the foregoing  provisions of this Subsection
(b),  Executive will be entitled to participate in or receive benefits under any
employee  benefit  plans  including,  but  not  limited  to,  retirement  plans,
supplemental   retirement   plans,   pension   plans,    profit-sharing   plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement  made  available  by the  Association  in the  future to its  senior
executives and key management  employees,  subject to, and on a basis consistent
with,  the  terms,  conditions  and  overall  administration  of such  plans and
arrangements.  Executive will be entitled to incentive  compensation and bonuses
as provided in any plan, or pursuant to any arrangement of the  Association,  in
which Executive is eligible to participate.  Nothing paid to the Executive under
any such plan or arrangement will be deemed to be in lieu of other  compensation
to which the  Executive  is entitled  under this  Agreement,  except as provided
under Section 5(e).

     (c) In addition to the Base Salary  provided for by  paragraph  (a) of this
Section 3, the Association  shall pay or reimburse  Executive for all reasonable
travel  and  other  obligations  under  this  Agreement  and  may  provide  such
additional compensation in such form and such amounts as the Board may from time
to time determine.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     (a) Upon the  occurrence  of an Event of  Termination  (as herein  defined)
during the Executive's term of employment  under this Agreement,  the provisions
of  this  Section  shall  apply.  As  used  in  this  Agreement,  an  "Event  of
Termination"  shall mean and include any one or more of the  following:  (i) the
termination by the Association of Executive's full-time employment hereunder for
any reason  other than a Change in Control,  as defined in Section  5(a) hereof;
disability,  as defined in Section 6(a) hereof; death; or retirement, as defined
in Section 7 hereof; (ii) Executive's resignation from the Association's employ,
upon (A) unless consented to by the Executive,  a material change in Executive's
function,  duties,  or  responsibilities,  which change would cause  Executive's
position to become one of lesser responsibility,  importance,  or scope from the
position and attributes  thereof described in Sections 1 and 2, above, (any such
material change shall be deemed a continuing  breach of this  Agreement),  (B) a
relocation of  Executive's  principal  place of employment by more than 35 miles
from  its  location  at the  effective  date of this  Agreement,  or a  material
reduction in the benefits and perquisites to Executive from those being provided
as of the effective date of this  Agreement,  (C) the liquidation or dissolution
of the Association, or (D) any breach of this Agreement by the Association. Upon
the occurrence of any event  described in clauses (A), (B), (C), or (D),  above,
Executive  shall have the right to elect to terminate her employment  under this
Agreement by resignation upon not less than sixty (60) days prior written notice
given  within a  reasonable  period of time not to  exceed,  except in case of a
continuing  breach,  four  calendar  months  after the event giving rise to said
right to elect.

     (b) Upon the occurrence of an Event of Termination  other than for Cause of
for Neglect (as described in Sections 8 and 9 hereof), the Association shall pay
Executive,  or,  in the  event  of her subsequent  death,  her beneficiary  or
beneficiaries, or her estate, as the case may be, as severance pay or liquidated
damages,  or both,  a sum equal to the  payments  due to the  Executive  for the
remaining term of the Agreement,  including Base Salary,  bonuses, and any other
cash or  deferred  compensation  paid  or to be paid  (including  the  value  of
employer  contributions that would have been made on the Executive's behalf over
the  remaining  term  of the  agreement  to any  tax-qualified  retirement  plan
sponsored by the  Association as of the Date of  Termination),  to the Executive
for the term of the Agreement provided,  however, that if the Association is not
in compliance  with its minimum  capital  requirements or if such payments would
cause  the  Association's  capital  to be  reduced  below  its  minimum  capital
requirements, such payments shall be deferred until such time as the Association
is in capital compliance.  All payments made pursuant to this Section 4(b) shall
be paid in substantially  equal monthly  installments over the remaining term of
this Agreement following the Executive's termination; provided, however, that if
the remaining term of the Agreement is less than one (1) year  (determined as of
the Executive's Date of  Termination),  such payments and benefits shall be paid
to the Executive in a lump sum within 30 days of the Date of Termination.

     (c) Upon the occurrence of an Event of Termination  other than for Cause or
for Neglect (as  described  in Sections 8 and 9 hereof),  the  Association  will
cause  to  be  continued   life,   medical,   dental  and  disability   coverage
substantially  identical  to the  coverage  maintained  by the  Association  for
Executive  prior  to  her termination.  Such  coverage  shall  cease  upon  the
expiration of the remaining term of this Agreement.

5.       CHANGE IN CONTROL.

     (a) No benefit  shall be paid under this  Section 5 unless there shall have
occurred a Change in Control of the Company or the Association.  For purposes of
this Agreement, a "Change in Control" of the Company or the Association shall be
deemed to occur if and when (a) an  offeror  other  than the  Company  purchases
shares of the common  stock of the  Company  or the  Association  pursuant  to a
tender or exchange  offer for such shares,  (b) any person (as such term is used
in Sections  13(d) and  14(d)(2) of the  Securities  Exchange Act of 1934) is or
becomes the  beneficial  owner,  directly or  indirectly,  of  securities of the
Company or the Association representing 25% or more of the combined voting power
of the Company's then outstanding securities, (c) the membership of the board of
directors of the Company or the Association changes as the result of a contested
election,  such that  individuals  who were  directors  at the  beginning of any
twenty-four month period (whether  commencing before or after the effective date
of this  Agreement) do not constitute a majority of the Board at the end of such
period, or (d) shareholders of the Company or the Association  approve a merger,
consolidation,  sale or disposition of all or substantially all of the Company's
or the Association's assets, or a plan of partial or complete liquidation.

     (b) If any of the events  described in Section 5(a) hereof  constituting  a
Change in Control have occurred or the Board of the  Association  or the Company
has  determined  that a Change  in  Control  has  occurred,  Executive  shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this Section
5 upon her subsequent  involuntary  termination of employment at any time during
the term of this  Agreement  (or  voluntary  termination  following  a Change of
Control following any demotion,  loss of title, office or significant authority,
reduction in her annual compensation or benefits, or relocation of her principal
place of employment by more than 35 miles from its location immediately prior to
the  Change in  Control),  unless  such  termination  is  because  of her death,
retirement as provided in Section 7,  termination  for Cause, or termination for
Disability.

     (c) Upon the occurrence of a Change in Control  followed by the Executive's
termination of employment,  the Association shall pay Executive, or in the event
of her subsequent death, her beneficiary or beneficiaries, or her estate, as the
case may be, as severance  pay or  liquidated  damages,  or both, a sum equal to
1.50  times the  Executive's  "base  amount,"  within  the  meaning  of  Section
280G(b)(3)  of the Internal  Revenue  Code of 1986  ("Code"),  as amended.  Such
payment shall be made in a lump sum paid within ten (10) days of the Executive's
Date of Termination.

     (d) Upon the occurrence of a Change in Control  followed by the Executive's
termination  of employment,  the  Association  will cause to be continued  life,
medical,  dental and disability coverage substantially identical to the coverage
maintained by the Association for Executive prior to her severance. In addition,
Executive shall be entitled to receive the value of employer  contributions that
would have been made on the  Executive's  behalf over the remaining  term of the
agreement to any  tax-qualified  retirement plan sponsored by the Association as
of the Date of  Termination.  Such  coverage and  payments  shall cease upon the
expiration of thirty-six (36) months.

     (e) Upon the  occurrence  of a Change in Control,  the  Executive  shall be
entitled to receive benefits due him under, or contributed by the Company or the
Association  on her  behalf,  pursuant  to  any  retirement,  incentive,  profit
sharing,  bonus,   performance,   disability  or  other  employee  benefit  plan
maintained by the  Association or the Company on the  Executive's  behalf to the
extent that such benefits are not otherwise  paid to the Executive upon a Change
in Control.

     (f) IRS Section 280G Issues.  If 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 Company or  Association,
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 Company or Association  (and their  successor)  shall be responsible for any
loss of  deductibility  related  thereto;  provided,  however,  that  Company or
Association 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 Company or
Association immediately prior to the change in control or such other independent
accounting  firm  or  advisor  as  may  be  mutually  agreeable  to  Company  or
Association  and  Executive  in the  exercise  of their  reasonable  good  faith
judgment.


6.       TERMINATION FOR DISABILITY.

     (a) If the Executive shall become disabled as defined in the  Association's
then  current  disability  plan (or,  if no such plan is then in effect,  if the
Executive  is  permanently  and totally  disabled  within the meaning of Section
22(e)(3) of the Code as determined by a physician  designated by the Board), the
Association may terminate Executive's employment for "Disability."

     (b) Upon the  Executive's  termination  of employment for  Disability,  the
Association will pay Executive,  as disability pay, a semi-monthly payment equal
to three-quarters  (3/4) of Executive's  semi-monthly rate of Base Salary on the
effective date of such termination.  These disability payments shall commence on
the effective date of Executive's termination and will end on the earlier of (i)
the date Executive returns to the full-time employment of the Association in the
same capacity as she was employed  prior to her  termination  for Disability and
pursuant to an employment agreement between Executive and the Association;  (ii)
Executive's full-time employment by another employer;  (iii) Executive attaining
the age of 65; or (iv)  Executive's  death; or (v) the expiration of the term of
this Agreement.  The disability pay shall be reduced by the amount, if any, paid
to the Executive under any plan of the Association providing disability benefits
to the Executive.

     (c) The Association  will cause to be continued life,  medical,  dental and
disability  coverage  substantially  identical to the coverage maintained by the
Association for Executive prior to her termination for Disability. This coverage
and payments shall cease upon the earlier of (i) the date  Executive  returns to
the  full-time  employment of the  Association,  in the same capacity as she was
employed prior to her  termination  for Disability and pursuant to an employment
agreement  between  Executive and the Association;  (ii)  Executive's  full-time
employment by another employer;  (iii)  Executive's  attaining the age of 65; or
(iv) the Executive's death; or (v) the expiration of the term of this Agreement.

     (d)  Notwithstanding  the  foregoing,  there  will be no  reduction  in the
compensation  otherwise  payable to  Executive  during any period  during  which
Executive is incapable of performing her duties hereunder by reason of temporary
disability.

7.       TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.

     Termination by the  Association of Executive  based on  "Retirement"  shall
mean  retirement  at age 65 or in  accordance  with any  retirement  arrangement
established  with  Executive's  consent with respect to him. Upon termination of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement  plan of the  Association  or the  Company  and other  plans to which
Executive is a party.  Upon the death of the  Executive  during the term of this
Agreement,  the Association shall pay to Executive's estate the compensation due
to the Executive  through the last day of the calendar  month in which her death
occurred.


<PAGE>

8.       TERMINATION FOR CAUSE.

     For  purposes of this  Agreement,  "Termination  for Cause"  shall  include
termination  because  of  the  Executive's  personal  dishonesty,  incompetence,
willful misconduct,  breach of fiduciary duty involving personal profit, willful
violation of any law,  rule,  or  regulation  (other than traffic  violations or
similar  offenses) or final  cease-and-desist  order,  or material breach of any
provision of this Agreement. In addition,  "Termination for Cause" shall include
termination  because of the  Executive's  intentional  failure to perform stated
duties, such as the refusal of the Executive to comply with the Association's or
the Company's  instructions,  policies or rules or other willful  conduct of the
Executive  which  materially  adversely  reflects  on the  Association's  or the
Company 's reputation or operation. For purposes of this Section, no act, or the
failure to act, on Executive's  part shall be "willful"  unless done, or omitted
to be done, not in good faith and without  reasonable  belief that the action or
omission  was  in  the  best  interest  of the  Association  or its  affiliates.
Notwithstanding  the  foregoing,  Executive  shall  not be  deemed  to have been
terminated  for Cause unless and until there shall have been  delivered to him a
copy of a  resolution  duly  adopted  by the  affirmative  vote of not less than
three-fourths  of the members of the Board at a meeting of the Board  called and
held for that purpose (after  reasonable  notice to Executive and an opportunity
for him, together with counsel,  to be heard before the Board),  finding that in
the good faith opinion of the Board,  Executive was guilty of conduct justifying
termination  for Cause and specifying the reasons  thereof.  The Executive shall
not have the right to  receive  compensation  or other  benefits  for any period
after  termination  for Cause.  Any stock options granted to Executive under any
stock option plan or any unvested  awards  granted under any other stock benefit
plan of the Association,  the Company,  or any subsidiary or affiliate  thereof,
shall  become  null and void  effective  upon  Executive's  receipt of Notice of
Termination for Cause pursuant to Section 9 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.

9.       TERMINATION FOR NEGLECT.

     The  Association and Company,  or either of them may terminate  Executive's
employment  under this  Agreement at any time for Neglect.  For purposes of this
Agreement,  "Neglect"  means the failure of Executive to give due care to stated
duties or to comply with instructions or directives of the Board of Directors of
the  Association  or  Company or either of them,  but where such  failure is not
determined to be willful or intentional as defined in Section 8. Termination for
Neglect  includes  termination  as the  result  of any  continuing  or  repeated
problems with  Executive's  job  performance  or conduct  after  written  notice
specifying such problem with  performance or conduct,  and where such continuing
and repeated problems were not determined to be willful or intentional, or where
the conduct was not deemed to have a material  adverse impact on the Association
or Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been  terminated  by  Neglect  unless  and until  there  shall have been sent to
Executive  a copy of a  resolution  duly  adopted by a majority  of the Board of
Directors of the  Association  and  Company,  or either of them  (excluding  the
Executive  in counting  the  majority if the  Executive  is then on the board of
directors,  and after  reasonable  notice to Executive  and an  opportunity  for
Executive to be heard before the board of  directors),  finding that in the good
faith  opinion of the board of directors  of the  Association  and  Company,  or
either of them, Executive engaged in conduct justifying  termination for Neglect
and describing  specifically the conduct.  Executive shall not have the right to
receive any salary or bonus for any period after  termination  of employment for
Neglect.  Executive  shall retain any vested  benefits in defined benefit plans,
defined  contribution  plans,  supplemental  executive  retirement plans,  stock
option plans,  restricted stock plans, or other such benefits, but shall forfeit
any rights that have not vested.


10.      REQUIRED PROVISIONS.

     (a) The Association may terminate  Executive's  employment at any time, but
any  termination  by the  Association,  other than as  described in Section 8 or
Section  9  of  this  Agreement,   shall  not  prejudice  Executive's  right  to
compensation  or other benefits under this  Agreement.  Executive shall not have
the  right to  receive  compensation  or other  benefits  for any  period  after
Termination for Cause as defined in Section 8 herein.

     (b)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
participating  in the conduct of the  Association's  affairs by a notice  served
under Section  8(e)(3) or (g)(1) of the Federal  Deposit  Insurance Act ("FDIA")
(12 U.S.C.  1818(e)(3)  and (g)(1)),  the  Association's  obligations  under the
Agreement  shall  be  suspended  as of the date of  service,  unless  stayed  by
appropriate  proceedings.  If the  charges  in the  notice  are  dismissed,  the
Association  may,  in its  discretion,  (i)  pay  Executive  all or  part of the
compensation  withheld  while its contract  obligations  were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.

     (c)  If   Executive  is  removed   and/or   permanently   prohibited   from
participating  in the conduct of the  Association's  affairs by an order  issued
under  Section  8(e)(4) or (g)(1) of the FDIA (12 U.S.C.  1818(e)(4) or (g)(1)),
all obligations of the Association under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting  parties shall
not be affected.

     (d) If the  Association is in default (as defined in Section 3(x)(1) of the
FDIA),  all  obligations  under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.

     (e) All obligations under this Agreement shall be terminated (except to the
extent  determined  that  continuation  of the  Agreement is  necessary  for the
continued  operation of the  Association):  (i) by the Director of the Office of
Thrift  Supervision  (the  "Director")  or his or her  designee  at the time the
Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters
into an agreement to provide assistance to or on behalf of the Association under
the authority contained in Section 13(c) of the FDIA or (ii) by the Director, or
his or her  designee  at the time  the  Director  or such  designee  approves  a
supervisory  merger to resolve  problems related to operation of the Association
or when the  Association  is  determined  by the  Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

     (f)  Any  payments  made  to  Executive  pursuant  to  this  Agreement,  or
otherwise,  are  subject  to and  conditioned  upon  compliance  with 12  U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

11.      NOTICE.

     (a) Any purported  termination by the  Association or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this  Agreement,  a "Notice of  Termination"  shall mean a written  notice which
shall indicate the specific termination  provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances  claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

     (b) "Date of  Termination"  shall  mean (A) if  Executive's  employment  is
terminated  for  Disability,  thirty (30) days after a Notice of  Termination is
given  (provided  that she shall not have  returned  to the  performance  of her
duties on a full-time basis during such thirty (30) day period),  and (B) if his
employment is terminated for any other reason,  the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

     (c) If, within thirty (30) days after any Notice of  Termination  is given,
the party  receiving such Notice of Termination  notifies the other party that a
dispute  exists  concerning  the  termination,  except upon the  occurrence of a
Change in Control and voluntary  termination  by the Executive in which case the
Date of  Termination  shall be the date  specified  in the  Notice,  the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties,  by a binding  arbitration award, or
by a final judgment,  order or decree of a court of competent  jurisdiction (the
time for appeal there from having  expired and no appeal having been  perfected)
and provided further that the Date of Termination  shall be extended by a notice
of dispute  only if such notice is given in good faith and the party giving such
notice  pursues  the  resolution  of such  dispute  with  reasonable  diligence.
Notwithstanding the pendency of any such dispute,  the Association will continue
to pay Executive her full  compensation in effect when the notice giving rise to
the dispute was given (including,  but not limited to, Base Salary) and continue
him as a participant in all  compensation,  benefit and insurance plans in which
he was participating  when the notice of dispute was given, until the dispute is
finally  resolved in  accordance  with this  Agreement.  Amounts paid under this
Section are in addition to all other amounts due under this  Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.

12.      NON-COMPETITION.

     (a) Upon any termination of Executive's employment hereunder pursuant to an
Event of  Termination as provided in Section 4 hereof,  Executive  agrees not to
compete  with the  Association  and/or the  Company for a period of one (1) year
following such  termination in any city, town or county in which the Association
and/or the  Company  has an office or has filed an  application  for  regulatory
approval to establish an office,  determined  as of the  effective  date of such
termination.  Executive  agrees that during such period and within said  cities,
towns and counties, Executive shall not work for or advise, consult or otherwise
serve  with,  directly  or  indirectly,  any entity  whose  business  materially
competes  with the  depository,  lending  or other  business  activities  of the
Association and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the  Association  and/or the  Company,  its  business  and
property in the event of Executive's  breach of this Subsection 11(a) agree that
in the event of any such breach by Executive, the Association and/or the Company
will be entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive,  Executive's partners,
agents,  servants,  employers,  employees  and all  persons  acting  for or with
Executive.  Executive represents and admits that in the event of the termination
of her  employment  pursuant  to Section 8 hereof,  Executive's  experience  and
capabilities are such that Executive can obtain employment in a business engaged
in other lines  and/or of a different  nature  than the  Association  and/or the
Company,  and that the  enforcement  of a remedy by way of  injunction  will not
prevent Executive from earning a livelihood. Nothing herein will be construed as
prohibiting the Association  and/or the Company from pursuing any other remedies
available to the  Association  and/or the Company for such breach or  threatened
breach, including the recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
business  activities and plans for business  activities of the  Association  and
affiliates  thereof,  as it may exist from time to time, is a valuable,  special
and unique asset of the business of the Association.  Executive will not, during
or  after  the term of her  employment,  disclose  any  knowledge  of the  past,
present,  planned  or  considered  business  activities  of the  Association  or
affiliates  thereof to any person,  firm,  corporation,  or other entity for any
reason or purpose  whatsoever.  Notwithstanding  the  foregoing,  Executive  may
disclose  any  knowledge  of  banking,  financial  and/or  economic  principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Association.  In the event of a breach or threatened
breach by the Executive of the provisions of this Section,  the Association will
be entitled to an injunction restraining Executive from disclosing,  in whole or
in part,  the knowledge of the past,  present,  planned or  considered  business
activities of the  Association  or  affiliates  thereof,  or from  rendering any
services to any person, firm, corporation,  other entity to whom such knowledge,
in whole or in  part,  has been  disclosed  or is  threatened  to be  disclosed.
Nothing herein will be construed as prohibiting  the  Association  from pursuing
any other remedies  available to the  Association  for such breach or threatened
breach, including the recovery of damages from Executive.

13.      SOURCE OF PAYMENTS.

     All  payments  provided in this  Agreement  shall be timely paid in cash or
check  from  the  general  funds  of  the  Association.  The  Company,  however,
guarantees  all  payments  and the  provision  of all amounts and  benefits  due
hereunder to Executive  and, if such payments are not timely paid or provided by
the  Association,  such  amounts and  benefits  shall be paid or provided by the
Company.

14.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior  employment  agreement  between the  Association or any
predecessor of the Association  and Executive,  except that this Agreement shall
not  affect or operate to reduce  any  benefit  or  compensation  inuring to the
Executive of a kind elsewhere provided.  No provision of this Agreement shall be
interpreted to mean that  Executive is subject to receiving  fewer benefits than
those available to him without reference to this Agreement.

15.      NO ATTACHMENT.

     (a) Except as  required  by law,  no right to receive  payments  under this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to affect any such action  shall be null,
void, and of no effect.  (b) This Agreement  shall be binding upon, and inure to
the benefit of,  Executive,  the  Association,  the Company and their respective
successors and assigns.

16.      MODIFICATION AND WAIVER.

     (a) This  Agreement may not be modified or amended  except by an instrument
in writing signed by the parties hereto.

     (b) No term or  condition  of this  Agreement  shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement,  except by written  instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing  waiver
unless specifically  stated therein,  and each such waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.


17.      SEVERABILITY.

     If, for any reason,  any  provision of this  Agreement,  or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this  Agreement or any part of such  provision not held so invalid,  and each
such other  provision and part thereof shall to the full extent  consistent with
law continue in full force and effect.

18.      HEADINGS FOR REFERENCE ONLY.

     The headings of sections  and  paragraphs  herein are  included  solely for
convenience of reference and shall not control the meaning or  interpretation of
any of the provisions of this Agreement.

19.      GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Oregon, unless
otherwise specified herein;  provided,  however, that in the event of a conflict
between the terms of this Agreement and any  applicable  federal or state law or
regulation, the provisions of such law or regulation shall prevail.

20.      ARBITRATION.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three  arbitrators  sitting in a location selected by the employee within one
hundred (100) miles from the location of the Association, 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;  provided,
however,  that Executive  shall be entitled to seek specific  performance of his
right to be paid  until  the Date of  Termination  during  the  pendency  of any
dispute or controversy arising under or in connection with this Agreement.

21.      PAYMENT OF LEGAL FEES.

     All  reasonable  legal fees paid or incurred by  Executive  pursuant to any
dispute or question of  interpretation  relating to this Agreement shall be paid
or reimbursed by the  Association,  if successful  pursuant to a legal judgment,
arbitration or settlement.

22.      INDEMNIFICATION.

     The Association shall provide Executive (including her heirs, executors and
administrators)   with  coverage  under  a  standard  directors'  and  officers'
liability insurance policy at its expense,  or in lieu thereof,  shall indemnify
Executive (and her heirs,  executors and  administrators)  to the fullest extent
permitted under law against all expenses and liabilities  reasonably incurred by
him in  connection  with or arising out of any action,  suite or  proceeding  in
which she may be  involved by reason of her having been a director or officer of
the  Association  (whether or not she  continues to be a directors or officer at
the  time  of  incurring  such  expenses  or  liabilities),  such  expenses  and
liabilities  to  include,  but not be  limited  to,  judgment,  court  costs and
attorneys' fees and the cost of reasonable settlements.



23.      SUCCESSOR TO THE ASSOCIATION OR THE COMPANY.

     The  Association  and the Company  shall require any successor or assignee,
whether direct or indirect, by purchase, merger,  consolidation or otherwise, to
all or  substantially  all the  business  or  assets of the  Association  or the
Company,  expressly  and  unconditionally  to assume  and agree to  perform  the
Association's  or the Company's  obligations  under this Agreement,  in the same
manner and to the same  extent  that the  Association  or the  Company  would be
required to perform if no such succession or assignment had taken place.


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by a duly  authorized  officer or director of the  Association  and the
Company,  and Executive has signed this  Agreement,  all on the 19th day of May,
2003.

KLAMATH FIRST BANCORP, INC.                 KLAMATH FIRST FEDERAL SAVINGS
                                                      AND LOAN ASSOCIATION


BY: /s/ Kermit K. Houser                    BY: /s/ Kermit K. Houser
    Kermit K. Houser, President & CEO           Kermit K. Houser President & CEO



/s/ Kathryn Rutledge                            /s/ Nina G. Drake
WITNESS:                                        Nina G. Drake


<PAGE>
                                                                 Exhibit 10(h).2
                     FIRST AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This FIRST  AMENDMENT TO AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal  Savings and Loan  Association  ("Association"),  Klamath First Bancorp,
Inc.,  ("Company")  and the  undersigned  executive  officer of Association  and
Company (the "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an Amended and
Restated Employment Agreement dated May 19, 2003, (the "Employment Agreement");

     WHEREAS,  the Executive  desires to enter into this  Agreement to faciliate
the  Transaction  so as to  enable  her  change in  control  of  benefits  to be
triggered under the Employment  Agreement and her Executive Salary  Continuation
Agreement.

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
the  Transaction  so as to  enable  her  change in  control  of  benefits  to be
triggered under the Employment  Agreement and her Executive Salary  Continuation
Agreement,  and to enhance the value of shares of common stock of Company  owned
by the Executive  and the value of her stock options to acquire  common stock of
Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Capitalized terms used herein, to the extent not defined  otherwise,  shall
     have the meaning ascribed to them in the Employment Agreement.

2.   Section 5(c) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association shall pay the Executive as severance pay or
     liquidated damages, or both (the "Base Severance Amount"),  an amount equal
     to $148,500.  In the event that all  conditions to closing under the Merger
     Agreement have been satisfied  during calendar year 2003, then  Association
     shall  make  payment  of the Base  Severance  Amount  plus  the  Additional
     Severance  Amount (as defined in Section  5(d) below) to the  Executive  on
     December 31, 2003. In the event such closing  conditions  are not satisfied
     during calendar year 2003, then the payments  contemplated  herein shall be
     made within 10 days after  consummation  of the merger  contemplated by the
     Merger Agreement.  Notwithstanding  the foregoing,  if the Executive enters
     into a new written  employment  agreement with Sterling or Sterling Savings
     Bank prior to  December  31, 2003 (but  effective  upon  completion  of the
     merger contemplated by the Merger Agreement), then the Severance Amount and
     Additional  Severance Amount shall not be paid pursuant to the terms hereof
     and any  severance to be provided to the  Executive,  if any,  shall be set
     forth in such new written employment agreement."

     Section 5(d) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association  shall  pay  the  Executive  as  additional
     severance the amount of $5,750 (the "Additional  Severance Amount") in lieu
     of any obligation to pay the Executive the value of employer  contributions
     that would have been made on the Executive's behalf over the remaining term
     of the  agreement to any  tax-qualified  retirement  plan.  The  Additional
     Severance  Amount  shall be paid at the time the Base  Severance  Amount is
     paid pursuant to Section 5(c) above.  Upon the  Executive's  termination of
     service in connection with or following a Change in Control arising from or
     relating   to   the   Merger   Agreement,   Sterling   Savings   Bank,   as
     successor-in-interest to the Association,  shall provide the Executive with
     continued life, medical, dental and disability coverage as is then provided
     by Sterling  Savings Bank to its  full-time  employees,  as the same may be
     changed from time to time,  during the 36 month period next  following  the
     Executive's  Date  of  Termination  with  the  cost to be  absorbed  by the
     Executive  being equal to the lesser of (i) the  employee  cost of coverage
     currently  being  borne  by the  Executive  or (ii)  the  employee  cost of
     coverage  borne by full-time  employees of Sterling  Savings Bank receiving
     the same  coverage;  provided  if the cost of  coverage  to be borne by the
     Executive is determined  under subpart (i), then such cost shall be subject
     to pro  rata  adjustment  based  upon the pro  rata  adjustment  in cost of
     coverage  that is borne by  full-time  employees  of Sterling  Savings Bank
     receiving the same coverage after completion of the merger  contemplated by
     the Merger Agreement."

3.   New Section 24 is added to the Employment Agreement as follows:

     "24.  Long  Term  Medical  Care.  The  Executive  shall  have  a  right  to
     participate  in the long term  medical care  program to be  implemented  by
     Association  if the Executive  meets the  eligibility  requirements  of the
     insurer. If the Executive meets the eligibility requirements of the insurer
     and becomes a participant  in the long term medical care  program,  then in
     that  event,  her Base  Severance  Amount  shall be  reduced  by the single
     premium cost paid by Association  for such long term medical care on behalf
     of the Executive (which is estimated to be $54,000) and the Executive shall
     have no obligation to reimburse  Association  for any premium cost relating
     to such program after the Executive's termination of employment."

4.   The  Employment  Agreement  shall be further  amended by adding  thereto an
     "Exhibit A to the  Employment  Agreement"  in the form  attached  hereto as
     Appendix I.

5.   Except as  specifically  set forth herein,  the Employment  Agreement shall
     continue  in full  force  and  effect.  To the  extent  that any  provision
     contained in this Agreement is  inconsistent  with any of the provisions of
     the  Employment  Agreement,  including  but not  limited to,  Section  5(b)
     thereof, the provisions contained in this Agreement shall be controlling.

6.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

7.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so  executed  shall be deemed an  original  and all of which,
     taken together, shall constitute one and the same agreement.

     The parties have entered this Agreement on July 14, 2003.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


                                                By: /s/ Kermit K. Houser
                                                Kermit K.  Houser
                                                President/CEO
                                                KLAMATH  FIRST BANCORP, INC.


                                                By: /s/ Craig M Moore
                                                Craig M Moore
                                                SVP/Chief Auditor

                                                EXECUTIVE:


                                                By: Nina G. Drake
                                                Nina G. Drake VP/Human Resources


<PAGE>
                                                                 Exhibit 10(h).3
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
Nina G. Drake,  an Employee of the Employer (hereinafter referred to as the
"Employee"), who resides in the State of Oregon.

                              W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

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

     WHEREAS,  the  Employee'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 Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.       EMPLOYMENT

          Although  this  Agreement is intended to provide the Employee  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 Employee and the Employer nor shall any  provision of this
          Agreement  restrict or expand the right of the  Employer to  terminate
          the  Employee's  employment.  This  Agreement  shall have no impact or
          effect  upon any  separate  written  Employment  Agreement  which  the
          Employee 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 from, and shall have no effect upon, or be affected
          by, the terms and provisions of said Employment Agreement.

          Except as otherwise set forth in this  Agreement,  the term "Employer"
          shall  mean  Klamath  First  Federal  Savings  and  Loan  Association;
          provided,  further,  that for  purposes  of this  Agreement,  the term
          "Employer" shall mean Klamath First Bancorp, Inc. and its subsidiaries
          and affiliated entities,  including any parent holding company and its
          subsidiaries.


II.      FRINGE BENEFITS

          The  salary  continuation  benefits  provided  by this  Agreement  are
          granted by the  Employer as a fringe  benefit to the  Employee and are
          not part of any salary  reduction plan or an  arrangement  deferring a
          bonus or a salary  increase.  The  Employee  has no option to take any
          current payment or bonus in lieu of these salary continuation benefits
          except as set forth hereinafter.


III.     retirement date and early retirement date

         A.       Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-two  ("62") years of age and  acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.

<PAGE>


         B.       Early Retirement Date:

               The term "Early  Retirement  Date" shall mean the Retirement,  as
               defined above, of the Employee on, or after the Employee achieves
               fifty-five  (55) years of age, but has not yet reached  sixty-two
               (62) years of age.


IV.      retirement benefit and early retirement benefit

         A.       Retirement Benefit:

               If the Employee shall remain in the continuous  employment of the
               Employer until  attaining age sixty-two  (62), the Employee shall
               be entitled to be paid the "Normal Retirement  Benefit" specified
               in   Schedule  A,   payable  in   substantially   equal   monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the Employee  Retires (or on
               such later date as may be mutually  agreed  upon by the  Employee
               and the  Employer  in advance of said  Retirement  date)  payable
               until the Employee's death. After  commencement of payments,  the
               Normal  Retirement  Benefit will increase by two percent (2%) per
               year.

         B.       Early Retirement Benefit:

               The  Employee  shall  have the right to  retire  on a date  which
               constitutes an Early  Retirement  Date as defined in Subparagraph
               III (B) above.  In the event the  Employee  elects to Retire on a
               date which  constitutes an Early  Retirement Date, and said early
               retirement  is not  pursuant to a Change in Control as defined in
               paragraph VI below, the Employee shall be entitled to be paid the
               "Normal Retirement  Benefit" specified in Schedule A for the date
               the Retirement occurs, but reduced by a factor of one-half of one
               percent  (.5%) per month for each month or portion  thereof  that
               the Early  Retirement  occurs prior to the  Retirement  Date. The
               benefit   shall  be  payable  in   substantially   equal  monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the  Early  Retirement  Date
               occurs (or on such later date as may be  mutually  agreed upon by
               the Employee and the Employer in advance of such Early Retirement
               Date).  After  commencement  of  payments,  the Early  Retirement
               benefit will increase by two percent (2%) per year.

               Example:  If the Early  Retirement  Date occurs on the Employee's
               60th birthday and if the Retirement Date in Section III.A.  above
               is at age 62, the Normal Retirement Benefit specified in Schedule
               "A" as of the  Employee's  60th birthday  would be reduced by 12%
               [.5% x 24 months].


V.       other termination of EMPLOYMENT and DISABILITY

         A.       Payments in the Event Employment Is Terminated Prior to
                  Retirement:

               The  Employer  reserves  the right to  terminate  the  Employee's
               employment,  with or without  cause but  subject  to any  written
               employment  agreement  which may then exist, at any time prior to
               the  Employee's  Retirement.  In the event that the employment of
               the Employee shall be terminated,  other than by reason of death,
               Disability  or  Retirement,  prior  to the  Employee's  attaining
               sixty-two (62) years of age, then this Agreement  shall terminate
               on the date of such termination of employment; provided, however,
               that the Employee shall be entitled to the following  benefits as
               may be applicable  depending upon the  circumstances  surrounding
               the Employee's termination:

              (i)      Termination for Other Than Disability, Change in Control
                       or Cause:

               If the Employee's  employment is terminated by the Employee or by
               the  Employer for any reason  other than  Disability,  "Change in
               Control"  or  "Termination  for  Cause,"  the  Employee  shall be
               entitled to be paid the "Normal Retirement  Benefit" specified in
               Schedule   A  as  of  the  date  of   termination,   payable   in
               substantially equal monthly installments on the first day of each
               month,  beginning with the month following the month in which the
               Employee  attains  sixty-two  (62) years of age (or on such later
               date  as may be  mutually  agreed  upon by the  Employee  and the
               Employer   not  less  than   fifteen  (15)  days  prior  to  such
               commencement  date) payable until the Employee's death, and shall
               increase  by two  percent  (2%)  per  year.  Alternatively,  upon
               achieving age fifty-five (55) but before  achieving age sixty-two
               (62),  the  Employee  may choose to receive the Early  Retirement
               Benefit with the reductions from the "Normal Retirement  Benefit"
               as of the date of termination,  and as described in Section IV.B.
               of this Agreement.  The benefit shall be payable in substantially
               equal  monthly  installments  on the  first  day of  each  month,
               beginning  with the month  following the month in which the Early
               Retirement  Date occurs (or on such later date as may be mutually
               agreed  upon by the  Employee  and the  Employer  not  less  than
               fifteen (15) days prior to such commencement date) payable to the
               Employee's  death,  and shall  increase by two  percent  (2%) per
               year.

<PAGE>


                   (ii)    Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee 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 Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

         B.       Payment in the Event of Disability Prior to Retirement:

               The  Employee  shall,  in  connection  with  acceptance  of  this
               Agreement,  elect  below  either  the "Lump Sum  Payment"  or the
               "Annuity  for Life"  option in the  event  the  Employee  becomes
               disabled at any time after the Effective  Date of this  Agreement
               but prior to  Retirement.  The term  "Disability"  or  "Disabled"
               shall  have the same  meaning  given  such terms in any policy of
               disability  insurance  maintained by the Employer for the benefit
               of employees  including  the  Employee.  In the absence of such a
               policy,  which  extends  coverage to the Employee in the event of
               disability, the terms shall mean bodily injury or disease (mental
               or  physical)   which  wholly  and   continuously   prevents  the
               performance of the Employee's duties to the Employer for at least
               one hundred twenty (120) days.

(i)      Lump Sum Payment.

                    The  Employee  shall  be  entitled  to be paid  the lump sum
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the  date  of  disability  or  date  the
                    Employee  otherwise  terminated  service  with the  Employer
                    other than for Cause.  The lump sum shall be payable 60 days
                    from the date the Employer has received a written request to
                    commence benefits, along with documentation showing that the
                    Employee has become disabled.

(ii)     Annuity for Life.

                    The Employee shall be entitled to be paid an annuity for the
                    Employee's life. The Employer shall purchase such an annuity
                    from an  insurance  company  with an A. M.  Best or  Moody's
                    rating  of  no  less  than  AA  and  using  the   amount  of
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the date of  disability  or the date the
                    Employee  otherwise  terminated  service  with the  Employer
                    other  than for  Cause.  The  Employer  shall  purchase  the
                    annuity  within  60 days  from  the date  the  Employer  has
                    received a written request to commence benefits,  along with
                    documentation showing that the Employee has become Disabled.
                    Nevertheless,  if the amount of the  applicable  "Disability
                    Benefit"  specified in Schedule A is $50,000.00 or less, the
                    payment  shall be as a lump sum to the  Employee and not the
                    purchase of an annuity for life.

(iii)    Employee  Election of Disability  Benefit.

                    I elect to receive the following  Disability Benefit (Please
                    sign on applicable line):

                           ______________________    Lump Sum Benefit.


                           /s/ Nina G. Drake         Annuity for Life.



VI.               CHANGE OF CONTROL

         A.       Definition of Change In Control:

                    A "Change in Control" of Klamath  First  Bancorp,  Inc. (the
                    "Company")  or  Klamath  First  Federal   Savings  and  Loan
                    Association (the "Association")  shall be deemed to occur if
                    and when (a) an  offeror  other than the  Company  purchases
                    shares of the common stock of the Company or the Association
                    pursuant to a tender or exchange offer for such shares,  (b)
                    any  person  (as such  term is used in  Sections  13(d)  and
                    14(d)(2)  of the  Securities  Exchange  Act of  1934)  is or
                    becomes the beneficial  owner,  directly or  indirectly,  of
                    securities  of the Company or the  Association  representing
                    25% or more of the combined voting power of the Company's or
                    the  Association's  then  outstanding  securities,  (c)  the
                    membership  of the board of  directors of the Company or the
                    Association  changes as the result of a contested  election,
                    such that individuals who were directors at the beginning of
                    any twenty-four  month period (whether  commencing before or
                    after  the  effective   date  of  this   Agreement)  do  not
                    constitute  a  majority  of the  Board  at the  end of  such
                    period,   or  (d)   shareholders   of  the  Company  or  the
                    Association  approve  a  merger,   consolidation,   sale  or
                    disposition of all or substantially  all of the Company's or
                    the  Association's  assets, or a plan of partial or complete
                    liquidation.

         B.       Termination by the Employer on Account of or After a Change in
                  Control:

                    In the event the Employee's  employment with the Employer is
                    terminated  by the Employer in  connection  with a Change in
                    Control,  the Employee  shall be  immediately  vested in the
                    "Normal Retirement  Benefit" specified in Schedule A for the
                    date the Employee  achieves age sixty-two (62). The Employee
                    shall be entitled to be paid the "Change in Control Benefit"
                    specified  in Schedule  A, in  substantially  equal  monthly
                    installments  on the first day of each month,  beginning  no
                    sooner  than the  month  following  the  month in which  the
                    Employee  attains  age  fifty-five  (55),  as  requested  in
                    writing by the Employee and delivered to the Employer or its
                    successor  thirty  (30) days  prior to the  commencement  of
                    installment payments;  provided,  however, that in the event
                    the  Employee  does  not  request  a  commencement  date  as
                    specified,  such installments shall be paid on the first day
                    of each month,  beginning with the month following the month
                    in which the Employee  attains  sixty-two (62) years of age.
                    Upon the commencement of payments, the installments shall be
                    payable until the  Employee's  death,  and shall increase by
                    two percent (2%) per year.

                    A  termination  shall be deemed to be in  connection  with a
                    Change in Control  if,  within two (2) years  following  the
                    occurrence  of a  Change  in  Control:  (a)  the  Employee's
                    employment  with the Employer is  terminated by the Employer
                    other than a Termination  for Cause; or (b) by reason of the
                    Employer's actions any adverse change occurs in the scope of
                    the  Employee's  position,   material  responsibilities  and
                    duties, salary,  benefits or location of employment;  or (c)
                    the  Employer  causes  an event to  occur  which  reasonably
                    constitutes  or  results  in a  demotion,  loss of title,  a
                    significant diminution of responsibilities or authority,  or
                    a  constructive  termination  (by forcing a  resignation  or
                    otherwise) of the Employee's employment.


VII.     benefit accounting

                    The  Employer  shall  account  for this  benefit  using  the
                    regulatory  accounting  principles of the Employer's primary
                    federal  regulator.  The Employer shall establish an accrued
                    liability  retirement  account for the  Employee  into which
                    appropriate reserves shall be accrued.


VIII.    restrictions on funding

                    The Employer shall have no obligation to set aside,  earmark
                    or  entrust  any  fund  or  money  with  which  to  pay  its
                    obligations  under this Employee Plan. The Employee,  her or
                    her beneficiary (ies), or any successor in interest shall be
                    and remain simply a general  creditor of the Employer in the
                    same manner as any other creditor having a general claim for
                    matured and unpaid  compensation.  The Employer reserves the
                    absolute right, at its sole  discretion,  to either fund the
                    obligations  undertaken  by this Employee Plan or to refrain
                    from  funding the same and to determine  the extent,  nature
                    and method of such  funding.  Should the  Employer  elect to
                    fund this Employee  Plan,  in whole or in part,  through the
                    purchase  of  life  insurance,   mutual  funds,   disability
                    policies or  annuities,  the Employer  reserves the absolute
                    right, in its sole discretion,  to terminate such funding at
                    any time, in whole or in part. At no time shall any Employee
                    be deemed to have any lien, right,  title or interest in any
                    specific funding investment or assets of the Employer.

                    If the  Employer  elects  to  invest  in a  life  insurance,
                    disability  or annuity  policy on the life of the  Employee,
                    then the  Employee  shall  assist  the  Employer  by  freely
                    submitting to a physical exam and supplying such  additional
                    information necessary to obtain such insurance or annuities.

                    Notwithstanding  anything  hereinabove to the contrary,  the
                    Employer and the Employee acknowledge and agree that, in the
                    event of a Change in Control and at the  written  request of
                    the Employee,  the Employer 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 Employer in its sole  discretion
                    deems   appropriate   and  in  compliance   with  applicable
                    provisions of the Internal  Revenue Code of 1986, as amended
                    (the  "Code")  in  order  to  permit  the  Employer  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
                    Employer  to  be  used  exclusively  for  discharge  of  the
                    Employer's  obligations pursuant to this Agreement and shall
                    continue  to be  subject  to the  claims  of the  Employer's
                    general   creditors  until  paid  to  the  Employee  or  its
                    beneficiaries  in such manner and at such times as specified
                    in this Agreement


IX.      MISCELLANEOUS

         A.       Alienability and Assignment Prohibition:

                    The  Employee  shall  have no power  or  right to  transfer,
                    assign, anticipate,  hypothecate,  mortgage, commute, modify
                    or otherwise encumber in advance any of the benefits payable
                    hereunder  nor  shall any of said  benefits  be  subject  to
                    seizure for the payment of any debts, judgments,  alimony or
                    separate   maintenance   owed   by  the   Employee   nor  be
                    transferable by operation of law in the event of bankruptcy,
                    insolvency or otherwise.  In the event the Employee attempts
                    assignment, commutation, hypothecation, transfer or disposal
                    of the benefits hereunder,  the Employer's liabilities shall
                    forthwith cease and terminate.

         B.       Binding Obligation of the Employer and any Successor in
                  Interest:

                    The  Employer  shall not merge or  consolidate  into or with
                    another Employer or sell  substantially all of its assets to
                    another Employer,  firm or person until such Employer,  firm
                    or  person  expressly  agree,  in  writing,  to  assume  and
                    discharge the duties and  obligations  of the Employer under
                    this Employee Plan. This Employee Plan shall be binding upon
                    the parties hereto, their successors,  beneficiaries,  heirs
                    and personal representatives.

         C.       Amendment or Revocation:

                    It is agreed by and between the parties hereto that,  during
                    the  lifetime of the  Employee,  this  Employee  Plan may be
                    amended  or  revoked  at any time or  times,  in whole or in
                    part, by the mutual written  consent of the Employee and the
                    Employer.

         D.       Gender:

                    Whenever  in  this  Employee  Plan  words  are  used  in the
                    masculine or neuter gender, they shall be read and construed
                    as in the  masculine,  feminine or neuter  gender,  whenever
                    they should so apply.

         E.       Effect on Other Employer Benefit Plans:

                    Nothing  contained  in this  Employee  Plan shall affect the
                    right of the Employee to participate in or be covered by any
                    qualified or non-qualified pension,  profit-sharing,  group,
                    bonus or other  supplemental  compensation or fringe benefit
                    plan  constituting  a part  of the  Employer's  existing  or
                    future compensation structure.

         F.       Headings:

                    Headings and  subheadings in this Employee Plan are inserted
                    for reference and convenience only and shall not be deemed a
                    part of this Employee Plan.

         G.       Applicable Law:

                    The laws of the State of Oregon  shall  govern the  validity
                    and interpretation of this Agreement.

         H.       Partial Invalidity:

                    If any  term,  provision,  covenant,  or  condition  of this
                    Employee Plan 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  Employee  Plan  shall  remain in full  force and effect
                    notwithstanding such partial invalidity.

         I.       Not a Contract of Employment:

                    This Agreement  shall not be deemed to constitute a contract
                    of  employment  between  the parties  hereto,  nor shall any
                    provision  hereof  restrict  the  right of the  Employer  to
                    discharge  the  Employee,  or  restrict  the  right  of  the
                    Employee to terminate employment.

         J.       Notices:

                    Any notice  required or  permitted of either the Employee or
                    the Employer  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.

<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       Nina G. Drake
                                            1003 Wild Plum Drive
                                            Klamath Falls, OR 97601

         K.       Opportunity To Consult With Independent Advisors:

                    The  Employee   acknowledges  that  the  Employee  has  been
                    afforded  the   opportunity  to  consult  with   independent
                    advisors  of  her  or  her   choosing   including,   without
                    limitation,   accountants   or  tax   advisors  and  counsel
                    regarding  both the benefits  granted to the Employee  under
                    the terms of this Agreement and the (i) terms and conditions
                    which may affect the Employee'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  Employee
                    acknowledges and agrees shall be the sole  responsibility of
                    the Employee  notwithstanding any other term or provision of
                    this Agreement. The Employee further acknowledges and agrees
                    that the Employer shall have no liability whatsoever related
                    to any such  personal tax effects or other  personal  costs,
                    expenses,  or  liabilities  applicable  to the  Employee and
                    further  specifically  waives any right for the Employee and
                    her  or her  heirs,  beneficiaries,  legal  representatives,
                    agents, successors, and assigns to claim or assert liability
                    on the part of the Employer related to the matters described
                    above   in   this   subparagraph.   The   Employee   further
                    acknowledges   and  agrees  that  the   Employee  has  read,
                    understands  and consents to all of the terms and conditions
                    of this  Agreement,  and that the Employee  enters into this
                    Agreement  with  a  full  understanding  of  its  terms  and
                    conditions.


X.       ADMINISTRATIVE AND CLAIMS PROVISION

         A.       Named Fiduciary and Plan Administrator:

                    The  "Named  Fiduciary  and  Plan   Administrator"  of  this
                    Employee Plan shall be Klamath First  Bancorp,  Inc.,  until
                    its  resignation or removal by the Board. As Named Fiduciary
                    and Plan  Administrator,  the Employer  shall be responsible
                    for  the  management,  control  and  administration  of  the
                    Employee  Plan.  The Named  Fiduciary may delegate to others
                    certain    aspects   of   the   management   and   operation
                    responsibilities   of  the  Employee   Plan   including  the
                    employment  of advisors and the  delegation  of  ministerial
                    duties to qualified individuals.

         B.       Claims Procedure:

                    In the event a  dispute  arises  over  benefits  under  this
                    Employee  Plan and benefits are not paid to the Employee and
                    the claimant feels she is 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
                    provisions  of this  Employee  Plan 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 a
                    further review of the claim denial is desired. A claim shall
                    be  deemed   denied  if  the   Named   Fiduciary   and  Plan
                    Administrator  fail to take any action  within the aforesaid
                    forty-five-day period.

                    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  Employee  Plan or any  documents  relating
                    thereto  and submit any written  issues and  comments it 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.

C.       Arbitration:

                    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  Employer 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").  In the  event  JAMS is unable or
                    unwilling to conduct the arbitration  provided for under the
                    terms of this Paragraph,  or has  discontinued its business,
                    the parties agree that a representative member,  selected by
                    the  mutual  agreement  of  the  parties,  of  the  American
                    Arbitration  Association ("AAA"),  shall conduct the binding
                    arbitration  referred  to in this  Paragraph.  Notice of the
                    demand for  arbitration  shall be filed in writing  with the
                    other  party to this  Agreement  and with  JAMS (or AAA,  if
                    necessary).  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, or if there are
                    none, the rules of procedure used or established by AAA. Any
                    award  rendered  by JAMS or AAA 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
                    Klamath Falls,  Oregon,  unless  otherwise  agreed to by the
                    parties.

         D.       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, the prevailing party
                    shall be entitled to recover from the  non-prevailing  party
                    reasonable  expenses,  attorneys' fees and costs incurred in
                    connection  therewith or in the enforcement or collection of
                    any  judgment or award  rendered  therein.  The  "prevailing
                    party" means the party  determined by the  arbitrator(s)  or
                    court,  as the case may be, to have most  nearly  prevailed,
                    even if such  party  did not  prevail  in all  matters,  not
                    necessarily the one in whose favor a judgment is rendered.


XI.      SECTION 280G BENEFITS ADJUSTMENT

                    If all or any portion of the amounts payable to the Employee
                    under this  Agreement,  either alone or together  with other
                    payments  which the  Employee  has the right to receive from
                    the Employer,  constitute "excess parachute payments" within
                    the meaning of Section 280G of the Code, that are subject to
                    the  excise  tax  imposed  by  Section  4999 of the Code (or
                    similar  tax  and/or  assessment),  the  Employer  (and  its
                    successor) and the Employee each agree to pay their share of
                    any taxes that may be imposed as a result of  payments  made
                    pursuant to this Agreement; provided, however, that Employer
                    and  Employee  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 Employee is greater than the amount initially
                    so  determined,  then the Employee 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.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

  Klamath First Federal Savings and Loan Association



/s/ Kermit K. Houser                              /s/ Kelly A. Male
Kermit K. Houser                                  Witness
President and CEO




/s/ Nina G. Drake                                 /s/ Kathyn Rutledge
Nina G. Drake VP/Human Resources                  Witness

<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE A
                            EMPLOYEE BENEFIT SCHEDULE

                                   NINA DRAKE
                         DATE OF BIRTH: DECEMBER 8, 1952
                             HIRED ON: JUNE 3, 2002

                                 NORMAL           CHANGE IN                            DEATH BENEFIT:       DEATH BENEFIT:
       VESTING               RETIREMENT             CONTROL         DISABILITY            DEATH WHILE                AFTER
      DATE (1)               BENEFIT (2)         BENEFIT (3)        BENEFIT (4)           EMPLOYED (5)      TERMINATION (6)
<S>                             <C>                 <C>               <C>                    <C>                  <C>
   January 1, 2003                   $0                  NA                 $0               $763,570             $100,000
   January 1, 2004               $2,563                  NA                 $0               $763,570             $100,000
   January 1, 2005               $5,767                  NA            $17,937               $763,570             $100,000
   January 1, 2006              $10,252                  NA            $42,847               $763,570             $102,521
   January 1, 2007              $16,019             $44,287            $80,871               $763,570             $160,190
   January 1, 2008              $23,067             $48,868           $134,155               $763,570             $230,673
   January 1, 2009              $31,397             $53,450           $205,098               $763,570             $313,971
   January 1, 2010              $41,009             $58,031           $296,379               $763,570             $410,085
   January 1, 2011              $51,901             $62,613           $410,983               $763,570             $519,014
   January 1, 2012              $64,076             $67,194           $552,232               $763,570             $640,758
   January 1, 2013              $70,483             $71,776           $723,818               $763,570             $704,834
   January 1, 2014              $76,357             $76,357           $845,307               $763,570             $763,570
   and thereafter               $76,357             $76,357                 NA           see #5 below         see #5 below
<FN>

1.  The date that Normal Retirement and Death benefits vest.  See separate footnotes for Change in Control and
     Disability Benefits.
2.  Annual Retirement Benefits payable at age sixty-two (62). Benefits are payable for life and increase by 2% per
     year after Retirement.
3. The Employee is eligible to retire following Termination pursuant to a Change in Control any time after the
     attainment of age fifty five (55).  This is the annual sum the Employee will be paid if the Employee elects to
     receive Retirement Benefits on or after the Employee's birthday, but before the following anniversary. Once
     payments begin, Benefits are payable for life and increase by 2% per year thereafter.
4. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty
     Balance as of disability date.  Disability Benefit value is determined by straight-line interpolation between the
    amounts showing in this column for Jan 1 of the calendar year the disability occurs and Jan 1 of the following
    calendar year.  Benefit is paid as Employee elected in the Agreement.  No post-retirement benefit.
5.  Death benefit equals 10x initial Normal Retirement Benefit to age 70, 7x initial Normal Retirement Benefit to
    Age 80, and 3 x initial Normal Retirement Benefit thereafter.
6.  Unless termination is for Cause, the death benefit is the greater of $100,000 or 10x the vested annual retirement
     benefit at the time of termination.
</FN>
</TABLE>


/s/ Nina G. Drake   5/14/03   /s/ Kermit K. Houser                      5/19/03
Nina G. Drake       Date      Bank Officer                              Date


<PAGE>

                                                                 Exhibit 10(h).4
           FIRST AMENDMENT TO executive salary continuation AGREEMENT

     This FIRST  AMENDMENT  TO EXECUTIVE  SALARY  CONTINUATION  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal Savings and Loan Association  ("Employer") and the undersigned executive
officer of Employer ("Employee").

     WHEREAS,   Employer   and  Employee   entered  into  an  Executive   Salary
Continuation Agreement (the "SCA") effective January 1, 2003;

     WHEREAS,  Klamath First Bancorp,  Inc.  ("Company"),  the parent company of
Employer,  has entered into an Agreement and Plan of Merger dated as of July 14,
2003, (the "Merger Agreement") with Sterling Financial Corporation  ("Sterling")
with respect to a proposed transaction (the "Transaction") whereby Sterling will
acquire all of the outstanding shares of Company common stock in a stock merger;

     WHEREAS,  Employer  desire to enter into this  Agreement to facilitate  the
Transaction; and

     WHEREAS,  Employee  desires to enter into this  Agreement to faciliate  the
Transaction  so as to enable  Employee (a) to receive a cash-out of her benefits
under the SCA as provided  herein and (b) to receive change in control  benefits
under her employment agreement.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Notwithstanding  anything  contained in the SCA to the  contrary,  Employer
     shall  have the  right to pay  Employee  at any time  from the date  hereof
     through   December  31,  2003  the  amount  of  $473,327  less  all  tax
     withholding  obligations  with respect  thereto (the "Cash-Out  Amount") in
     full and complete satisfaction of all obligations of Employer under the SCA
     and all rights of Employee  under the SCA. Upon Employer  making payment of
     the Cash-Out Amount to Employee as provided herein, the SCA shall terminate
     and shall have no further force or effect.

2.   Upon payment of the Cash-Out  Amount to Employee by Employer as provided in
     paragraph  1 above,  Employee  does hereby  release  and forever  discharge
     Employer,  its  affiliates,   and  their  respective  assigns,   directors,
     officers,  employees and agents from any and all claims, demands, causes of
     action and rights that Employee has or might have under the SCA of any kind
     or character whatsoever, whether known or unknown.

3.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

4.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so executed  shall be deemed an  original  and both of which,
     taken together, shall constitute one and the same agreement.

     The parties have  executed  this  Agreement on the day and year first above
     written.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION

                                        By:   /s/ Kermit K. Houser
                                               Kermit K. Houser
                                               President/CEO


                                     EMPLOYEE:


                                        By:   /s/ Nina G. Drake
                                              Nina G. Drake VP/Human Resources



<PAGE>
                                                                 Exhibit 10(i).1
                              EMPLOYMENT AGREEMENT

     THIS  AGREEMENT  is made  effective  as of January 1, 2003,  by and between
     KLAMATH  FIRST  FINANCIAL  SERVICES,   INC.  (the  "Company"),   an  Oregon
     corporation; and Jeffrey D. Schlenker (the "Executive").

     WHEREAS,  the Company  wishes to assure itself of the services of Executive
     for the period provided in this Agreement; and

     WHEREAS,  the Executive is willing to serve in the employ of the Company on
     a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
     and upon the other terms and conditions  hereinafter provided,  the parties
     hereby agree as follows:

1.   POSITION AND RESPONSIBILITIES.

     During the period of his employment hereunder, Executive agrees to serve as
     President & Program Manager of the Company.  During said period,  Executive
     also  agrees to serve,  if  elected,  as an officer  of the  Company or any
     affiliate of the Company.

2.   TERMS AND DUTIES.

     (a)  The term of this Agreement shall be deemed to have commenced as of the
          date  first  above  written  and  shall   continue  for  a  period  of
          twenty-four  (24) full calendar months  thereafter.  Commencing on the
          first  anniversary  date,  and  continuing  at each  anniversary  date
          thereafter, the Board of Directors of the Company (the "Board") or its
          parent companies'  Compensation Committee may extend the Agreement for
          an  additional  year.  Prior  to the  extension  of the  Agreement  as
          provided herein, the Board of Directors of the Company will review the
          Executive's performance evaluation for purposes of determining whether
          to extend the Agreement,  and the results thereof shall be included in
          the minutes of the Board's meeting.

     (b)  During the period of his employment  hereunder,  except for periods of
          absence  occasioned  by  illness,  reasonable  vacation  periods,  and
          reasonable leaves of absence, Executive shall devote substantially all
          his  business  time,  attention,  skill,  and efforts to the  faithful
          performance of his duties hereunder including  activities and services
          related to the organization,  operation and management of the Company;
          provided,  however, that, with the approval of the Board, as evidenced
          by a resolution of such Board, from time to time, Executive may serve,
          or  continue  to serve,  on the boards of  directors  of, and hold any
          other offices or positions in, companies or  organizations,  which, in
          such Board's judgment,  will not present any conflict of interest with
          the Company,  or  materially  affect the  performance  of  Executive's
          duties pursuant to this Agreement.

     3.   COMPENSATION AND REIMBURSEMENT.

     (a)  The  compensation  specified under this Agreement shall constitute the
          salary and benefits paid for the duties described in Sections 1 and 2.
          The Company shall pay Executive as  compensation  a salary of $ 45,000
          per year ("Base Salary") effective 1/1/2003. Such Base Salary shall be
          payable in  accordance  with the  customary  payroll  practices of the
          Company. During the period of this Agreement,  Executive's Base Salary
          shall be  reviewed  at least  annually;  the first such review will be
          made no  later  than one year  from the date of this  Agreement.  Such
          review  shall  be  conducted  by the  Board or its  parent  companies'
          Compensation  Committee,  and the Board may increase  Executive's Base
          Salary.  In addition to the Base Salary provided in this Section 3(a),
          the Company shall provide  Executive at no cost to Executive  with all
          such other  benefits as are  provided  uniformly  to regular  salaried
          employees of the Company.

     (b)  The Company  will  provide  Executive  with  employee  benefit  plans,
          arrangements  and  perquisites  substantially  equivalent  to those in
          which Executive was  participating or otherwise  deriving benefit from
          immediately prior to the beginning of the term of this Agreement,  and
          the Company will not, without Executive's prior written consent,  make
          any changes in such plans,  arrangements  or  perquisites  which would
          adversely affect Executive's rights or benefits  thereunder.  However,
          changes  in   Company-sponsored   group   insurance   plan   premiums,
          deductibles, co-payments and related coverage limits or conditions are
          excluded  from  the  prior  sentence  for any  such  change  which  is
          consistently  applied  to or  available  to regular  salaried  Company
          employees. Without limiting the generality of the foregoing provisions
          of this Subsection  (b),  Executive will be entitled to participate in
          or receive benefits under any employee  benefit plans  including,  but
          not limited  to,  retirement  plans,  supplemental  retirement  plans,
          pension plans, profit-sharing plans, health-and-accident plan, medical
          coverage  or any  other  employee  benefit  plan or  arrangement  made
          available  by the Company in the future to its senior  executives  and
          key management employees,  subject to, and on a basis consistent with,
          the terms,  conditions  and overall  administration  of such plans and
          arrangements. Executive will be entitled to incentive compensation and
          bonuses as provided in any plan, or pursuant to any arrangement of the
          Company,  in which Executive is eligible to participate.  Nothing paid
          to the Executive under any such plan or arrangement  will be deemed to
          be in lieu of other  compensation  to which the  Executive is entitled
          under this Agreement, except as provided under Section 5(e).

     (c)  In addition to the Base Salary  provided for by paragraph  (a) of this
          Section  3, the  Company  shall  pay or  reimburse  Executive  for all
          reasonable  travel and other  obligations under this Agreement and may
          provide such additional  compensation in such form and such amounts as
          the Board may from time to time determine.

4.   PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     (a)  Upon the  occurrence of an Event of  Termination  (as herein  defined)
          during the Executive's  term of employment  under this Agreement,  the
          provisions of this Section shall apply. As used in this Agreement,  an
          "Event of  Termination"  shall mean and include any one or more of the
          following: (i) the termination by the Company of Executive's full-time
          employment hereunder for any reason other than a Change in Control, as
          defined in Section 5(a) hereof; disability, as defined in Section 6(a)
          hereof;  death;  or retirement,  as defined in Section 7 hereof;  (ii)
          Executive's  resignation  from the Company's  employ,  upon (A) unless
          consented  to by the  Executive,  a  material  change  in  Executive's
          function,  duties,  or  responsibilities,  which  change  would  cause
          Executive's   position   to  become  one  of  lesser   responsibility,
          importance,   or  scope  from  the  position  and  attributes  thereof
          described in Sections 1 and 2, above,  (any such material change shall
          be deemed a continuing breach of this Agreement),  (B) a relocation of
          Executive's  principal  place of employment by more than 35 miles from
          its location at the effective  date of this  Agreement,  or a material
          reduction  in the  benefits and  perquisites  to Executive  from those
          being  provided as of the effective  date of this  Agreement,  (C) the
          liquidation or  dissolution of the Company,  or (D) any breach of this
          Agreement by the Company.  Upon the occurrence of any event  described
          in clauses (A),  (B),  (C), or (D),  above,  Executive  shall have the
          right to elect to terminate  his  employment  under this  Agreement by
          resignation  upon not less than sixty (60) days prior  written  notice
          given within a reasonable period of time not to exceed, except in case
          of a continuing  breach,  four calendar  months after the event giving
          rise to said right to elect.

     (b)  Upon the occurrence of an Event of Termination other than for Cause or
          for Neglect  (as  described  in Sections 8 and 9 hereof),  the Company
          shall pay  Executive,  or, in the event of his subsequent  death,  his
          beneficiary or  beneficiaries,  or his estate,  as the case may be, as
          severance  pay or  liquidated  damages,  or both,  a sum  equal to the
          payments due to the Executive for the remaining term of the Agreement,
          including  Base  Salary,  bonuses,  and any  other  cash  or  deferred
          compensation  paid or to be paid  (including  the  value  of  employer
          contributions that would have been made on the Executive's behalf over
          the remaining  term of the agreement to any  tax-qualified  retirement
          plan sponsored by the Company as of the Date of  Termination),  to the
          Executive for the term of the Agreement provided, however, that if the
          Company or its  affiliates  are not in  compliance  with their minimum
          capital  requirements or if such payments would cause the Company's or
          its  affiliates'  capital  to be  reduced  below its  minimum  capital
          requirements,  such payments  shall be deferred until such time as the
          Company or its affiliates are in capital compliance. All payments made
          pursuant to this  Section  4(b) shall be paid in  substantially  equal
          monthly  installments  over  the  remaining  term  of  this  Agreement
          following the Executive's termination;  provided, however, that if the
          remaining term of the Agreement is less than one (1) year  (determined
          as of the Executive's Date of Termination), such payments and benefits
          shall be paid to the  Executive  in a lump sum  within  30 days of the
          Date of Termination.

     (c)  Upon the occurrence of an Event of Termination other than for Cause or
          for Neglect  (as  described  in Sections 8 and 9 hereof),  the Company
          will  cause to be  continued  life,  medical,  dental  and  disability
          coverage  substantially  identical to the coverage  maintained  by the
          Company for Executive  prior to his  termination.  Such coverage shall
          cease upon the expiration of the remaining term of this Agreement.

5.   CHANGE IN CONTROL.

     (a)  No benefit  shall be paid under this Section 5 unless there shall have
          occurred a Change in Control of the  Company or its parent  companies,
          Klamath First Federal  Savings and Loan  Association  or Klamath First
          Bancorp, Inc. For purposes of this Agreement, a "Change in Control" of
          the Company  shall be deemed to occur if and when (a) an offeror other
          than the  Company  or its  parent  companies  purchases  shares of the
          common  stock of the  Company or its parent  companies  pursuant  to a
          tender or exchange offer for such shares, (b) any person (as such term
          is used in Sections 13(d) and 14(d)(2) of the Securities  Exchange Act
          of 1934) is or becomes the beneficial  owner,  directly or indirectly,
          of securities of the Company or its parent companies  representing 25%
          or more of the combined  voting  power of the  Company's or its parent
          companies'  then  outstanding  securities,  (c) the  membership of the
          board of directors of the Company or its parent  companies  changes as
          the result of a contested  election,  such that  individuals  who were
          directors at the beginning of any  twenty-four  month period  (whether
          commencing  before or after the effective  date of this  Agreement) do
          not  constitute a majority of the Board at the end of such period,  or
          (d)  shareholders  of the  Company or its parent  companies  approve a
          merger, consolidation, sale or disposition of all or substantially all
          of the Company's or its parent companies' assets, or a plan of partial
          or complete liquidation.

     (b)  If any of the events  described in Section 5(a) hereof  constituting a
          Change  in  Control  have  occurred  or the Board of the  Company  has
          determined  that a Change in Control has occurred,  Executive shall be
          entitled to the benefits  provided in  paragraphs  (c), (d) and (e) of
          this  Section  5  upon  his  subsequent  involuntary   termination  of
          employment at any time during the term of this Agreement (or voluntary
          termination following a Change of Control following any demotion, loss
          of title,  office or  significant  authority,  reduction in his annual
          compensation  or benefits,  or relocation  of his  principal  place of
          employment by more than 35 miles from its location  immediately  prior
          to the Change in Control),  unless such  termination is because of his
          death,  retirement as provided in Section 7, termination for Cause, or
          termination for Disability.

     (c) Upon the occurrence of a Change in Control  followed by the Executive's
termination of employment,  the Company shall pay Executive,  or in the event of
his subsequent  death, his beneficiary or  beneficiaries,  or his estate, as the
case may be, as severance  pay or  liquidated  damages,  or both, a sum equal to
1.50 times the "base  salary" as defined in Section  3.c as above,  as  amended.
Such  payment  shall  be made in a lump  sum paid  within  ten (10)  days of the
Executive's Date of Termination.

     (d)  Upon the occurrence of a Change in Control followed by the Executive's
          termination  of  employment,  the Company  will cause to be  continued
          life, medical,  dental and disability coverage substantially identical
          to the coverage  maintained by the Company or its parent companies for
          Executive  prior to his  severance.  In addition,  Executive  shall be
          entitled  to receive the value of  employer  contributions  that would
          have been made on the  Executive's  behalf over the remaining  term of
          the agreement to any  tax-qualified  retirement  plan sponsored by the
          Company as of the Date of  Termination.  Such  coverage  and  payments
          shall cease upon the expiration of thirty-six (36) months.

     (e)  Upon the  occurrence of a Change in Control,  the  Executive  shall be
          entitled to receive  benefits  due him under,  or  contributed  by the
          Company  or its  parent  companies  on  his  behalf,  pursuant  to any
          retirement, incentive, profit sharing, bonus, performance,  disability
          or other employee benefit plan maintained by the Company or its parent
          companies on the  Executive's  behalf to the extent that such benefits
          are not otherwise paid to the Executive upon a Change in Control.

     (f)  IRS Section 280G Issues.  If 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 Company
          or its parent companies, 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 Company
          (and its successor) shall be responsible for any loss of deductibility
          related thereto;  provided,  however, that Company 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
          Company  immediately  prior to the  change in  control  or such  other
          independent accounting firm or advisor as may be mutually agreeable to
          Company and Executive in the exercise of their  reasonable  good faith
          judgment.

6.   TERMINATION FOR DISABILITY.

     (a)  If the  Executive  shall become  disabled as defined in the  Company's
          then current  disability  plan (or, if no such plan is then in effect,
          if the  Executive  is  permanently  and  totally  disabled  within the
          meaning of Section  22(e)(3) of the Code as  determined by a physician
          designated  by the  Board),  the  Company  may  terminate  Executive's
          employment for "Disability."

     (b)  Upon the  Executive's  termination of employment for  Disability,  the
          Company will pay Executive,  as disability pay, a semi-monthly payment
          equal to three-quarters (3/4) of Executive's semi-monthly rate of Base
          Salary on the effective  date of such  termination.  These  disability
          payments   shall   commence  on  the  effective  date  of  Executive's
          termination  and will  end on the  earlier  of (i) the date  Executive
          returns  to the  full-time  employment  of  the  Company  in the  same
          capacity as he was employed  prior to his  termination  for Disability
          and pursuant to an  employment  agreement  between  Executive  and the
          Company;  (ii) Executive's  full-time  employment by another employer;
          (iii) Executive attaining the age of 65; or (iv) Executive's death; or
          (v) the expiration of the term of this  Agreement.  The disability pay
          shall be reduced by the amount,  if any, paid to the  Executive  under
          any  plan  of  the  Company  providing   disability  benefits  to  the
          Executive.

     (c)  The  Company  will cause to be  continued  life,  medical,  dental and
          disability coverage substantially identical to the coverage maintained
          by the Company for Executive  prior to his termination for Disability.
          This  coverage  and  payments  shall cease upon the earlier of (i) the
          date Executive returns to the full-time  employment of the Company, in
          the same  capacity as he was  employed  prior to his  termination  for
          Disability and pursuant to an employment  agreement  between Executive
          and the Company;  (ii)  Executive's  full-time  employment  by another
          employer;  (iii)  Executive's  attaining  the age of 65;  or (iv)  the
          Executive's  death;  or  (v)  the  expiration  of  the  term  of  this
          Agreement.

     (d)  Notwithstanding  the  foregoing,  there  will be no  reduction  in the
          compensation  otherwise  payable to Executive during any period during
          which  Executive is incapable of  performing  his duties  hereunder by
          reason of temporary disability.

7.   TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.

     Termination by the Company of Executive  based on  "Retirement"  shall mean
     retirement  at age 65 or in  accordance  with  any  retirement  arrangement
     established with Executive's  consent with respect to him. Upon termination
     of Executive upon  Retirement,  Executive shall be entitled to all benefits
     under any retirement  plan of the Company or the Company and other plans to
     which Executive is a party. Upon the death of the Executive during the term
     of  this  Agreement,  the  Company  shall  pay to  Executive's  estate  the
     compensation  due to the  Executive  through  the last day of the  calendar
     month in which his death occurred.

8.   TERMINATION FOR CAUSE.

     For  purposes of this  Agreement,  "Termination  for Cause"  shall  include
     termination because of the Executive's personal  dishonesty,  incompetence,
     willful  misconduct,  breach of fiduciary duty involving  personal  profit,
     willful  violation  of any law,  rule,  or  regulation  (other than traffic
     violations  or  similar  offenses)  or  final  cease-and-desist  order,  or
     material  breach  of  any  provision  of  this   Agreement.   In  addition,
     "Termination   for  Cause"  shall  include   termination   because  of  the
     Executive's  intentional  failure to  perform  stated  duties,  such as the
     refusal  of the  Executive  to  comply  with the  Company's  or its  parent
     companies' instructions,  policies or rules or other willful conduct of the
     Executive  which  materially  adversely  reflects on the  Company's  or its
     parent companies' reputation or operation. For purposes of this Section, no
     act, or the failure to act, on Executive's  part shall be "willful"  unless
     done,  or omitted  to be done,  not in good  faith and  without  reasonable
     belief that the action or omission was in the best  interest of the Company
     or its affiliates.  Notwithstanding  the foregoing,  Executive shall not be
     deemed to have been  terminated for Cause unless and until there shall have
     been  delivered  to  him  a  copy  of a  resolution  duly  adopted  by  the
     affirmative vote of not less than three-fourths of the members of the Board
     at a  meeting  of the  Board  called  and  held  for  that  purpose  (after
     reasonable  notice to Executive and an opportunity  for him,  together with
     counsel,  to be heard  before the  Board),  finding  that in the good faith
     opinion  of  the  Board,   Executive  was  guilty  of  conduct   justifying
     termination  for Cause and  specifying the reasons  thereof.  The Executive
     shall not have the right to receive  compensation or other benefits for any
     period after  termination for Cause. Any stock options granted to Executive
     under any stock option plan or any unvested  awards granted under any other
     stock  benefit  plan of the  Company,  the Company,  or any  subsidiary  or
     affiliate  thereof,  shall become null and void effective upon  Executive's
     receipt of Notice of  Termination  for Cause  pursuant to Section 9 hereof,
     and shall not be  exercisable  by Executive at any time  subsequent to such
     Termination for Cause.

9.   TERMINATION FOR NEGLECT.

     The  Company  and  its  parent  companies  or any  of  them  may  terminate
     Executive's  employment  under this Agreement at any time for Neglect.  For
     purposes of this  Agreement,  "Neglect"  means the failure of  Executive to
     give due care to stated duties or to comply with instructions or directives
     of the Board of Directors of the Company or its parent  companies or any of
     them, but where such failure is not determined to be willful or intentional
     as defined in Section 8.  Termination for Neglect  includes  termination as
     the result of any  continuing  or repeated  problems with  Executive's  job
     performance  or conduct after written notice  specifying  such problem with
     performance or conduct,  and where such  continuing  and repeated  problems
     were not determined to be willful or intentional,  or where the conduct was
     not  deemed  to  have a  material  adverse  impact  on the  Company  or its
     affiliates. Notwithstanding the foregoing, Executive shall not be deemed to
     have been terminated by Neglect unless and until there shall have been sent
     to Executive a copy of a resolution duly adopted by a majority of the Board
     of  Directors  of the  Company  or its  parent  companies,  or any of  them
     (excluding  the Executive in counting the majority if the Executive is then
     on the board of directors,  and after reasonable notice to Executive and an
     opportunity  for  Executive  to be heard  before  the board of  directors),
     finding  that in the good faith  opinion of the board of  directors  of the
     Company  or its  parent  companies,  or any of them,  Executive  engaged in
     conduct justifying termination for Neglect and describing  specifically the
     conduct.  Executive shall not have the right to receive any salary or bonus
     for any period after termination of employment for Neglect. Executive shall
     retain any vested benefits in defined benefit plans,  defined  contribution
     plans,   supplemental  executive  retirement  plans,  stock  option  plans,
     restricted  stock  plans,  or other such  benefits,  but shall  forfeit any
     rights that have not vested.

<PAGE>

10.  REQUIRED PROVISIONS.

     (a)  The  Company  or  its  parent  companies  may  terminate   Executive's
          employment  at any time,  but any  termination  by the  Company or its
          parent companies, other than as described in Section 8 or Section 9 of
          this Agreement,  shall not prejudice Executive's right to compensation
          or other benefits under this  Agreement.  Executive shall not have the
          right to receive  compensation  or other benefits for any period after
          Termination for Cause as defined in Section 8 herein.

     (b)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
          participating in the conduct of the Company's or its parent companies'
          affairs  by a notice  served  under  Section  8(e)(3) or (g)(1) of the
          Federal  Deposit  Insurance  Act  ("FDIA") (12 U.S.C.  1818(e)(3)  and
          (g)(1)),  the  Company's  obligations  under  the  Agreement  shall be
          suspended  as of the date of  service,  unless  stayed by  appropriate
          proceedings.  If the charges in the notice are dismissed,  the Company
          may,  in  its  discretion,  (i)  pay  Executive  all  or  part  of the
          compensation  withheld while its contract  obligations  were suspended
          and (ii) reinstate (in whole or in part) any of its  obligations  that
          were suspended.

     (c)  If   Executive  is  removed   and/or   permanently   prohibited   from
          participating in the conduct of the Company's or its parent companies'
          affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDIA
          (12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Company under
          the Agreement  shall  terminate as of the effective date of the order,
          but vested rights of the contracting parties shall not be affected.

     (d)  If the Company or its parent  companies  are in default (as defined in
          Section  3(x)(1) of the FDIA),  all  obligations  under this Agreement
          shall  terminate as of the date of default,  but this paragraph  shall
          not affect any vested rights of the parties.

     (e)  All obligations  under this Agreement  shall be terminated  (except to
          the extent  determined that continuation of the Agreement is necessary
          for the continued  operation of the Company or its parent  companies):
          (i)  by  the  Director  of  the  Office  of  Thrift  Supervision  (the
          "Director")  or his or her  designee at the time the  Federal  Deposit
          Insurance  Corporation or the Resolution Trust Corporation enters into
          an agreement to provide  assistance  to or on behalf of the Company or
          its parent companies under the authority contained in Section 13(c) of
          the FDIA or (ii) by the  Director,  or his or her designee at the time
          the Director or such designee approves a supervisory merger to resolve
          problems related to operation of the Company or its parent  companies,
          or when the  Company or its parent  companies  are  determined  by the
          Director  to be in an unsafe or unsound  condition.  Any rights of the
          parties that have already  vested,  however,  shall not be affected by
          such action.

     (f)  Any  payments  made  to  Executive  pursuant  to  this  Agreement,  or
          otherwise,  are subject to and  conditioned  upon  compliance  with 12
          U.S.C. section 1828(k) and any regulations promulgated thereunder.

11.  NOTICE.

     (a)  Any  purported  termination  by the Company or by  Executive  shall be
          communicated  by Notice of Termination to the other party hereto.  For
          purposes of this  Agreement,  a "Notice of  Termination"  shall mean a
          written notice which shall indicate the specific termination provision
          in this Agreement relied upon and shall set forth in reasonable detail
          the facts and circumstances claimed to provide a basis for termination
          of Executive's employment under the provision so indicated.

     (b)  "Date of  Termination"  shall mean (A) if  Executive's  employment  is
          terminated  for  Disability,  thirty  (30)  days  after  a  Notice  of
          Termination is given  (provided that he shall not have returned to the
          performance of his duties on a full-time basis during such thirty (30)
          day period),  and (B) if his  employment is  terminated  for any other
          reason, the date specified in the Notice of Termination (which, in the
          case of a  Termination  for Cause,  shall not be less than thirty (30)
          days from the date such Notice of Termination is given).

     (c)  If, within thirty (30) days after any Notice of  Termination is given,
          the party  receiving  such Notice of  Termination  notifies  the other
          party that a dispute exists  concerning the  termination,  except upon
          the occurrence of a Change in Control and voluntary termination by the
          Executive  in which  case the  Date of  Termination  shall be the date
          specified in the Notice,  the Date of Termination shall be the date on
          which the  dispute is  finally  determined,  either by mutual  written
          agreement  of the parties,  by a binding  arbitration  award,  or by a
          final judgment,  order or decree of a court of competent  jurisdiction
          (the time for appeal  there from having  expired and no appeal  having
          been  perfected)  and provided  further  that the Date of  Termination
          shall be extended by a notice of dispute  only if such notice is given
          in good faith and the party giving such notice  pursues the resolution
          of  such  dispute  with  reasonable  diligence.   Notwithstanding  the
          pendency  of any  such  dispute,  the  Company  will  continue  to pay
          Executive his full  compensation in effect when the notice giving rise
          to the dispute was given (including,  but not limited to, Base Salary)
          and continue him as a  participant  in all  compensation,  benefit and
          insurance  plans in  which he was  participating  when the  notice  of
          dispute was given, until the dispute is finally resolved in accordance
          with this  Agreement.  Amounts paid under this Section are in addition
          to all other amounts due under this  Agreement and shall not be offset
          against or reduce any other amounts due under this Agreement.

12.  NON-COMPETITION.

     (a)  Upon any termination of Executive's  employment  hereunder pursuant to
          an Event of  Termination  as provided  in Section 4 hereof,  Executive
          agrees not to compete with the Company and/or its parent companies for
          a period of one (1) year following such  termination in any city, town
          or county in which the  Company  and/or its parent  companies  have an
          office  or have  filed  an  application  for  regulatory  approval  to
          establish  an  office,  determined  as of the  effective  date of such
          termination.  Executive agrees that during such period and within said
          cities,  towns and counties,  Executive  shall not work for or advise,
          consult or otherwise  serve with,  directly or indirectly,  any entity
          whose business  materially  competes with the  depository,  lending or
          other business  activities of the Company and/or its parent companies.
          The parties hereto, recognizing that irreparable injury will result to
          the Company and/or its parent  companies,  their business and property
          in the event of Executive's breach of this Subsection 11(a) agree that
          in the event of any such breach by Executive,  the Company  and/or its
          parent  companies will be entitled,  in addition to any other remedies
          and damages  available,  to an  injunction  to restrain the  violation
          hereof  by  Executive,   Executive's   partners,   agents,   servants,
          employers,  employees  and all persons  acting for or with  Executive.
          Executive  represents and admits that in the event of the  termination
          of his employment pursuant to Section 8 hereof, Executive's experience
          and  capabilities  are such that Executive can obtain  employment in a
          business  engaged in other lines and/or of a different nature than the
          Company  and/or its parent  companies,  and that the  enforcement of a
          remedy by way of injunction will not prevent  Executive from earning a
          livelihood.  Nothing  herein  will be  construed  as  prohibiting  the
          Company  and/or its parent  companies from pursuing any other remedies
          available to them for such breach or threatened breach,  including the
          recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
          business  activities and plans for business  activities of the Company
          and  affiliates  thereof,  as it may  exist  from  time to time,  is a
          valuable,  special and unique  asset of the  business of the  Company.
          Executive  will  not,  during  or after  the  term of his  employment,
          disclose any  knowledge of the past,  present,  planned or  considered
          business  activities  of the  Company  or  affiliates  thereof  to any
          person, firm,  corporation,  or other entity for any reason or purpose
          whatsoever.  Notwithstanding the foregoing, Executive may disclose any
          knowledge of banking,  financial and/or economic principles,  concepts
          or  ideas  which  are not  solely  and  exclusively  derived  from the
          business plans and activities of the Company. In the event of a breach
          or  threatened  breach  by the  Executive  of the  provisions  of this
          Section,  the  Company  and/or its  affiliates  will be entitled to an
          injunction restraining Executive from disclosing, in whole or in part,
          the knowledge of the past,  present,  planned or  considered  business
          activities of the Company or affiliates thereof, or from rendering any
          services to any person, firm,  corporation,  other entity to whom such
          knowledge, in whole or in part, has been disclosed or is threatened to
          be  disclosed.  Nothing  herein will be construed as  prohibiting  the
          Company  and/or  its  affiliates  from  pursuing  any  other  remedies
          available to them for such breach or threatened breach,  including the
          recovery of damages from Executive.

13.  SOURCE OF PAYMENTS.

     All  payments  provided in this  Agreement  shall be timely paid in cash or
     check from the general funds of the Company.

14.  EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto
     and supersedes any prior  employment  agreement  between the Company or any
     predecessor of the Company and Executive,  except that this Agreement shall
     not affect or operate to reduce any benefit or compensation  inuring to the
     Executive of a kind  elsewhere  provided.  No  provision of this  Agreement
     shall be interpreted  to mean that Executive is subject to receiving  fewer
     benefits than those available to him without reference to this Agreement.

15.  NO ATTACHMENT.

     (a)  Except as  required by law,  no right to receive  payments  under this
          Agreement shall be subject to anticipation,  commutation,  alienation,
          sale, assignment, encumbrance, charge, pledge, or hypothecation, or to
          execution,  attachment,  levy,  or similar  process or  assignment  by
          operation of law, and any attempt, voluntary or involuntary, to affect
          any such action shall be null, void, and of no effect.

     (b)  This  Agreement  shall be binding  upon,  and inure to the benefit of,
          Executive,  the Company,  the Company and their respective  successors
          and assigns.

16.  MODIFICATION AND WAIVER.

     (a)  This  Agreement may not be modified or amended except by an instrument
          in writing signed by the parties hereto.

     (b)  No term or  condition of this  Agreement  shall be deemed to have been
          waived, nor shall there be any estoppel against the enforcement of any
          provision of this Agreement, except by written instrument of the party
          charged with such waiver or estoppel.  No such written waiver shall be
          deemed a continuing  waiver unless  specifically  stated therein,  and
          each  such  waiver  shall  operate  only  as to the  specific  term or
          condition  waived  and shall not  constitute  a waiver of such term or
          condition  for the future as to any act other  than that  specifically
          waived.

17.  SEVERABILITY.

     If, for any reason,  any  provision of this  Agreement,  or any part of any
     provision,  is held  invalid,  such  invalidity  shall not affect any other
     provision  of this  Agreement  or any  part of such  provision  not held so
     invalid,  and each such other  provision and part thereof shall to the full
     extent consistent with law continue in full force and effect.

18.  HEADINGS FOR REFERENCE ONLY.

     The headings of sections  and  paragraphs  herein are  included  solely for
     convenience   of   reference   and  shall  not   control   the  meaning  or
     interpretation of any of the provisions of this Agreement.

19.  GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Oregon, unless
     otherwise  specified  herein;  provided,  however,  that in the  event of a
     conflict between the terms of this Agreement and any applicable  federal or
     state law or  regulation,  the  provisions of such law or regulation  shall
     prevail.

20.  ARBITRATION.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
     Agreement shall be settled  exclusively by arbitration,  conducted before a
     panel of three  arbitrators  sitting in a location selected by the employee
     within  one  hundred  (100)  miles from the  location  of the  Company,  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; provided, however, that Executive shall be entitled to
     seek  specific  performance  of his  right  to be paid  until  the  Date of
     Termination during the pendency of any dispute or controversy arising under
     or in connection with this Agreement.

21.  PAYMENT OF LEGAL FEES.

     All  reasonable  legal fees paid or incurred by  Executive  pursuant to any
     dispute or question of  interpretation  relating to this Agreement shall be
     paid or  reimbursed  by the  Company,  if  successful  pursuant  to a legal
     judgment, arbitration or settlement.

22.  INDEMNIFICATION.

     The Company or its parent companies shall provide Executive  (including his
     heirs,  executors  and  administrators)  with  coverage  under  a  standard
     directors' and officers'  liability  insurance policy at its expense, or in
     lieu  thereof,  shall  indemnify  Executive  (and his heirs,  executors and
     administrators)  to the  fullest  extent  permitted  under law  against all
     expenses and liabilities  reasonably  incurred by him in connection with or
     arising out of any action,  suite or proceeding in which he may be involved
     by reason of his having been a director or officer of the Company  (whether
     or not he  continues  to be a directors or officer at the time of incurring
     such expenses or  liabilities),  such expenses and  liabilities to include,
     but not be limited to,  judgment,  court costs and attorneys'  fees and the
     cost of reasonable settlements.

23.  SUCCESSOR TO THE COMPANY.

     The Company  shall  require any  successor or assignee,  whether  direct or
     indirect,  by  purchase,  merger,  consolidation  or  otherwise,  to all or
     substantially  all the  business  or assets of the  Company  or its  parent
     companies, expressly and unconditionally to assume and agree to perform the
     Company's  obligations under this Agreement,  in the same manner and to the
     same  extent  that the  Company  would be  required  to  perform if no such
     succession or assignment had taken place.


          IN WITNESS  WHEREOF,  the parties hereto have caused this Agreement to
     be executed by a duly  authorized  officer or director of the Company,  and
     Executive has signed this Agreement, all on the 14th day of July, 2003.

KLAMATH FIRST FINANCIAL SERVICES, INC.


BY:  /s/ Kermit K. Houser
         Kermit K. Houser, Chairman of the Board



/s/ Jeffrey D. Schlenker                             /s/ Nina G. Drake
Jeffrey D. Schlenker                                          WITNESS:

<PAGE>
                                                                 Exhibit 10(i).2
                     FIRST AMENDMENT TO employment AGREEMENT

     This FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Agreement") is made and
     entered into on July 14, 2003, by and between  Klamath  Federal Savings and
     Loan Association ("Association"),  Klamath First Bancorp, Inc., ("Company")
     and the  undersigned  executive  officer of  Association  and Company  (the
     "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an  Employment
     Agreement dated July 11, 2003, (the "Employment Agreement");

     WHEREAS,  Company has entered into an Agreement and Plan of Merger dated as
     of  July  14,  2003,  (the  "Merger  Agreement")  with  Sterling  Financial
     Corporation  ("Sterling")  with  respect  to a  proposed  transaction  (the
     "Transaction")  whereby Sterling will acquire all of the outstanding shares
     of Company common stock in a stock merger;

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
     facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
     the  Transaction  so as to enable his change in control of  benefits  to be
     triggered  under  the  Employment   Agreement  and  his  Executive   Salary
     Continuation Agreement,  and to enhance the value of shares of common stock
     of Company  owned by the  Executive  and the value of his stock  options to
     acquire common stock of Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
     valuable  consideration,  the  receipt and  sufficiency  of which is hereby
     acknowledged by the parties, it is agreed by the parties as follows:

     1.   Capitalized  terms used herein,  to the extent not defined  otherwise,
          shall have the meaning ascribed to them in the Employment Agreement.

     2.   Section  5(c)  of the  Employment  Agreement  is  amended  in  full as
          follows:

          "Upon the occurrence of a Change in Control arising from or related to
          the Merger Agreement, Association shall pay the Executive as severance
          pay or liquidated damages,  or both (the "Base Severance Amount"),  an
          amount equal to $67,500.  In the event that all  conditions to closing
          under the Merger  Agreement have been satisfied  during  calendar year
          2003, then Association shall make payment of the Base Severance Amount
          plus the  Additional  Severance  Amount (as  defined  in Section  5(d)
          below) to the  Executive  on  December  31,  2003.  In the event  such
          closing  conditions are not satisfied  during calendar year 2003, then
          the  payments  contemplated  herein shall be made within 10 days after
          consummation  of the  merger  contemplated  by the  Merger  Agreement.
          Notwithstanding  the  foregoing,  if the  Executive  enters into a new
          written  employment  agreement with Sterling or Sterling  Savings Bank
          prior to  December  31, 2003 (but  effective  upon  completion  of the
          merger  contemplated  by the  Merger  Agreement),  then the  Severance
          Amount and Additional  Severance  Amount shall not be paid pursuant to
          the terms hereof and any severance to be provided to the Executive, if
          any, shall be set forth in such new written employment agreement."

          Section  5(d)  of the  Employment  Agreement  is  amended  in  full as
          follows:

          "Upon the occurrence of a Change in Control arising from or related to
          the  Merger   Agreement,   Association  shall  pay  the  Executive  as
          additional  severance the amount of $5,750 (the "Additional  Severance
          Amount") in lieu of any  obligation  to pay the Executive the value of
          employer  contributions  that would have been made on the  Executive's
          behalf over the remaining  term of the agreement to any  tax-qualified
          retirement plan. The Additional  Severance Amount shall be paid at the
          time the Base Severance Amount is paid pursuant to Section 5(c) above.
          Upon the  Executive's  termination  of service in  connection  with or
          following a Change in Control  arising  from or relating to the Merger
          Agreement,  Sterling  Savings  Bank, as  successor-in-interest  to the
          Association, shall provide the Executive with continued life, medical,
          dental and disability coverage as is then provided by Sterling Savings
          Bank to its full-time employees,  as the same may be changed from time
          to time,  during the 36 month period next  following  the  Executive's
          Date of  Termination  with the cost to be  absorbed  by the  Executive
          being  equal  to the  lesser  of (i) the  employee  cost  of  coverage
          currently  being borne by the  Executive or (ii) the employee  cost of
          coverage  borne  by  full-time  employees  of  Sterling  Savings  Bank
          receiving  the same  coverage;  provided if the cost of coverage to be
          borne by the Executive is determined under subpart (i), then such cost
          shall  be  subject  to pro  rata  adjustment  based  upon the pro rata
          adjustment in cost of coverage that is borne by full-time employees of
          Sterling  Savings Bank receiving the same coverage after completion of
          the merger contemplated by the Merger Agreement."

     3.   New Section 24 is added to the Employment Agreement as follows:

          "24.  Long Term  Medical  Care.  The  Executive  shall have a right to
          participate in the long term medical care program to be implemented by
          Association if the Executive meets the eligibility requirements of the
          insurer.  If the Executive meets the  eligibility  requirements of the
          insurer  and  becomes  a  participant  in the long term  medical  care
          program,  then in that  event,  his  Base  Severance  Amount  shall be
          reduced by the single premium cost paid by  Association  for such long
          term medical care on behalf of the Executive (which is estimated to be
          $34,000)  and the  Executive  shall have no  obligation  to  reimburse
          Association  for any premium cost  relating to such program  after the
          Executive's termination of employment."

     4.   The Employment Agreement shall be further amended by adding thereto an
          "Exhibit A to the Employment Agreement" in the form attached hereto as
          Appendix I.

     5.   Except as  specifically  set forth herein,  the  Employment  Agreement
          shall  continue  in full  force and  effect.  To the  extent  that any
          provision  contained in this Agreement is inconsistent with any of the
          provisions of the Employment Agreement,  including but not limited to,
          Section 5(b) thereof, the provisions contained in this Agreement shall
          be controlling.

     6.   In the event the Merger  Agreement is terminated,  then this Agreement
          shall have no further force or effect.

     7.   This Agreement may be executed in  counterparts by the parties hereto,
          each of which when so executed  shall be deemed an original and all of
          which, taken together, shall constitute one and the same agreement.

          The parties have entered this Agreement on July 14, 2003.

          KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


          By:   /s/ Kermit K. Houser
          Kermit K. Houser President/CEO
          KLAMATH FIRST BANCORP, INC.


          By:   /s/ Craig M Moore
          Craig M Moore Chief Auditor
          EXECUTIVE:


          By:   /s/ Jeffery D. Schlenker
          Jeffery D. Schlenker President of KFFS
<PAGE>
                                                                 Exhibit 10(i).3
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
Jeffery D. Schlenker,  an Employee of the Employer  (hereinafter  referred to as
the "Employee"), who resides in the State of Oregon.

                              W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

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

     WHEREAS,  the  Employee'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 Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.       EMPLOYMENT

          Although  this  Agreement is intended to provide the Employee  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 Employee and the Employer nor shall any  provision of this
          Agreement  restrict or expand the right of the  Employer to  terminate
          the  Employee's  employment.  This  Agreement  shall have no impact or
          effect  upon any  separate  written  Employment  Agreement  which  the
          Employee 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 from, and shall have no effect upon, or be affected
          by, the terms and provisions of said Employment Agreement.

          Except as otherwise set forth in this  Agreement,  the term "Employer"
          shall  mean  Klamath  First  Federal  Savings  and  Loan  Association;
          provided,  further,  that for  purposes  of this  Agreement,  the term
          "Employer" shall mean Klamath First Bancorp, Inc. and its subsidiaries
          and affiliated entities,  including any parent holding company and its
          subsidiaries.


II.      FRINGE BENEFITS

          The  salary  continuation  benefits  provided  by this  Agreement  are
          granted by the  Employer as a fringe  benefit to the  Employee and are
          not part of any salary  reduction plan or an  arrangement  deferring a
          bonus or a salary  increase.  The  Employee  has no option to take any
          current payment or bonus in lieu of these salary continuation benefits
          except as set forth hereinafter.


III.     retirement date and early retirement date

         A.       Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-two  ("62") years of age and  acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.

<PAGE>


         B.       Early Retirement Date:

               The term "Early  Retirement  Date" shall mean the Retirement,  as
               defined above, of the Employee on, or after the Employee achieves
               fifty-five  (55) years of age, but has not yet reached  sixty-two
               (62) years of age.


IV.      retirement benefit and early retirement benefit

         A.       Retirement Benefit:

               If the Employee shall remain in the continuous  employment of the
               Employer until  attaining age sixty-two  (62), the Employee shall
               be entitled to be paid the "Normal Retirement  Benefit" specified
               in   Schedule  A,   payable  in   substantially   equal   monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the Employee  Retires (or on
               such later date as may be mutually  agreed  upon by the  Employee
               and the  Employer  in advance of said  Retirement  date)  payable
               until the Employee's death. After  commencement of payments,  the
               Normal  Retirement  Benefit will increase by two percent (2%) per
               year.

         B.       Early Retirement Benefit:

               The  Employee  shall  have the right to  retire  on a date  which
               constitutes an Early  Retirement  Date as defined in Subparagraph
               III (B) above.  In the event the  Employee  elects to Retire on a
               date which  constitutes an Early  Retirement Date, and said early
               retirement  is not  pursuant to a Change in Control as defined in
               paragraph VI below, the Employee shall be entitled to be paid the
               "Normal Retirement  Benefit" specified in Schedule A for the date
               the Retirement occurs, but reduced by a factor of one-half of one
               percent  (.5%) per month for each month or portion  thereof  that
               the Early  Retirement  occurs prior to the  Retirement  Date. The
               benefit   shall  be  payable  in   substantially   equal  monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the  Early  Retirement  Date
               occurs (or on such later date as may be  mutually  agreed upon by
               the Employee and the Employer in advance of such Early Retirement
               Date).  After  commencement  of  payments,  the Early  Retirement
               benefit will increase by two percent (2%) per year.

               Example:  If the Early  Retirement  Date occurs on the Employee's
               60th birthday and if the Retirement Date in Section III.A.  above
               is at age 62, the Normal Retirement Benefit specified in Schedule
               "A" as of the  Employee's  60th birthday  would be reduced by 12%
               [.5% x 24 months].


V.       other termination of EMPLOYMENT and DISABILITY

         A.       Payments in the Event Employment Is Terminated Prior to
                  Retirement:

               The  Employer  reserves  the right to  terminate  the  Employee's
               employment,  with or without  cause but  subject  to any  written
               employment  agreement  which may then exist, at any time prior to
               the  Employee's  Retirement.  In the event that the employment of
               the Employee shall be terminated,  other than by reason of death,
               Disability  or  Retirement,  prior  to the  Employee's  attaining
               sixty-two (62) years of age, then this Agreement  shall terminate
               on the date of such termination of employment; provided, however,
               that the Employee shall be entitled to the following  benefits as
               may be applicable  depending upon the  circumstances  surrounding
               the Employee's termination:

              (i)      Termination for Other Than Disability, Change in Control
                       or Cause:

               If the Employee's  employment is terminated by the Employee or by
               the  Employer for any reason  other than  Disability,  "Change in
               Control"  or  "Termination  for  Cause,"  the  Employee  shall be
               entitled to be paid the "Normal Retirement  Benefit" specified in
               Schedule   A  as  of  the  date  of   termination,   payable   in
               substantially equal monthly installments on the first day of each
               month,  beginning with the month following the month in which the
               Employee  attains  sixty-two  (62) years of age (or on such later
               date  as may be  mutually  agreed  upon by the  Employee  and the
               Employer   not  less  than   fifteen  (15)  days  prior  to  such
               commencement  date) payable until the Employee's death, and shall
               increase  by two  percent  (2%)  per  year.  Alternatively,  upon
               achieving age fifty-five (55) but before  achieving age sixty-two
               (62),  the  Employee  may choose to receive the Early  Retirement
               Benefit with the reductions from the "Normal Retirement  Benefit"
               as of the date of termination,  and as described in Section IV.B.
               of this Agreement.  The benefit shall be payable in substantially
               equal  monthly  installments  on the  first  day of  each  month,
               beginning  with the month  following the month in which the Early
               Retirement  Date occurs (or on such later date as may be mutually
               agreed  upon by the  Employee  and the  Employer  not  less  than
               fifteen (15) days prior to such commencement date) payable to the
               Employee's  death,  and shall  increase by two  percent  (2%) per
               year.

<PAGE>


                   (ii)    Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee 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 Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

         B.       Payment in the Event of Disability Prior to Retirement:

               The  Employee  shall,  in  connection  with  acceptance  of  this
               Agreement,  elect  below  either  the "Lump Sum  Payment"  or the
               "Annuity  for Life"  option in the  event  the  Employee  becomes
               disabled at any time after the Effective  Date of this  Agreement
               but prior to  Retirement.  The term  "Disability"  or  "Disabled"
               shall  have the same  meaning  given  such terms in any policy of
               disability  insurance  maintained by the Employer for the benefit
               of employees  including  the  Employee.  In the absence of such a
               policy,  which  extends  coverage to the Employee in the event of
               disability, the terms shall mean bodily injury or disease (mental
               or  physical)   which  wholly  and   continuously   prevents  the
               performance of the Employee's duties to the Employer for at least
               one hundred twenty (120) days.

(i)      Lump Sum Payment.

                    The  Employee  shall  be  entitled  to be paid  the lump sum
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the  date  of  disability  or  date  the
                    Employee  otherwise  terminated  service  with the  Employer
                    other than for Cause.  The lump sum shall be payable 60 days
                    from the date the Employer has received a written request to
                    commence benefits, along with documentation showing that the
                    Employee has become disabled.

(ii)     Annuity for Life.

                    The Employee shall be entitled to be paid an annuity for the
                    Employee's life. The Employer shall purchase such an annuity
                    from an  insurance  company  with an A. M.  Best or  Moody's
                    rating  of  no  less  than  AA  and  using  the   amount  of
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the date of  disability  or the date the
                    Employee  otherwise  terminated  service  with the  Employer
                    other  than for  Cause.  The  Employer  shall  purchase  the
                    annuity  within  60 days  from  the date  the  Employer  has
                    received a written request to commence benefits,  along with
                    documentation showing that the Employee has become Disabled.
                    Nevertheless,  if the amount of the  applicable  "Disability
                    Benefit"  specified in Schedule A is $50,000.00 or less, the
                    payment  shall be as a lump sum to the  Employee and not the
                    purchase of an annuity for life.

(iii)    Employee  Election of Disability  Benefit.

                    I elect to receive the following  Disability Benefit (Please
                    sign on applicable line):

                           /s/ Jeffery D. Schlenker  Lump Sum Benefit.


                           ________________________  Annuity for Life.



VI.               CHANGE OF CONTROL

         A.       Definition of Change In Control:

                    A "Change in Control" of Klamath  First  Bancorp,  Inc. (the
                    "Company")  or  Klamath  First  Federal   Savings  and  Loan
                    Association (the "Association")  shall be deemed to occur if
                    and when (a) an  offeror  other than the  Company  purchases
                    shares of the common stock of the Company or the Association
                    pursuant to a tender or exchange offer for such shares,  (b)
                    any  person  (as such  term is used in  Sections  13(d)  and
                    14(d)(2)  of the  Securities  Exchange  Act of  1934)  is or
                    becomes the beneficial  owner,  directly or  indirectly,  of
                    securities  of the Company or the  Association  representing
                    25% or more of the combined voting power of the Company's or
                    the  Association's  then  outstanding  securities,  (c)  the
                    membership  of the board of  directors of the Company or the
                    Association  changes as the result of a contested  election,
                    such that individuals who were directors at the beginning of
                    any twenty-four  month period (whether  commencing before or
                    after  the  effective   date  of  this   Agreement)  do  not
                    constitute  a  majority  of the  Board  at the  end of  such
                    period,   or  (d)   shareholders   of  the  Company  or  the
                    Association  approve  a  merger,   consolidation,   sale  or
                    disposition of all or substantially  all of the Company's or
                    the  Association's  assets, or a plan of partial or complete
                    liquidation.

         B.       Termination by the Employer on Account of or After a Change in
                  Control:

                    In the event the Employee's  employment with the Employer is
                    terminated  by the Employer in  connection  with a Change in
                    Control,  the Employee  shall be  immediately  vested in the
                    "Normal Retirement  Benefit" specified in Schedule A for the
                    date the Employee  achieves age sixty-two (62). The Employee
                    shall be entitled to be paid the "Change in Control Benefit"
                    specified  in Schedule  A, in  substantially  equal  monthly
                    installments  on the first day of each month,  beginning  no
                    sooner  than the  month  following  the  month in which  the
                    Employee  attains  age  fifty-five  (55),  as  requested  in
                    writing by the Employee and delivered to the Employer or its
                    successor  thirty  (30) days  prior to the  commencement  of
                    installment payments;  provided,  however, that in the event
                    the  Employee  does  not  request  a  commencement  date  as
                    specified,  such installments shall be paid on the first day
                    of each month,  beginning with the month following the month
                    in which the Employee  attains  sixty-two (62) years of age.
                    Upon the commencement of payments, the installments shall be
                    payable until the  Employee's  death,  and shall increase by
                    two percent (2%) per year.

                    A  termination  shall be deemed to be in  connection  with a
                    Change in Control  if,  within two (2) years  following  the
                    occurrence  of a  Change  in  Control:  (a)  the  Employee's
                    employment  with the Employer is  terminated by the Employer
                    other than a Termination  for Cause; or (b) by reason of the
                    Employer's actions any adverse change occurs in the scope of
                    the  Employee's  position,   material  responsibilities  and
                    duties, salary,  benefits or location of employment;  or (c)
                    the  Employer  causes  an event to  occur  which  reasonably
                    constitutes  or  results  in a  demotion,  loss of title,  a
                    significant diminution of responsibilities or authority,  or
                    a  constructive  termination  (by forcing a  resignation  or
                    otherwise) of the Employee's employment.


VII.     benefit accounting

                    The  Employer  shall  account  for this  benefit  using  the
                    regulatory  accounting  principles of the Employer's primary
                    federal  regulator.  The Employer shall establish an accrued
                    liability  retirement  account for the  Employee  into which
                    appropriate reserves shall be accrued.


VIII.    restrictions on funding

                    The Employer shall have no obligation to set aside,  earmark
                    or  entrust  any  fund  or  money  with  which  to  pay  its
                    obligations  under this Employee Plan. The Employee,  her or
                    his beneficiary (ies), or any successor in interest shall be
                    and remain simply a general  creditor of the Employer in the
                    same manner as any other creditor having a general claim for
                    matured and unpaid  compensation.  The Employer reserves the
                    absolute right, at its sole  discretion,  to either fund the
                    obligations  undertaken  by this Employee Plan or to refrain
                    from  funding the same and to determine  the extent,  nature
                    and method of such  funding.  Should the  Employer  elect to
                    fund this Employee  Plan,  in whole or in part,  through the
                    purchase  of  life  insurance,   mutual  funds,   disability
                    policies or  annuities,  the Employer  reserves the absolute
                    right, in its sole discretion,  to terminate such funding at
                    any time, in whole or in part. At no time shall any Employee
                    be deemed to have any lien, right,  title or interest in any
                    specific funding investment or assets of the Employer.

                    If the  Employer  elects  to  invest  in a  life  insurance,
                    disability  or annuity  policy on the life of the  Employee,
                    then the  Employee  shall  assist  the  Employer  by  freely
                    submitting to a physical exam and supplying such  additional
                    information necessary to obtain such insurance or annuities.

                    Notwithstanding  anything  hereinabove to the contrary,  the
                    Employer and the Employee acknowledge and agree that, in the
                    event of a Change in Control and at the  written  request of
                    the Employee,  the Employer 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 Employer in its sole  discretion
                    deems   appropriate   and  in  compliance   with  applicable
                    provisions of the Internal  Revenue Code of 1986, as amended
                    (the  "Code")  in  order  to  permit  the  Employer  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
                    Employer  to  be  used  exclusively  for  discharge  of  the
                    Employer's  obligations pursuant to this Agreement and shall
                    continue  to be  subject  to the  claims  of the  Employer's
                    general   creditors  until  paid  to  the  Employee  or  its
                    beneficiaries  in such manner and at such times as specified
                    in this Agreement


IX.      MISCELLANEOUS

         A.       Alienability and Assignment Prohibition:

                    The  Employee  shall  have no power  or  right to  transfer,
                    assign, anticipate,  hypothecate,  mortgage, commute, modify
                    or otherwise encumber in advance any of the benefits payable
                    hereunder  nor  shall any of said  benefits  be  subject  to
                    seizure for the payment of any debts, judgments,  alimony or
                    separate   maintenance   owed   by  the   Employee   nor  be
                    transferable by operation of law in the event of bankruptcy,
                    insolvency or otherwise.  In the event the Employee attempts
                    assignment, commutation, hypothecation, transfer or disposal
                    of the benefits hereunder,  the Employer's liabilities shall
                    forthwith cease and terminate.

         B.       Binding Obligation of the Employer and any Successor in
                  Interest:

                    The  Employer  shall not merge or  consolidate  into or with
                    another Employer or sell  substantially all of its assets to
                    another Employer,  firm or person until such Employer,  firm
                    or  person  expressly  agree,  in  writing,  to  assume  and
                    discharge the duties and  obligations  of the Employer under
                    this Employee Plan. This Employee Plan shall be binding upon
                    the parties hereto, their successors,  beneficiaries,  heirs
                    and personal representatives.

         C.       Amendment or Revocation:

                    It is agreed by and between the parties hereto that,  during
                    the  lifetime of the  Employee,  this  Employee  Plan may be
                    amended  or  revoked  at any time or  times,  in whole or in
                    part, by the mutual written  consent of the Employee and the
                    Employer.

         D.       Gender:

                    Whenever  in  this  Employee  Plan  words  are  used  in the
                    masculine or neuter gender, they shall be read and construed
                    as in the  masculine,  feminine or neuter  gender,  whenever
                    they should so apply.

         E.       Effect on Other Employer Benefit Plans:

                    Nothing  contained  in this  Employee  Plan shall affect the
                    right of the Employee to participate in or be covered by any
                    qualified or non-qualified pension,  profit-sharing,  group,
                    bonus or other  supplemental  compensation or fringe benefit
                    plan  constituting  a part  of the  Employer's  existing  or
                    future compensation structure.

         F.       Headings:

                    Headings and  subheadings in this Employee Plan are inserted
                    for reference and convenience only and shall not be deemed a
                    part of this Employee Plan.

         G.       Applicable Law:

                    The laws of the State of Oregon  shall  govern the  validity
                    and interpretation of this Agreement.

         H.       Partial Invalidity:

                    If any  term,  provision,  covenant,  or  condition  of this
                    Employee Plan 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  Employee  Plan  shall  remain in full  force and effect
                    notwithstanding such partial invalidity.

         I.       Not a Contract of Employment:

                    This Agreement  shall not be deemed to constitute a contract
                    of  employment  between  the parties  hereto,  nor shall any
                    provision  hereof  restrict  the  right of the  Employer  to
                    discharge  the  Employee,  or  restrict  the  right  of  the
                    Employee to terminate employment.

         J.       Notices:

                    Any notice  required or  permitted of either the Employee or
                    the Employer  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.

<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       Jeffery D. Schlenker
                                            PO Box T
                                            Klamath Falls, OR 97601

         K.       Opportunity To Consult With Independent Advisors:

                    The  Employee   acknowledges  that  the  Employee  has  been
                    afforded  the   opportunity  to  consult  with   independent
                    advisors  of  his  or  her   choosing   including,   without
                    limitation,   accountants   or  tax   advisors  and  counsel
                    regarding  both the benefits  granted to the Employee  under
                    the terms of this Agreement and the (i) terms and conditions
                    which may affect the Employee'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  Employee
                    acknowledges and agrees shall be the sole  responsibility of
                    the Employee  notwithstanding any other term or provision of
                    this Agreement. The Employee further acknowledges and agrees
                    that the Employer shall have no liability whatsoever related
                    to any such  personal tax effects or other  personal  costs,
                    expenses,  or  liabilities  applicable  to the  Employee and
                    further  specifically  waives any right for the Employee and
                    his  or her  heirs,  beneficiaries,  legal  representatives,
                    agents, successors, and assigns to claim or assert liability
                    on the part of the Employer related to the matters described
                    above   in   this   subparagraph.   The   Employee   further
                    acknowledges   and  agrees  that  the   Employee  has  read,
                    understands  and consents to all of the terms and conditions
                    of this  Agreement,  and that the Employee  enters into this
                    Agreement  with  a  full  understanding  of  its  terms  and
                    conditions.


X.       ADMINISTRATIVE AND CLAIMS PROVISION

         A.       Named Fiduciary and Plan Administrator:

                    The  "Named  Fiduciary  and  Plan   Administrator"  of  this
                    Employee Plan shall be Klamath First  Bancorp,  Inc.,  until
                    its  resignation or removal by the Board. As Named Fiduciary
                    and Plan  Administrator,  the Employer  shall be responsible
                    for  the  management,  control  and  administration  of  the
                    Employee  Plan.  The Named  Fiduciary may delegate to others
                    certain    aspects   of   the   management   and   operation
                    responsibilities   of  the  Employee   Plan   including  the
                    employment  of advisors and the  delegation  of  ministerial
                    duties to qualified individuals.

         B.       Claims Procedure:

                    In the event a  dispute  arises  over  benefits  under  this
                    Employee  Plan and benefits are not paid to the Employee and
                    the claimant  feels he is 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
                    provisions  of this  Employee  Plan 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 a
                    further review of the claim denial is desired. A claim shall
                    be  deemed   denied  if  the   Named   Fiduciary   and  Plan
                    Administrator  fail to take any action  within the aforesaid
                    forty-five-day period.

                    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  Employee  Plan or any  documents  relating
                    thereto  and submit any written  issues and  comments it 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.

C.       Arbitration:

                    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  Employer 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").  In the  event  JAMS is unable or
                    unwilling to conduct the arbitration  provided for under the
                    terms of this Paragraph,  or has  discontinued its business,
                    the parties agree that a representative member,  selected by
                    the  mutual  agreement  of  the  parties,  of  the  American
                    Arbitration  Association ("AAA"),  shall conduct the binding
                    arbitration  referred  to in this  Paragraph.  Notice of the
                    demand for  arbitration  shall be filed in writing  with the
                    other  party to this  Agreement  and with  JAMS (or AAA,  if
                    necessary).  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, or if there are
                    none, the rules of procedure used or established by AAA. Any
                    award  rendered  by JAMS or AAA 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
                    Klamath Falls,  Oregon,  unless  otherwise  agreed to by the
                    parties.

         D.       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, the prevailing party
                    shall be entitled to recover from the  non-prevailing  party
                    reasonable  expenses,  attorneys' fees and costs incurred in
                    connection  therewith or in the enforcement or collection of
                    any  judgment or award  rendered  therein.  The  "prevailing
                    party" means the party  determined by the  arbitrator(s)  or
                    court,  as the case may be, to have most  nearly  prevailed,
                    even if such  party  did not  prevail  in all  matters,  not
                    necessarily the one in whose favor a judgment is rendered.


XI.      SECTION 280G BENEFITS ADJUSTMENT

                    If all or any portion of the amounts payable to the Employee
                    under this  Agreement,  either alone or together  with other
                    payments  which the  Employee  has the right to receive from
                    the Employer,  constitute "excess parachute payments" within
                    the meaning of Section 280G of the Code, that are subject to
                    the  excise  tax  imposed  by  Section  4999 of the Code (or
                    similar  tax  and/or  assessment),  the  Employer  (and  its
                    successor) and the Employee each agree to pay their share of
                    any taxes that may be imposed as a result of  payments  made
                    pursuant to this Agreement; provided, however, that Employer
                    and  Employee  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 Employee is greater than the amount initially
                    so  determined,  then the Employee 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.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

  Klamath First Federal Savings and Loan Association



/s/ Kermit K. Houser                  /s/ Nina G. Drake
Kermit K. Houser                      Witness
President and CEO




/s/ Jeffery D. Schlenker              /s/ Nina G. Drake
Jeffery D. Schlenker                  Witness

<PAGE>

<TABLE>
<CAPTION>
                                   SCHEDULE A
                            EMPLOYEE BENEFIT SCHEDULE

                                 JEFF SCHLENKER
                          DATE OF BIRTH: JUNE 20, 1967
                             HIRED ON: JUNE 15, 2001

                 NORMAL CHANGE IN DEATH BENEFIT: DEATH BENEFIT:
     VESTING           RETIREMENT         CONTROL      DISABILITY        DEATH WHILE             AFTER
     DATE (1)          BENEFIT (2)     BENEFIT (3)     BENEFIT (4)       EMPLOYED (5)   TERMINATION (6)
<S>                      <C>             <C>           <C>                <C>               <C>
 January 1, 2003           $1,538              NA              $0         $2,037,770          $100,000
 January 1, 2004           $4,614              NA          $3,742         $2,037,770          $100,000
 January 1, 2005           $9,228              NA         $11,918         $2,037,770          $100,000
 January 1, 2006          $15,379              NA         $25,307         $2,037,770          $153,794
 January 1, 2007          $23,069              NA         $44,779         $2,037,770          $230,691
 January 1, 2008          $32,297              NA         $71,312         $2,037,770          $322,967
 January 1, 2009          $43,062              NA        $105,994         $2,037,770          $430,623
 January 1, 2010          $55,366              NA        $150,043         $2,037,770          $553,658
 January 1, 2011          $69,207              NA        $204,810         $2,037,770          $692,073
 January 1, 2012          $76,897              NA        $271,803         $2,037,770          $768,970
 January 1, 2013          $84,587              NA        $320,631         $2,037,770          $845,867
 January 1, 2014          $92,276              NA        $374,447         $2,037,770          $922,764
 January 1, 2015          $99,966              NA        $433,682         $2,037,770          $999,661
 January 1, 2016         $107,656              NA        $498,800         $2,037,770        $1,076,558
 January 1, 2017         $115,345              NA        $570,301         $2,037,770        $1,153,455
 January 1, 2018         $123,035              NA        $648,724         $2,037,770        $1,230,352
 January 1, 2019         $130,725              NA        $734,651         $2,037,770        $1,307,249
 January 1, 2020         $138,415              NA        $828,711         $2,037,770        $1,384,146
 January 1, 2021         $146,104              NA        $931,578         $2,037,770        $1,461,043
 January 1, 2022         $153,794        $118,191      $1,043,982         $2,037,770        $1,537,940
 January 1, 2023         $161,484        $130,417      $1,166,708         $2,037,770        $1,614,837
 January 1, 2024         $169,173        $142,644      $1,300,602         $2,037,770        $1,691,734
 January 1, 2025         $176,863        $154,870      $1,446,573         $2,037,770        $1,768,631
 January 1, 2026         $184,553        $167,097      $1,605,604         $2,037,770        $1,845,528
 January 1, 2027         $192,242        $179,324      $1,778,748         $2,037,770        $1,922,425
 January 1, 2028         $199,932        $191,550      $1,967,143         $2,037,770        $1,999,322
 January 1, 2029         $203,777        $203,777      $2,172,011         $2,037,770        $2,037,770
  and thereafter         $203,777        $203,777              NA       see #5 below      see #5 below
<FN>

1.  The date that Normal Retirement and Death benefits vest.  See separate footnotes for Change in Control and
     Disability Benefits.
2.  Annual Retirement Benefits payable at age sixty-two (62). Benefits are payable for life and increase by 2% per
     year after Retirement.
3. The Employee is eligible to retire following Termination pursuant to a Change in Control any time after the
     attainment of age fifty five (55).  This is the annual sum the Employee will be paid if the Employee elects to
     receive Retirement Benefits on or after the Employee's birthday, but before the following anniversary. Once
     payments begin, Benefits are payable for life and increase by 2% per year thereafter.
4. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty
     Balance as of disability date.  Disability Benefit value is determined by straight-line interpolation between the
    amounts showing in this column for Jan 1 of the calendar year the disability occurs and Jan 1 of the following
    calendar year.  Benefit is paid as Employee elected in the Agreement.  No post-retirement benefit.
5.  Death benefit equals 10x initial Normal Retirement Benefit to age 70, 7x initial Normal Retirement Benefit to
    Age 80, and 3 x initial Normal Retirement Benefit thereafter.
6.  Unless termination is for Cause, the death benefit is the greater of $100,000 or 10x the vested annual retirement
     benefit at the time of termination.
</FN>
</TABLE>


/s/ Jeffrey D. Schlenker   5/16/03   /s/ Kermit K. Houser               5/19/03
Jeffrey D. Schlenker       Date      Bank Officer                       Date

<PAGE>
                                                                 Exhibit 10(i).4
           FIRST AMENDMENT TO executive salary continuation AGREEMENT

     This FIRST  AMENDMENT  TO EXECUTIVE  SALARY  CONTINUATION  AGREEMENT  (this
     "Agreement")  is made and  entered  into on July 14,  2003,  by and between
     Klamath  Federal  Savings  and  Loan   Association   ("Employer")  and  the
     undersigned executive officer of Employer ("Employee").

     WHEREAS,   Employer   and  Employee   entered  into  an  Executive   Salary
     Continuation Agreement (the "SCA") effective January 1, 2003;

     WHEREAS,  Klamath First Bancorp,  Inc.  ("Company"),  the parent company of
     Employer, has entered into an Agreement and Plan of Merger dated as of July
     14, 2003,  (the "Merger  Agreement")  with Sterling  Financial  Corporation
     ("Sterling")  with respect to a proposed  transaction  (the  "Transaction")
     whereby  Sterling  will  acquire all of the  outstanding  shares of Company
     common stock in a stock merger;

     WHEREAS,  Employer  desire to enter into this  Agreement to facilitate  the
     Transaction; and

     WHEREAS,  Employee  desires to enter into this  Agreement to facilitate the
     Transaction  so as to enable  Employee  (a) to  receive a  cash-out  of his
     benefits under the SCA as provided herein, (b) to receive change in control
     benefits  under his  employment  agreement  and (c) to enhance the value of
     shares of common  stock of Company  owned by Employee  and the value of his
     stock options to acquire common stock of Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
     valuable  consideration,  the  receipt and  sufficiency  of which is hereby
     acknowledged by the parties, it is agreed by the parties as follows:

     1.   Notwithstanding  anything  contained  in  the  SCA  to  the  contrary,
          Employer  shall  have the right to pay  Employee  at any time from the
          date hereof through  December 31, 2003 the amount of $511,577 less all
          tax  withholding  obligations  with  respect  thereto  (the  "Cash-Out
          Amount")  in full and  complete  satisfaction  of all  obligations  of
          Employer  under the SCA and all rights of Employee under the SCA. Upon
          Employer making payment of the Cash-Out Amount to Employee as provided
          herein,  the SCA shall  terminate  and shall have no further  force or
          effect.

     2.   Upon  payment  of the  Cash-Out  Amount to  Employee  by  Employer  as
          provided  in  paragraph  1 above,  Employee  does  hereby  release and
          forever  discharge  Employer,  its  affiliates,  and their  respective
          assigns,  directors,  officers,  employees and agents from any and all
          claims,  demands,  causes of action and rights  that  Employee  has or
          might have under the SCA of any kind or character whatsoever,  whether
          known or unknown.

     3.   In the event the Merger  Agreement is terminated,  then this Agreement
          shall have no further force or effect.

     4.   This Agreement may be executed in  counterparts by the parties hereto,
          each of which when so executed shall be deemed an original and both of
          which, taken together, shall constitute one and the same agreement.

          The parties  have  executed  this  Agreement on the day and year first
          above written.

          KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


          By:   /s/ Kermit K. Houser
              Kermit K. Houser President/CEO
              EMPLOYEE:


          By:   /s/ Jeffrey D. Schlenker
              Jeffery D. Schlenker President of KFFS

<PAGE>
                                                                 Exhibit 10(j).1
                       DIRECTOR FEE CONTINUATION AGREEMENT

     THIS AGREEMENT,  made and entered into this First Day of January,  2003, by
and between Klamath First Bancorp,  Inc., a thrift holding company  (hereinafter
referred  to as the  "Bank"),  and  Rodney N.  Murray,  a member of the Board of
Directors of the Bank (hereinafter referred to as the "Director").

                                   WITNESSETH:

     WHEREAS,  it is  the  consensus  of the  Board  of  Directors  (hereinafter
referred to as the "Board") that the Director's services to the Bank in the past
have been of exceptional  merit and have constituted an invaluable  contribution
to the general  welfare of the Bank and in bringing it to its present  status of
operating efficiency, and its present position in its field of activity;

     WHEREAS, the Director's  experience,  knowledge of the affairs of the Bank,
reputation,  and contacts in the industry are so valuable that  assurance of the
Director's  continued services is essential for the future growth and profits of
the  Bank  and it is in the  best  interests  of the  Bank to  arrange  terms of
continued  service for the Director so as to  reasonably  assure the  Director's
remaining in the Bank's service during the Director's  lifetime or until the age
of retirement;

     WHEREAS,  it is the  desire of the Bank  that the  Director's  services  be
retained as herein provided;

     WHEREAS, the Director is willing to continue to serve the Bank provided the
Bank agrees to pay the  Director or the  Director's  surviving  spouse,  certain
benefits in accordance with the terms and conditions hereinafter set forth;

     ACCORDINGLY,  it is the desire of the Bank and the  Director  to enter into
this Agreement  under which the Bank will agree to make certain  payments to the
Director at retirement or the  Director's  surviving  spouse in the event of the
Director's death pursuant to this Agreement;

     FURTHERMORE, it is the intent of the parties hereto that this Director Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental  retirement  benefits  for the  Director,  and to be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Director is fully advised of the
Bank's  financial  status  and has  had  substantial  input  in the  design  and
operation of this benefit plan; and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.   SERVICE

     The Director will continue to serve the Bank in such capacity and with such
     duties and responsibilities as may be assigned,  and with such compensation
     as may be  determined  from time to time by the Board of  Directors  of the
     Bank.

II.  FRINGE BENEFITS

     The fee continuation benefits provided by this Agreement are granted by the
     Bank as a  fringe  benefit  to the  Director  and  are not  part of any fee
     reduction plan or an arrangement  deferring a bonus or a fee increase.  The
     Director  has no option  to take any  current  payment  or bonus in lieu of
     these fee continuation benefits except as set forth hereinafter.

III. retirement date AND NORMAL RETIREMENT AGE

     A.   Retirement  Date: If the Director  continuously  serves the Bank,  the
          Director shall be eligible to retire from active service with the Bank
          upon the  attainment of age  fifty-five  (55) and receive the benefits
          described  below,  unless by action  of the  Board of  Directors  this
          period of active service shall be shortened or extended.

     B.   Normal  Retirement Age:  Normal  Retirement Age shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-eight (68).

     C.   Normal Retirement Age Following a Change in Control:  The term "Normal
          Retirement  Age Following a Change in Control"  shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-five (65).

     D.   Early Retirement Date: The term "Early Retirement Date" shall mean the
          Retirement  of the Director  from active  service with the Bank at the
          beginning of any month after the Director  achieves age 55, but before
          attaining age sixty-eight (68), [sixty-five (65) following a Change in
          Control].

IV.  DIRECTOR BENEFITS - normal retirement age

     A.   Director  Emeritus  Benefits:  Upon the  attainment of age  sixty-five
          (65),  the Director  shall be entitled to serve the Bank as a Director
          Emeritus in accordance with the procedures and policies established by
          the Board of Directors of the Bank applicable to service as a Director
          Emeritus. If the Director elects to serve as a Director Emeritus,  the
          Director  shall be paid two thousand eight hundred thirty four dollars
          ($2,834) per month for a period of thirty-six (36) months,  commencing
          with the Retirement Date and continuing until the earlier of the third
          anniversary  thereof,  or the death of the Director.  Monthly payments
          will be increased by two percent at the end of each calendar  year. If
          the Director declines or is unable to serve as Director Emeritus,  the
          Director  shall  forfeit  any  entitlement  to the  Director  Emeritus
          Benefits.

     B.   Director Retirement  Benefits:  After the expiration of the thirty-six
          (36) month period  described  above in Paragraph IV A., the Bank shall
          pay to  the  Director  Retirement  Benefit  Payments  equal  to  three
          thousand  seven  dollars  per  month  ($3,007)  until the death of the
          Director. Monthly payments shall increase by two percent at the end of
          each calendar year.

V.   DIRECTOR BENEFITS - EARLY RETIREMENT AGE

     The Director shall have the right to retire on a date which  constitutes an
     Early Retirement Date as defined  previously in Subparagraph III. D. In the
     event the Director elects Early Retirement,  the Director shall be entitled
     to be paid  Director  Retirement  Benefits  equal to the "Early  Retirement
     Benefit"  applicable for the calendar year in which the Director retires as
     specified in Schedule  "A". The benefit  shall be payable in  substantially
     equal monthly  installments on the first day of each month,  beginning with
     the month  following the month the Director  Retires (or on such later date
     as may be mutually  agreed upon by the  Director and the Bank in advance of
     such Early Retirement), payable until the Director's death.

VI.  DIRECTOR DEATH BENEFITS - NORMAL RETIREMENT AGE

     In the event the Director Retires on or after the Normal Retirement Age and
     dies before receiving a total of thirty-six (36) monthly Director  Emeritus
     Benefits and twenty-four (24) monthly  Director  Retirement  Benefits,  the
     Bank shall  continue such monthly  payments  until the full number of sixty
     (60) monthly  payments have been made, or until the death of the Director's
     surviving  spouse,  whichever  occurs earlier.  Said payments due hereunder
     shall  begin  the  first  day of the month  following  the  decease  of the
     Director.

VII. DIRECTOR DEATH BENEFITS - EARLY RETIREMENT AGE

     In the  event  the  Director  Retires  on a  date  that  constitutes  Early
     Retirement and dies before receiving a total of sixty (60) monthly Director
     Retirement  Benefits,  the Bank shall continue such monthly  payments until
     the full number of sixty (60) monthly payments have been made, or until the
     death of the Director's  surviving spouse,  whichever occurs earlier.  Said
     payments due hereunder shall begin the first day of the month following the
     decease of the Director.
<PAGE>

VIII. benefit accounting

     The Bank shall  account for this benefit  using the  regulatory  accounting
     principles  of  the  Bank's  primary  federal  regulator.  The  Bank  shall
     establish an accrued  liability  retirement  account for the Director  into
     which appropriate reserves shall be accrued.

IX.  vesting

     Director's  interest in the benefits that are the subject of this Agreement
     shall be subject to a vesting schedule described in Schedule A.

X.   other termination of SERVICE

     A.   Voluntary  Resignation or failure to be re-elected:  In the event that
          the  service  of  the  Director  shall  terminate  by  the  Director's
          voluntary action, or by the Director's failure to be re-elected to the
          Board without cause, prior to the Retirement Date described in III. A.
          above,  then  this  Agreement  shall  terminate  upon the date of such
          termination  of  service  and the Bank  shall  pay to the  Director  a
          monthly  amount  equal  to  one-twelfth  (1/12)  times  the  "Director
          Retirement  Benefit" as  described  in Schedule A and earned as of the
          date of termination.  Such benefits shall be payable commencing on the
          first of the month  after the  Director  reaches  age 68 and  continue
          until the death of the Director.  Monthly  payments  shall increase by
          two percent at the end of each calendar year.

          In the event the  Director's  death should occur after such  severance
          but prior to the  completion of the monthly  payments  provided for in
          this Paragraph IX, the Bank shall continue such monthly payments until
          a total of sixty (60) monthly  payments  have been made,  or until the
          death of the Director's  surviving  spouse,  whichever occurs earlier.
          Said  payments  due  hereunder  shall begin the first day of the month
          following the decease of the Director.

     B.   Removal for Cause:  "Removal for Cause"  shall  include the removal of
          the  Director   because  of  the   Director's   personal   dishonesty,
          incompetence,  willful misconduct,  breach of fiduciary duty involving
          personal  profit,  willful  violation of any law,  rule, or regulation
          (other  than  traffic   violations  or  similar   offenses)  or  final
          cease-and-desist order. Notwithstanding the foregoing,  Director shall
          not be deemed to have been  removed  for Cause  unless and until there
          shall have been delivered to the Director a copy of a resolution  duly
          adopted by the affirmative vote of not less than  three-fourths of the
          remaining  members of the Board at a meeting  of the Board  called and
          held for that  purpose  (after  reasonable  notice to Director  and an
          opportunity,  together  with  counsel,  to be heard before the Board),
          finding that in the good faith opinion of the Board,  the Director was
          guilty of conduct  justifying  removal  for Cause and  specifying  the
          reasons  thereof.  The  Director  shall not have the right to  receive
          compensation  or other  benefits  for any period after the removal for
          Cause. All rights under this Agreement shall be forfeited,  whether or
          not vested.  Any stock options granted to the Director under any stock
          option  plan or any  unvested  awards  granted  under any other  stock
          benefit plan of the Bank,  or any  subsidiary  or  affiliate  thereof,
          shall become null and void effective upon Director's receipt of Notice
          of Removal for Cause pursuant to paragraph  IX(ii)  hereof,  and shall
          not be  exercisable  by the  Director at any time  subsequent  to such
          Removal for Cause.

     C.   Payments in the Event of Disability Prior to Retirement.  In the event
          the Director  becomes Disabled at any time after the Effective Date of
          this Agreement but prior to Retirement, the Director shall be entitled
          to be  paid  as a lump  sum  the  "Disability  Benefit"  specified  in
          Schedule "A" as of the date of the  disability.  The lump sum shall be
          payable  60 days from the date the  Employer  has  received  a written
          request to commence benefits,  along with  documentation  showing that
          the Employee has become  Disabled.  Once the lump sum payment has been
          made,  this  Agreement  is  terminated,  and the Bank  has no  further
          obligation to the Director or the  Director's  surviving  spouse under
          this plan.

          The term  "Disability" or "Disabled" shall have the same meaning given
          such terms in any policy of  disability  insurance  maintained  by the
          Employer for the benefit of its employees  including the Director.  In
          the absence of such a policy which extends coverage to the Director in
          the event of disability, the terms shall mean bodily injury or disease
          (mental or  physical)  which  wholly  and  continuously  prevents  the
          performance of the Employee's  duties to the Employer for at least one
          hundred twenty (120) days.

XI.  CHANGE OF CONTROL

          A "Change in Control" of the Bank or of Klamath First Federal  Savings
          and Loan Association (the  "Association")  shall be deemed to occur if
          and when (a) an offer or other than the Bank  purchases  shares of the
          common  stock of the Bank or the  Association  pursuant to a tender or
          exchange  offer for such shares,  (b) any person (as such term is used
          in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
          is or  becomes  the  beneficial  owner,  directly  or  indirectly,  of
          securities of the Bank or the Association  representing 25% or more of
          the combined voting power of the Bank's then  outstanding  securities,
          (c) the  membership  of the  board  of  directors  of the  Bank or the
          Association changes as the result of a contested  election,  such that
          individuals  who were  directors at the  beginning of any  twenty-four
          month period (whether commencing before or after the effective date of
          this  Agreement) do not  constitute a majority of the Board at the end
          of such period,  or (d)  shareholders  of the Bank or the  Association
          approve  a  merger,  consolidation,  sale  or  disposition  of  all or
          substantially all of the Bank's or the Association's assets, or a plan
          of  partial  or  complete  liquidation.   For  the  purposes  of  this
          Agreement,  transfers  made on account  of deaths or gifts,  transfers
          between  family  members or transfers to a qualified  retirement  plan
          maintained by the Bank or the Association,  shall not be considered in
          determining whether there has been a change in control.

          Upon a Change  of  Control,  if the  Director  subsequently  suffers a
          Termination of Service  (voluntary or involuntary),  except for cause,
          then the Director  shall be paid Director  Retirement  Benefits of two
          thousand eight hundred thirty four ($2,834) per month, commencing with
          the  Retirement   Date  specified  in  paragraph  III.  C.  above  and
          continuing  until  the  death  of  the  Director.  Alternatively,  the
          Director  may elect to receive the "Early  Retirement  Benefit:  After
          Change in  Control"  as  specified  in the  Schedule A, as of the date
          selected for early  retirement.  However,  if the Director dies before
          sixty monthly  payments have been made,  the Bank shall  continue such
          monthly  payments  until a total of sixty (60) monthly  payments  have
          been  made,  or until the death of the  Director's  surviving  spouse,
          whichever  occurs earlier.  Monthly  payments will be increased by two
          percent at the end of each calendar year.  Director  Emeritus Benefits
          provided  for in  paragraph VI above shall not be paid if the Director
          receives  benefits  pursuant  to  termination  following  a Change  in
          Control.

XII. restrictions on funding

          The Bank shall have no obligation to set aside, earmark or entrust any
          fund or money with which to pay its  obligations  under this  Director
          Plan.  The  Directors  or their  surviving  spouse shall be and remain
          simply a general  creditor of the Bank in the same manner as any other
          creditor having a general claim for matured and unpaid compensation.

          The Bank  reserves  the absolute  right,  at its sole  discretion,  to
          either fund the  obligations  undertaken  by this  Director Plan or to
          refrain from funding the same and to determine the extent,  nature and
          method of such  funding.  Should the Bank elect to fund this  Director
          Plan,  in whole or in part,  through the  purchase of life  insurance,
          mutual funds, disability policies or annuities,  the Bank reserves the
          absolute right, in its sole  discretion,  to terminate such funding at
          any time, in whole or in part. At no time shall any Director be deemed
          to have any lien or right,  title or  interest  in or to any  specific
          funding investment or assets of the Bank.

XIII. MISCELLANEOUS

          A.   Status as an Unsecured General Creditor: Notwithstanding anything
               contained herein to the contrary:  (i) neither the Director,  nor
               the Director's  spouse shall have any legal or equitable  rights,
               interests,  or claims in or to any specific property or assets of
               the Bank 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
               Director or the Director's  spouse 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 Director and the Director's  spouse shall be
               unsecured  general  creditors  with respect to any benefits which
               may be payable under the terms of this Agreement.

               Notwithstanding  the above, the Director and the Bank acknowledge
               and agree  that,  in the event of a Change in Control  and at the
               written request of the Director,  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 Director or his beneficiaries
               in such manner and at such times as specified in this Agreement.

          B.   Binding Obligation of the Bank and any Successor in Interest: The
               Bank shall not merge or consolidate  into or with another bank or
               sell  substantially  all of its assets to another  bank,  firm or
               person  until  such  bank,  firm or person  expressly  agree,  in
               writing,  to assume and discharge the duties and  obligations  of
               the Bank under this  Director  Plan.  This Director Plan shall be
               binding upon the parties hereto, their successors, beneficiaries,
               heirs and personal representatives.

          C.   Amendment or Revocation:  It is agreed by and between the parties
               hereto that,  during the lifetime of the Director,  this Director
               Plan may be amended or revoked at any time or times,  in whole or
               in part,  by the mutual  written  consent of the Director and the
               Bank.

          D.   Gender:  Whenever  in this  Director  Plan  words are used in the
               masculine or neuter  gender,  they shall be read and construed as
               in the masculine, feminine or neuter gender, whenever they should
               so apply.

          E.   Effect on Other Bank  Benefit  Plans:  Nothing  contained in this
               Director   Plan  shall  affect  the  right  of  the  Director  to
               participate  in or be covered by any  qualified or  non-qualified
               pension,  profit-sharing,  group,  bonus  or  other  supplemental
               compensation  or fringe  benefit plan  constituting a part of the
               Bank's existing or future  compensation  structure.  However,  in
               connection  with the  establishment  of this Director  Plan,  the
               Director is waiving any rights  under the Klamath  First  Federal
               Savings and Loan Association  Director Emeritus Plan dated August
               20, 1996, which waiver is further documented in Schedule B.

          F.   Headings:  Headings and  subheadings  in this  Director  Plan are
               inserted  for  reference  and  convenience  only and shall not be
               deemed a part of this Director Plan.

          G.   Applicable Law: The validity and interpretation of this Agreement
               shall be governed by the laws of the State of Oregon.

          H.   12  U.S.C.  Sec.  1828(k):  Any  payments  made  to the  Director
               pursuant to this Director Plan, or otherwise,  are subject to and
               conditioned upon their compliance with 12 U.S.C.  Sec. 1828(k) or
               any regulations promulgated thereunder.

          I.   Partial  Invalidity:   If  any  term,  provision,   covenant,  or
               condition of this Director Plan 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 Director  Plan shall remain in full force
               and effect notwithstanding such partial invalidity.

          J.   Continuation as Director: Neither this Agreement nor the payments
               of any  benefits  hereunder  shall be  construed as giving to the
               Director  any  right to be  retained  as a member of the Board of
               Directors of the Bank.

XIV. ERISA PROVISION

          A.   Named Fiduciary and Plan Administrator:  The "Named Fiduciary and
               Plan  Administrator" of this Director Plan shall be Klamath First
               Bancorp,  Inc., until its resignation or removal by the Board. As
               Named  Fiduciary  and  Plan  Administrator,  the  Bank  shall  be
               responsible for the management, control and administration of the
               Director Plan. The Named Fiduciary may delegate to others certain
               aspects of the management and operation  responsibilities  of the
               Director  Plan  including  the  employment  of  advisors  and the
               delegation of ministerial duties to qualified individuals.

          B.   Claims Procedure and  Arbitration:  In the event a dispute arises
               over benefits  under this Director Plan and benefits are not paid
               to the Director  (or to the  Director's  surviving  spouse in the
               case of the  Director's  death) 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 sixty (60) 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,  it shall
               provide  in  writing  within  sixty  (60) days of receipt of such
               claim its  specific  reasons for such  denial,  reference  to the
               provisions  of this  Director Plan 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 a further review of
               the claim  denial is desired.  A claim shall be deemed  denied if
               the  Named  Fiduciary  and  Plan  Administrator  fail to take any
               action within the aforesaid sixty-day period. If claimants desire
               a second  review they shall notify the Named  Fiduciary  and Plan
               Administrator  in  writing  within  sixty  (60) days of the first
               claim  denial.  Claimants  may review this  Director  Plan or any
               documents  relating  thereto  and submit any  written  issues and
               comments it 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  sixty (60)
               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.

               If  claimants  continue to dispute the benefit  denial based upon
               completed  performance  of this  Director Plan or the meaning and
               effect of the terms and  conditions  thereof,  then claimants may
               submit the dispute to an arbitrator  for final  arbitration.  The
               arbitrator  shall be selected by mutual agreement of the Bank and
               the claimants.  The arbitrator  shall operate under any generally
               recognized  set of  arbitration  rules.  The parties hereto agree
               that they and their heirs, personal  representatives,  successors
               and assigns  shall be bound by the  decision  of such  arbitrator
               with  respect to any  controversy  properly  submitted  to it for
               determination.

               Where a dispute arises as to the Bank's discharge of the Director
               "for  cause,"  such  dispute  shall   likewise  be  submitted  to
               arbitration as above described and the parties hereto agree to be
               bound by the decision thereunder.

          In witness  whereof,  the  parties  hereto  acknowledge  that each has
     carefully  read this  Agreement  and executed  the original  thereof on the
     first  day set  forth  hereinabove,  and  that,  upon  execution,  each has
     received a conforming copy.


                                            KLAMATH FIRST BANCORP, INC.
                                                     Klamath Falls, Oregon


/s/ Nina G. Drake                           By: /s/ Kermit K. Houser
Witness                                     Kermit K. Houser, President and CEO

/s/ Nina G. Drake                           /s/ Rodney Murray
Witness                                     Rodney Murray

<PAGE>

                                   SCHEDULE B

                          WAIVER OF PRIOR PLAN BENEFITS


          In  consideration  for the benefits made  available to the Director by
     this Agreement, the Director and agrees as follows:

               (a) The Director is party to that certain Agreement made with the
          Bank entitled the Klamath First Federal  Savings and Loan  Association
          Director  Emeritus  Plan  dated  August  20,  1996  (the  "Prior  Plan
          Agreement");

               (b) This  Agreement and the benefits  hereunder are provided as a
          substitute  for the Prior Plan  Agreement  and the  benefits  provided
          thereunder;

               (c) The Prior Plan  Agreement  and the  benefits  thereunder  are
          hereby terminated effective as of the date of this Agreement;

               (d) The Director  hereby waives and  relinquishes  for himself or
          herself, and his or her heirs,  beneficiaries,  legal representatives,
          agents,  successors and assigns,  any and all right,  entitlement  and
          interest  that the Director has or may have pursuant to the Prior Plan
          Agreement and the benefits thereunder;

               (e) The Director accepts the Director  Benefits  afforded by this
          Agreement in full and complete substitution for the benefits otherwise
          provided by the Prior Plan Agreement; and the Director acknowledges he
          (i) has had an  opportunity to consult with advisors of the Director's
          own  choice  in  determining  to enter  into this  Agreement  and this
          Waiver,  (ii)  understands  that  the  effect  of  this  Waiver  is to
          terminate,  waive and relinquish forever all rights,  entitlements and
          interests  that the  Director  has or may have  under the  Prior  Plan
          Agreement and the benefits  thereunder as a condition to receiving the
          benefits under this Agreement; and (iii) the Director is entering into
          this Agreement and this Waiver  voluntarily and with full appreciation
          of the effect of doing so.


Dated:  5/16/03                     /s/ Rodney Murray
                                    Rodney Murray

I consent to and agree to be bound by the foregoing Waiver:


/s/ Marie D. Murray                 /s/ Nina G. Drake
Director's Spouse                   Witness
<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE A
                    DIRECTOR BENEFIT SCHEDULE - RODNEY MURRAY

                            JOINED THE BOARD IN 1976
                         DATE OF BIRTH: January 6, 1928

                          DIRECTOR             DIRECTOR                            CHANGE IN            EARLY
                          EMERITUS            RETIREMENT                            CONTROL           RETIREMENT      DISABILITY
    RETIREMENT            BENEFIT:             BENEFIT:           EARLY             BENEFIT:           BENEFIT:        BENEFIT:
       ON OR               Payable             Payable         RETIREMENT           Payable          After Change    Payable Upon
      BEFORE         Upon Retirement (1)   Jan 1, 2006 (2)    BENEFIT: (3)    Upon Retirement (4)     in Control     Disability (5)

<S>                               <C>                <C>                  <C>              <C>               <C>       <C>
  January 1, 2003                 $34,008            $36,084              na               $34,008           na              $0
  January 1, 2004                 $34,008            $36,084              na               $34,680           na        $114,275
  January 1, 2005                 $34,008            $36,084              na               $35,374           na        $126,160
  January 1, 2006                      na            $36,084              na               $36,084           na        $141,785
  and thereafter                       na            $36,084              na               $36,084           na              na

<FN>


1. The Director may retire and commence service as a Director Emeritus anytime after 1/1/2003.
    Payments continue for thirty-six (36) months and increase by 2% per year.
2. Retirement Plan Benefits commence following service as a Director Emeritus. Benefits increase by 2% per year after Retirement.
3. Early Retirement Benefits payable commencing as of Director's birthday in the Calendar Year listed assuming
    no interruption of service.  Benefits increase by 2% per year after Retirement.
4. Retirement Benefits payable upon attainment of age 65 following a Change in Control. No Director Emeritus
    benefits are payable under this circumstance.  Benefits increase by 2% per year after Retirement.
5. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty Balance
     as of disability date.  Disability Benefit value is determined by straight-line interpolation between the amounts
    showing in this column for Jan 1 of the year the disability occurs and Jan 1 of the following calendar year.
    Disability Benefit is paid as a lump sum, with no further benefits.  No post-retirement benefit.
</FN>
</TABLE>


/s/ Rodney Murray    5/16/03    /s/ Kermit K. Houser                   5/19/03
Rodney Murray        Date       Bank Officer                           Date
<PAGE>
                                                                 Exhibit 10(j).2
                       DIRECTOR FEE CONTINUATION AGREEMENT

     THIS AGREEMENT,  made and entered into this First Day of January,  2003, by
and between Klamath First Bancorp,  Inc., a thrift holding company  (hereinafter
referred  to as the  "Bank"),  and  Bernard  Agrons,  a member  of the  Board of
Directors of the Bank (hereinafter referred to as the "Director").

                                   WITNESSETH:

     WHEREAS,  it is  the  consensus  of the  Board  of  Directors  (hereinafter
referred to as the "Board") that the Director's services to the Bank in the past
have been of exceptional  merit and have constituted an invaluable  contribution
to the general  welfare of the Bank and in bringing it to its present  status of
operating efficiency, and its present position in its field of activity;

     WHEREAS, the Director's  experience,  knowledge of the affairs of the Bank,
reputation,  and contacts in the industry are so valuable that  assurance of the
Director's  continued services is essential for the future growth and profits of
the  Bank  and it is in the  best  interests  of the  Bank to  arrange  terms of
continued  service for the Director so as to  reasonably  assure the  Director's
remaining in the Bank's service during the Director's  lifetime or until the age
of retirement;

     WHEREAS,  it is the  desire of the Bank  that the  Director's  services  be
retained as herein provided;

     WHEREAS, the Director is willing to continue to serve the Bank provided the
Bank agrees to pay the  Director or the  Director's  surviving  spouse,  certain
benefits in accordance with the terms and conditions hereinafter set forth;

     ACCORDINGLY,  it is the desire of the Bank and the  Director  to enter into
this Agreement  under which the Bank will agree to make certain  payments to the
Director at retirement or the  Director's  surviving  spouse in the event of the
Director's death pursuant to this Agreement;

     FURTHERMORE, it is the intent of the parties hereto that this Director Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental  retirement  benefits  for the  Director,  and to be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Director is fully advised of the
Bank's  financial  status  and has  had  substantial  input  in the  design  and
operation of this benefit plan; and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.   SERVICE

     The Director will continue to serve the Bank in such capacity and with such
     duties and responsibilities as may be assigned,  and with such compensation
     as may be  determined  from time to time by the Board of  Directors  of the
     Bank.

II.  FRINGE BENEFITS

     The fee continuation benefits provided by this Agreement are granted by the
     Bank as a  fringe  benefit  to the  Director  and  are not  part of any fee
     reduction plan or an arrangement  deferring a bonus or a fee increase.  The
     Director  has no option  to take any  current  payment  or bonus in lieu of
     these fee continuation benefits except as set forth hereinafter.

III. retirement date AND NORMAL RETIREMENT AGE

     A.   Retirement  Date: If the Director  continuously  serves the Bank,  the
          Director shall be eligible to retire from active service with the Bank
          upon the  attainment of age  fifty-five  (55) and receive the benefits
          described  below,  unless by action  of the  Board of  Directors  this
          period of active service shall be shortened or extended.

     B.   Normal  Retirement Age:  Normal  Retirement Age shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-eight (68).

     C.   Normal Retirement Age Following a Change in Control:  The term "Normal
          Retirement  Age Following a Change in Control"  shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-five (65).

     D.   Early Retirement Date: The term "Early Retirement Date" shall mean the
          Retirement  of the Director  from active  service with the Bank at the
          beginning of any month after the Director  achieves age 55, but before
          attaining age sixty-eight (68), [sixty-five (65) following a Change in
          Control].

IV.  DIRECTOR BENEFITS - normal retirement age

     A.   Director  Emeritus  Benefits:  Upon the  attainment of age  sixty-five
          (65),  the Director  shall be entitled to serve the Bank as a Director
          Emeritus in accordance with the procedures and policies established by
          the Board of Directors of the Bank applicable to service as a Director
          Emeritus. If the Director elects to serve as a Director Emeritus,  the
          Director  shall be paid two thousand eight hundred thirty four dollars
          ($2,834) per month for a period of thirty-six (36) months,  commencing
          with the Retirement Date and continuing until the earlier of the third
          anniversary  thereof,  or the death of the Director.  Monthly payments
          will be increased by two percent at the end of each calendar  year. If
          the Director declines or is unable to serve as Director Emeritus,  the
          Director  shall  forfeit  any  entitlement  to the  Director  Emeritus
          Benefits.

     B.   Director Retirement  Benefits:  After the expiration of the thirty-six
          (36) month period  described  above in Paragraph IV A., the Bank shall
          pay to  the  Director  Retirement  Benefit  Payments  equal  to  three
          thousand  seven  dollars  per  month  ($3,007)  until the death of the
          Director. Monthly payments shall increase by two percent at the end of
          each calendar year.

V.   DIRECTOR BENEFITS - EARLY RETIREMENT AGE

     The Director shall have the right to retire on a date which  constitutes an
     Early Retirement Date as defined  previously in Subparagraph III. D. In the
     event the Director elects Early Retirement,  the Director shall be entitled
     to be paid  Director  Retirement  Benefits  equal to the "Early  Retirement
     Benefit"  applicable for the calendar year in which the Director retires as
     specified in Schedule  "A". The benefit  shall be payable in  substantially
     equal monthly  installments on the first day of each month,  beginning with
     the month  following the month the Director  Retires (or on such later date
     as may be mutually  agreed upon by the  Director and the Bank in advance of
     such Early Retirement), payable until the Director's death.

VI.  DIRECTOR DEATH BENEFITS - NORMAL RETIREMENT AGE

     In the event the Director Retires on or after the Normal Retirement Age and
     dies before receiving a total of thirty-six (36) monthly Director  Emeritus
     Benefits and twenty-four (24) monthly  Director  Retirement  Benefits,  the
     Bank shall  continue such monthly  payments  until the full number of sixty
     (60) monthly  payments have been made, or until the death of the Director's
     surviving  spouse,  whichever  occurs earlier.  Said payments due hereunder
     shall  begin  the  first  day of the month  following  the  decease  of the
     Director.

VII. DIRECTOR DEATH BENEFITS - EARLY RETIREMENT AGE

     In the  event  the  Director  Retires  on a  date  that  constitutes  Early
     Retirement and dies before receiving a total of sixty (60) monthly Director
     Retirement  Benefits,  the Bank shall continue such monthly  payments until
     the full number of sixty (60) monthly payments have been made, or until the
     death of the Director's  surviving spouse,  whichever occurs earlier.  Said
     payments due hereunder shall begin the first day of the month following the
     decease of the Director.
<PAGE>

VIII. benefit accounting

     The Bank shall  account for this benefit  using the  regulatory  accounting
     principles  of  the  Bank's  primary  federal  regulator.  The  Bank  shall
     establish an accrued  liability  retirement  account for the Director  into
     which appropriate reserves shall be accrued.

IX.  vesting

     Director's  interest in the benefits that are the subject of this Agreement
     shall be subject to a vesting schedule described in Schedule A.

X.   other termination of SERVICE

     A.   Voluntary  Resignation or failure to be re-elected:  In the event that
          the  service  of  the  Director  shall  terminate  by  the  Director's
          voluntary action, or by the Director's failure to be re-elected to the
          Board without cause, prior to the Retirement Date described in III. A.
          above,  then  this  Agreement  shall  terminate  upon the date of such
          termination  of  service  and the Bank  shall  pay to the  Director  a
          monthly  amount  equal  to  one-twelfth  (1/12)  times  the  "Director
          Retirement  Benefit" as  described  in Schedule A and earned as of the
          date of termination.  Such benefits shall be payable commencing on the
          first of the month  after the  Director  reaches  age 68 and  continue
          until the death of the Director.  Monthly  payments  shall increase by
          two percent at the end of each calendar year.

          In the event the  Director's  death should occur after such  severance
          but prior to the  completion of the monthly  payments  provided for in
          this Paragraph IX, the Bank shall continue such monthly payments until
          a total of sixty (60) monthly  payments  have been made,  or until the
          death of the Director's  surviving  spouse,  whichever occurs earlier.
          Said  payments  due  hereunder  shall begin the first day of the month
          following the decease of the Director.

     B.   Removal for Cause:  "Removal for Cause"  shall  include the removal of
          the  Director   because  of  the   Director's   personal   dishonesty,
          incompetence,  willful misconduct,  breach of fiduciary duty involving
          personal  profit,  willful  violation of any law,  rule, or regulation
          (other  than  traffic   violations  or  similar   offenses)  or  final
          cease-and-desist order. Notwithstanding the foregoing,  Director shall
          not be deemed to have been  removed  for Cause  unless and until there
          shall have been delivered to the Director a copy of a resolution  duly
          adopted by the affirmative vote of not less than  three-fourths of the
          remaining  members of the Board at a meeting  of the Board  called and
          held for that  purpose  (after  reasonable  notice to Director  and an
          opportunity,  together  with  counsel,  to be heard before the Board),
          finding that in the good faith opinion of the Board,  the Director was
          guilty of conduct  justifying  removal  for Cause and  specifying  the
          reasons  thereof.  The  Director  shall not have the right to  receive
          compensation  or other  benefits  for any period after the removal for
          Cause. All rights under this Agreement shall be forfeited,  whether or
          not vested.  Any stock options granted to the Director under any stock
          option  plan or any  unvested  awards  granted  under any other  stock
          benefit plan of the Bank,  or any  subsidiary  or  affiliate  thereof,
          shall become null and void effective upon Director's receipt of Notice
          of Removal for Cause pursuant to paragraph  IX(ii)  hereof,  and shall
          not be  exercisable  by the  Director at any time  subsequent  to such
          Removal for Cause.

     C.   Payments in the Event of Disability Prior to Retirement.  In the event
          the Director  becomes Disabled at any time after the Effective Date of
          this Agreement but prior to Retirement, the Director shall be entitled
          to be  paid  as a lump  sum  the  "Disability  Benefit"  specified  in
          Schedule "A" as of the date of the  disability.  The lump sum shall be
          payable  60 days from the date the  Employer  has  received  a written
          request to commence benefits,  along with  documentation  showing that
          the Employee has become  Disabled.  Once the lump sum payment has been
          made,  this  Agreement  is  terminated,  and the Bank  has no  further
          obligation to the Director or the  Director's  surviving  spouse under
          this plan.

          The term  "Disability" or "Disabled" shall have the same meaning given
          such terms in any policy of  disability  insurance  maintained  by the
          Employer for the benefit of its employees  including the Director.  In
          the absence of such a policy which extends coverage to the Director in
          the event of disability, the terms shall mean bodily injury or disease
          (mental or  physical)  which  wholly  and  continuously  prevents  the
          performance of the Employee's  duties to the Employer for at least one
          hundred twenty (120) days.

XI.  CHANGE OF CONTROL

          A "Change in Control" of the Bank or of Klamath First Federal  Savings
          and Loan Association (the  "Association")  shall be deemed to occur if
          and when (a) an offer or other than the Bank  purchases  shares of the
          common  stock of the Bank or the  Association  pursuant to a tender or
          exchange  offer for such shares,  (b) any person (as such term is used
          in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
          is or  becomes  the  beneficial  owner,  directly  or  indirectly,  of
          securities of the Bank or the Association  representing 25% or more of
          the combined voting power of the Bank's then  outstanding  securities,
          (c) the  membership  of the  board  of  directors  of the  Bank or the
          Association changes as the result of a contested  election,  such that
          individuals  who were  directors at the  beginning of any  twenty-four
          month period (whether commencing before or after the effective date of
          this  Agreement) do not  constitute a majority of the Board at the end
          of such period,  or (d)  shareholders  of the Bank or the  Association
          approve  a  merger,  consolidation,  sale  or  disposition  of  all or
          substantially all of the Bank's or the Association's assets, or a plan
          of  partial  or  complete  liquidation.   For  the  purposes  of  this
          Agreement,  transfers  made on account  of deaths or gifts,  transfers
          between  family  members or transfers to a qualified  retirement  plan
          maintained by the Bank or the Association,  shall not be considered in
          determining whether there has been a change in control.

          Upon a Change  of  Control,  if the  Director  subsequently  suffers a
          Termination of Service  (voluntary or involuntary),  except for cause,
          then the Director  shall be paid Director  Retirement  Benefits of two
          thousand eight hundred thirty four ($2,834) per month, commencing with
          the  Retirement   Date  specified  in  paragraph  III.  C.  above  and
          continuing  until  the  death  of  the  Director.  Alternatively,  the
          Director  may elect to receive the "Early  Retirement  Benefit:  After
          Change in  Control"  as  specified  in the  Schedule A, as of the date
          selected for early  retirement.  However,  if the Director dies before
          sixty monthly  payments have been made,  the Bank shall  continue such
          monthly  payments  until a total of sixty (60) monthly  payments  have
          been  made,  or until the death of the  Director's  surviving  spouse,
          whichever  occurs earlier.  Monthly  payments will be increased by two
          percent at the end of each calendar year.  Director  Emeritus Benefits
          provided  for in  paragraph VI above shall not be paid if the Director
          receives  benefits  pursuant  to  termination  following  a Change  in
          Control.

XII. restrictions on funding

          The Bank shall have no obligation to set aside, earmark or entrust any
          fund or money with which to pay its  obligations  under this  Director
          Plan.  The  Directors  or their  surviving  spouse shall be and remain
          simply a general  creditor of the Bank in the same manner as any other
          creditor having a general claim for matured and unpaid compensation.

          The Bank  reserves  the absolute  right,  at its sole  discretion,  to
          either fund the  obligations  undertaken  by this  Director Plan or to
          refrain from funding the same and to determine the extent,  nature and
          method of such  funding.  Should the Bank elect to fund this  Director
          Plan,  in whole or in part,  through the  purchase of life  insurance,
          mutual funds, disability policies or annuities,  the Bank reserves the
          absolute right, in its sole  discretion,  to terminate such funding at
          any time, in whole or in part. At no time shall any Director be deemed
          to have any lien or right,  title or  interest  in or to any  specific
          funding investment or assets of the Bank.

XIII. MISCELLANEOUS

          A.   Status as an Unsecured General Creditor: Notwithstanding anything
               contained herein to the contrary:  (i) neither the Director,  nor
               the Director's  spouse shall have any legal or equitable  rights,
               interests,  or claims in or to any specific property or assets of
               the Bank 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
               Director or the Director's  spouse 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 Director and the Director's  spouse shall be
               unsecured  general  creditors  with respect to any benefits which
               may be payable under the terms of this Agreement.

               Notwithstanding  the above, the Director and the Bank acknowledge
               and agree  that,  in the event of a Change in Control  and at the
               written request of the Director,  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 Director or his beneficiaries
               in such manner and at such times as specified in this Agreement.

          B.   Binding Obligation of the Bank and any Successor in Interest: The
               Bank shall not merge or consolidate  into or with another bank or
               sell  substantially  all of its assets to another  bank,  firm or
               person  until  such  bank,  firm or person  expressly  agree,  in
               writing,  to assume and discharge the duties and  obligations  of
               the Bank under this  Director  Plan.  This Director Plan shall be
               binding upon the parties hereto, their successors, beneficiaries,
               heirs and personal representatives.

          C.   Amendment or Revocation:  It is agreed by and between the parties
               hereto that,  during the lifetime of the Director,  this Director
               Plan may be amended or revoked at any time or times,  in whole or
               in part,  by the mutual  written  consent of the Director and the
               Bank.

          D.   Gender:  Whenever  in this  Director  Plan  words are used in the
               masculine or neuter  gender,  they shall be read and construed as
               in the masculine, feminine or neuter gender, whenever they should
               so apply.

          E.   Effect on Other Bank  Benefit  Plans:  Nothing  contained in this
               Director   Plan  shall  affect  the  right  of  the  Director  to
               participate  in or be covered by any  qualified or  non-qualified
               pension,  profit-sharing,  group,  bonus  or  other  supplemental
               compensation  or fringe  benefit plan  constituting a part of the
               Bank's existing or future  compensation  structure.  However,  in
               connection  with the  establishment  of this Director  Plan,  the
               Director is waiving any rights  under the Klamath  First  Federal
               Savings and Loan Association  Director Emeritus Plan dated August
               20, 1996, which waiver is further documented in Schedule B.

          F.   Headings:  Headings and  subheadings  in this  Director  Plan are
               inserted  for  reference  and  convenience  only and shall not be
               deemed a part of this Director Plan.

          G.   Applicable Law: The validity and interpretation of this Agreement
               shall be governed by the laws of the State of Oregon.

          H.   12  U.S.C.  Sec.  1828(k):  Any  payments  made  to the  Director
               pursuant to this Director Plan, or otherwise,  are subject to and
               conditioned upon their compliance with 12 U.S.C.  Sec. 1828(k) or
               any regulations promulgated thereunder.

          I.   Partial  Invalidity:   If  any  term,  provision,   covenant,  or
               condition of this Director Plan 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 Director  Plan shall remain in full force
               and effect notwithstanding such partial invalidity.

          J.   Continuation as Director: Neither this Agreement nor the payments
               of any  benefits  hereunder  shall be  construed as giving to the
               Director  any  right to be  retained  as a member of the Board of
               Directors of the Bank.

XIV. ERISA PROVISION

          A.   Named Fiduciary and Plan Administrator:  The "Named Fiduciary and
               Plan  Administrator" of this Director Plan shall be Klamath First
               Bancorp,  Inc., until its resignation or removal by the Board. As
               Named  Fiduciary  and  Plan  Administrator,  the  Bank  shall  be
               responsible for the management, control and administration of the
               Director Plan. The Named Fiduciary may delegate to others certain
               aspects of the management and operation  responsibilities  of the
               Director  Plan  including  the  employment  of  advisors  and the
               delegation of ministerial duties to qualified individuals.

          B.   Claims Procedure and  Arbitration:  In the event a dispute arises
               over benefits  under this Director Plan and benefits are not paid
               to the Director  (or to the  Director's  surviving  spouse in the
               case of the  Director's  death) 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 sixty (60) 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,  it shall
               provide  in  writing  within  sixty  (60) days of receipt of such
               claim its  specific  reasons for such  denial,  reference  to the
               provisions  of this  Director Plan 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 a further review of
               the claim  denial is desired.  A claim shall be deemed  denied if
               the  Named  Fiduciary  and  Plan  Administrator  fail to take any
               action within the aforesaid sixty-day period. If claimants desire
               a second  review they shall notify the Named  Fiduciary  and Plan
               Administrator  in  writing  within  sixty  (60) days of the first
               claim  denial.  Claimants  may review this  Director  Plan or any
               documents  relating  thereto  and submit any  written  issues and
               comments it 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  sixty (60)
               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.

               If  claimants  continue to dispute the benefit  denial based upon
               completed  performance  of this  Director Plan or the meaning and
               effect of the terms and  conditions  thereof,  then claimants may
               submit the dispute to an arbitrator  for final  arbitration.  The
               arbitrator  shall be selected by mutual agreement of the Bank and
               the claimants.  The arbitrator  shall operate under any generally
               recognized  set of  arbitration  rules.  The parties hereto agree
               that they and their heirs, personal  representatives,  successors
               and assigns  shall be bound by the  decision  of such  arbitrator
               with  respect to any  controversy  properly  submitted  to it for
               determination.

               Where a dispute arises as to the Bank's discharge of the Director
               "for  cause,"  such  dispute  shall   likewise  be  submitted  to
               arbitration as above described and the parties hereto agree to be
               bound by the decision thereunder.

          In witness  whereof,  the  parties  hereto  acknowledge  that each has
     carefully  read this  Agreement  and executed  the original  thereof on the
     first  day set  forth  hereinabove,  and  that,  upon  execution,  each has
     received a conforming copy.

                                            KLAMATH FIRST BANCORP, INC.
                                                     Klamath Falls, Oregon


/s/ Nina G. Drake                   By: /s/ Rodney Murray
Witness                                 Rodney N. Murray, Chairman of Board

/s/ Kathryn Rutledge                    /s/ Bernard Z. Agrons
Witness                                 Bernard Agrons
<PAGE>

                                   SCHEDULE B

                          WAIVER OF PRIOR PLAN BENEFITS


          In  consideration  for the benefits made  available to the Director by
     this Agreement, the Director and agrees as follows:

               (a) The Director is party to that certain Agreement made with the
          Bank entitled the Klamath First Federal  Savings and Loan  Association
          Director  Emeritus  Plan  dated  August  20,  1996  (the  "Prior  Plan
          Agreement");

               (b) This  Agreement and the benefits  hereunder are provided as a
          substitute  for the Prior Plan  Agreement  and the  benefits  provided
          thereunder;

               (c) The Prior Plan  Agreement  and the  benefits  thereunder  are
          hereby terminated effective as of the date of this Agreement;

               (d) The Director  hereby waives and  relinquishes  for himself or
          herself, and his or her heirs,  beneficiaries,  legal representatives,
          agents,  successors and assigns,  any and all right,  entitlement  and
          interest  that the Director has or may have pursuant to the Prior Plan
          Agreement and the benefits thereunder;

               (e) The Director accepts the Director  Benefits  afforded by this
          Agreement in full and complete substitution for the benefits otherwise
          provided by the Prior Plan Agreement; and the Director acknowledges he
          (i) has had an  opportunity to consult with advisors of the Director's
          own  choice  in  determining  to enter  into this  Agreement  and this
          Waiver,  (ii)  understands  that  the  effect  of  this  Waiver  is to
          terminate,  waive and relinquish forever all rights,  entitlements and
          interests  that the  Director  has or may have  under the  Prior  Plan
          Agreement and the benefits  thereunder as a condition to receiving the
          benefits under this Agreement; and (iii) the Director is entering into
          this Agreement and this Waiver  voluntarily and with full appreciation
          of the effect of doing so.

          Dated:  5/21/03                     /s/ Bernard Z. Agrons
                                              Bernard Agrons

          I consent to and agree to be bound by the foregoing Waiver:


/s/ Betty Jo Agrons by Bernard Z. Agrons, Atty in Fact      /s/ Kathryn Rutledge
Director's Spouse                                           Witness

<TABLE>
<CAPTION>
                                   SCHEDULE A
                   DIRECTOR BENEFIT SCHEDULE - BERNARD AGRONS

                            JOINED THE BOARD IN 1974
                           DATE OF BIRTH: JULY 2, 1922

                        DIRECTOR            DIRECTOR                                CHANGE IN             EARLY
                        EMERITUS           RETIREMENT                                CONTROL           RETIREMENT      DISABILITY
  RETIREMENT            BENEFIT:            BENEFIT:             EARLY               BENEFIT:           BENEFIT:        BENEFIT:
    ON OR               Payable              Payable          RETIREMENT             Payable          After Change    Payable Upon
    BEFORE        Upon Retirement (1)    Jan 1, 2006 (2)     BENEFIT: (3)      Upon Retirement (4)     in Control     Disability (5)


<S>                     <C>                  <C>                  <C>                <C>                   <C>           <C>
 January 1, 2003        $34,008              $36,084              na                 $34,008               na                  $0
 January 1, 2004        $34,008              $36,084              na                 $34,680               na             $83,180
 January 1, 2005        $34,008              $36,084              na                 $35,374               na             $93,531
 January 1, 2006           na                $36,084              na                 $36,084               na            $106,574
  and thereafter           na                $36,084              na                 $36,084               na               na

<FN>


1. The Director may retire and commence service as a Director Emeritus anytime after 1/1/2003.
    Payments continue for thirty-six (36) months and increase by 2% per year.
2. Retirement Plan Benefits commence following service as a Director Emeritus. Benefits increase by 2% per year after Retirement.
3. Early Retirement Benefits payable commencing as of Director's birthday in the Calendar Year listed assuming
    no interruption of service.  Benefits increase by 2% per year after Retirement.
4. Retirement Benefits payable upon attainment of age 65 following a Change in Control. No Director Emeritus
    benefits are payable under this circumstance.  Benefits increase by 2% per year after Retirement.
5. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty Balance
     as of disability date.  Disability Benefit value is determined by straight-line interpolation between the amounts
    showing in this column for Jan 1 of the year the disability occurs and Jan 1 of the following calendar year.
    Disability Benefit is paid as a lump sum, with no further benefits.  No post-retirement benefit.
</FN>
</TABLE>


/s/ Bernard Z. Agrons   5/21/03     /s/ Rodney Murray                    6/3/03
Bernard Agrons          Date        Bank Officer                         Date
<PAGE>
                                                                 Exhibit 10(j).3
                       DIRECTOR FEE CONTINUATION AGREEMENT

     THIS AGREEMENT,  made and entered into this First Day of January,  2003, by
and between Klamath First Bancorp,  Inc., a thrift holding company  (hereinafter
referred  to as the  "Bank"),  and Timothy A.  Bailey,  a member of the Board of
Directors of the Bank (hereinafter referred to as the "Director").

                                   WITNESSETH:

     WHEREAS,  it is  the  consensus  of the  Board  of  Directors  (hereinafter
referred to as the "Board") that the Director's services to the Bank in the past
have been of exceptional  merit and have constituted an invaluable  contribution
to the general  welfare of the Bank and in bringing it to its present  status of
operating efficiency, and its present position in its field of activity;

     WHEREAS, the Director's  experience,  knowledge of the affairs of the Bank,
reputation,  and contacts in the industry are so valuable that  assurance of the
Director's  continued services is essential for the future growth and profits of
the  Bank  and it is in the  best  interests  of the  Bank to  arrange  terms of
continued  service for the Director so as to  reasonably  assure the  Director's
remaining in the Bank's service during the Director's  lifetime or until the age
of retirement;

     WHEREAS,  it is the  desire of the Bank  that the  Director's  services  be
retained as herein provided;

     WHEREAS, the Director is willing to continue to serve the Bank provided the
Bank agrees to pay the  Director or the  Director's  surviving  spouse,  certain
benefits in accordance with the terms and conditions hereinafter set forth;

     ACCORDINGLY,  it is the desire of the Bank and the  Director  to enter into
this Agreement  under which the Bank will agree to make certain  payments to the
Director at retirement or the  Director's  surviving  spouse in the event of the
Director's death pursuant to this Agreement;

     FURTHERMORE, it is the intent of the parties hereto that this Director Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental  retirement  benefits  for the  Director,  and to be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Director is fully advised of the
Bank's  financial  status  and has  had  substantial  input  in the  design  and
operation of this benefit plan; and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.   SERVICE

     The Director will continue to serve the Bank in such capacity and with such
     duties and responsibilities as may be assigned,  and with such compensation
     as may be  determined  from time to time by the Board of  Directors  of the
     Bank.

II.  FRINGE BENEFITS

     The fee continuation benefits provided by this Agreement are granted by the
     Bank as a  fringe  benefit  to the  Director  and  are not  part of any fee
     reduction plan or an arrangement  deferring a bonus or a fee increase.  The
     Director  has no option  to take any  current  payment  or bonus in lieu of
     these fee continuation benefits except as set forth hereinafter.

III. retirement date AND NORMAL RETIREMENT AGE

     A.   Retirement  Date: If the Director  continuously  serves the Bank,  the
          Director shall be eligible to retire from active service with the Bank
          upon the  attainment of age  fifty-five  (55) and receive the benefits
          described  below,  unless by action  of the  Board of  Directors  this
          period of active service shall be shortened or extended.

     B.   Normal  Retirement Age:  Normal  Retirement Age shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-eight (68).

     C.   Normal Retirement Age Following a Change in Control:  The term "Normal
          Retirement  Age Following a Change in Control"  shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-five (65).

     D.   Early Retirement Date: The term "Early Retirement Date" shall mean the
          Retirement  of the Director  from active  service with the Bank at the
          beginning of any month after the Director  achieves age 55, but before
          attaining age sixty-eight (68), [sixty-five (65) following a Change in
          Control].

IV.  DIRECTOR BENEFITS - normal retirement age

     A.   Director  Emeritus  Benefits:  Upon the  attainment of age  sixty-five
          (65),  the Director  shall be entitled to serve the Bank as a Director
          Emeritus in accordance with the procedures and policies established by
          the Board of Directors of the Bank applicable to service as a Director
          Emeritus. If the Director elects to serve as a Director Emeritus,  the
          Director  shall be paid two thousand eight hundred thirty four dollars
          ($2,834) per month for a period of thirty-six (36) months,  commencing
          with the Retirement Date and continuing until the earlier of the third
          anniversary  thereof,  or the death of the Director.  Monthly payments
          will be increased by two percent at the end of each calendar  year. If
          the Director declines or is unable to serve as Director Emeritus,  the
          Director  shall  forfeit  any  entitlement  to the  Director  Emeritus
          Benefits.

     B.   Director Retirement  Benefits:  After the expiration of the thirty-six
          (36) month period  described  above in Paragraph IV A., the Bank shall
          pay to  the  Director  Retirement  Benefit  Payments  equal  to  three
          thousand  seven  dollars  per  month  ($3,007)  until the death of the
          Director. Monthly payments shall increase by two percent at the end of
          each calendar year.

V.   DIRECTOR BENEFITS - EARLY RETIREMENT AGE

     The Director shall have the right to retire on a date which  constitutes an
     Early Retirement Date as defined  previously in Subparagraph III. D. In the
     event the Director elects Early Retirement,  the Director shall be entitled
     to be paid  Director  Retirement  Benefits  equal to the "Early  Retirement
     Benefit"  applicable for the calendar year in which the Director retires as
     specified in Schedule  "A". The benefit  shall be payable in  substantially
     equal monthly  installments on the first day of each month,  beginning with
     the month  following the month the Director  Retires (or on such later date
     as may be mutually  agreed upon by the  Director and the Bank in advance of
     such Early Retirement), payable until the Director's death.

VI.  DIRECTOR DEATH BENEFITS - NORMAL RETIREMENT AGE

     In the event the Director Retires on or after the Normal Retirement Age and
     dies before receiving a total of thirty-six (36) monthly Director  Emeritus
     Benefits and twenty-four (24) monthly  Director  Retirement  Benefits,  the
     Bank shall  continue such monthly  payments  until the full number of sixty
     (60) monthly  payments have been made, or until the death of the Director's
     surviving  spouse,  whichever  occurs earlier.  Said payments due hereunder
     shall  begin  the  first  day of the month  following  the  decease  of the
     Director.

VII. DIRECTOR DEATH BENEFITS - EARLY RETIREMENT AGE

     In the  event  the  Director  Retires  on a  date  that  constitutes  Early
     Retirement and dies before receiving a total of sixty (60) monthly Director
     Retirement  Benefits,  the Bank shall continue such monthly  payments until
     the full number of sixty (60) monthly payments have been made, or until the
     death of the Director's  surviving spouse,  whichever occurs earlier.  Said
     payments due hereunder shall begin the first day of the month following the
     decease of the Director.
<PAGE>

VIII. benefit accounting

     The Bank shall  account for this benefit  using the  regulatory  accounting
     principles  of  the  Bank's  primary  federal  regulator.  The  Bank  shall
     establish an accrued  liability  retirement  account for the Director  into
     which appropriate reserves shall be accrued.

IX.  vesting

     Director's  interest in the benefits that are the subject of this Agreement
     shall be subject to a vesting schedule described in Schedule A.

X.   other termination of SERVICE

     A.   Voluntary  Resignation or failure to be re-elected:  In the event that
          the  service  of  the  Director  shall  terminate  by  the  Director's
          voluntary action, or by the Director's failure to be re-elected to the
          Board without cause, prior to the Retirement Date described in III. A.
          above,  then  this  Agreement  shall  terminate  upon the date of such
          termination  of  service  and the Bank  shall  pay to the  Director  a
          monthly  amount  equal  to  one-twelfth  (1/12)  times  the  "Director
          Retirement  Benefit" as  described  in Schedule A and earned as of the
          date of termination.  Such benefits shall be payable commencing on the
          first of the month  after the  Director  reaches  age 68 and  continue
          until the death of the Director.  Monthly  payments  shall increase by
          two percent at the end of each calendar year.

          In the event the  Director's  death should occur after such  severance
          but prior to the  completion of the monthly  payments  provided for in
          this Paragraph IX, the Bank shall continue such monthly payments until
          a total of sixty (60) monthly  payments  have been made,  or until the
          death of the Director's  surviving  spouse,  whichever occurs earlier.
          Said  payments  due  hereunder  shall begin the first day of the month
          following the decease of the Director.

     B.   Removal for Cause:  "Removal for Cause"  shall  include the removal of
          the  Director   because  of  the   Director's   personal   dishonesty,
          incompetence,  willful misconduct,  breach of fiduciary duty involving
          personal  profit,  willful  violation of any law,  rule, or regulation
          (other  than  traffic   violations  or  similar   offenses)  or  final
          cease-and-desist order. Notwithstanding the foregoing,  Director shall
          not be deemed to have been  removed  for Cause  unless and until there
          shall have been delivered to the Director a copy of a resolution  duly
          adopted by the affirmative vote of not less than  three-fourths of the
          remaining  members of the Board at a meeting  of the Board  called and
          held for that  purpose  (after  reasonable  notice to Director  and an
          opportunity,  together  with  counsel,  to be heard before the Board),
          finding that in the good faith opinion of the Board,  the Director was
          guilty of conduct  justifying  removal  for Cause and  specifying  the
          reasons  thereof.  The  Director  shall not have the right to  receive
          compensation  or other  benefits  for any period after the removal for
          Cause. All rights under this Agreement shall be forfeited,  whether or
          not vested.  Any stock options granted to the Director under any stock
          option  plan or any  unvested  awards  granted  under any other  stock
          benefit plan of the Bank,  or any  subsidiary  or  affiliate  thereof,
          shall become null and void effective upon Director's receipt of Notice
          of Removal for Cause pursuant to paragraph  IX(ii)  hereof,  and shall
          not be  exercisable  by the  Director at any time  subsequent  to such
          Removal for Cause.

     C.   Payments in the Event of Disability Prior to Retirement.  In the event
          the Director  becomes Disabled at any time after the Effective Date of
          this Agreement but prior to Retirement, the Director shall be entitled
          to be  paid  as a lump  sum  the  "Disability  Benefit"  specified  in
          Schedule "A" as of the date of the  disability.  The lump sum shall be
          payable  60 days from the date the  Employer  has  received  a written
          request to commence benefits,  along with  documentation  showing that
          the Employee has become  Disabled.  Once the lump sum payment has been
          made,  this  Agreement  is  terminated,  and the Bank  has no  further
          obligation to the Director or the  Director's  surviving  spouse under
          this plan.

          The term  "Disability" or "Disabled" shall have the same meaning given
          such terms in any policy of  disability  insurance  maintained  by the
          Employer for the benefit of its employees  including the Director.  In
          the absence of such a policy which extends coverage to the Director in
          the event of disability, the terms shall mean bodily injury or disease
          (mental or  physical)  which  wholly  and  continuously  prevents  the
          performance of the Employee's  duties to the Employer for at least one
          hundred twenty (120) days.

XI.  CHANGE OF CONTROL

          A "Change in Control" of the Bank or of Klamath First Federal  Savings
          and Loan Association (the  "Association")  shall be deemed to occur if
          and when (a) an offer or other than the Bank  purchases  shares of the
          common  stock of the Bank or the  Association  pursuant to a tender or
          exchange  offer for such shares,  (b) any person (as such term is used
          in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
          is or  becomes  the  beneficial  owner,  directly  or  indirectly,  of
          securities of the Bank or the Association  representing 25% or more of
          the combined voting power of the Bank's then  outstanding  securities,
          (c) the  membership  of the  board  of  directors  of the  Bank or the
          Association changes as the result of a contested  election,  such that
          individuals  who were  directors at the  beginning of any  twenty-four
          month period (whether commencing before or after the effective date of
          this  Agreement) do not  constitute a majority of the Board at the end
          of such period,  or (d)  shareholders  of the Bank or the  Association
          approve  a  merger,  consolidation,  sale  or  disposition  of  all or
          substantially all of the Bank's or the Association's assets, or a plan
          of  partial  or  complete  liquidation.   For  the  purposes  of  this
          Agreement,  transfers  made on account  of deaths or gifts,  transfers
          between  family  members or transfers to a qualified  retirement  plan
          maintained by the Bank or the Association,  shall not be considered in
          determining whether there has been a change in control.

          Upon a Change  of  Control,  if the  Director  subsequently  suffers a
          Termination of Service  (voluntary or involuntary),  except for cause,
          then the Director  shall be paid Director  Retirement  Benefits of two
          thousand eight hundred thirty four ($2,834) per month, commencing with
          the  Retirement   Date  specified  in  paragraph  III.  C.  above  and
          continuing  until  the  death  of  the  Director.  Alternatively,  the
          Director  may elect to receive the "Early  Retirement  Benefit:  After
          Change in  Control"  as  specified  in the  Schedule A, as of the date
          selected for early  retirement.  However,  if the Director dies before
          sixty monthly  payments have been made,  the Bank shall  continue such
          monthly  payments  until a total of sixty (60) monthly  payments  have
          been  made,  or until the death of the  Director's  surviving  spouse,
          whichever  occurs earlier.  Monthly  payments will be increased by two
          percent at the end of each calendar year.  Director  Emeritus Benefits
          provided  for in  paragraph VI above shall not be paid if the Director
          receives  benefits  pursuant  to  termination  following  a Change  in
          Control.

XII. restrictions on funding

          The Bank shall have no obligation to set aside, earmark or entrust any
          fund or money with which to pay its  obligations  under this  Director
          Plan.  The  Directors  or their  surviving  spouse shall be and remain
          simply a general  creditor of the Bank in the same manner as any other
          creditor having a general claim for matured and unpaid compensation.

          The Bank  reserves  the absolute  right,  at its sole  discretion,  to
          either fund the  obligations  undertaken  by this  Director Plan or to
          refrain from funding the same and to determine the extent,  nature and
          method of such  funding.  Should the Bank elect to fund this  Director
          Plan,  in whole or in part,  through the  purchase of life  insurance,
          mutual funds, disability policies or annuities,  the Bank reserves the
          absolute right, in its sole  discretion,  to terminate such funding at
          any time, in whole or in part. At no time shall any Director be deemed
          to have any lien or right,  title or  interest  in or to any  specific
          funding investment or assets of the Bank.

XIII. MISCELLANEOUS

          A.   Status as an Unsecured General Creditor: Notwithstanding anything
               contained herein to the contrary:  (i) neither the Director,  nor
               the Director's  spouse shall have any legal or equitable  rights,
               interests,  or claims in or to any specific property or assets of
               the Bank 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
               Director or the Director's  spouse 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 Director and the Director's  spouse shall be
               unsecured  general  creditors  with respect to any benefits which
               may be payable under the terms of this Agreement.

               Notwithstanding  the above, the Director and the Bank acknowledge
               and agree  that,  in the event of a Change in Control  and at the
               written request of the Director,  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 Director or his beneficiaries
               in such manner and at such times as specified in this Agreement.

          B.   Binding Obligation of the Bank and any Successor in Interest: The
               Bank shall not merge or consolidate  into or with another bank or
               sell  substantially  all of its assets to another  bank,  firm or
               person  until  such  bank,  firm or person  expressly  agree,  in
               writing,  to assume and discharge the duties and  obligations  of
               the Bank under this  Director  Plan.  This Director Plan shall be
               binding upon the parties hereto, their successors, beneficiaries,
               heirs and personal representatives.

          C.   Amendment or Revocation:  It is agreed by and between the parties
               hereto that,  during the lifetime of the Director,  this Director
               Plan may be amended or revoked at any time or times,  in whole or
               in part,  by the mutual  written  consent of the Director and the
               Bank.

          D.   Gender:  Whenever  in this  Director  Plan  words are used in the
               masculine or neuter  gender,  they shall be read and construed as
               in the masculine, feminine or neuter gender, whenever they should
               so apply.

          E.   Effect on Other Bank  Benefit  Plans:  Nothing  contained in this
               Director   Plan  shall  affect  the  right  of  the  Director  to
               participate  in or be covered by any  qualified or  non-qualified
               pension,  profit-sharing,  group,  bonus  or  other  supplemental
               compensation  or fringe  benefit plan  constituting a part of the
               Bank's existing or future  compensation  structure.  However,  in
               connection  with the  establishment  of this Director  Plan,  the
               Director is waiving any rights  under the Klamath  First  Federal
               Savings and Loan Association  Director Emeritus Plan dated August
               20, 1996, which waiver is further documented in Schedule B.

          F.   Headings:  Headings and  subheadings  in this  Director  Plan are
               inserted  for  reference  and  convenience  only and shall not be
               deemed a part of this Director Plan.

          G.   Applicable Law: The validity and interpretation of this Agreement
               shall be governed by the laws of the State of Oregon.

          H.   12  U.S.C.  Sec.  1828(k):  Any  payments  made  to the  Director
               pursuant to this Director Plan, or otherwise,  are subject to and
               conditioned upon their compliance with 12 U.S.C.  Sec. 1828(k) or
               any regulations promulgated thereunder.

          I.   Partial  Invalidity:   If  any  term,  provision,   covenant,  or
               condition of this Director Plan 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 Director  Plan shall remain in full force
               and effect notwithstanding such partial invalidity.

          J.   Continuation as Director: Neither this Agreement nor the payments
               of any  benefits  hereunder  shall be  construed as giving to the
               Director  any  right to be  retained  as a member of the Board of
               Directors of the Bank.

XIV. ERISA PROVISION

          A.   Named Fiduciary and Plan Administrator:  The "Named Fiduciary and
               Plan  Administrator" of this Director Plan shall be Klamath First
               Bancorp,  Inc., until its resignation or removal by the Board. As
               Named  Fiduciary  and  Plan  Administrator,  the  Bank  shall  be
               responsible for the management, control and administration of the
               Director Plan. The Named Fiduciary may delegate to others certain
               aspects of the management and operation  responsibilities  of the
               Director  Plan  including  the  employment  of  advisors  and the
               delegation of ministerial duties to qualified individuals.

          B.   Claims Procedure and  Arbitration:  In the event a dispute arises
               over benefits  under this Director Plan and benefits are not paid
               to the Director  (or to the  Director's  surviving  spouse in the
               case of the  Director's  death) 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 sixty (60) 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,  it shall
               provide  in  writing  within  sixty  (60) days of receipt of such
               claim its  specific  reasons for such  denial,  reference  to the
               provisions  of this  Director Plan 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 a further review of
               the claim  denial is desired.  A claim shall be deemed  denied if
               the  Named  Fiduciary  and  Plan  Administrator  fail to take any
               action within the aforesaid sixty-day period. If claimants desire
               a second  review they shall notify the Named  Fiduciary  and Plan
               Administrator  in  writing  within  sixty  (60) days of the first
               claim  denial.  Claimants  may review this  Director  Plan or any
               documents  relating  thereto  and submit any  written  issues and
               comments it 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  sixty (60)
               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.

               If  claimants  continue to dispute the benefit  denial based upon
               completed  performance  of this  Director Plan or the meaning and
               effect of the terms and  conditions  thereof,  then claimants may
               submit the dispute to an arbitrator  for final  arbitration.  The
               arbitrator  shall be selected by mutual agreement of the Bank and
               the claimants.  The arbitrator  shall operate under any generally
               recognized  set of  arbitration  rules.  The parties hereto agree
               that they and their heirs, personal  representatives,  successors
               and assigns  shall be bound by the  decision  of such  arbitrator
               with  respect to any  controversy  properly  submitted  to it for
               determination.

               Where a dispute arises as to the Bank's discharge of the Director
               "for  cause,"  such  dispute  shall   likewise  be  submitted  to
               arbitration as above described and the parties hereto agree to be
               bound by the decision thereunder.

          In witness  whereof,  the  parties  hereto  acknowledge  that each has
     carefully  read this  Agreement  and executed  the original  thereof on the
     first  day set  forth  hereinabove,  and  that,  upon  execution,  each has
     received a conforming copy.

                                            KLAMATH FIRST BANCORP, INC.
                                                     Klamath Falls, Oregon


/s/ Nina G. Drake                          By: /s/ Rodney Murray
Witness                                    Rodney N. Murray, Chairman of Board

/s/ Kristin A. Bring                           /s/ Timothy A. Bailey
Witness                                        Timothy Bailey
<PAGE>

                                   SCHEDULE B

                          WAIVER OF PRIOR PLAN BENEFITS


          In  consideration  for the benefits made  available to the Director by
     this Agreement, the Director and agrees as follows:

               (a) The Director is party to that certain Agreement made with the
          Bank entitled the Klamath First Federal  Savings and Loan  Association
          Director  Emeritus  Plan  dated  August  20,  1996  (the  "Prior  Plan
          Agreement");

               (b) This  Agreement and the benefits  hereunder are provided as a
          substitute  for the Prior Plan  Agreement  and the  benefits  provided
          thereunder;

               (c) The Prior Plan  Agreement  and the  benefits  thereunder  are
          hereby terminated effective as of the date of this Agreement;

               (d) The Director  hereby waives and  relinquishes  for himself or
          herself, and his or her heirs,  beneficiaries,  legal representatives,
          agents,  successors and assigns,  any and all right,  entitlement  and
          interest  that the Director has or may have pursuant to the Prior Plan
          Agreement and the benefits thereunder;

               (e) The Director accepts the Director  Benefits  afforded by this
          Agreement in full and complete substitution for the benefits otherwise
          provided by the Prior Plan Agreement; and the Director acknowledges he
          (i) has had an  opportunity to consult with advisors of the Director's
          own  choice  in  determining  to enter  into this  Agreement  and this
          Waiver,  (ii)  understands  that  the  effect  of  this  Waiver  is to
          terminate,  waive and relinquish forever all rights,  entitlements and
          interests  that the  Director  has or may have  under the  Prior  Plan
          Agreement and the benefits  thereunder as a condition to receiving the
          benefits under this Agreement; and (iii) the Director is entering into
          this Agreement and this Waiver  voluntarily and with full appreciation
          of the effect of doing so.

Dated:  5/12/03                     /s/ Timothy A. Bailey
                                    Timothy Bailey

I consent to and agree to be bound by the foregoing Waiver:


/s/ Kristin L. Bailey               /s/ Kristin A. Bring
Director's Spouse                   Witness
<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE A
                   DIRECTOR BENEFIT SCHEDULE - TIMOTHY BAILEY

                            JOINED THE BOARD IN 1993
                          DATE OF BIRTH: August 7, 1946

                        DIRECTOR           DIRECTOR                          CHANGE IN           EARLY
                        EMERITUS          RETIREMENT                          CONTROL          RETIREMENT      DISABILITY
                        BENEFIT:           BENEFIT:           EARLY           BENEFIT:          BENEFIT:        BENEFIT:
      VESTING            Payable           Payable         RETIREMENT         Payable         After Change    Payable Upon
       DATE         Sept 1, 2011 (1)   Sept 1, 2014 (2)   BENEFIT: (3)    Sept 1, 2011 (4)     in Control     Disability (5)

<S>                      <C>               <C>               <C>              <C>               <C>              <C>
  January 1, 2003             $0            $7,216            $2,454           $34,008           $17,680               $0
  January 1, 2004             $0           $10,824            $4,330           $34,008           $19,720          $28,589
  January 1, 2005             $0           $14,432            $6,639           $34,008           $21,760          $45,528
  January 1, 2006             $0           $18,041            $9,381           $34,008           $23,800          $64,448
  January 1, 2007             $0           $21,649           $12,556           $34,008           $25,840          $85,529
  January 1, 2008             $0           $25,257           $16,164           $34,008           $27,880         $108,965
  January 1, 2009             $0           $28,865           $20,205           $34,008           $29,920         $134,967
  January 1, 2010             $0           $32,473           $24,679           $34,008           $31,960         $163,762
  January 1, 2011        $34,008           $36,084           $29,586           $34,008           $34,008         $195,595
  January 1, 2012        $34,008           $36,084           $31,751             na                na            $230,732
  January 1, 2013        $34,008           $36,084           $33,916             na                na            $244,963
  January 1, 2014          na              $36,084             na                na                na            $260,072
<FN>

1. In order to retire as a Director Emeritus, the Director must serve until attaining age sixty-five (65).
    Payments continue for thirty-six (36) months and increase by 2% per year.
2. Retirement Plan Benefits commence at age sixty-eight (68). Benefits increase by 2% per year after Retirement.
3. Early Retirement Benefits payable commencing as of Director's birthday in the Calendar Year listed assuming
    no interruption of service.  Benefits increase by 2% per year after Retirement.
4. Retirement Benefits payable upon attainment of age 65 following a Change in Control. No Director Emeritus
    benefits are payable under this circumstance.  Benefits increase by 2% per year after Retirement.
5. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty Balance
     as of disability date.  Disability Benefit value is determined by straight-line interpolation between the amounts
    showing in this column for Jan 1 of the year the disability occurs and Jan 1 of the following calendar year.
    Disability Benefit is paid as a lump sum, with no further benefits.  No post-retirement benefit.
</FN>
</TABLE>


/s/ Timothy Bailey  5/13/03    /s/ Kermit K. Houser               5/19/03
Timothy Bailey      Date       Bank Officer                       Date
<PAGE>
                                                                 Exhibit 10(j).4
                       DIRECTOR FEE CONTINUATION AGREEMENT

     THIS AGREEMENT,  made and entered into this First Day of January,  2003, by
and between Klamath First Bancorp,  Inc., a thrift holding company  (hereinafter
referred  to as the  "Bank"),  and  James D.  Bocchi,  a member  of the Board of
Directors of the Bank (hereinafter referred to as the "Director").

                                   WITNESSETH:

     WHEREAS,  it is  the  consensus  of the  Board  of  Directors  (hereinafter
referred to as the "Board") that the Director's services to the Bank in the past
have been of exceptional  merit and have constituted an invaluable  contribution
to the general  welfare of the Bank and in bringing it to its present  status of
operating efficiency, and its present position in its field of activity;

     WHEREAS, the Director's  experience,  knowledge of the affairs of the Bank,
reputation,  and contacts in the industry are so valuable that  assurance of the
Director's  continued services is essential for the future growth and profits of
the  Bank  and it is in the  best  interests  of the  Bank to  arrange  terms of
continued  service for the Director so as to  reasonably  assure the  Director's
remaining in the Bank's service during the Director's  lifetime or until the age
of retirement;

     WHEREAS,  it is the  desire of the Bank  that the  Director's  services  be
retained as herein provided;

     WHEREAS, the Director is willing to continue to serve the Bank provided the
Bank agrees to pay the  Director or the  Director's  surviving  spouse,  certain
benefits in accordance with the terms and conditions hereinafter set forth;

     ACCORDINGLY,  it is the desire of the Bank and the  Director  to enter into
this Agreement  under which the Bank will agree to make certain  payments to the
Director at retirement or the  Director's  surviving  spouse in the event of the
Director's death pursuant to this Agreement;

     FURTHERMORE, it is the intent of the parties hereto that this Director Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental  retirement  benefits  for the  Director,  and to be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Director is fully advised of the
Bank's  financial  status  and has  had  substantial  input  in the  design  and
operation of this benefit plan; and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.   SERVICE

     The Director will continue to serve the Bank in such capacity and with such
     duties and responsibilities as may be assigned,  and with such compensation
     as may be  determined  from time to time by the Board of  Directors  of the
     Bank.

II.  FRINGE BENEFITS

     The fee continuation benefits provided by this Agreement are granted by the
     Bank as a  fringe  benefit  to the  Director  and  are not  part of any fee
     reduction plan or an arrangement  deferring a bonus or a fee increase.  The
     Director  has no option  to take any  current  payment  or bonus in lieu of
     these fee continuation benefits except as set forth hereinafter.

III. retirement date AND NORMAL RETIREMENT AGE

     A.   Retirement  Date: If the Director  continuously  serves the Bank,  the
          Director shall be eligible to retire from active service with the Bank
          upon the  attainment of age  fifty-five  (55) and receive the benefits
          described  below,  unless by action  of the  Board of  Directors  this
          period of active service shall be shortened or extended.

     B.   Normal  Retirement Age:  Normal  Retirement Age shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-eight (68).

     C.   Normal Retirement Age Following a Change in Control:  The term "Normal
          Retirement  Age Following a Change in Control"  shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-five (65).

     D.   Early Retirement Date: The term "Early Retirement Date" shall mean the
          Retirement  of the Director  from active  service with the Bank at the
          beginning of any month after the Director  achieves age 55, but before
          attaining age sixty-eight (68), [sixty-five (65) following a Change in
          Control].

IV.  DIRECTOR BENEFITS - normal retirement age

     A.   Director  Emeritus  Benefits:  Upon the  attainment of age  sixty-five
          (65),  the Director  shall be entitled to serve the Bank as a Director
          Emeritus in accordance with the procedures and policies established by
          the Board of Directors of the Bank applicable to service as a Director
          Emeritus. If the Director elects to serve as a Director Emeritus,  the
          Director  shall be paid two thousand eight hundred thirty four dollars
          ($2,834) per month for a period of thirty-six (36) months,  commencing
          with the Retirement Date and continuing until the earlier of the third
          anniversary  thereof,  or the death of the Director.  Monthly payments
          will be increased by two percent at the end of each calendar  year. If
          the Director declines or is unable to serve as Director Emeritus,  the
          Director  shall  forfeit  any  entitlement  to the  Director  Emeritus
          Benefits.

     B.   Director Retirement  Benefits:  After the expiration of the thirty-six
          (36) month period  described  above in Paragraph IV A., the Bank shall
          pay to  the  Director  Retirement  Benefit  Payments  equal  to  three
          thousand  seven  dollars  per  month  ($3,007)  until the death of the
          Director. Monthly payments shall increase by two percent at the end of
          each calendar year.

V.   DIRECTOR BENEFITS - EARLY RETIREMENT AGE

     The Director shall have the right to retire on a date which  constitutes an
     Early Retirement Date as defined  previously in Subparagraph III. D. In the
     event the Director elects Early Retirement,  the Director shall be entitled
     to be paid  Director  Retirement  Benefits  equal to the "Early  Retirement
     Benefit"  applicable for the calendar year in which the Director retires as
     specified in Schedule  "A". The benefit  shall be payable in  substantially
     equal monthly  installments on the first day of each month,  beginning with
     the month  following the month the Director  Retires (or on such later date
     as may be mutually  agreed upon by the  Director and the Bank in advance of
     such Early Retirement), payable until the Director's death.

VI.  DIRECTOR DEATH BENEFITS - NORMAL RETIREMENT AGE

     In the event the Director Retires on or after the Normal Retirement Age and
     dies before receiving a total of thirty-six (36) monthly Director  Emeritus
     Benefits and twenty-four (24) monthly  Director  Retirement  Benefits,  the
     Bank shall  continue such monthly  payments  until the full number of sixty
     (60) monthly  payments have been made, or until the death of the Director's
     surviving  spouse,  whichever  occurs earlier.  Said payments due hereunder
     shall  begin  the  first  day of the month  following  the  decease  of the
     Director.

VII. DIRECTOR DEATH BENEFITS - EARLY RETIREMENT AGE

     In the  event  the  Director  Retires  on a  date  that  constitutes  Early
     Retirement and dies before receiving a total of sixty (60) monthly Director
     Retirement  Benefits,  the Bank shall continue such monthly  payments until
     the full number of sixty (60) monthly payments have been made, or until the
     death of the Director's  surviving spouse,  whichever occurs earlier.  Said
     payments due hereunder shall begin the first day of the month following the
     decease of the Director.
<PAGE>

VIII. benefit accounting

     The Bank shall  account for this benefit  using the  regulatory  accounting
     principles  of  the  Bank's  primary  federal  regulator.  The  Bank  shall
     establish an accrued  liability  retirement  account for the Director  into
     which appropriate reserves shall be accrued.

IX.  vesting

     Director's  interest in the benefits that are the subject of this Agreement
     shall be subject to a vesting schedule described in Schedule A.

X.   other termination of SERVICE

     A.   Voluntary  Resignation or failure to be re-elected:  In the event that
          the  service  of  the  Director  shall  terminate  by  the  Director's
          voluntary action, or by the Director's failure to be re-elected to the
          Board without cause, prior to the Retirement Date described in III. A.
          above,  then  this  Agreement  shall  terminate  upon the date of such
          termination  of  service  and the Bank  shall  pay to the  Director  a
          monthly  amount  equal  to  one-twelfth  (1/12)  times  the  "Director
          Retirement  Benefit" as  described  in Schedule A and earned as of the
          date of termination.  Such benefits shall be payable commencing on the
          first of the month  after the  Director  reaches  age 68 and  continue
          until the death of the Director.  Monthly  payments  shall increase by
          two percent at the end of each calendar year.

          In the event the  Director's  death should occur after such  severance
          but prior to the  completion of the monthly  payments  provided for in
          this Paragraph IX, the Bank shall continue such monthly payments until
          a total of sixty (60) monthly  payments  have been made,  or until the
          death of the Director's  surviving  spouse,  whichever occurs earlier.
          Said  payments  due  hereunder  shall begin the first day of the month
          following the decease of the Director.

     B.   Removal for Cause:  "Removal for Cause"  shall  include the removal of
          the  Director   because  of  the   Director's   personal   dishonesty,
          incompetence,  willful misconduct,  breach of fiduciary duty involving
          personal  profit,  willful  violation of any law,  rule, or regulation
          (other  than  traffic   violations  or  similar   offenses)  or  final
          cease-and-desist order. Notwithstanding the foregoing,  Director shall
          not be deemed to have been  removed  for Cause  unless and until there
          shall have been delivered to the Director a copy of a resolution  duly
          adopted by the affirmative vote of not less than  three-fourths of the
          remaining  members of the Board at a meeting  of the Board  called and
          held for that  purpose  (after  reasonable  notice to Director  and an
          opportunity,  together  with  counsel,  to be heard before the Board),
          finding that in the good faith opinion of the Board,  the Director was
          guilty of conduct  justifying  removal  for Cause and  specifying  the
          reasons  thereof.  The  Director  shall not have the right to  receive
          compensation  or other  benefits  for any period after the removal for
          Cause. All rights under this Agreement shall be forfeited,  whether or
          not vested.  Any stock options granted to the Director under any stock
          option  plan or any  unvested  awards  granted  under any other  stock
          benefit plan of the Bank,  or any  subsidiary  or  affiliate  thereof,
          shall become null and void effective upon Director's receipt of Notice
          of Removal for Cause pursuant to paragraph  IX(ii)  hereof,  and shall
          not be  exercisable  by the  Director at any time  subsequent  to such
          Removal for Cause.

     C.   Payments in the Event of Disability Prior to Retirement.  In the event
          the Director  becomes Disabled at any time after the Effective Date of
          this Agreement but prior to Retirement, the Director shall be entitled
          to be  paid  as a lump  sum  the  "Disability  Benefit"  specified  in
          Schedule "A" as of the date of the  disability.  The lump sum shall be
          payable  60 days from the date the  Employer  has  received  a written
          request to commence benefits,  along with  documentation  showing that
          the Employee has become  Disabled.  Once the lump sum payment has been
          made,  this  Agreement  is  terminated,  and the Bank  has no  further
          obligation to the Director or the  Director's  surviving  spouse under
          this plan.

          The term  "Disability" or "Disabled" shall have the same meaning given
          such terms in any policy of  disability  insurance  maintained  by the
          Employer for the benefit of its employees  including the Director.  In
          the absence of such a policy which extends coverage to the Director in
          the event of disability, the terms shall mean bodily injury or disease
          (mental or  physical)  which  wholly  and  continuously  prevents  the
          performance of the Employee's  duties to the Employer for at least one
          hundred twenty (120) days.

XI.  CHANGE OF CONTROL

          A "Change in Control" of the Bank or of Klamath First Federal  Savings
          and Loan Association (the  "Association")  shall be deemed to occur if
          and when (a) an offer or other than the Bank  purchases  shares of the
          common  stock of the Bank or the  Association  pursuant to a tender or
          exchange  offer for such shares,  (b) any person (as such term is used
          in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
          is or  becomes  the  beneficial  owner,  directly  or  indirectly,  of
          securities of the Bank or the Association  representing 25% or more of
          the combined voting power of the Bank's then  outstanding  securities,
          (c) the  membership  of the  board  of  directors  of the  Bank or the
          Association changes as the result of a contested  election,  such that
          individuals  who were  directors at the  beginning of any  twenty-four
          month period (whether commencing before or after the effective date of
          this  Agreement) do not  constitute a majority of the Board at the end
          of such period,  or (d)  shareholders  of the Bank or the  Association
          approve  a  merger,  consolidation,  sale  or  disposition  of  all or
          substantially all of the Bank's or the Association's assets, or a plan
          of  partial  or  complete  liquidation.   For  the  purposes  of  this
          Agreement,  transfers  made on account  of deaths or gifts,  transfers
          between  family  members or transfers to a qualified  retirement  plan
          maintained by the Bank or the Association,  shall not be considered in
          determining whether there has been a change in control.

          Upon a Change  of  Control,  if the  Director  subsequently  suffers a
          Termination of Service  (voluntary or involuntary),  except for cause,
          then the Director  shall be paid Director  Retirement  Benefits of two
          thousand eight hundred thirty four ($2,834) per month, commencing with
          the  Retirement   Date  specified  in  paragraph  III.  C.  above  and
          continuing  until  the  death  of  the  Director.  Alternatively,  the
          Director  may elect to receive the "Early  Retirement  Benefit:  After
          Change in  Control"  as  specified  in the  Schedule A, as of the date
          selected for early  retirement.  However,  if the Director dies before
          sixty monthly  payments have been made,  the Bank shall  continue such
          monthly  payments  until a total of sixty (60) monthly  payments  have
          been  made,  or until the death of the  Director's  surviving  spouse,
          whichever  occurs earlier.  Monthly  payments will be increased by two
          percent at the end of each calendar year.  Director  Emeritus Benefits
          provided  for in  paragraph VI above shall not be paid if the Director
          receives  benefits  pursuant  to  termination  following  a Change  in
          Control.

XII. restrictions on funding

          The Bank shall have no obligation to set aside, earmark or entrust any
          fund or money with which to pay its  obligations  under this  Director
          Plan.  The  Directors  or their  surviving  spouse shall be and remain
          simply a general  creditor of the Bank in the same manner as any other
          creditor having a general claim for matured and unpaid compensation.

          The Bank  reserves  the absolute  right,  at its sole  discretion,  to
          either fund the  obligations  undertaken  by this  Director Plan or to
          refrain from funding the same and to determine the extent,  nature and
          method of such  funding.  Should the Bank elect to fund this  Director
          Plan,  in whole or in part,  through the  purchase of life  insurance,
          mutual funds, disability policies or annuities,  the Bank reserves the
          absolute right, in its sole  discretion,  to terminate such funding at
          any time, in whole or in part. At no time shall any Director be deemed
          to have any lien or right,  title or  interest  in or to any  specific
          funding investment or assets of the Bank.

XIII. MISCELLANEOUS

          A.   Status as an Unsecured General Creditor: Notwithstanding anything
               contained herein to the contrary:  (i) neither the Director,  nor
               the Director's  spouse shall have any legal or equitable  rights,
               interests,  or claims in or to any specific property or assets of
               the Bank 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
               Director or the Director's  spouse 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 Director and the Director's  spouse shall be
               unsecured  general  creditors  with respect to any benefits which
               may be payable under the terms of this Agreement.

               Notwithstanding  the above, the Director and the Bank acknowledge
               and agree  that,  in the event of a Change in Control  and at the
               written request of the Director,  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 Director or his beneficiaries
               in such manner and at such times as specified in this Agreement.

          B.   Binding Obligation of the Bank and any Successor in Interest: The
               Bank shall not merge or consolidate  into or with another bank or
               sell  substantially  all of its assets to another  bank,  firm or
               person  until  such  bank,  firm or person  expressly  agree,  in
               writing,  to assume and discharge the duties and  obligations  of
               the Bank under this  Director  Plan.  This Director Plan shall be
               binding upon the parties hereto, their successors, beneficiaries,
               heirs and personal representatives.

          C.   Amendment or Revocation:  It is agreed by and between the parties
               hereto that,  during the lifetime of the Director,  this Director
               Plan may be amended or revoked at any time or times,  in whole or
               in part,  by the mutual  written  consent of the Director and the
               Bank.

          D.   Gender:  Whenever  in this  Director  Plan  words are used in the
               masculine or neuter  gender,  they shall be read and construed as
               in the masculine, feminine or neuter gender, whenever they should
               so apply.

          E.   Effect on Other Bank  Benefit  Plans:  Nothing  contained in this
               Director   Plan  shall  affect  the  right  of  the  Director  to
               participate  in or be covered by any  qualified or  non-qualified
               pension,  profit-sharing,  group,  bonus  or  other  supplemental
               compensation  or fringe  benefit plan  constituting a part of the
               Bank's existing or future  compensation  structure.  However,  in
               connection  with the  establishment  of this Director  Plan,  the
               Director is waiving any rights  under the Klamath  First  Federal
               Savings and Loan Association  Director Emeritus Plan dated August
               20, 1996, which waiver is further documented in Schedule B.

          F.   Headings:  Headings and  subheadings  in this  Director  Plan are
               inserted  for  reference  and  convenience  only and shall not be
               deemed a part of this Director Plan.

          G.   Applicable Law: The validity and interpretation of this Agreement
               shall be governed by the laws of the State of Oregon.

          H.   12  U.S.C.  Sec.  1828(k):  Any  payments  made  to the  Director
               pursuant to this Director Plan, or otherwise,  are subject to and
               conditioned upon their compliance with 12 U.S.C.  Sec. 1828(k) or
               any regulations promulgated thereunder.

          I.   Partial  Invalidity:   If  any  term,  provision,   covenant,  or
               condition of this Director Plan 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 Director  Plan shall remain in full force
               and effect notwithstanding such partial invalidity.

          J.   Continuation as Director: Neither this Agreement nor the payments
               of any  benefits  hereunder  shall be  construed as giving to the
               Director  any  right to be  retained  as a member of the Board of
               Directors of the Bank.

XIV. ERISA PROVISION

          A.   Named Fiduciary and Plan Administrator:  The "Named Fiduciary and
               Plan  Administrator" of this Director Plan shall be Klamath First
               Bancorp,  Inc., until its resignation or removal by the Board. As
               Named  Fiduciary  and  Plan  Administrator,  the  Bank  shall  be
               responsible for the management, control and administration of the
               Director Plan. The Named Fiduciary may delegate to others certain
               aspects of the management and operation  responsibilities  of the
               Director  Plan  including  the  employment  of  advisors  and the
               delegation of ministerial duties to qualified individuals.

          B.   Claims Procedure and  Arbitration:  In the event a dispute arises
               over benefits  under this Director Plan and benefits are not paid
               to the Director  (or to the  Director's  surviving  spouse in the
               case of the  Director's  death) 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 sixty (60) 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,  it shall
               provide  in  writing  within  sixty  (60) days of receipt of such
               claim its  specific  reasons for such  denial,  reference  to the
               provisions  of this  Director Plan 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 a further review of
               the claim  denial is desired.  A claim shall be deemed  denied if
               the  Named  Fiduciary  and  Plan  Administrator  fail to take any
               action within the aforesaid sixty-day period. If claimants desire
               a second  review they shall notify the Named  Fiduciary  and Plan
               Administrator  in  writing  within  sixty  (60) days of the first
               claim  denial.  Claimants  may review this  Director  Plan or any
               documents  relating  thereto  and submit any  written  issues and
               comments it 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  sixty (60)
               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.

               If  claimants  continue to dispute the benefit  denial based upon
               completed  performance  of this  Director Plan or the meaning and
               effect of the terms and  conditions  thereof,  then claimants may
               submit the dispute to an arbitrator  for final  arbitration.  The
               arbitrator  shall be selected by mutual agreement of the Bank and
               the claimants.  The arbitrator  shall operate under any generally
               recognized  set of  arbitration  rules.  The parties hereto agree
               that they and their heirs, personal  representatives,  successors
               and assigns  shall be bound by the  decision  of such  arbitrator
               with  respect to any  controversy  properly  submitted  to it for
               determination.

               Where a dispute arises as to the Bank's discharge of the Director
               "for  cause,"  such  dispute  shall   likewise  be  submitted  to
               arbitration as above described and the parties hereto agree to be
               bound by the decision thereunder.

          In witness  whereof,  the  parties  hereto  acknowledge  that each has
     carefully  read this  Agreement  and executed  the original  thereof on the
     first  day set  forth  hereinabove,  and  that,  upon  execution,  each has
     received a conforming copy.

                                            KLAMATH FIRST BANCORP, INC.
                                                     Klamath Falls, Oregon


/s/ Nina G. Drake                           By: /s/ Rodney Murray
Witness                                     Rodney N. Murray, Chairman of Board

/s/ Kathryn Rutledge                        /s/ James Bocchi
Witness                                     James Bocchi

<PAGE>

                                   SCHEDULE B

                          WAIVER OF PRIOR PLAN BENEFITS


          In  consideration  for the benefits made  available to the Director by
     this Agreement, the Director and agrees as follows:

               (a) The Director is party to that certain Agreement made with the
          Bank entitled the Klamath First Federal  Savings and Loan  Association
          Director  Emeritus  Plan  dated  August  20,  1996  (the  "Prior  Plan
          Agreement");

               (b) This  Agreement and the benefits  hereunder are provided as a
          substitute  for the Prior Plan  Agreement  and the  benefits  provided
          thereunder;

               (c) The Prior Plan  Agreement  and the  benefits  thereunder  are
          hereby terminated effective as of the date of this Agreement;

               (d) The Director  hereby waives and  relinquishes  for himself or
          herself, and his or her heirs,  beneficiaries,  legal representatives,
          agents,  successors and assigns,  any and all right,  entitlement  and
          interest  that the Director has or may have pursuant to the Prior Plan
          Agreement and the benefits thereunder;

               (e) The Director accepts the Director  Benefits  afforded by this
          Agreement in full and complete substitution for the benefits otherwise
          provided by the Prior Plan Agreement; and the Director acknowledges he
          (i) has had an  opportunity to consult with advisors of the Director's
          own  choice  in  determining  to enter  into this  Agreement  and this
          Waiver,  (ii)  understands  that  the  effect  of  this  Waiver  is to
          terminate,  waive and relinquish forever all rights,  entitlements and
          interests  that the  Director  has or may have  under the  Prior  Plan
          Agreement and the benefits  thereunder as a condition to receiving the
          benefits under this Agreement; and (iii) the Director is entering into
          this Agreement and this Waiver  voluntarily and with full appreciation
          of the effect of doing so.


Dated:  5/21/03                     /s/ James Bocchi
                                            James Bocchi

I consent to and agree to be bound by the foregoing Waiver:


/s/ Doralyn M Bocchi                /s/ Tina M Tedeschi
Director's Spouse                   Witness
<TABLE>
<CAPTION>
                                   SCHEDULE A
                    DIRECTOR BENEFIT SCHEDULE - JAMES BOCCHI

                            JOINED THE BOARD IN 1984
                          DATE OF BIRTH: June 24, 1924

                        DIRECTOR             DIRECTOR                          CHANGE IN           EARLY
                        EMERITUS            RETIREMENT                          CONTROL          RETIREMENT      DISABILITY
    RETIREMENT          BENEFIT:             BENEFIT:           EARLY           BENEFIT:          BENEFIT:        BENEFIT:
       ON OR             Payable             Payable         RETIREMENT         Payable         After Change    Payable Upon
      BEFORE        Upon Retirement (1)  Jan 1, 2006 (2)    BENEFIT: (3)   Upon Retirement (4)   in Control     Disability (5)

<S>                           <C>                <C>                  <C>           <C>                <C>          <C>
  January 1, 2003             $34,008            $36,084              na            $34,008            na                 $0
  January 1, 2004             $34,008            $36,084              na            $34,680            na            $92,364
  January 1, 2005             $34,008            $36,084              na            $35,374            na           $116,241
  January 1, 2006                  na            $36,084              na            $36,084            na           $145,498
  and thereafter                   na            $36,084              na            $36,084            na                 na
<FN>



1. The Director may retire and commence service as a Director Emeritus anytime after 1/1/2003.
    Payments continue for thirty-six (36) months and increase by 2% per year.
2. Retirement Plan Benefits commence following service as a Director Emeritus. Benefits increase by 2% per year after Retirement.
3. Early Retirement Benefits payable commencing as of Director's birthday in the Calendar Year listed assuming
    no interruption of service.  Benefits increase by 2% per year after Retirement.
4. Retirement Benefits payable upon attainment of age 65 following a Change in Control. No Director Emeritus
    benefits are payable under this circumstance.  Benefits increase by 2% per year after Retirement.
5. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty Balance
     as of disability date.  Disability Benefit value is determined by straight-line interpolation between the amounts
    showing in this column for Jan 1 of the year the disability occurs and Jan 1 of the following calendar year.
    Disability Benefit is paid as a lump sum, with no further benefits.  No post-retirement benefit.
</FN>
</TABLE>


/s/ James Bocchi     5/21/03     /s/ Rodney Murray                   6/3/03
James Bocchi         Date        Bank Officer                        Date
<PAGE>
                                                                 Exhibit 10(j).5
                       DIRECTOR FEE CONTINUATION AGREEMENT

     THIS AGREEMENT,  made and entered into this First Day of January,  2003, by
and between Klamath First Bancorp,  Inc., a thrift holding company  (hereinafter
referred to as the  "Bank"),  and Donald N.  Bauhofer,  a member of the Board of
Directors of the Bank (hereinafter referred to as the "Director").

                                   WITNESSETH:

     WHEREAS,  it is  the  consensus  of the  Board  of  Directors  (hereinafter
referred to as the "Board") that the Director's services to the Bank in the past
have been of exceptional  merit and have constituted an invaluable  contribution
to the general  welfare of the Bank and in bringing it to its present  status of
operating efficiency, and its present position in its field of activity;

     WHEREAS, the Director's  experience,  knowledge of the affairs of the Bank,
reputation,  and contacts in the industry are so valuable that  assurance of the
Director's  continued services is essential for the future growth and profits of
the  Bank  and it is in the  best  interests  of the  Bank to  arrange  terms of
continued  service for the Director so as to  reasonably  assure the  Director's
remaining in the Bank's service during the Director's  lifetime or until the age
of retirement;

     WHEREAS,  it is the  desire of the Bank  that the  Director's  services  be
retained as herein provided;

     WHEREAS, the Director is willing to continue to serve the Bank provided the
Bank agrees to pay the  Director or the  Director's  surviving  spouse,  certain
benefits in accordance with the terms and conditions hereinafter set forth;

     ACCORDINGLY,  it is the desire of the Bank and the  Director  to enter into
this Agreement  under which the Bank will agree to make certain  payments to the
Director at retirement or the  Director's  surviving  spouse in the event of the
Director's death pursuant to this Agreement;

     FURTHERMORE, it is the intent of the parties hereto that this Director Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental  retirement  benefits  for the  Director,  and to be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Director is fully advised of the
Bank's  financial  status  and has  had  substantial  input  in the  design  and
operation of this benefit plan; and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.   SERVICE

     The Director will continue to serve the Bank in such capacity and with such
     duties and responsibilities as may be assigned,  and with such compensation
     as may be  determined  from time to time by the Board of  Directors  of the
     Bank.

II.  FRINGE BENEFITS

     The fee continuation benefits provided by this Agreement are granted by the
     Bank as a  fringe  benefit  to the  Director  and  are not  part of any fee
     reduction plan or an arrangement  deferring a bonus or a fee increase.  The
     Director  has no option  to take any  current  payment  or bonus in lieu of
     these fee continuation benefits except as set forth hereinafter.

III. retirement date AND NORMAL RETIREMENT AGE

     A.   Retirement  Date: If the Director  continuously  serves the Bank,  the
          Director shall be eligible to retire from active service with the Bank
          upon the  attainment of age  fifty-five  (55) and receive the benefits
          described  below,  unless by action  of the  Board of  Directors  this
          period of active service shall be shortened or extended.

     B.   Normal  Retirement Age:  Normal  Retirement Age shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-eight (68).

     C.   Normal Retirement Age Following a Change in Control:  The term "Normal
          Retirement  Age Following a Change in Control"  shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-five (65).

     D.   Early Retirement Date: The term "Early Retirement Date" shall mean the
          Retirement  of the Director  from active  service with the Bank at the
          beginning of any month after the Director  achieves age 55, but before
          attaining age sixty-eight (68), [sixty-five (65) following a Change in
          Control].

IV.  DIRECTOR BENEFITS - normal retirement age

     A.   Director  Emeritus  Benefits:  Upon the  attainment of age  sixty-five
          (65),  the Director  shall be entitled to serve the Bank as a Director
          Emeritus in accordance with the procedures and policies established by
          the Board of Directors of the Bank applicable to service as a Director
          Emeritus. If the Director elects to serve as a Director Emeritus,  the
          Director  shall be paid two thousand eight hundred thirty four dollars
          ($2,834) per month for a period of thirty-six (36) months,  commencing
          with the Retirement Date and continuing until the earlier of the third
          anniversary  thereof,  or the death of the Director.  Monthly payments
          will be increased by two percent at the end of each calendar  year. If
          the Director declines or is unable to serve as Director Emeritus,  the
          Director  shall  forfeit  any  entitlement  to the  Director  Emeritus
          Benefits.

     B.   Director Retirement  Benefits:  After the expiration of the thirty-six
          (36) month period  described  above in Paragraph IV A., the Bank shall
          pay to  the  Director  Retirement  Benefit  Payments  equal  to  three
          thousand  seven  dollars  per  month  ($3,007)  until the death of the
          Director. Monthly payments shall increase by two percent at the end of
          each calendar year.

V.   DIRECTOR BENEFITS - EARLY RETIREMENT AGE

     The Director shall have the right to retire on a date which  constitutes an
     Early Retirement Date as defined  previously in Subparagraph III. D. In the
     event the Director elects Early Retirement,  the Director shall be entitled
     to be paid  Director  Retirement  Benefits  equal to the "Early  Retirement
     Benefit"  applicable for the calendar year in which the Director retires as
     specified in Schedule  "A". The benefit  shall be payable in  substantially
     equal monthly  installments on the first day of each month,  beginning with
     the month  following the month the Director  Retires (or on such later date
     as may be mutually  agreed upon by the  Director and the Bank in advance of
     such Early Retirement), payable until the Director's death.

VI.  DIRECTOR DEATH BENEFITS - NORMAL RETIREMENT AGE

     In the event the Director Retires on or after the Normal Retirement Age and
     dies before receiving a total of thirty-six (36) monthly Director  Emeritus
     Benefits and twenty-four (24) monthly  Director  Retirement  Benefits,  the
     Bank shall  continue such monthly  payments  until the full number of sixty
     (60) monthly  payments have been made, or until the death of the Director's
     surviving  spouse,  whichever  occurs earlier.  Said payments due hereunder
     shall  begin  the  first  day of the month  following  the  decease  of the
     Director.

VII. DIRECTOR DEATH BENEFITS - EARLY RETIREMENT AGE

     In the  event  the  Director  Retires  on a  date  that  constitutes  Early
     Retirement and dies before receiving a total of sixty (60) monthly Director
     Retirement  Benefits,  the Bank shall continue such monthly  payments until
     the full number of sixty (60) monthly payments have been made, or until the
     death of the Director's  surviving spouse,  whichever occurs earlier.  Said
     payments due hereunder shall begin the first day of the month following the
     decease of the Director.
<PAGE>

VIII. benefit accounting

     The Bank shall  account for this benefit  using the  regulatory  accounting
     principles  of  the  Bank's  primary  federal  regulator.  The  Bank  shall
     establish an accrued  liability  retirement  account for the Director  into
     which appropriate reserves shall be accrued.

IX.  vesting

     Director's  interest in the benefits that are the subject of this Agreement
     shall be subject to a vesting schedule described in Schedule A.

X.   other termination of SERVICE

     A.   Voluntary  Resignation or failure to be re-elected:  In the event that
          the  service  of  the  Director  shall  terminate  by  the  Director's
          voluntary action, or by the Director's failure to be re-elected to the
          Board without cause, prior to the Retirement Date described in III. A.
          above,  then  this  Agreement  shall  terminate  upon the date of such
          termination  of  service  and the Bank  shall  pay to the  Director  a
          monthly  amount  equal  to  one-twelfth  (1/12)  times  the  "Director
          Retirement  Benefit" as  described  in Schedule A and earned as of the
          date of termination.  Such benefits shall be payable commencing on the
          first of the month  after the  Director  reaches  age 68 and  continue
          until the death of the Director.  Monthly  payments  shall increase by
          two percent at the end of each calendar year.

          In the event the  Director's  death should occur after such  severance
          but prior to the  completion of the monthly  payments  provided for in
          this Paragraph IX, the Bank shall continue such monthly payments until
          a total of sixty (60) monthly  payments  have been made,  or until the
          death of the Director's  surviving  spouse,  whichever occurs earlier.
          Said  payments  due  hereunder  shall begin the first day of the month
          following the decease of the Director.

     B.   Removal for Cause:  "Removal for Cause"  shall  include the removal of
          the  Director   because  of  the   Director's   personal   dishonesty,
          incompetence,  willful misconduct,  breach of fiduciary duty involving
          personal  profit,  willful  violation of any law,  rule, or regulation
          (other  than  traffic   violations  or  similar   offenses)  or  final
          cease-and-desist order. Notwithstanding the foregoing,  Director shall
          not be deemed to have been  removed  for Cause  unless and until there
          shall have been delivered to the Director a copy of a resolution  duly
          adopted by the affirmative vote of not less than  three-fourths of the
          remaining  members of the Board at a meeting  of the Board  called and
          held for that  purpose  (after  reasonable  notice to Director  and an
          opportunity,  together  with  counsel,  to be heard before the Board),
          finding that in the good faith opinion of the Board,  the Director was
          guilty of conduct  justifying  removal  for Cause and  specifying  the
          reasons  thereof.  The  Director  shall not have the right to  receive
          compensation  or other  benefits  for any period after the removal for
          Cause. All rights under this Agreement shall be forfeited,  whether or
          not vested.  Any stock options granted to the Director under any stock
          option  plan or any  unvested  awards  granted  under any other  stock
          benefit plan of the Bank,  or any  subsidiary  or  affiliate  thereof,
          shall become null and void effective upon Director's receipt of Notice
          of Removal for Cause pursuant to paragraph  IX(ii)  hereof,  and shall
          not be  exercisable  by the  Director at any time  subsequent  to such
          Removal for Cause.

     C.   Payments in the Event of Disability Prior to Retirement.  In the event
          the Director  becomes Disabled at any time after the Effective Date of
          this Agreement but prior to Retirement, the Director shall be entitled
          to be  paid  as a lump  sum  the  "Disability  Benefit"  specified  in
          Schedule "A" as of the date of the  disability.  The lump sum shall be
          payable  60 days from the date the  Employer  has  received  a written
          request to commence benefits,  along with  documentation  showing that
          the Employee has become  Disabled.  Once the lump sum payment has been
          made,  this  Agreement  is  terminated,  and the Bank  has no  further
          obligation to the Director or the  Director's  surviving  spouse under
          this plan.

          The term  "Disability" or "Disabled" shall have the same meaning given
          such terms in any policy of  disability  insurance  maintained  by the
          Employer for the benefit of its employees  including the Director.  In
          the absence of such a policy which extends coverage to the Director in
          the event of disability, the terms shall mean bodily injury or disease
          (mental or  physical)  which  wholly  and  continuously  prevents  the
          performance of the Employee's  duties to the Employer for at least one
          hundred twenty (120) days.

XI.  CHANGE OF CONTROL

          A "Change in Control" of the Bank or of Klamath First Federal  Savings
          and Loan Association (the  "Association")  shall be deemed to occur if
          and when (a) an offer or other than the Bank  purchases  shares of the
          common  stock of the Bank or the  Association  pursuant to a tender or
          exchange  offer for such shares,  (b) any person (as such term is used
          in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
          is or  becomes  the  beneficial  owner,  directly  or  indirectly,  of
          securities of the Bank or the Association  representing 25% or more of
          the combined voting power of the Bank's then  outstanding  securities,
          (c) the  membership  of the  board  of  directors  of the  Bank or the
          Association changes as the result of a contested  election,  such that
          individuals  who were  directors at the  beginning of any  twenty-four
          month period (whether commencing before or after the effective date of
          this  Agreement) do not  constitute a majority of the Board at the end
          of such period,  or (d)  shareholders  of the Bank or the  Association
          approve  a  merger,  consolidation,  sale  or  disposition  of  all or
          substantially all of the Bank's or the Association's assets, or a plan
          of  partial  or  complete  liquidation.   For  the  purposes  of  this
          Agreement,  transfers  made on account  of deaths or gifts,  transfers
          between  family  members or transfers to a qualified  retirement  plan
          maintained by the Bank or the Association,  shall not be considered in
          determining whether there has been a change in control.

          Upon a Change  of  Control,  if the  Director  subsequently  suffers a
          Termination of Service  (voluntary or involuntary),  except for cause,
          then the Director  shall be paid Director  Retirement  Benefits of two
          thousand eight hundred thirty four ($2,834) per month, commencing with
          the  Retirement   Date  specified  in  paragraph  III.  C.  above  and
          continuing  until  the  death  of  the  Director.  Alternatively,  the
          Director  may elect to receive the "Early  Retirement  Benefit:  After
          Change in  Control"  as  specified  in the  Schedule A, as of the date
          selected for early  retirement.  However,  if the Director dies before
          sixty monthly  payments have been made,  the Bank shall  continue such
          monthly  payments  until a total of sixty (60) monthly  payments  have
          been  made,  or until the death of the  Director's  surviving  spouse,
          whichever  occurs earlier.  Monthly  payments will be increased by two
          percent at the end of each calendar year.  Director  Emeritus Benefits
          provided  for in  paragraph VI above shall not be paid if the Director
          receives  benefits  pursuant  to  termination  following  a Change  in
          Control.

XII. restrictions on funding

          The Bank shall have no obligation to set aside, earmark or entrust any
          fund or money with which to pay its  obligations  under this  Director
          Plan.  The  Directors  or their  surviving  spouse shall be and remain
          simply a general  creditor of the Bank in the same manner as any other
          creditor having a general claim for matured and unpaid compensation.

          The Bank  reserves  the absolute  right,  at its sole  discretion,  to
          either fund the  obligations  undertaken  by this  Director Plan or to
          refrain from funding the same and to determine the extent,  nature and
          method of such  funding.  Should the Bank elect to fund this  Director
          Plan,  in whole or in part,  through the  purchase of life  insurance,
          mutual funds, disability policies or annuities,  the Bank reserves the
          absolute right, in its sole  discretion,  to terminate such funding at
          any time, in whole or in part. At no time shall any Director be deemed
          to have any lien or right,  title or  interest  in or to any  specific
          funding investment or assets of the Bank.

XIII. MISCELLANEOUS

          A.   Status as an Unsecured General Creditor: Notwithstanding anything
               contained herein to the contrary:  (i) neither the Director,  nor
               the Director's  spouse shall have any legal or equitable  rights,
               interests,  or claims in or to any specific property or assets of
               the Bank 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
               Director or the Director's  spouse 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 Director and the Director's  spouse shall be
               unsecured  general  creditors  with respect to any benefits which
               may be payable under the terms of this Agreement.

               Notwithstanding  the above, the Director and the Bank acknowledge
               and agree  that,  in the event of a Change in Control  and at the
               written request of the Director,  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 Director or his beneficiaries
               in such manner and at such times as specified in this Agreement.

          B.   Binding Obligation of the Bank and any Successor in Interest: The
               Bank shall not merge or consolidate  into or with another bank or
               sell  substantially  all of its assets to another  bank,  firm or
               person  until  such  bank,  firm or person  expressly  agree,  in
               writing,  to assume and discharge the duties and  obligations  of
               the Bank under this  Director  Plan.  This Director Plan shall be
               binding upon the parties hereto, their successors, beneficiaries,
               heirs and personal representatives.

          C.   Amendment or Revocation:  It is agreed by and between the parties
               hereto that,  during the lifetime of the Director,  this Director
               Plan may be amended or revoked at any time or times,  in whole or
               in part,  by the mutual  written  consent of the Director and the
               Bank.

          D.   Gender:  Whenever  in this  Director  Plan  words are used in the
               masculine or neuter  gender,  they shall be read and construed as
               in the masculine, feminine or neuter gender, whenever they should
               so apply.

          E.   Effect on Other Bank  Benefit  Plans:  Nothing  contained in this
               Director   Plan  shall  affect  the  right  of  the  Director  to
               participate  in or be covered by any  qualified or  non-qualified
               pension,  profit-sharing,  group,  bonus  or  other  supplemental
               compensation  or fringe  benefit plan  constituting a part of the
               Bank's existing or future  compensation  structure.  However,  in
               connection  with the  establishment  of this Director  Plan,  the
               Director is waiving any rights  under the Klamath  First  Federal
               Savings and Loan Association  Director Emeritus Plan dated August
               20, 1996, which waiver is further documented in Schedule B.

          F.   Headings:  Headings and  subheadings  in this  Director  Plan are
               inserted  for  reference  and  convenience  only and shall not be
               deemed a part of this Director Plan.

          G.   Applicable Law: The validity and interpretation of this Agreement
               shall be governed by the laws of the State of Oregon.

          H.   12  U.S.C.  Sec.  1828(k):  Any  payments  made  to the  Director
               pursuant to this Director Plan, or otherwise,  are subject to and
               conditioned upon their compliance with 12 U.S.C.  Sec. 1828(k) or
               any regulations promulgated thereunder.

          I.   Partial  Invalidity:   If  any  term,  provision,   covenant,  or
               condition of this Director Plan 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 Director  Plan shall remain in full force
               and effect notwithstanding such partial invalidity.

          J.   Continuation as Director: Neither this Agreement nor the payments
               of any  benefits  hereunder  shall be  construed as giving to the
               Director  any  right to be  retained  as a member of the Board of
               Directors of the Bank.

XIV. ERISA PROVISION

          A.   Named Fiduciary and Plan Administrator:  The "Named Fiduciary and
               Plan  Administrator" of this Director Plan shall be Klamath First
               Bancorp,  Inc., until its resignation or removal by the Board. As
               Named  Fiduciary  and  Plan  Administrator,  the  Bank  shall  be
               responsible for the management, control and administration of the
               Director Plan. The Named Fiduciary may delegate to others certain
               aspects of the management and operation  responsibilities  of the
               Director  Plan  including  the  employment  of  advisors  and the
               delegation of ministerial duties to qualified individuals.

          B.   Claims Procedure and  Arbitration:  In the event a dispute arises
               over benefits  under this Director Plan and benefits are not paid
               to the Director  (or to the  Director's  surviving  spouse in the
               case of the  Director's  death) 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 sixty (60) 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,  it shall
               provide  in  writing  within  sixty  (60) days of receipt of such
               claim its  specific  reasons for such  denial,  reference  to the
               provisions  of this  Director Plan 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 a further review of
               the claim  denial is desired.  A claim shall be deemed  denied if
               the  Named  Fiduciary  and  Plan  Administrator  fail to take any
               action within the aforesaid sixty-day period. If claimants desire
               a second  review they shall notify the Named  Fiduciary  and Plan
               Administrator  in  writing  within  sixty  (60) days of the first
               claim  denial.  Claimants  may review this  Director  Plan or any
               documents  relating  thereto  and submit any  written  issues and
               comments it 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  sixty (60)
               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.

               If  claimants  continue to dispute the benefit  denial based upon
               completed  performance  of this  Director Plan or the meaning and
               effect of the terms and  conditions  thereof,  then claimants may
               submit the dispute to an arbitrator  for final  arbitration.  The
               arbitrator  shall be selected by mutual agreement of the Bank and
               the claimants.  The arbitrator  shall operate under any generally
               recognized  set of  arbitration  rules.  The parties hereto agree
               that they and their heirs, personal  representatives,  successors
               and assigns  shall be bound by the  decision  of such  arbitrator
               with  respect to any  controversy  properly  submitted  to it for
               determination.

               Where a dispute arises as to the Bank's discharge of the Director
               "for  cause,"  such  dispute  shall   likewise  be  submitted  to
               arbitration as above described and the parties hereto agree to be
               bound by the decision thereunder.

          In witness  whereof,  the  parties  hereto  acknowledge  that each has
     carefully  read this  Agreement  and executed  the original  thereof on the
     first  day set  forth  hereinabove,  and  that,  upon  execution,  each has
     received a conforming copy.

                                            KLAMATH FIRST BANCORP, INC.
                                                     Klamath Falls, Oregon


/s/ Nina G. Drake                           By: /s/ Rodney Murray
Witness                                     Rodney N. Murray, Chairman of Board

/s/ Nina G. Drake                           /s/ Donald Bauhofer
Witness                                     Donald Bauhofer
<PAGE>
<TABLE>
<CAPTION>
                                                           SCHEDULE A
                                                                     DIRECTOR BENEFIT SCHEDULE - DONALD BAUHOFER

                                                              JOINED THE BOARD IN 2002
                                                                    DATE OF BIRTH: March 8, 1951

                        DIRECTOR           DIRECTOR                          CHANGE IN           EARLY
                        EMERITUS          RETIREMENT                          CONTROL          RETIREMENT      DISABILITY
                        BENEFIT:           BENEFIT:           EARLY           BENEFIT:          BENEFIT:        BENEFIT:
      VESTING            Payable           Payable         RETIREMENT         Payable         After Change    Payable Upon
       DATE         April 1, 2016 (1) April 1, 2019 (2)   BENEFIT: (3)   April 1, 2016 (4)     in Control     Disability (5)
<S>                           <C>                <C>             <C>                <C>              <C>            <C>
  January 1, 2003                  $0                 $0              $0            $34,008               $0              $0
  January 1, 2004                  $0             $7,216              $0            $34,008               $0              $0
  January 1, 2005                  $0            $10,824              $0            $34,008               $0         $20,898
  January 1, 2006                  $0            $14,432          $3,175            $34,008          $13,600         $33,281
  January 1, 2007                  $0            $18,041          $5,051            $34,008          $15,640         $47,111
  January 1, 2008                  $0            $21,649          $7,361            $34,008          $17,680         $62,521
  January 1, 2009                  $0            $25,257         $10,103            $34,008          $19,720         $79,652
  January 1, 2010                  $0            $28,865         $13,278            $34,008          $21,760         $98,659
  January 1, 2011                  $0            $32,473         $16,886            $34,008          $23,800        $119,708
  January 1, 2012                  $0            $36,084         $20,927            $34,008          $25,840        $142,978
  January 1, 2013                  $0            $36,084         $23,092            $34,008          $27,880        $168,663
  January 1, 2014                  $0            $36,084         $25,257            $34,008          $29,920        $179,065
  January 1, 2015                  $0            $36,084         $27,422            $34,008          $31,960        $190,110
  January 1, 2016             $34,008            $36,084         $29,586            $34,008          $34,008        $201,835
  January 1, 2017             $34,008            $36,084         $31,751                 na               na        $214,284
  January 1, 2018             $34,008            $36,084         $33,916                 na               na        $227,500
  January 1, 2019                  na            $36,084              na                 na               na        $241,532
<FN>



1. In order to retire as a Director Emeritus, the Director must serve until attaining age sixty-five (65).
    Payments continue for thirty-six (36) months and increase by 2% per year.
2. Retirement Plan Benefits commence at age sixty-eight (68). Benefits increase by 2% per year after Retirement.
3. Early Retirement Benefits payable commencing as of Director's birthday in the Calendar Year listed assuming
    no interruption of service.  Benefits increase by 2% per year after Retirement.
4. Retirement Benefits payable upon attainment of age 65 following a Change in Control. No Director Emeritus
    benefits are payable under this circumstance.  Benefits increase by 2% per year after Retirement.
5. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty Balance
     as of disability date.  Disability Benefit value is determined by straight-line interpolation between the amounts
    showing in this column for Jan 1 of the year the disability occurs and Jan 1 of the following calendar year.
    Disability Benefit is paid as a lump sum, with no further benefits.  No post-retirement benefit.
</FN>
</TABLE>


/s/ Donald Bauhofer   5/29/03    /s/ Rodney Murray                   6/3/03
Donald Bauhofer       Date       Bank Officer                        Date
<PAGE>
                                                                 Exhibit 10(j).6

                       DIRECTOR FEE CONTINUATION AGREEMENT

     THIS AGREEMENT,  made and entered into this First Day of January,  2003, by
and between Klamath First Bancorp,  Inc., a thrift holding company  (hereinafter
referred  to as the  "Bank"),  and William C.  Dalton,  a member of the Board of
Directors of the Bank (hereinafter referred to as the "Director").

                                   WITNESSETH:

     WHEREAS,  it is  the  consensus  of the  Board  of  Directors  (hereinafter
referred to as the "Board") that the Director's services to the Bank in the past
have been of exceptional  merit and have constituted an invaluable  contribution
to the general  welfare of the Bank and in bringing it to its present  status of
operating efficiency, and its present position in its field of activity;

     WHEREAS, the Director's  experience,  knowledge of the affairs of the Bank,
reputation,  and contacts in the industry are so valuable that  assurance of the
Director's  continued services is essential for the future growth and profits of
the  Bank  and it is in the  best  interests  of the  Bank to  arrange  terms of
continued  service for the Director so as to  reasonably  assure the  Director's
remaining in the Bank's service during the Director's  lifetime or until the age
of retirement;

     WHEREAS,  it is the  desire of the Bank  that the  Director's  services  be
retained as herein provided;

     WHEREAS, the Director is willing to continue to serve the Bank provided the
Bank agrees to pay the  Director or the  Director's  surviving  spouse,  certain
benefits in accordance with the terms and conditions hereinafter set forth;

     ACCORDINGLY,  it is the desire of the Bank and the  Director  to enter into
this Agreement  under which the Bank will agree to make certain  payments to the
Director at retirement or the  Director's  surviving  spouse in the event of the
Director's death pursuant to this Agreement;

     FURTHERMORE, it is the intent of the parties hereto that this Director Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental  retirement  benefits  for the  Director,  and to be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Director is fully advised of the
Bank's  financial  status  and has  had  substantial  input  in the  design  and
operation of this benefit plan; and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.   SERVICE

     The Director will continue to serve the Bank in such capacity and with such
     duties and responsibilities as may be assigned,  and with such compensation
     as may be  determined  from time to time by the Board of  Directors  of the
     Bank.

II.  FRINGE BENEFITS

     The fee continuation benefits provided by this Agreement are granted by the
     Bank as a  fringe  benefit  to the  Director  and  are not  part of any fee
     reduction plan or an arrangement  deferring a bonus or a fee increase.  The
     Director  has no option  to take any  current  payment  or bonus in lieu of
     these fee continuation benefits except as set forth hereinafter.

III. retirement date AND NORMAL RETIREMENT AGE

     A.   Retirement  Date: If the Director  continuously  serves the Bank,  the
          Director shall be eligible to retire from active service with the Bank
          upon the  attainment of age  fifty-five  (55) and receive the benefits
          described  below,  unless by action  of the  Board of  Directors  this
          period of active service shall be shortened or extended.

     B.   Normal  Retirement Age:  Normal  Retirement Age shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-eight (68).

     C.   Normal Retirement Age Following a Change in Control:  The term "Normal
          Retirement  Age Following a Change in Control"  shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-five (65).

     D.   Early Retirement Date: The term "Early Retirement Date" shall mean the
          Retirement  of the Director  from active  service with the Bank at the
          beginning of any month after the Director  achieves age 55, but before
          attaining age sixty-eight (68), [sixty-five (65) following a Change in
          Control].

IV.  DIRECTOR BENEFITS - normal retirement age

     A.   Director  Emeritus  Benefits:  Upon the  attainment of age  sixty-five
          (65),  the Director  shall be entitled to serve the Bank as a Director
          Emeritus in accordance with the procedures and policies established by
          the Board of Directors of the Bank applicable to service as a Director
          Emeritus. If the Director elects to serve as a Director Emeritus,  the
          Director  shall be paid two thousand eight hundred thirty four dollars
          ($2,834) per month for a period of thirty-six (36) months,  commencing
          with the Retirement Date and continuing until the earlier of the third
          anniversary  thereof,  or the death of the Director.  Monthly payments
          will be increased by two percent at the end of each calendar  year. If
          the Director declines or is unable to serve as Director Emeritus,  the
          Director  shall  forfeit  any  entitlement  to the  Director  Emeritus
          Benefits.

     B.   Director Retirement  Benefits:  After the expiration of the thirty-six
          (36) month period  described  above in Paragraph IV A., the Bank shall
          pay to  the  Director  Retirement  Benefit  Payments  equal  to  three
          thousand  seven  dollars  per  month  ($3,007)  until the death of the
          Director. Monthly payments shall increase by two percent at the end of
          each calendar year.

V.   DIRECTOR BENEFITS - EARLY RETIREMENT AGE

     The Director shall have the right to retire on a date which  constitutes an
     Early Retirement Date as defined  previously in Subparagraph III. D. In the
     event the Director elects Early Retirement,  the Director shall be entitled
     to be paid  Director  Retirement  Benefits  equal to the "Early  Retirement
     Benefit"  applicable for the calendar year in which the Director retires as
     specified in Schedule  "A". The benefit  shall be payable in  substantially
     equal monthly  installments on the first day of each month,  beginning with
     the month  following the month the Director  Retires (or on such later date
     as may be mutually  agreed upon by the  Director and the Bank in advance of
     such Early Retirement), payable until the Director's death.

VI.  DIRECTOR DEATH BENEFITS - NORMAL RETIREMENT AGE

     In the event the Director Retires on or after the Normal Retirement Age and
     dies before receiving a total of thirty-six (36) monthly Director  Emeritus
     Benefits and twenty-four (24) monthly  Director  Retirement  Benefits,  the
     Bank shall  continue such monthly  payments  until the full number of sixty
     (60) monthly  payments have been made, or until the death of the Director's
     surviving  spouse,  whichever  occurs earlier.  Said payments due hereunder
     shall  begin  the  first  day of the month  following  the  decease  of the
     Director.

VII. DIRECTOR DEATH BENEFITS - EARLY RETIREMENT AGE

     In the  event  the  Director  Retires  on a  date  that  constitutes  Early
     Retirement and dies before receiving a total of sixty (60) monthly Director
     Retirement  Benefits,  the Bank shall continue such monthly  payments until
     the full number of sixty (60) monthly payments have been made, or until the
     death of the Director's  surviving spouse,  whichever occurs earlier.  Said
     payments due hereunder shall begin the first day of the month following the
     decease of the Director.
<PAGE>

VIII. benefit accounting

     The Bank shall  account for this benefit  using the  regulatory  accounting
     principles  of  the  Bank's  primary  federal  regulator.  The  Bank  shall
     establish an accrued  liability  retirement  account for the Director  into
     which appropriate reserves shall be accrued.

IX.  vesting

     Director's  interest in the benefits that are the subject of this Agreement
     shall be subject to a vesting schedule described in Schedule A.

X.   other termination of SERVICE

     A.   Voluntary  Resignation or failure to be re-elected:  In the event that
          the  service  of  the  Director  shall  terminate  by  the  Director's
          voluntary action, or by the Director's failure to be re-elected to the
          Board without cause, prior to the Retirement Date described in III. A.
          above,  then  this  Agreement  shall  terminate  upon the date of such
          termination  of  service  and the Bank  shall  pay to the  Director  a
          monthly  amount  equal  to  one-twelfth  (1/12)  times  the  "Director
          Retirement  Benefit" as  described  in Schedule A and earned as of the
          date of termination.  Such benefits shall be payable commencing on the
          first of the month  after the  Director  reaches  age 68 and  continue
          until the death of the Director.  Monthly  payments  shall increase by
          two percent at the end of each calendar year.

          In the event the  Director's  death should occur after such  severance
          but prior to the  completion of the monthly  payments  provided for in
          this Paragraph IX, the Bank shall continue such monthly payments until
          a total of sixty (60) monthly  payments  have been made,  or until the
          death of the Director's  surviving  spouse,  whichever occurs earlier.
          Said  payments  due  hereunder  shall begin the first day of the month
          following the decease of the Director.

     B.   Removal for Cause:  "Removal for Cause"  shall  include the removal of
          the  Director   because  of  the   Director's   personal   dishonesty,
          incompetence,  willful misconduct,  breach of fiduciary duty involving
          personal  profit,  willful  violation of any law,  rule, or regulation
          (other  than  traffic   violations  or  similar   offenses)  or  final
          cease-and-desist order. Notwithstanding the foregoing,  Director shall
          not be deemed to have been  removed  for Cause  unless and until there
          shall have been delivered to the Director a copy of a resolution  duly
          adopted by the affirmative vote of not less than  three-fourths of the
          remaining  members of the Board at a meeting  of the Board  called and
          held for that  purpose  (after  reasonable  notice to Director  and an
          opportunity,  together  with  counsel,  to be heard before the Board),
          finding that in the good faith opinion of the Board,  the Director was
          guilty of conduct  justifying  removal  for Cause and  specifying  the
          reasons  thereof.  The  Director  shall not have the right to  receive
          compensation  or other  benefits  for any period after the removal for
          Cause. All rights under this Agreement shall be forfeited,  whether or
          not vested.  Any stock options granted to the Director under any stock
          option  plan or any  unvested  awards  granted  under any other  stock
          benefit plan of the Bank,  or any  subsidiary  or  affiliate  thereof,
          shall become null and void effective upon Director's receipt of Notice
          of Removal for Cause pursuant to paragraph  IX(ii)  hereof,  and shall
          not be  exercisable  by the  Director at any time  subsequent  to such
          Removal for Cause.

     C.   Payments in the Event of Disability Prior to Retirement.  In the event
          the Director  becomes Disabled at any time after the Effective Date of
          this Agreement but prior to Retirement, the Director shall be entitled
          to be  paid  as a lump  sum  the  "Disability  Benefit"  specified  in
          Schedule "A" as of the date of the  disability.  The lump sum shall be
          payable  60 days from the date the  Employer  has  received  a written
          request to commence benefits,  along with  documentation  showing that
          the Employee has become  Disabled.  Once the lump sum payment has been
          made,  this  Agreement  is  terminated,  and the Bank  has no  further
          obligation to the Director or the  Director's  surviving  spouse under
          this plan.

          The term  "Disability" or "Disabled" shall have the same meaning given
          such terms in any policy of  disability  insurance  maintained  by the
          Employer for the benefit of its employees  including the Director.  In
          the absence of such a policy which extends coverage to the Director in
          the event of disability, the terms shall mean bodily injury or disease
          (mental or  physical)  which  wholly  and  continuously  prevents  the
          performance of the Employee's  duties to the Employer for at least one
          hundred twenty (120) days.

XI.  CHANGE OF CONTROL

          A "Change in Control" of the Bank or of Klamath First Federal  Savings
          and Loan Association (the  "Association")  shall be deemed to occur if
          and when (a) an offer or other than the Bank  purchases  shares of the
          common  stock of the Bank or the  Association  pursuant to a tender or
          exchange  offer for such shares,  (b) any person (as such term is used
          in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
          is or  becomes  the  beneficial  owner,  directly  or  indirectly,  of
          securities of the Bank or the Association  representing 25% or more of
          the combined voting power of the Bank's then  outstanding  securities,
          (c) the  membership  of the  board  of  directors  of the  Bank or the
          Association changes as the result of a contested  election,  such that
          individuals  who were  directors at the  beginning of any  twenty-four
          month period (whether commencing before or after the effective date of
          this  Agreement) do not  constitute a majority of the Board at the end
          of such period,  or (d)  shareholders  of the Bank or the  Association
          approve  a  merger,  consolidation,  sale  or  disposition  of  all or
          substantially all of the Bank's or the Association's assets, or a plan
          of  partial  or  complete  liquidation.   For  the  purposes  of  this
          Agreement,  transfers  made on account  of deaths or gifts,  transfers
          between  family  members or transfers to a qualified  retirement  plan
          maintained by the Bank or the Association,  shall not be considered in
          determining whether there has been a change in control.

          Upon a Change  of  Control,  if the  Director  subsequently  suffers a
          Termination of Service  (voluntary or involuntary),  except for cause,
          then the Director  shall be paid Director  Retirement  Benefits of two
          thousand eight hundred thirty four ($2,834) per month, commencing with
          the  Retirement   Date  specified  in  paragraph  III.  C.  above  and
          continuing  until  the  death  of  the  Director.  Alternatively,  the
          Director  may elect to receive the "Early  Retirement  Benefit:  After
          Change in  Control"  as  specified  in the  Schedule A, as of the date
          selected for early  retirement.  However,  if the Director dies before
          sixty monthly  payments have been made,  the Bank shall  continue such
          monthly  payments  until a total of sixty (60) monthly  payments  have
          been  made,  or until the death of the  Director's  surviving  spouse,
          whichever  occurs earlier.  Monthly  payments will be increased by two
          percent at the end of each calendar year.  Director  Emeritus Benefits
          provided  for in  paragraph VI above shall not be paid if the Director
          receives  benefits  pursuant  to  termination  following  a Change  in
          Control.

XII. restrictions on funding

          The Bank shall have no obligation to set aside, earmark or entrust any
          fund or money with which to pay its  obligations  under this  Director
          Plan.  The  Directors  or their  surviving  spouse shall be and remain
          simply a general  creditor of the Bank in the same manner as any other
          creditor having a general claim for matured and unpaid compensation.

          The Bank  reserves  the absolute  right,  at its sole  discretion,  to
          either fund the  obligations  undertaken  by this  Director Plan or to
          refrain from funding the same and to determine the extent,  nature and
          method of such  funding.  Should the Bank elect to fund this  Director
          Plan,  in whole or in part,  through the  purchase of life  insurance,
          mutual funds, disability policies or annuities,  the Bank reserves the
          absolute right, in its sole  discretion,  to terminate such funding at
          any time, in whole or in part. At no time shall any Director be deemed
          to have any lien or right,  title or  interest  in or to any  specific
          funding investment or assets of the Bank.

XIII. MISCELLANEOUS

          A.   Status as an Unsecured General Creditor: Notwithstanding anything
               contained herein to the contrary:  (i) neither the Director,  nor
               the Director's  spouse shall have any legal or equitable  rights,
               interests,  or claims in or to any specific property or assets of
               the Bank 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
               Director or the Director's  spouse 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 Director and the Director's  spouse shall be
               unsecured  general  creditors  with respect to any benefits which
               may be payable under the terms of this Agreement.

               Notwithstanding  the above, the Director and the Bank acknowledge
               and agree  that,  in the event of a Change in Control  and at the
               written request of the Director,  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 Director or his beneficiaries
               in such manner and at such times as specified in this Agreement.

          B.   Binding Obligation of the Bank and any Successor in Interest: The
               Bank shall not merge or consolidate  into or with another bank or
               sell  substantially  all of its assets to another  bank,  firm or
               person  until  such  bank,  firm or person  expressly  agree,  in
               writing,  to assume and discharge the duties and  obligations  of
               the Bank under this  Director  Plan.  This Director Plan shall be
               binding upon the parties hereto, their successors, beneficiaries,
               heirs and personal representatives.

          C.   Amendment or Revocation:  It is agreed by and between the parties
               hereto that,  during the lifetime of the Director,  this Director
               Plan may be amended or revoked at any time or times,  in whole or
               in part,  by the mutual  written  consent of the Director and the
               Bank.

          D.   Gender:  Whenever  in this  Director  Plan  words are used in the
               masculine or neuter  gender,  they shall be read and construed as
               in the masculine, feminine or neuter gender, whenever they should
               so apply.

          E.   Effect on Other Bank  Benefit  Plans:  Nothing  contained in this
               Director   Plan  shall  affect  the  right  of  the  Director  to
               participate  in or be covered by any  qualified or  non-qualified
               pension,  profit-sharing,  group,  bonus  or  other  supplemental
               compensation  or fringe  benefit plan  constituting a part of the
               Bank's existing or future  compensation  structure.  However,  in
               connection  with the  establishment  of this Director  Plan,  the
               Director is waiving any rights  under the Klamath  First  Federal
               Savings and Loan Association  Director Emeritus Plan dated August
               20, 1996, which waiver is further documented in Schedule B.

          F.   Headings:  Headings and  subheadings  in this  Director  Plan are
               inserted  for  reference  and  convenience  only and shall not be
               deemed a part of this Director Plan.

          G.   Applicable Law: The validity and interpretation of this Agreement
               shall be governed by the laws of the State of Oregon.

          H.   12  U.S.C.  Sec.  1828(k):  Any  payments  made  to the  Director
               pursuant to this Director Plan, or otherwise,  are subject to and
               conditioned upon their compliance with 12 U.S.C.  Sec. 1828(k) or
               any regulations promulgated thereunder.

          I.   Partial  Invalidity:   If  any  term,  provision,   covenant,  or
               condition of this Director Plan 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 Director  Plan shall remain in full force
               and effect notwithstanding such partial invalidity.

          J.   Continuation as Director: Neither this Agreement nor the payments
               of any  benefits  hereunder  shall be  construed as giving to the
               Director  any  right to be  retained  as a member of the Board of
               Directors of the Bank.

XIV. ERISA PROVISION

          A.   Named Fiduciary and Plan Administrator:  The "Named Fiduciary and
               Plan  Administrator" of this Director Plan shall be Klamath First
               Bancorp,  Inc., until its resignation or removal by the Board. As
               Named  Fiduciary  and  Plan  Administrator,  the  Bank  shall  be
               responsible for the management, control and administration of the
               Director Plan. The Named Fiduciary may delegate to others certain
               aspects of the management and operation  responsibilities  of the
               Director  Plan  including  the  employment  of  advisors  and the
               delegation of ministerial duties to qualified individuals.

          B.   Claims Procedure and  Arbitration:  In the event a dispute arises
               over benefits  under this Director Plan and benefits are not paid
               to the Director  (or to the  Director's  surviving  spouse in the
               case of the  Director's  death) 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 sixty (60) 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,  it shall
               provide  in  writing  within  sixty  (60) days of receipt of such
               claim its  specific  reasons for such  denial,  reference  to the
               provisions  of this  Director Plan 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 a further review of
               the claim  denial is desired.  A claim shall be deemed  denied if
               the  Named  Fiduciary  and  Plan  Administrator  fail to take any
               action within the aforesaid sixty-day period. If claimants desire
               a second  review they shall notify the Named  Fiduciary  and Plan
               Administrator  in  writing  within  sixty  (60) days of the first
               claim  denial.  Claimants  may review this  Director  Plan or any
               documents  relating  thereto  and submit any  written  issues and
               comments it 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  sixty (60)
               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.

               If  claimants  continue to dispute the benefit  denial based upon
               completed  performance  of this  Director Plan or the meaning and
               effect of the terms and  conditions  thereof,  then claimants may
               submit the dispute to an arbitrator  for final  arbitration.  The
               arbitrator  shall be selected by mutual agreement of the Bank and
               the claimants.  The arbitrator  shall operate under any generally
               recognized  set of  arbitration  rules.  The parties hereto agree
               that they and their heirs, personal  representatives,  successors
               and assigns  shall be bound by the  decision  of such  arbitrator
               with  respect to any  controversy  properly  submitted  to it for
               determination.

               Where a dispute arises as to the Bank's discharge of the Director
               "for  cause,"  such  dispute  shall   likewise  be  submitted  to
               arbitration as above described and the parties hereto agree to be
               bound by the decision thereunder.

          In witness  whereof,  the  parties  hereto  acknowledge  that each has
     carefully  read this  Agreement  and executed  the original  thereof on the
     first  day set  forth  hereinabove,  and  that,  upon  execution,  each has
     received a conforming copy.


                                            KLAMATH FIRST BANCORP, INC.
                                                     Klamath Falls, Oregon


/s/ Nina G. Drake                           By: /s/ Rodney Murray
Witness                                     Rodney N. Murray, Chairman of Board

/s/ Kathryn Rutledge                        /s/ William C. Dalton
Witness                                     William Dalton

<PAGE>

                                   SCHEDULE B

                          WAIVER OF PRIOR PLAN BENEFITS


          In  consideration  for the benefits made  available to the Director by
     this Agreement, the Director and agrees as follows:

               (a) The Director is party to that certain Agreement made with the
          Bank entitled the Klamath First Federal  Savings and Loan  Association
          Director  Emeritus  Plan  dated  August  20,  1996  (the  "Prior  Plan
          Agreement");

               (b) This  Agreement and the benefits  hereunder are provided as a
          substitute  for the Prior Plan  Agreement  and the  benefits  provided
          thereunder;

               (c) The Prior Plan  Agreement  and the  benefits  thereunder  are
          hereby terminated effective as of the date of this Agreement;

               (d) The Director  hereby waives and  relinquishes  for himself or
          herself, and his or her heirs,  beneficiaries,  legal representatives,
          agents,  successors and assigns,  any and all right,  entitlement  and
          interest  that the Director has or may have pursuant to the Prior Plan
          Agreement and the benefits thereunder;

               (e) The Director accepts the Director  Benefits  afforded by this
          Agreement in full and complete substitution for the benefits otherwise
          provided by the Prior Plan Agreement; and the Director acknowledges he
          (i) has had an  opportunity to consult with advisors of the Director's
          own  choice  in  determining  to enter  into this  Agreement  and this
          Waiver,  (ii)  understands  that  the  effect  of  this  Waiver  is to
          terminate,  waive and relinquish forever all rights,  entitlements and
          interests  that the  Director  has or may have  under the  Prior  Plan
          Agreement and the benefits  thereunder as a condition to receiving the
          benefits under this Agreement; and (iii) the Director is entering into
          this Agreement and this Waiver  voluntarily and with full appreciation
          of the effect of doing so.


Dated:  5/21/03                     /s/ William C. Dalton
                                            William Dalton

I consent to and agree to be bound by the foregoing Waiver:


/s/ Joanne M. Dalton                Kathryn Rutledge
Director's Spouse                   Witness
<PAGE>
<TABLE>
<CAPTION>
                                                              SCHEDULE A
                                                                           DIRECTOR BENEFIT SCHEDULE - WILLIAM DALTON

                                                                   JOINED THE BOARD IN 1972
                                                                       DATE OF BIRTH: November 24, 1930

                         DIRECTOR               DIRECTOR                             CHANGE IN           EARLY
                         EMERITUS              RETIREMENT                             CONTROL         RETIREMENT      DISABILITY
    RETIREMENT           BENEFIT:               BENEFIT:          EARLY              BENEFIT:           BENEFIT:        BENEFIT:
      ON OR               Payable               Payable        RETIREMENT            Payable          After Change    Payable Upon
      BEFORE        Upon Retirement (1)     Jan 1, 2006 (2)  BENEFIT: (3)     Upon Retirement (4)     in Control    Disability (5)


<S>                              <C>                <C>                <C>                <C>                  <C>        <C>
 January 1, 2003                 $34,008            $36,084            na                 $34,008              na               $0
 January 1, 2004                 $34,008            $36,084            na                 $34,680              na         $125,069
 January 1, 2005                 $34,008            $36,084            na                 $35,374              na         $170,738
 January 1, 2006                      na            $36,084            na                 $36,084              na         $225,027
  and thereafter                      na            $36,084            na                 $36,084              na               na

<FN>


1. The Director may retire and commence service as a Director Emeritus anytime after 1/1/2003.
    Payments continue for thirty-six (36) months and increase by 2% per year.
2. Retirement Plan Benefits commence following service as a Director Emeritus. Benefits increase by 2% per year after Retirement.
3. Early Retirement Benefits payable commencing as of Director's birthday in the Calendar Year listed assuming
    no interruption of service.  Benefits increase by 2% per year after Retirement.
4. Retirement Benefits payable upon attainment of age 65 following a Change in Control. No Director Emeritus
    benefits are payable under this circumstance.  Benefits increase by 2% per year after Retirement.
5. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty Balance
     as of disability date.  Disability Benefit value is determined by straight-line interpolation between the amounts
    showing in this column for Jan 1 of the year the disability occurs and Jan 1 of the following calendar year.
    Disability Benefit is paid as a lump sum, with no further benefits.  No post-retirement benefit.
</FN>
</TABLE>


/s/ William C. Dalton    5/21/03     /s/ Rodney Murray                    6/3/03
William Dalton           Date        Bank Officer                         Date

<PAGE>
                                                                 Exhibit 10(j).7

                       DIRECTOR FEE CONTINUATION AGREEMENT

     THIS AGREEMENT,  made and entered into this First Day of January,  2003, by
and between Klamath First Bancorp,  Inc., a thrift holding company  (hereinafter
referred  to as the  "Bank"),  and  Dianne E.  Spires,  a member of the Board of
Directors of the Bank (hereinafter referred to as the "Director").

                                   WITNESSETH:

     WHEREAS,  it is  the  consensus  of the  Board  of  Directors  (hereinafter
referred to as the "Board") that the Director's services to the Bank in the past
have been of exceptional  merit and have constituted an invaluable  contribution
to the general  welfare of the Bank and in bringing it to its present  status of
operating efficiency, and its present position in its field of activity;

     WHEREAS, the Director's  experience,  knowledge of the affairs of the Bank,
reputation,  and contacts in the industry are so valuable that  assurance of the
Director's  continued services is essential for the future growth and profits of
the  Bank  and it is in the  best  interests  of the  Bank to  arrange  terms of
continued  service for the Director so as to  reasonably  assure the  Director's
remaining in the Bank's service during the Director's  lifetime or until the age
of retirement;

     WHEREAS,  it is the  desire of the Bank  that the  Director's  services  be
retained as herein provided;

     WHEREAS, the Director is willing to continue to serve the Bank provided the
Bank agrees to pay the  Director or the  Director's  surviving  spouse,  certain
benefits in accordance with the terms and conditions hereinafter set forth;

     ACCORDINGLY,  it is the desire of the Bank and the  Director  to enter into
this Agreement  under which the Bank will agree to make certain  payments to the
Director at retirement or the  Director's  surviving  spouse in the event of the
Director's death pursuant to this Agreement;

     FURTHERMORE, it is the intent of the parties hereto that this Director Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental  retirement  benefits  for the  Director,  and to be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Director is fully advised of the
Bank's  financial  status  and has  had  substantial  input  in the  design  and
operation of this benefit plan; and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.   SERVICE

     The Director will continue to serve the Bank in such capacity and with such
     duties and responsibilities as may be assigned,  and with such compensation
     as may be  determined  from time to time by the Board of  Directors  of the
     Bank.

II.  FRINGE BENEFITS

     The fee continuation benefits provided by this Agreement are granted by the
     Bank as a  fringe  benefit  to the  Director  and  are not  part of any fee
     reduction plan or an arrangement  deferring a bonus or a fee increase.  The
     Director  has no option  to take any  current  payment  or bonus in lieu of
     these fee continuation benefits except as set forth hereinafter.

III. retirement date AND NORMAL RETIREMENT AGE

     A.   Retirement  Date: If the Director  continuously  serves the Bank,  the
          Director shall be eligible to retire from active service with the Bank
          upon the  attainment of age  fifty-five  (55) and receive the benefits
          described  below,  unless by action  of the  Board of  Directors  this
          period of active service shall be shortened or extended.

     B.   Normal  Retirement Age:  Normal  Retirement Age shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-eight (68).

     C.   Normal Retirement Age Following a Change in Control:  The term "Normal
          Retirement  Age Following a Change in Control"  shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-five (65).

     D.   Early Retirement Date: The term "Early Retirement Date" shall mean the
          Retirement  of the Director  from active  service with the Bank at the
          beginning of any month after the Director  achieves age 55, but before
          attaining age sixty-eight (68), [sixty-five (65) following a Change in
          Control].

IV.  DIRECTOR BENEFITS - normal retirement age

     A.   Director  Emeritus  Benefits:  Upon the  attainment of age  sixty-five
          (65),  the Director  shall be entitled to serve the Bank as a Director
          Emeritus in accordance with the procedures and policies established by
          the Board of Directors of the Bank applicable to service as a Director
          Emeritus. If the Director elects to serve as a Director Emeritus,  the
          Director  shall be paid two thousand eight hundred thirty four dollars
          ($2,834) per month for a period of thirty-six (36) months,  commencing
          with the Retirement Date and continuing until the earlier of the third
          anniversary  thereof,  or the death of the Director.  Monthly payments
          will be increased by two percent at the end of each calendar  year. If
          the Director declines or is unable to serve as Director Emeritus,  the
          Director  shall  forfeit  any  entitlement  to the  Director  Emeritus
          Benefits.

     B.   Director Retirement  Benefits:  After the expiration of the thirty-six
          (36) month period  described  above in Paragraph IV A., the Bank shall
          pay to  the  Director  Retirement  Benefit  Payments  equal  to  three
          thousand  seven  dollars  per  month  ($3,007)  until the death of the
          Director. Monthly payments shall increase by two percent at the end of
          each calendar year.

V.   DIRECTOR BENEFITS - EARLY RETIREMENT AGE

     The Director shall have the right to retire on a date which  constitutes an
     Early Retirement Date as defined  previously in Subparagraph III. D. In the
     event the Director elects Early Retirement,  the Director shall be entitled
     to be paid  Director  Retirement  Benefits  equal to the "Early  Retirement
     Benefit"  applicable for the calendar year in which the Director retires as
     specified in Schedule  "A". The benefit  shall be payable in  substantially
     equal monthly  installments on the first day of each month,  beginning with
     the month  following the month the Director  Retires (or on such later date
     as may be mutually  agreed upon by the  Director and the Bank in advance of
     such Early Retirement), payable until the Director's death.

VI.  DIRECTOR DEATH BENEFITS - NORMAL RETIREMENT AGE

     In the event the Director Retires on or after the Normal Retirement Age and
     dies before receiving a total of thirty-six (36) monthly Director  Emeritus
     Benefits and twenty-four (24) monthly  Director  Retirement  Benefits,  the
     Bank shall  continue such monthly  payments  until the full number of sixty
     (60) monthly  payments have been made, or until the death of the Director's
     surviving  spouse,  whichever  occurs earlier.  Said payments due hereunder
     shall  begin  the  first  day of the month  following  the  decease  of the
     Director.

VII. DIRECTOR DEATH BENEFITS - EARLY RETIREMENT AGE

     In the  event  the  Director  Retires  on a  date  that  constitutes  Early
     Retirement and dies before receiving a total of sixty (60) monthly Director
     Retirement  Benefits,  the Bank shall continue such monthly  payments until
     the full number of sixty (60) monthly payments have been made, or until the
     death of the Director's  surviving spouse,  whichever occurs earlier.  Said
     payments due hereunder shall begin the first day of the month following the
     decease of the Director.
<PAGE>

VIII. benefit accounting

     The Bank shall  account for this benefit  using the  regulatory  accounting
     principles  of  the  Bank's  primary  federal  regulator.  The  Bank  shall
     establish an accrued  liability  retirement  account for the Director  into
     which appropriate reserves shall be accrued.

IX.  vesting

     Director's  interest in the benefits that are the subject of this Agreement
     shall be subject to a vesting schedule described in Schedule A.

X.   other termination of SERVICE

     A.   Voluntary  Resignation or failure to be re-elected:  In the event that
          the  service  of  the  Director  shall  terminate  by  the  Director's
          voluntary action, or by the Director's failure to be re-elected to the
          Board without cause, prior to the Retirement Date described in III. A.
          above,  then  this  Agreement  shall  terminate  upon the date of such
          termination  of  service  and the Bank  shall  pay to the  Director  a
          monthly  amount  equal  to  one-twelfth  (1/12)  times  the  "Director
          Retirement  Benefit" as  described  in Schedule A and earned as of the
          date of termination.  Such benefits shall be payable commencing on the
          first of the month  after the  Director  reaches  age 68 and  continue
          until the death of the Director.  Monthly  payments  shall increase by
          two percent at the end of each calendar year.

          In the event the  Director's  death should occur after such  severance
          but prior to the  completion of the monthly  payments  provided for in
          this Paragraph IX, the Bank shall continue such monthly payments until
          a total of sixty (60) monthly  payments  have been made,  or until the
          death of the Director's  surviving  spouse,  whichever occurs earlier.
          Said  payments  due  hereunder  shall begin the first day of the month
          following the decease of the Director.

     B.   Removal for Cause:  "Removal for Cause"  shall  include the removal of
          the  Director   because  of  the   Director's   personal   dishonesty,
          incompetence,  willful misconduct,  breach of fiduciary duty involving
          personal  profit,  willful  violation of any law,  rule, or regulation
          (other  than  traffic   violations  or  similar   offenses)  or  final
          cease-and-desist order. Notwithstanding the foregoing,  Director shall
          not be deemed to have been  removed  for Cause  unless and until there
          shall have been delivered to the Director a copy of a resolution  duly
          adopted by the affirmative vote of not less than  three-fourths of the
          remaining  members of the Board at a meeting  of the Board  called and
          held for that  purpose  (after  reasonable  notice to Director  and an
          opportunity,  together  with  counsel,  to be heard before the Board),
          finding that in the good faith opinion of the Board,  the Director was
          guilty of conduct  justifying  removal  for Cause and  specifying  the
          reasons  thereof.  The  Director  shall not have the right to  receive
          compensation  or other  benefits  for any period after the removal for
          Cause. All rights under this Agreement shall be forfeited,  whether or
          not vested.  Any stock options granted to the Director under any stock
          option  plan or any  unvested  awards  granted  under any other  stock
          benefit plan of the Bank,  or any  subsidiary  or  affiliate  thereof,
          shall become null and void effective upon Director's receipt of Notice
          of Removal for Cause pursuant to paragraph  IX(ii)  hereof,  and shall
          not be  exercisable  by the  Director at any time  subsequent  to such
          Removal for Cause.

     C.   Payments in the Event of Disability Prior to Retirement.  In the event
          the Director  becomes Disabled at any time after the Effective Date of
          this Agreement but prior to Retirement, the Director shall be entitled
          to be  paid  as a lump  sum  the  "Disability  Benefit"  specified  in
          Schedule "A" as of the date of the  disability.  The lump sum shall be
          payable  60 days from the date the  Employer  has  received  a written
          request to commence benefits,  along with  documentation  showing that
          the Employee has become  Disabled.  Once the lump sum payment has been
          made,  this  Agreement  is  terminated,  and the Bank  has no  further
          obligation to the Director or the  Director's  surviving  spouse under
          this plan.

          The term  "Disability" or "Disabled" shall have the same meaning given
          such terms in any policy of  disability  insurance  maintained  by the
          Employer for the benefit of its employees  including the Director.  In
          the absence of such a policy which extends coverage to the Director in
          the event of disability, the terms shall mean bodily injury or disease
          (mental or  physical)  which  wholly  and  continuously  prevents  the
          performance of the Employee's  duties to the Employer for at least one
          hundred twenty (120) days.

XI.  CHANGE OF CONTROL

          A "Change in Control" of the Bank or of Klamath First Federal  Savings
          and Loan Association (the  "Association")  shall be deemed to occur if
          and when (a) an offer or other than the Bank  purchases  shares of the
          common  stock of the Bank or the  Association  pursuant to a tender or
          exchange  offer for such shares,  (b) any person (as such term is used
          in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
          is or  becomes  the  beneficial  owner,  directly  or  indirectly,  of
          securities of the Bank or the Association  representing 25% or more of
          the combined voting power of the Bank's then  outstanding  securities,
          (c) the  membership  of the  board  of  directors  of the  Bank or the
          Association changes as the result of a contested  election,  such that
          individuals  who were  directors at the  beginning of any  twenty-four
          month period (whether commencing before or after the effective date of
          this  Agreement) do not  constitute a majority of the Board at the end
          of such period,  or (d)  shareholders  of the Bank or the  Association
          approve  a  merger,  consolidation,  sale  or  disposition  of  all or
          substantially all of the Bank's or the Association's assets, or a plan
          of  partial  or  complete  liquidation.   For  the  purposes  of  this
          Agreement,  transfers  made on account  of deaths or gifts,  transfers
          between  family  members or transfers to a qualified  retirement  plan
          maintained by the Bank or the Association,  shall not be considered in
          determining whether there has been a change in control.

          Upon a Change  of  Control,  if the  Director  subsequently  suffers a
          Termination of Service  (voluntary or involuntary),  except for cause,
          then the Director  shall be paid Director  Retirement  Benefits of two
          thousand eight hundred thirty four ($2,834) per month, commencing with
          the  Retirement   Date  specified  in  paragraph  III.  C.  above  and
          continuing  until  the  death  of  the  Director.  Alternatively,  the
          Director  may elect to receive the "Early  Retirement  Benefit:  After
          Change in  Control"  as  specified  in the  Schedule A, as of the date
          selected for early  retirement.  However,  if the Director dies before
          sixty monthly  payments have been made,  the Bank shall  continue such
          monthly  payments  until a total of sixty (60) monthly  payments  have
          been  made,  or until the death of the  Director's  surviving  spouse,
          whichever  occurs earlier.  Monthly  payments will be increased by two
          percent at the end of each calendar year.  Director  Emeritus Benefits
          provided  for in  paragraph VI above shall not be paid if the Director
          receives  benefits  pursuant  to  termination  following  a Change  in
          Control.

XII. restrictions on funding

          The Bank shall have no obligation to set aside, earmark or entrust any
          fund or money with which to pay its  obligations  under this  Director
          Plan.  The  Directors  or their  surviving  spouse shall be and remain
          simply a general  creditor of the Bank in the same manner as any other
          creditor having a general claim for matured and unpaid compensation.

          The Bank  reserves  the absolute  right,  at its sole  discretion,  to
          either fund the  obligations  undertaken  by this  Director Plan or to
          refrain from funding the same and to determine the extent,  nature and
          method of such  funding.  Should the Bank elect to fund this  Director
          Plan,  in whole or in part,  through the  purchase of life  insurance,
          mutual funds, disability policies or annuities,  the Bank reserves the
          absolute right, in its sole  discretion,  to terminate such funding at
          any time, in whole or in part. At no time shall any Director be deemed
          to have any lien or right,  title or  interest  in or to any  specific
          funding investment or assets of the Bank.

XIII. MISCELLANEOUS

          A.   Status as an Unsecured General Creditor: Notwithstanding anything
               contained herein to the contrary:  (i) neither the Director,  nor
               the Director's  spouse shall have any legal or equitable  rights,
               interests,  or claims in or to any specific property or assets of
               the Bank 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
               Director or the Director's  spouse 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 Director and the Director's  spouse shall be
               unsecured  general  creditors  with respect to any benefits which
               may be payable under the terms of this Agreement.

               Notwithstanding  the above, the Director and the Bank acknowledge
               and agree  that,  in the event of a Change in Control  and at the
               written request of the Director,  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 Director or his beneficiaries
               in such manner and at such times as specified in this Agreement.

          B.   Binding Obligation of the Bank and any Successor in Interest: The
               Bank shall not merge or consolidate  into or with another bank or
               sell  substantially  all of its assets to another  bank,  firm or
               person  until  such  bank,  firm or person  expressly  agree,  in
               writing,  to assume and discharge the duties and  obligations  of
               the Bank under this  Director  Plan.  This Director Plan shall be
               binding upon the parties hereto, their successors, beneficiaries,
               heirs and personal representatives.

          C.   Amendment or Revocation:  It is agreed by and between the parties
               hereto that,  during the lifetime of the Director,  this Director
               Plan may be amended or revoked at any time or times,  in whole or
               in part,  by the mutual  written  consent of the Director and the
               Bank.

          D.   Gender:  Whenever  in this  Director  Plan  words are used in the
               masculine or neuter  gender,  they shall be read and construed as
               in the masculine, feminine or neuter gender, whenever they should
               so apply.

          E.   Effect on Other Bank  Benefit  Plans:  Nothing  contained in this
               Director   Plan  shall  affect  the  right  of  the  Director  to
               participate  in or be covered by any  qualified or  non-qualified
               pension,  profit-sharing,  group,  bonus  or  other  supplemental
               compensation  or fringe  benefit plan  constituting a part of the
               Bank's existing or future  compensation  structure.  However,  in
               connection  with the  establishment  of this Director  Plan,  the
               Director is waiving any rights  under the Klamath  First  Federal
               Savings and Loan Association  Director Emeritus Plan dated August
               20, 1996, which waiver is further documented in Schedule B.

          F.   Headings:  Headings and  subheadings  in this  Director  Plan are
               inserted  for  reference  and  convenience  only and shall not be
               deemed a part of this Director Plan.

          G.   Applicable Law: The validity and interpretation of this Agreement
               shall be governed by the laws of the State of Oregon.

          H.   12  U.S.C.  Sec.  1828(k):  Any  payments  made  to the  Director
               pursuant to this Director Plan, or otherwise,  are subject to and
               conditioned upon their compliance with 12 U.S.C.  Sec. 1828(k) or
               any regulations promulgated thereunder.

          I.   Partial  Invalidity:   If  any  term,  provision,   covenant,  or
               condition of this Director Plan 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 Director  Plan shall remain in full force
               and effect notwithstanding such partial invalidity.

          J.   Continuation as Director: Neither this Agreement nor the payments
               of any  benefits  hereunder  shall be  construed as giving to the
               Director  any  right to be  retained  as a member of the Board of
               Directors of the Bank.

XIV. ERISA PROVISION

          A.   Named Fiduciary and Plan Administrator:  The "Named Fiduciary and
               Plan  Administrator" of this Director Plan shall be Klamath First
               Bancorp,  Inc., until its resignation or removal by the Board. As
               Named  Fiduciary  and  Plan  Administrator,  the  Bank  shall  be
               responsible for the management, control and administration of the
               Director Plan. The Named Fiduciary may delegate to others certain
               aspects of the management and operation  responsibilities  of the
               Director  Plan  including  the  employment  of  advisors  and the
               delegation of ministerial duties to qualified individuals.

          B.   Claims Procedure and  Arbitration:  In the event a dispute arises
               over benefits  under this Director Plan and benefits are not paid
               to the Director  (or to the  Director's  surviving  spouse in the
               case of the  Director's  death) 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 sixty (60) 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,  it shall
               provide  in  writing  within  sixty  (60) days of receipt of such
               claim its  specific  reasons for such  denial,  reference  to the
               provisions  of this  Director Plan 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 a further review of
               the claim  denial is desired.  A claim shall be deemed  denied if
               the  Named  Fiduciary  and  Plan  Administrator  fail to take any
               action within the aforesaid sixty-day period. If claimants desire
               a second  review they shall notify the Named  Fiduciary  and Plan
               Administrator  in  writing  within  sixty  (60) days of the first
               claim  denial.  Claimants  may review this  Director  Plan or any
               documents  relating  thereto  and submit any  written  issues and
               comments it 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  sixty (60)
               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.

               If  claimants  continue to dispute the benefit  denial based upon
               completed  performance  of this  Director Plan or the meaning and
               effect of the terms and  conditions  thereof,  then claimants may
               submit the dispute to an arbitrator  for final  arbitration.  The
               arbitrator  shall be selected by mutual agreement of the Bank and
               the claimants.  The arbitrator  shall operate under any generally
               recognized  set of  arbitration  rules.  The parties hereto agree
               that they and their heirs, personal  representatives,  successors
               and assigns  shall be bound by the  decision  of such  arbitrator
               with  respect to any  controversy  properly  submitted  to it for
               determination.

               Where a dispute arises as to the Bank's discharge of the Director
               "for  cause,"  such  dispute  shall   likewise  be  submitted  to
               arbitration as above described and the parties hereto agree to be
               bound by the decision thereunder.

          In witness  whereof,  the  parties  hereto  acknowledge  that each has
     carefully  read this  Agreement  and executed  the original  thereof on the
     first  day set  forth  hereinabove,  and  that,  upon  execution,  each has
     received a conforming copy.


                                            KLAMATH FIRST BANCORP, INC.
                                                     Klamath Falls, Oregon


/s/ Nina G. Drake                           By: /s/ Rodney Murray
Witness                                     Rodney N. Murray, Chairman of Board

/s/ Kathryn Rutledge                        /s/ Dianne E. Spires
Witness                                     Dianne Spires

<PAGE>

                                   SCHEDULE B

                          WAIVER OF PRIOR PLAN BENEFITS


          In  consideration  for the benefits made  available to the Director by
     this Agreement, the Director and agrees as follows:

               (a) The Director is party to that certain Agreement made with the
          Bank entitled the Klamath First Federal  Savings and Loan  Association
          Director  Emeritus  Plan  dated  August  20,  1996  (the  "Prior  Plan
          Agreement");

               (b) This  Agreement and the benefits  hereunder are provided as a
          substitute  for the Prior Plan  Agreement  and the  benefits  provided
          thereunder;

               (c) The Prior Plan  Agreement  and the  benefits  thereunder  are
          hereby terminated effective as of the date of this Agreement;

               (d) The Director  hereby waives and  relinquishes  for himself or
          herself, and his or her heirs,  beneficiaries,  legal representatives,
          agents,  successors and assigns,  any and all right,  entitlement  and
          interest  that the Director has or may have pursuant to the Prior Plan
          Agreement and the benefits thereunder;

               (e) The Director accepts the Director  Benefits  afforded by this
          Agreement in full and complete substitution for the benefits otherwise
          provided by the Prior Plan Agreement; and the Director acknowledges he
          (i) has had an  opportunity to consult with advisors of the Director's
          own  choice  in  determining  to enter  into this  Agreement  and this
          Waiver,  (ii)  understands  that  the  effect  of  this  Waiver  is to
          terminate,  waive and relinquish forever all rights,  entitlements and
          interests  that the  Director  has or may have  under the  Prior  Plan
          Agreement and the benefits  thereunder as a condition to receiving the
          benefits under this Agreement; and (iii) the Director is entering into
          this Agreement and this Waiver  voluntarily and with full appreciation
          of the effect of doing so.


Dated:  5/21/03                     /s/ Dianne E. Spires
                                    Dianne Spires

I consent to and agree to be bound by the foregoing Waiver:


/s/ Oliver Spires                   /s/ Janice Wachter
Director's Spouse                   Witness

<PAGE>
<TABLE>
<CAPTION>
                                                           SCHEDULE A
                                                                      DIRECTOR BENEFIT SCHEDULE - DIANNE SPIRES

                                                              JOINED THE BOARD IN 1997
                                                                     DATE OF BIRTH: MAY 30, 1954

                        DIRECTOR           DIRECTOR                          CHANGE IN           EARLY
                        EMERITUS          RETIREMENT                          CONTROL          RETIREMENT      DISABILITY
                        BENEFIT:           BENEFIT:           EARLY           BENEFIT:          BENEFIT:        BENEFIT:
      VESTING            Payable           Payable         RETIREMENT         Payable         After Change    Payable Upon
       DATE          Jun 1, 2019 (1)   Jun 1, 2022 (2)    BENEFIT: (3)    Jun 1, 2019 (4)      in Control     Disability (5)
<S>                           <C>                <C>             <C>                <C>              <C>            <C>
  January 1, 2003                  $0             $7,216              $0            $34,008               $0              $0
  January 1, 2004                  $0            $10,824              $0            $34,008               $0         $21,167
  January 1, 2005                  $0            $14,432              $0            $34,008               $0         $33,709
  January 1, 2006                  $0            $18,041              $0            $34,008               $0         $47,718
  January 1, 2007                  $0            $21,649              $0            $34,008               $0         $63,327
  January 1, 2008                  $0            $25,257              $0            $34,008               $0         $80,679
  January 1, 2009                  $0            $28,865          $6,350            $34,008          $13,600         $99,931
  January 1, 2010                  $0            $32,473          $9,092            $34,008          $15,640        $121,251
  January 1, 2011                  $0            $36,084         $12,268            $34,008          $17,680        $144,820
  January 1, 2012                  $0            $36,084         $14,432            $34,008          $19,720        $170,836
  January 1, 2013                  $0            $36,084         $16,597            $34,008          $21,760        $181,373
  January 1, 2014                  $0            $36,084         $18,762            $34,008          $23,800        $192,560
  January 1, 2015                  $0            $36,084         $20,927            $34,008          $25,840        $204,436
  January 1, 2016                  $0            $36,084         $23,092            $34,008          $27,880        $217,045
  January 1, 2017                  $0            $36,084         $25,257            $34,008          $29,920        $230,432
  January 1, 2018                  $0            $36,084         $27,422            $34,008          $31,960        $244,645
  January 1, 2019             $34,008            $36,084         $29,586            $34,008          $34,008        $259,734
  January 1, 2020             $34,008            $36,084         $31,751                 na               na        $275,754
  January 1, 2021             $34,008            $36,084         $33,916                 na               na        $292,762
  January 1, 2022                  na            $36,084              na                 na               na        $310,819
<FN>

1. In order to retire as a Director Emeritus, the Director must serve until attaining age sixty-five (65).
    Payments continue for thirty-six (36) months and increase by 2% per year.
2. Retirement Plan Benefits commence at age sixty-eight (68). Benefits increase by 2% per year after Retirement.
3. Early Retirement Benefits payable commencing as of Director's birthday in the Calendar Year listed assuming
    no interruption of service.  Benefits increase by 2% per year after Retirement.
4. Retirement Benefits payable upon attainment of age 65 following a Change in Control. No Director Emeritus
    benefits are payable under this circumstance.  Benefits increase by 2% per year after Retirement.
5. Accrued Liability Balance as of Jan 1 in the year specified.  Disability benefit value is the Accrued Liaibilty Balance
     as of disability date.  Disability Benefit value is determined by straight-line interpolation between the amounts
    showing in this column for Jan 1 of the year the disability occurs and Jan 1 of the following calendar year.
    Disability Benefit is paid as a lump sum, with no further benefits.  No post-retirement benefit.

</FN>
</TABLE>

/s/ Dianne E. Spires   5/21/03      /s/ Rodney Murray                   6/3/03
Dianne Spires          Date         Bank Officer                        Date
<PAGE>
                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                        KLAMATH FIRST BANCORP, INC.

Date:   August 15, 2003                 By: /s/ Kermit K. Houser
                                        -------------------------
                                        Kermit K. Houser, President and
                                        Chief Executive Officer


Date:   August 15, 2003                 By: /s/ Marshall J. Alexander
                                        ------------------------------
                                        Marshall J. Alexander, Executive Vice
                                        President and Chief Financial Officer