Document:

EXECUTIVE EMPLOYMENT AGREEMENT

     This Executive  Employment Agreement (the "Agreement") is dated effective
as of April 19,  1999 (the  "Effective  Date"),  by and  between  Dolly  Lusty
("Executive") and Umpqua Holdings Corporation ("Umpqua").

     1.  EMPLOYMENT.  Umpqua,  either  directly  or one of  its  wholly  owned
subsidiaries,  employs the Executive and the Executive accepts that employment
on the terms and conditions contained in this Agreement.

     2. TERM.  Umpqua agrees to employ the Executive for a period of two years
commencing  on the  Effective  Date (the  "Term"),  unless that  employment is
terminated earlier in accordance with this Agreement.

     3.  OPTION  TO  EXTEND.  Umpqua  has the  option to  extend,  in its sole
discretion,  the  Executive's  employment for one additional year upon written
notice to the  Executive no less than 60 days prior to the  expiration  of the
Term.

     4.   DUTIES; POSITION.

          4.1   Position.   Executive   shall  be   employed  as  Senior  Vice
President/Credit  Administrator of South Umpqua Bank (the "Bank"), and as such
will have overall responsibility for the Bank's credit administration and such
other duties as may be  designated  by the President of Umpqua and will report
to the President of Umpqua.

          4.2  Obligations to Umpqua.

          (a) Executive  agrees that to the best of his ability and experience
     Executive  will at all times loyally and  conscientiously  perform all of
     the duties and obligations required of and from Executive pursuant to the
     express and implicit  terms of this Agreement and at the direction of the
     President of Umpqua.

          (b) Executive  agrees that Executive will devote all of his business
     and  professional  time and attention to the business  affairs of Umpqua.
     Executive  shall not be employed by any person  (including any individual
     or  entity)  other  than  Umpqua in  connection  with any other  business
     activity.

     5. BASE  COMPENSATION.  For  services  performed  under  this  Agreement,
Executive shall be entitled to a salary ("Base Salary") of a minimum of $6,250
per month together with perquisites provided to senior officers of Umpqua.

     6.  TERMINATION.  The  employment of Executive  shall  terminate upon the
occurrence of any one or more of the events in this Section 6.

          6.1 For  Cause.  Umpqua's  termination  of  Executive  for Cause (as
defined in Section 7.1 below) ("Termination For Cause").

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          6.2 Without Cause.  Umpqua's termination of Executive without Cause,
at any time at Umpqua's sole  discretion,  for any or no reason other than for
Cause ("Termination Without Cause").

          6.3 By New President/Chief  Executive Officer.  Umpqua's termination
of Executive within six (6) months following the initial date of employment of
a  President  and  Chief  Executive   Officer  other  than  Raymond  P.  Davis
("Termination by New President/CEO").

          6.4 For Good Reason.  Executive's termination of his employment with
Umpqua for Good  Reason (as  defined in Section  7.2 below)  within the 90-day
period immediately  following one of the events set forth in Section 7.2 below
("Termination For Good Reason").

          6.5 End of Term.  Upon the  expiration of the term of this Agreement
the  employment  of  Executive  shall  revert to  employment-at-will  and this
Agreement shall terminate,  unless this Agreement is renewed in writing by the
parties.

          6.6 Death or Disability.  Upon  Executive's  death or Disability (as
defined in Section 7.3 below).

     7.   DEFINITIONS.

          7.1  Cause.  For  the  purposes  of  this  Agreement,   "Cause"  for
Executive's  termination  will exist upon the occurrence of one or more of the
following events:

          (a) Dishonest or fraudulent conduct by Executive with respect to the
     performance of his duties with Umpqua;

          (b) Conduct by Executive  that  materially  discredits  Umpqua or is
     materially detrimental to the reputation of Umpqua,  including conviction
     or a plea of nolo  contendere of Executive of a felony or crime involving
     moral turpitude;

          (c)   Executive's   willful   misconduct  or  gross   negligence  in
     performance of his duties under this Agreement, including but not limited
     to Executive's  refusal to comply in any material  respect with the legal
     directives of the Board of Directors or the President and Chief Executive
     Officer;

          (d) An  order  from a state or  federal  banking  regulatory  agency
     requesting  or  requiring  removal of  Executive or a finding by any such
     agency that Executive's  performance threatens the safety or soundness of
     Umpqua or any of its subsidiaries;

          (e) Executive's  failure to materially  perform the duties set forth
     in Section 4 of this Agreement; or

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          (f) Breach of Executive's fiduciary duties to Umpqua.

          7.2 Good Reason.  For purposes of this Agreement,  "Good Reason" for
Executive's  termination  will exist upon the occurrence of one or more of the
following events:

          (a) A material  adverse change in Executive's  position causing such
     position to be of materially reduced stature or responsibility;

          (b) A reduction  of  Executive's  Base Salary  unless in  connection
     with,  and to the same degree as,  reductions  in the  salaries of all or
     substantially all similarly situated employees of Umpqua; or

          (c) An  unconsented  requirement  for  Executive  to  relocate  to a
     facility  or  location  more  than  50  miles  from  Executive's  current
     location.

          7.3 Disability.  For purposes of this Agreement,  "Disability" shall
mean that Executive has been unable to perform his duties under this Agreement
as a result of his  incapacity  due to  physical or mental  illness,  and such
inability,  which continues for at least 120 consecutive  calendar days or 150
calendar days during any consecutive  12-month period,  if shorter,  after its
commencement,  is determined to be total and permanent by a physician selected
by Umpqua and its insurers and  acceptable to Executive or  Executive's  legal
representative  (with such agreement on  acceptability of the physician not to
be unreasonably withheld).

     8. SEVERANCE  BENEFITS.  Executive shall be entitled to receive severance
benefits upon termination of employment only as set forth in this Section 8.

          8.1 Termination  Without Cause or For Good Reason. In the event of a
Termination  Without  Cause or  Termination  For Good Reason,  Executive  will
receive  payment  for all Base Salary and  benefits  accrued as of the date of
Executive's termination together with a payment of severance benefits equal to
six (6) months Base Salary.

          8.2 Termination by Reason of Death or Disability.  In the event of a
Termination by reason of death or Disability,  Executive will receive  payment
for all  Base  Salary  and  benefits  accrued  as of the  date of  Executive's
termination.

          8.3 Termination by New President/CEO.  In the event of a Termination
by New  President/CEO,  Executive will receive payment for all Base Salary and
benefits  accrued  as of the date of  termination  together  with a payment of
severance benefits equal to six (6) months Base Salary.

          8.4 Termination Relating to a Change in Control.

          (a) In the event that Executive is terminated in anticipation of, in
     connection  with, or within one hundred  eighty (180) days  following the
     closing date of a Change in Control and without  Cause,  then Umpqua,  or

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     its  successor  in  interest,  shall pay  Executive  all Base  Salary and
     benefits  accrued as of the date of  termination  together with severance
     benefits equal to two (2) years Base Salary.

          (b) In the event that Executive is terminated 180 days or more after
     the closing date of a Change in Control and without  Cause,  then Umpqua,
     or its  successor in interest,  shall pay  Executive  all Base Salary and
     benefits  accrued as of the date of  termination  together with severance
     equal to the greater of (i) an amount  equal to two (2) years Base Salary
     from the closing date of the Change in Control  minus the Base Salary for
     the  number of days  elapsed  since  the  closing  date of the  Change in
     Control or (ii) as otherwise provided in this Agreement.

          8.5 Section 280G.  All severance  payments made under this Agreement
must be within the limits set forth in Section  280G of the  Internal  Revenue
Code; if a payment would otherwise be an "excess parachute payment" as defined
in Section 280G,  the payment shall be reduced to avoid the  applicability  of
Section 280G.

     9. DEFINITION OF CHANGE IN CONTROL. For the purposes of this Agreement, a
"Change in Control" shall be deemed to have occurred when any of the following
events takes place:

          9.1 Acquisition of Fifty Percent or More of Voting Power. Any person
(including any individual or entity) or persons acting in concert  becomes the
beneficial owner of voting shares  representing fifty percent (50%) or more of
the voting power of Umpqua.

          9.2 Removal of  Directors.  A majority of the Board of  Directors of
Umpqua are removed  from office by a vote of the  shareholders  of Umpqua over
the recommendation of the Board of Directors then serving.

          9.3  Merger.  Umpqua  is a  party  to a plan  of  merger  or plan of
exchange and upon consummation of such plan, the shareholders of Umpqua do not
own or  continue  to own at least a majority  of the  shares of the  surviving
company.

     10.  ARBITRATION.  Any dispute or claim  arising out of or in  connection
with  this  Agreement  will be  finally  settled  by  binding  arbitration  in
Roseburg,  Oregon in  accordance  with the rules of the  American  Arbitration
Association by one  arbitrator  appointed in accordance  with said rules.  The
arbitrator shall apply Oregon law, without  reference to rules of conflicts of
law or rules of  statutory  arbitration,  to the  resolution  of any  dispute.
Judgment on the award  rendered by the  arbitrator may be entered in any court
having jurisdiction  thereof.  Notwithstanding the foregoing,  the parties may
apply to any  court of  competent  jurisdiction  for  preliminary  or  interim
equitable relief, or to compel arbitration in accordance with this Section 10,
without breach of this arbitration provision.

     11. CONFIDENTIAL INFORMATION.  The parties acknowledge that in the course
of Executive's  duties he will have access to and become familiar with certain
proprietary and confidential information of Umpqua and other information about
Umpqua  not  known  by  its  actual  or   potential   competitors.   Executive
acknowledges that such information  constitutes valuable,  special, and unique
assets of Umpqua's  business,  even though  such  information  may not be of a
technical  nature and may not be protected under trade secret or related laws.

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Executive  agrees that he will hold in a fiduciary  capacity  and will not use
for himself and will not reveal,  communicate, or divulge during the period of
his  employment  with  Umpqua  or at any time  thereafter,  and in any  manner
whatsoever, any such date and confidential information of any kind, nature, or
description concerning any matters affecting or relating to Umpqua's business,
its customers,  or its services, to any person, firm, entity, or company other
than Umpqua or persons,  firms,  entities,  or companies designated by Umpqua.
Executive agrees that all memoranda,  notes, records,  papers, customer files,
and other documents, and all copies thereof relating to Umpqua's operations or
business,  or matters related to any of Umpqua's customers,  some of which may
be prepared by  Executive,  and all objects  associated  therewith  in any way
obtained by Executive, shall be Umpqua's property.

     12. NOTICES.  All notices,  requests,  demands,  and other communications
provided  for by this  Agreement  will  be in  writing  and  shall  be  deemed
sufficient    upon   receipt,    when    delivered    personally   or   by   a
nationally-recognized  delivery  service (such as Federal  Express),  or three
business days after being deposited in the U.S. mail as certified mail, return
receipt  requested,  with postage prepaid,  if such notice is addressed to the
party  to be  notified  at such  party's  address  as set  forth  below  or as
subsequently modified by written notice.

           To Umpqua:     Umpqua Holdings Corporation
                          445 S.E. Main Street
                          Roseburg, Oregon 97470
                          Attention:President

           To Executive:  Dolly Lusty
                          P.O. Box 309
                          Roseburg, OR  97470

     13.  GENERAL PROVISIONS.

          13.1 Governing Law. The validity,  interpretation,  construction and
performance  of this  Agreement  shall be governed by the laws of the State of
Oregon, without giving effect to the principles of conflict of laws.

          13.2  Severability.  If one or more provisions of this Agreement are
held  to  be  unenforceable   under  applicable  law,  the  parties  agree  to
renegotiate  such  provision(s)  in good faith.  In the event that the parties
cannot  reach a  mutually  agreeable  and  enforceable  replacement  for  such
provision, then (i) such provision shall be excluded from this Agreement, (ii)
the balance of the Agreement  shall be interpreted as if such  provisions were
so excluded,  and (iii) the balance of the Agreement  shall be  enforceable in
accordance with its terms.

          13.3  Counterparts.  This Agreement may be executed in counterparts,
each of which  shall be deemed an  original,  but all of which  together  will
constitute one and the same instrument.

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          13.4 Entire Agreement. This Agreement constitutes the sole agreement
of the parties and  supersedes all oral  negotiations  and prior writings with
respect to the subject matter hereof.

          13.5 Waiver.  No waiver of any provision of this Agreement  shall be
valid unless in writing, signed by the party against whom the waiver is sought
to be  enforced.  The  waiver of any  breach of this  Agreement  or failure to
enforce any provision of this Agreement shall not waive any later breach.

          13.6  Assignment.  Executive shall not assign or transfer any of his
rights pursuant to this Agreement, wholly or partially, to any other person or
to delegate the performance of its duties under the terms of this Agreement.

          13.7  Attorneys'  Fees.  In the  event of any  arbitration  or legal
proceeding relating to this Agreement, the prevailing party in such proceeding
shall be entitled to recover reasonable attorneys' fees in such proceeding, or
any appeal  thereof,  to be set by the  arbitrators  or the court  without the
necessity of hearing testimony or receiving evidence, in addition to the costs
and disbursements allowed by law.

          14.  ADVICE OF COUNSEL.  EACH PARTY TO THIS  AGREEMENT  ACKNOWLEDGES
THAT, IN EXECUTING THIS AGREEMENT,  SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT  LEGAL  COUNSEL,  AND HAS READ AND UNDERSTOOD ALL OF
THE  TERMS AND  PROVISIONS  OF THIS  AGREEMENT.  THIS  AGREEMENT  SHALL NOT BE
CONSTRUED AGAINST ANY PARTY BE REASON OF THE DRAFTING OR PREPARATION HEREOF.

                                UMPQUA HOLDINGS CORPORATION

                                By: /s/ Raymond P. Davis
                                    -----------------------------------------
                                    Raymond P. Davis, Director, President and
                                        Chief Executive Officer

                                /s/ Dolly Lusty
                                ----------------------------------------------
                                Dolly Lusty

                                   10.4 - 6UMPQUA HOLDINGS CORPORATION

                          NON-QUALIFIED STOCK OPTION

      This  Non-Qualified  Stock  Option is granted  under the terms of Umpqua
Holdings  Corporation  Stock  Option  Plan  (the  "Plan"),  adopted  by Umpqua
Holdings  Corporation,  an Oregon corporation  ("Umpqua")  effective March 12,
1999 as the  successor  plan to the South  Umpqua State Bank 1995 Stock Option
Plan.  Unless otherwise  defined herein,  terms defined in the Plan shall have
the same defined meanings in this Option.

      The "Optionee"                      ______________________________

      Number of Shares of the             ______________________________
      Umpqua Common Stock

      "Exercise Price" per Share          $______________

      "Date of Grant"                     ______________________________

      "Expiration Date"                   ______________________________

1.    Terms of the Option.

      1.1 Grant of Option  Umpqua  hereby  grants to the  Optionee  the right,
privilege,  and option to purchase up to the number of shares indicated above,
subject  to  adjustment  as  hereinafter  set forth in Section  1.2 below,  of
Umpqua's Common Stock (the "Option Shares") at the Exercise Price per share as
indicated above (the "Option"). The Option may only be exercised as to a whole
number of shares of Common Stock.

      1.2. Adjustments Upon Changes in Capitalization. In the event of changes
in the outstanding  securities of Umpqua by reason of stock  dividends,  stock
splits, combinations,  reclassification of securities, exchanges of shares, or
reorganizations, the number and class of securities of Umpqua deliverable upon
the exercise of this Option and the  Exercise  Price under this Option will be
subject to  adjustment.  Adjustments  under this  Section  1.2 will be made by
Umpqua's  Board of Directors and their  determination  as to what  adjustments
will be made, and the extent thereof, will be final, binding, and conclusive.

      1.3  Status  of this  Option  as a  Non-Qualified  Stock  Option.  It is
intended by Umpqua that this  Option  will not qualify as an  incentive  stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.

      1.4  Nontransferability  of  Option.  This  Option and the rights of the
Optionee under this Option may not be transferred in any manner except by will
or by the laws of descent and distribution upon the death of the Optionee.

      1.5 Reservation of Shares. Umpqua agrees that at all times there will be
reserved  for issuance  upon  exercise of this 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.  This  Option  may only be
exercised in accordance  with the vesting  schedule,  terms and  conditions of
Appendix A hereto.

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      2.2 Effect of Unpaid  Leaves of Absence.  If at any time during the term
of this Option, the Optionee is on unpaid leave from Umpqua or any Subsidiary,
the  Option  may not be  exercised  during  such  unpaid  leave  and the dates
contained in Appendix A shall be extended by the length of such unpaid leave.

      2.3 Expiration and  Termination of Option.  This 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  Option.  To the extent that
this Option has not been exercised prior to the Expiration Date or any earlier
termination,  all further  rights to purchase  Option Shares  pursuant to this
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) may exercise this Option.

      3.2 Notice of Exercise.  A "Notice of  Exercise,"  on a form approved by
Umpqua at the time of  exercise,  must be signed  and  delivered  to  Umpqua's
corporate  Secretary or such other person as Umpqua may  designate at Umpqua's
principal  business  office.  Umpqua  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 this Option,  Umpqua 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 this  Option,  the
Notice of Exercise will 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
Umpqua.  A Notice of Exercise  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 may be made by check.  Umpqua, in its sole discretion,  may permit the
Exercise Price to be paid, in whole or in part, by the surrender to Umpqua for
cancellation  of other  securities  of  Umpqua  that  have  been  owned by the
Optionee for at least  six-months with a fair market value equal to the Option
Price for the number of shares so  purchased.  Securities  of Umpqua  that are
surrendered for cancellation will be valued at the publicly reported price for
the last sale on the last business day  preceding the day Umpqua  receives the
Notice of  Exercise,  or, if there are no  publicly  reported  prices for such
securities,  at the fair market value of such securities as determined in good
faith by Umpqua's  Board of Directors.  If the Exercise Price is being paid in
whole or in part by the delivery of other securities of Umpqua,  the Notice of
Exercise must be  accompanied by delivery of the  certificates  or instruments
representing  such other securities,  duly endorsed for  cancellation.  Umpqua
may, in its sole  discretion,  permit an Optionee to elect to pay the Exercise
Price by  authorizing  a third party to sell the Shares to be issued upon such
exercise (or, at least, a sufficient  portion  thereof) and  instructing  such
third  party to  immediately  remit  to  Umpqua a  sufficient  portion  of the
proceeds from such sale to Umpqua to pay the Exercise Price and the entire tax
withholding resulting from such exercise.

      3.4 Payment of Tax  Withholding  Amounts.  The Optionee  must,  upon the
exercise of any portion of this Option, either with the delivery of the Notice
of Exercise or upon  notification  by Umpqua of the amount due,  pay to Umpqua
the  amounts,  as  reasonably  determined  by  Umpqua,  necessary  to  satisfy
applicable  federal,  state  and  local  tax  withholding  requirements  ("Tax
Withholding").  Payment of such Tax Withholding by the Optionee may be made by
check,  by delivery of other  securities  of Umpqua or by the  application  of
Shares that could be received upon exercise of an Option,  or shares of Common
Stock which could be received  upon  exercise of any other stock option issued
by Umpqua,  by the Optionee so notifying Umpqua at the time of delivery of the
Notice of  Exercise.  This  application  of Shares  shall be  accomplished  by
crediting toward the Optionee's  withholding obligation the difference between
the fair market value of Umpqua's  Common Stock and the exercise  price of the
Option or other stock option  specified  in the  Optionee's  notice.  Any such

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application  shall be  considered  an  exercise  of the Option or other  stock
option to the extent that Shares are so applied  and, as such,  may add to the
Optionee's withholding  obligation.  No Shares will be issued upon an exercise
of an Option  unless and until  payment or adequate  provision  for payment of
such Tax  Withholding  amounts has been made in accordance with the foregoing.
If additional  withholding  is or becomes  required  beyond any amount paid or
provided for by the Optionee in accordance  with the  foregoing,  the Optionee
will pay such additional  amount to Umpqua  immediately upon demand by Umpqua.
If the Optionee  fails to pay the amount  demanded,  Umpqua may withhold  that
amount from other amounts payable by Umpqua or any of its  subsidiaries to the
Optionee,  including  salary,  subject to  applicable  law, and  Optionee,  by
receiving and exercising such Option shall be deemed to have consented to such
withholding.

      3.5 Delivery of Shares Following Exercise.  Umpqua will make delivery of
the Option  Shares  purchased  within a reasonable  time after it receives the
Notice of  Exercise  and  payment  in full of the  Exercise  Price and all Tax
Withholding  amounts with respect to the exercise of the Option have been paid
or adequately  provided for. However, if any law or regulation requires Umpqua
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 Umpqua's Common Stock is then listed,  then the date
of delivery of such shares may be extended  for the period  necessary  to take
such action. The Optionee shall only become the holder of such shares upon the
actual issuance of the stock certificate representing such shares.

4.    Termination and/or Acceleration of the Option Upon Certain Events

      4.1 Effect of the Death of the  Optionee.  If the Optionee dies while an
employee of Umpqua or any  Subsidiary,  this Option  will  terminate  one year
after the date of such death or, if sooner,  upon the Expiration Date. In such
event,  this  Option may be  exercised  only to the extent  the  Optionee  was
entitled to exercise this Option on the date of the Optionee's  death and only
by the person or persons to whom the  Optionee's  rights under this 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  becomes
totally  and  permanently  disabled  (as  defined  in Section 22 (e)(3) of the
Internal  Revenue Code of 1986, as amended) while an employee of Umpqua or any
Subsidiary,  this  Option  will  terminate  one  year  after  the date of such
termination  of employment or, if sooner,  upon the  Expiration  Date. In such
event,  this  Option may be  exercised  only to the extent  the  Optionee  was
entitled to exercise this 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 Umpqua or any Subsidiary is terminated for
cause,  as  determined  by Umpqua's  President  or Board of Directors in their
reasonable  discretion,  this  Option  will  terminate  immediately  upon  the
delivery to the Optionee of any notice of such termination.

      4.4 Effect of Any Other  Termination  of the Employment of the Optionee.
If the Optionee's  employment  with Umpqua or any  Subsidiary  terminates as a
result of the  Optionee's  retirement or for any reason other than the reasons
set  forth in  Sections  4.1,  4.2 or 4.3 of this  Option,  this  Option  will
terminate  thirty (30) days after the date of such  termination  of employment
or, if sooner,  upon the  Expiration  Date. In such event,  this Option may be
exercised only to the extent the Optionee was entitled to exercise this Option
on the date of such termination.  For purposes of this Option,  the Optionee's
employment  with  Umpqua  or  any  Subsidiary  shall  be  considered  to  have
terminated if the Optionee for any reason  becomes a  "part-time"  employee as
such term is defined in Umpqua's then existing employment rules or guidelines.

      4.5  Effect  of a Change of  Control  of  Umpqua.  In the event of (a) a
merger, consolidation,  plan of exchange or voluntary share exchange agreement
with one or more corporations in which the shareholders of Umpqua  immediately

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prior to such transaction do not, following such transaction, continue to hold
securities  with voting rights equal to at least 50% of all votes  entitled to
be cast in the election of directors of the  surviving  entity,  (b) a sale of
all or  substantially  all of the assets of Umpqua or (c) the  dissolution and
liquidation  of Umpqua  (collectively  a  "Change  of  Control  Transaction"),
(i) this  Option may be assumed by the successor in interest in such Change of
Control  Transaction,  (ii) the  Optionee  may receive  from the  successor in
interest  in such  Change of Control  Transaction  a  replacement  option with
rights which are  economically  equivalent  to the rights under this Option at
the time of such  Change of Control  Transaction  or,  (iii) if neither of the
foregoing  occurs,  this Option shall terminate upon the closing of the Change
of Control Transaction. If, in a Change of Control Transaction, this Option is
neither assumed nor replaced by the successor in interest,  the Optionee shall
be provided with notice at least thirty (30) days prior to the closing of such
Change of Control Transaction and shall be entitled to exercise this Option as
to all of the Option Shares without  regard to the vesting  schedule set forth
in Section 2.1.

5.    Representations, Warranties and Covenants of the Optionee.

      5.1. No Effect on Employment.  The Optionee  understands and agrees that
nothing  contained  in this Option will be  construed to limit or restrict the
rights of Umpqua 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 Option Shares under this
Option is subject to and is conditioned  upon the continued  employment of the
Optionee by Umpqua or a Subsidiary and that such  employment can be terminated
at any time by Umpqua or its Subsidiary.

      5.2. Rights Prior to Exercise of This 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 Option  Shares is reflected in Umpqua's
stock transfer records.

      5.3. Tax  Implications.  The Optionee  understands  that,  under federal
income tax laws as they  currently  exist,  the  exercise  of this Option will
result in ordinary income to the Optionee in an amount equal to the difference
between the Exercise Price and the fair market value of the shares acquired on
the date of such exercise.

      5.4 Underwriter's  Lock-up. The Optionee by accepting this Option agrees
that whenever  Umpqua  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 Umpqua 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.

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

6.    Miscellaneous Provisions

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

      6.2. Notices. All notices to the Optionee or other persons then entitled
to exercise  this Option will be  delivered  at the address  contained  in the
records of Umpqua or such other  address as may be specified in writing by the

                                      4
<PAGE>

Optionee or such other person.  All notices to Umpqua will be delivered at its
principal office.

      6.3. Governing Law and  Interpretation.  This Option 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 Option 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 Option and the Plan, the terms of the
Plan will prevail.  All matters of interpretation of the Plan and this Option,
including the  applicable  terms and  conditions  and the  definitions  of the
words,  will be determined in the sole and final  discretion of Umpqua's Board
of Directors.

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

                                    UMPQUA HOLDINGS CORPORATION

                                    By:  ____________________________________
                                         Raymond P. Davis President
Attest:

By: _______________________________
    ____________________, Secretary

                                    OPTIONEE:

                                    __________________________________________
                                    __________________________________________

                                      5

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