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EXHIBIT 10.2




NONQUALIFIED STOCK OPTION AGREEMENT




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



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






1. Terms of the Option.




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



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



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



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



2. Time of Exercise of Option.




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



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



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



3. Option Exercise Procedures.




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



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



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



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



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



4. Termination of the Option 




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



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



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



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



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



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5. Effect of Change of Control Transaction




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



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



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



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



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



6. Representations, Warranties and Covenants of the Optionee.




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



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



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



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



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



7. Miscellaneous Provisions




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



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



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



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



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



UMPQUA HOLDINGS CORPORATION




	 	 	 
	By:

	 	/s/ Daniel A. Sullivan
	 	 	 
	

	 	EVP/Chief Financial Officer






OPTIONEE:




	 	 	 
	/s/ Raymond P. Davis
	 





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NONQUALIFIED STOCK OPTION AGREEMENT

Vesting Schedule



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




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





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