Document:

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                                                                    EXHIBIT 10.3
                                    AGREEMENT
                                    ---------

         THIS AGREEMENT is made and entered into this 2 day of April, 1998, by
and between the BANK OF SOUTHERN OREGON, an Oregon Banking corporation,
hereinafter referred to as "Bank" and RICH HIEB, hereinafter referred to as
"RH".

                                R E C I T A L S:
                                ----------------

         1. Bank is an Oregon banking corporation authorized to do business in
the State of Oregon. Bank is in the process of forming a Bank Holding Company,
hereinafter referred to as "BHC", which is expected to acquire all of the stock
of the Bank in a stock exchange transaction during 1998.

         2. RH has the necessary expertise and experience to run a bank holding
company and is willing to serve as Executive Vice President and Chief Operating
Officer of same.

         For the reasons recited above and in consideration of the following
mutual promises and covenants, the parties hereby agree as follows:

                                   SECTION ONE
                                   EMPLOYMENT

         Bank hereby employs RH to act as the Chief Operating Officer of Bank
and, upon its approval, the BHC. RH hereby accepts such employment upon the
terms and conditions hereinafter set forth.

                                   SECTION TWO
                               TERMS OF EMPLOYMENT

         The term of employment shall begin as of May 1, 1998 and shall extend
until terminated as provided for herein. This Agreement shall not be effective
until May 1, 1998.

                                  SECTION THREE
                                  COMPENSATION

         For all the services to be rendered by RH to Bank, in any capacity,
including those services provided as Chief Operating Officer or any other duties
assigned to him by the directors of Bank, Bank agrees to pay RH a salary of
$100,000.00 for the first year of this Agreement. This shall be referred to as
the "basic salary". Such basic salary shall be paid to RH in bi-monthly
installments of $4,166.00 on the 15th of each month and on the last day of each
month. The first such bi-monthly installment of $4,166.00 shall be paid on May
15, 1998 and the same bi-monthly installments of $4,166.00 shall be paid
thereafter during the term of this Agreement. The Board of Directors of Bank
shall have the right to adjust the base salary of RH on an annual basic.
However, RH's salary and other benefits, in the aggregate, will not be less than
that initially set forth by the terms of this Agreement.

                                  SECTION FOUR
                                     DUTIES

         RH accepts employment with Bank on the terms and conditions set forth
in this Agreement, and agrees to devote his full time employment to the
performance of his duties under this Agreement. Such duties include those but
are not limited to those set forth in the Statement of Responsibilities, a copy
of which is attached hereto as Exhibit "A" and by this reference incorporated
herein.

<PAGE>   2

         RH shall perform such specific duties and shall exercise such specific
authority as may be assigned to RH from time to time by the Board of Directors
of Bank. In performing such duties RH shall be subject to the direction and
control of the Board of Directors of Bank. RH further agrees that in all aspects
of such employment RH shall comply with all applicable laws and regulations and
with the policies, of Bank from time to time established and shall perform his
duties faithfully, intelligently and honestly to the best of his ability and in
the best interest of Bank. If requested to do so RH shall serve as a director of
Bank without additional compensation.

                                  SECTION FIVE
                               ADDITIONAL BENEFITS

         In addition to the basic salary set forth above Bank agrees to provide
RH with the following benefits:

         A. RH will receive fringe benefits offered to Bank employees. These
include health insurance coverage, participation in incentive compensation and
401 plans, sick leave benefits and paid vacation benefits. The terms and
conditions of such benefits shall be as established from time to time by the
board of directors of Bank. Notwithstanding the foregoing, RH will be allowed
not less than four weeks of paid vacation per year on the terms and conditions
provided in Bank's vacation pay benefit plan.

         B. In accordance with its policies and procedures established from time
to time by its board of directors, Bank will reimburse RH for reasonable
business expenses, including travel expenses.

         C. Bank will purchase a vehicle for use by RH during the term of his
employment. The vehicle shall have a maximum cost of $35,000.00. If possible and
if to the benefit of both Bank and RH, Bank may elect to purchase RH's existing
vehicle. Bank will pay all expenses associated with the maintenance, repair and
operation of the vehicle, including insurance coverage. RH's year end W-2 will
include the value of the personal use of the vehicle as required by IRS
regulations.

         D. Bank will purchase a $150,000.00 term life insurance policy on RH to
age 65. The beneficiary shall be as designated by RH. The type and term of
policy to be at Bank's discretion.

         E. Subject to RH's ability to qualify, Bank will purchase a disability
insurance policy for RH providing income protection equivalent to 50% of RH's
base salary, initially $4,166.00 per month. This shall be payable up to age
sixty-five (65). Disability payments shall commence 90 days from the date of
disability.

         F. Bank will pay for RH's monthly dues at the Rogue Valley Country
Club.

                                   SECTION SIX
                                STOCK OPTION PLAN

         Upon the execution of this Agreement RH shall be granted an option to
purchase 20,000 shares of the common stock of Bank. If Bank grants stock
dividends, declares stock splits or other adjustments to its currently issued
and outstanding stock, RH's option to purchase shall likewise increase to
reflect the benefit of such action. This option to purchase the 20,000 shares
shall vest as follows:

         A. 30% (6,000 shares) on the third anniversary of his employment.

         B. 20% (4,000 shares) at the end of each of the fourth, fifth and sixth
years of employment.

         C. 10% (2,000 shares) after completion of the seventh year of
employment.

         Notwithstanding the above, if there is a sale or change in control of
Bank then the option to purchase the 20,000 shares shall vest as follows:

<PAGE>   3

         A. 50% (10,000 shares) if a sale or change in control occurs before a
completion of the first three (3) years of employment;

         B. 50% (10,000 shares) representing the remaining balance of option
shares if a sale or change of control occurs after the first three (3) years of
employment.

         The non-vested options will expire (i) upon termination of RH's
employment by Bank for cause, (ii) ninety [90] days after termination of RH's
employment by Bank without cause, (iii) upon termination of RH's employment by
RH without cause, (iv) ninety [90] days after termination of RH's employment by
RH with cause, or (v) one [1] year after RH's death or disability. RH shall have
ninety [90] days after termination of his employment or vesting of his stock
option, whichever last occurs, to exercise his option(s) to purchase. If the
Bank terminates RH's employment without cause, or RH leaves with cause, for
stock option vesting purposes only, RH shall be deemed to have continued through
his next employment anniversary date.

         For the purposes of this Agreement, a sale or change of control of Bank
shall constitute a sale or change in ownership of more than 40% of its voting
stock to one entity other than the BHC.

         The stock option plan, and the terms and conditions thereof, are
subject to approval by RH and the shareholders of Bank. Bank will use its
reasonable best efforts to qualify such stock option plan and to establish an
option price available to RH based upon the fair market value of the shares as
required by generally accepted accounting principles, the Internal Revenue Code
and regulations thereunder, for qualified stock options. It is anticipated that
the shareholders of Bank will approve the stock option plan at a meeting of such
shareholders in May, 1998 and that pursuant to the terms of the Bank Holding
Company formation the plan will become the plan of the BHC. The terms and
conditions of the grant of options to RH, in addition to those set forth above,
are subject to approval by RH. RH shall either approve or reject the stock
option plan and grant of option, by written notice to Bank, on or before June 1,
1998. In the event RH rejects the stock option plan or grant of option, or in
the event this stock option plan is not approved by shareholders then either RH
or Bank may terminate this Agreement and neither party shall have any liability
to the other.

                                  SECTION SEVEN
                                   TERMINATION

         RH acknowledges that he is an "at will" employee and that he may be
dismissed at any time, with or without cause, for any reason whatsoever. RH may
terminate this Agreement, at any time, for any reason whatsoever, upon written
notice to Bank. For the purposes of this Agreement, termination of RH's
employment by Bank for cause shall include, but is not limited to, the
following:

         A. RH fails or refuses to comply with the policies, standards, and
regulations of Bank as established by the Board of Directors from time to time.

         B. RH commits an act of fraud, dishonesty, material misconduct, gross
negligence, gross neglect of his duties, continued and repeated insobriety, or
conviction of any crime constituting a felony;

         C. Conduct which is seriously prejudicial to Bank including, but not
limited to, neglect of duty or breach of this Agreement.

         D. RH suffers a permanent disability. For the purposes of this
Agreement "permanent disability" shall be defined as RH's inability due to
physical or mental illness, or other cause, to perform the majority of RH's
usual duties for a period of 90 days. Permanent disability shall be determined
by a licensed physician hired by Bank. RH hereby agrees in advance to an
examination by a licensed physician selected by Bank if so required to determine
whether or not RH suffers a permanent disability.

<PAGE>   4

         E. In the event of the death of RH. In such event Bank shall pay to
RH's estate the salary which would be otherwise payable to RH through the end of
the month in the month in which RH's death occurs.

         F. A violation of the State of Oregon or Federal Banking Rules and
Regulations of such a nature as to disqualify RH from his duties as set forth
herein.

         In the event RH is terminated from employment by Bank for cause or in
the event RH quits the employment of Bank without cause then RH will not be
entitled to any severance pay or other benefits following the date of
termination.

         For the purposes of this Agreement, termination by RH for cause shall
include, but is not limited to, the following:

         A. RH suffering a permanent disability as defined above.

         B. RH is required by the Board of Directors of Bank to perform any
illegal or fraudulent act.

         C. A breach by Bank of the provisions of this Agreement.

         In the event RH is terminated by Bank without cause or in the event RH
quits with cause then RH shall be entitled to the following benefits:

         A. The payment of one year's basic salary, equal to the basic salary
paid to RH during the 12-month period preceding the date of termination. Such
payment shall be made in 12 equal monthly installments during the 12 months
following the date of termination.

         B. In the event of a sale or change of control of the Bank, the
guaranteed payment will be reduced by the amounts received by RH through
employment compensation, non-competition payments and/or other benefits and
payments made by the succeeding or acquiring entity. RH will be entitled to any
additional compensation received by RH after credit to Bank for guaranteed
payments.

         C. Payment of these benefits is contingent upon RH signing a complete
release of liability to Bank for termination of his employment and all claims
arising through the date of termination of his employment.

         Notwithstanding the above, if RH goes to work for or consults with
another entity which is in competition with Bank then Bank will not be required
to make any further payments hereunder.

                                  SECTION EIGHT
                                     NOTICES

         Written notice shall be deemed to have been received by the respective
parties when mailed by both first class and certified mail, return receipt
requested to the following addresses:

Bank                                   Rich Hieb
1455 E. McAndrews Road                 668 Farnsworth Drive
Medford, Oregon 97504                  Central Point, OR 97502

         These addresses will remain in effect until the respective party has
notified the other in writing of a change of address.

                                  SECTION NINE
                                  RESTRICTIONS

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         During the term of this Agreement, or in the event Bank terminates RH's
employment for cause or RH terminates his employment without cause, and at
Bank's sole option for a period up to one (1) year after such termination, RH
agrees that the following restrictions and limitations shall apply to him:

         A. RH will not, on behalf of himself or on behalf of any other person,
firm, corporation, limited liability company or any other entity, call on any of
the customers of Bank in any county where Bank maintains an office or branch, or
of any of its affiliates or subsidiaries for the purpose of soliciting services
and/or providing to any of the customers any banking services or other products
or services provided by Bank, nor will he, in any way, directly or indirectly,
for himself or on behalf of any other person, firm, corporation, limited
liability company or other entity, solicit, divert or take away any customer of
Bank, its affiliates or subsidiaries. For the purposes of this Agreement the
phrase "call on" includes, but is not limited to, contacting a customer in
person, by telephone, by facsimile transmission, by letter, by electronic
transmission or by any other means calculated to make contact with such customer
of Bank.

         B. RH will not, on behalf of himself or on behalf of any other person,
firm, corporation, limited liability company or any other entity, solicit or
hire any of the employees of Bank or any of its affiliates or subsidiaries.

         C. If Bank elects to apply the restrictions of this Article to RH for a
period up to one (1) year after termination of RH's employment, during such
period, Bank shall timely and regularly pay RH the monthly basic salary received
by RH at the date of such termination and shall continue RH's health insurance
during such period, providing the same coverage provided to Bank's employees.

                                   SECTION TEN
                            CONFIDENTIAL INFORMATION

         Both during and after termination of employment, RH agrees, that in
addition to any other limitation contained in this Agreement, regardless of the
circumstances of the termination of employment, he will not communicate to any
person, firm, corporation, limited liability company or other entity, any other
information relating to customer lists, prices, secrets, advertising, loans,
accounts, nor any confidential knowledge, information or secrets that RH may
from time to time acquire with respect to the business of Bank, or any of its
affiliates or subsidiaries. RH agrees upon termination of his employment that he
will not retain originals or copies of any of the business records, information
or documents of Bank, in any form whatsoever, including but not limited to
information on computer disks and hard drives.

         Notwithstanding the above, disclosure is authorized only when done in
the course and scope of RH's employment or as required by law.

                                 SECTION ELEVEN
                                INJUNCTIVE RELIEF

         RH hereby acknowledges that the services to be rendered under this
Agreement are of unique, special and extraordinary character that would be
difficult or impossible for Bank to replace, and by reason of such difficulty,
RH hereby agrees that for violation of any of the provisions of this Agreement,
Bank shall, in addition to any of the rights or remedies available under this
Agreement, at law or otherwise, be entitled to an injunction to be issued by a
court of competent jurisdiction enjoining and restraining RH from committing any
violation of this Agreement and RH hereby consents to the issuance of such
injunction.

                                 SECTION TWELVE
                             COMMUNICATIONS TO BANK

<PAGE>   6

         A. From the time this Agreement commences until the termination of this
Agreement, RH shall communicate and channel to Bank all knowledge, business, and
customer contacts and any other matters of information that could concern or be
in any way beneficial to the business of Bank, whether acquired by RH before or
during the term of this Agreement; provided, however, that nothing under this
Agreement shall be construed as requiring such communications where the
information is lawfully protected from disclosure as a trade secret of a third
party.

         B. Any such information communicated to Bank as stated above shall be
and remain the property of Bank, in spite of the subsequent termination of this
Agreement.

                                SECTION THIRTEEN
                                 BINDING EFFECT

         This Agreement shall be binding upon the parties hereto, their heirs,
assigns, personal representatives and successors in interest. This Agreement may
be assigned to and assumed by the BHC upon its approval. Upon formation of BHC
this Agreement shall be deemed to have been assigned and assumed by BHC. RH
shall then be deemed to be an employee of BHC and not of Bank.

                                SECTION FOURTEEN
                                  GOVERNING LAW

         The parties agree that this Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Oregon. The parties
agree that exclusive venue and jurisdiction shall lie in Jackson County, Oregon.

                                 SECTION FIFTEEN
                                  CREATIVE WORK

         RH agrees that all creative work and work product including, but not
limited to, all technology, business management tools, processes, software,
patents, trademarks, copyrights developed by RH during the term of this
Agreement, irrespective of when or where such work or work product was produced,
constitutes work made for hire, all rights of which are owned by Bank. In any
event, I assign to Bank all rights, title and interest, whether by way of
copyrights, trade secret, trademark, patent or otherwise, in all such work
and/or work product, whether or not the same is subject to protection by patent,
trademark, or copyright laws.

                                 SECTION SIXTEEN
                                ENTIRE AGREEMENT

         This Agreement, the stock option plan, the policies and procedures
including personnel policies adopted by Bank's board of directors, shall
constitute the entire agreement between the parties and any prior understanding
or representation of any kind preceding the date of this Agreement shall not be
binding upon either party except to the extent incorporated in this Agreement.
Notwithstanding the above, the board of directors of Bank shall have the right
to unilaterally modify, amend and/or revise its policies and procedures
including its personnel policies.

                                SECTION SEVENTEEN
                            MODIFICATION OF AGREEMENT

         Any modification of this Agreement or additional obligation assumed by
either party in connection with this Agreement shall be binding only if
evidenced in writing signed by each party or any authorized representative of
each party.

                                SECTION EIGHTEEN
                                    NO WAIVER

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         The failure of either party to this Agreement to insist upon the
performance of any of the terms and conditions of this Agreement, or the waiver
of any breach of any of the terms and conditions of this Agreement, shall not be
construed as thereafter waiving any such terms and conditions, but the same
shall continue and remain in full force and effect as if no such forbearance or
waiver had occurred.

                                SECTION NINETEEN
                                  ATTORNEY FEES

         In the event a suit or action is filed concerning this Agreement then
the prevailing party shall be awarded their reasonable attorney fees as set by
the trial court, or if on appeal, by the appellate court.

                                 SECTION TWENTY
                                TIME OF EXECUTION

         RH acknowledges that this Agreement has been executed prior to the time
that RH actually commenced working as Chief Operating Officer of Bank.

                               SECTION TWENTY-ONE
                                 REPRESENTATIONS

         After April 30, 1998, RH represents and warrants to Bank that there are
no employment contracts or other contractual obligations to which RH is subject
which prevents RH from entering into this Agreement or from fully performing
RH's duties under this Agreement.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
                                                  BANK OF SOUTHERN OREGON

                                                  By
                                                    ---------------------------
                                                  Its:
                                                      -------------------------

                                                  -----------------------------
                                                  Rich Hieb

<PAGE>   8

                          STATEMENT OF RESPONSIBILITIES
                Chief Operating Officer/Executive Vice President

The COO/Executive Vice President of BANK OF SOUTHERN OREGON ("Bank") shall be
responsible for:

Strategic Leadership:

Assist in the development and implementation of a long-term plan which leverages
the assets of the company's various holdings and maximizes the return to the
company.

Develop financial projections to correspond with growth projections and goals.
Review areas to maximize income or reduce expenses.

Maintain a complete line of product offerings. Insure that the company's
products are competitive. Review nonbanking products and determine whether any
opportunities exist.

Establish smooth operating conditions within the company that are efficient and
effective. Insure that the operation is in a condition to expand through regular
growth and/or merger or acquisition.

Develop a strategy for future growth. Identify and evaluate banking
opportunities outside existing area.

Management Leadership:

Manage the administrative operations of the company and each of the
subsidiaries.

Support the President/CEO in the management of the company and insure adequate
backup in his absence.

Assist in providing leadership and vision and communicating that to employees
throughout the organization.

Manage the development of efficient and effective systems (financial,
administrative, operating) for the company that become the common systems for
all future growth.

Insure compliance with regulatory procedures resulting in adequate examinations.

Evaluate opportunities to maximize non-interest income and reduce non-interest
expense.<PAGE>   1

                                                                    EXHIBIT 10.4
                    ADVANCES, SECURITY AND DEPOSIT AGREEMENT

                                January 21, 1999

         This Advances, Security and Deposit Agreement ("Agreement") is made as
of the above date and is between the Federal Home Loan Bank of Seattle,
including its successors ("Seattle Bank"), and Bank of Southern Oregon,
including its successor ("Customer"). Except as to Customers which have not
signed prior Agreements, it renews, amends and restates prior contracts between
the parties or their predecessors entitled "Advances Agreement, Pledge Agreement
and Security Agreement" and "Deposit Account Resolution."

                                    Recitals
                                    --------

A.       The Seattle Bank is authorized by the Federal Home Loan Bank Act, as
         amended, and related regulations and directives ("Act"), and by the
         Seattle Bank's own policies, to make loans to the Customer
         ("Advances"). The Seattle Bank is also authorized to provided demand
         and time deposit accounts to the Customer ("Accounts") and to perform
         additional services, all of which may create obligations from the
         Customer to the Seattle Bank ("Other Obligations"). Other Obligations
         may include, without limitation, debts by reason of interest rate swap
         agreements, letters of credit, overdrafts, settlements, and wire
         transfers.

B.       This Agreement, and related polices which are, from time to time, sent
         by the Seattle Bank to its Customers, specifies the terms and
         conditions under which the Seattle Bank may make Advances available to
         the Customer; open and use Accounts; and collateralize such Advances
         and Other Obligations.

                                   Agreements
                                   ----------

1.       Prior to or at the time of the execution and delivery of this
         Agreement, the Customer has provided the Seattle Bank with a certified
         copy of a resolution adopted by the Customer's Board of Directors or
         other governing body ("Resolution") approving this Agreement and
         authorizing designated officers or employees of the Customer to obtain
         Advances, open and use Accounts, and incur Other Obligations. The
         Seattle Bank may rely upon, and the Customer is estopped from denying,
         the authority of the persons designated in the Resolution.

2.       The Customer may request Advances from the Seattle Bank by applying to
         the Seattle Bank in such form as it shall require.

3.       Each Advance shall be evidenced by a promissory note ("Note") or by
         another confirming document as required by the Seattle Bank. The
         applicable terms and conditions of this Agreement are incorporated
         therein as well as in other agreements, if any, that relate to Other
         Obligations.

4.       On the first day of each month or at such other times that payments of
         principal and/or interest are due, the Customer agrees to pay, or to
         authorize a charge to the Customer's Account for the principal and/or
         interest that is due on each outstanding Advance, Note or Other
         Obligation. Interest shall be charged at the rate set forth in the Note
         or other instrument evidencing the Indebtedness. Delinquent principal
         and/or interest may bear interest, at the option of the Seattle Bank,
         equal to the Seattle Bank's then-current Flexible Balance advance rate.

5.       As collateral ("Security") for the payment of all Advances, Notes or
         Other Obligations (collectively, "Indebtedness") of the Customer to the
         Seattle Bank, the Customer hereby assigns, pledges and grants security
         interests to the Seattle Bank ("Security Interest") in the following:
         (a) its stock in the Seattle Bank (which cannot be pledged to another
         entity); (b) its funds on deposit with the Seattle Bank; (c) its notes
         or other instruments representing obligations of third parties,
         including the proceeds thereof; and any related

<PAGE>   2

         mortgages or deeds of trust ("Mortgages") securing any of them and/or
         any securities representing an interest in such Mortgages; (d)
         securities issued, insured or guaranteed by the United States
         government or by any agency thereof; (e) other real estate-related
         collateral; and (f) its instruments, accounts, general intangibles,
         inventory, equipment and other property in which a security interest
         can be granted by the Customer to the Seattle Bank. Upon the withdrawal
         from membership in the Seattle Bank, and as the final part of the plan
         of liquidation of the Customer's Indebtedness to the Seattle Bank, the
         stock of such Customer may be redeemed and credited upon the
         indebtedness of the Customer, in whole or in part, for an amount equal
         to the par value of the stock which would otherwise be paid to the
         Customer by the Seattle Bank.

6.       The Customer agrees that it holds the Security for the benefit of, and
         subject to the direction and control of, the Seattle Bank; including
         limitation, the following; (a) Security and Security Interests shall
         include and extend to after-acquired Security; (b) the Customer may
         use, commingle or dispose of all or part of the Security or proceeds
         thereof if, at all times, it owns and maintains Security of the types
         and kinds specified by the Act and as required to meet the requirements
         thereof, free and clear of pledges, liens, or other encumbrances of
         third parties, in such amount of the outstanding indebtedness as may be
         specified by the Seattle Bank from time to time; (c) at its expense and
         as soon as possible upon demand by the Seattle Bank, the Customer will
         assemble, segregate and/or deliver such portions of the Security as are
         directed by the Seattle Bank at or to a location designated by it; will
         allow the Seattle Bank to participate in such assembly, segregation or
         delivery and to verify or audit such Security, including, without
         limitations, access to the Customer's premises and record for such
         purposes; and will protect and promptly disclose to the Seattle Bank
         any material change in value of the Security so assembled, segregated
         or delivered; (d) the Customer promptly will make, execute and deliver
         to the Seattle Bank such assignments, listings, powers or other
         documents as the Seattle Bank may reasonably request concerning the
         Security; (e) at it expense, the Customer promptly will provide to the
         Seattle Bank such reports, audits and confirmations regarding the
         Security as the Seattle Bank may reasonably request; and (f) the
         Customer shall pay to the Seattle Bank any reasonable fees associated
         with the processing, control, and maintenance of such Security.

7.       Upon the occurrence of any one or more of the following events
         ("Default"), the Seattle Bank may, without notice, declare and thereby
         cause all Indebtedness of the Customer to be due and payable
         immediately; (a) failure of the Customer to make any payments due on
         any Indebtedness, or breach of or failure to perform any other duty as
         provided herein or in any other agreement to which the Customer and the
         Seattle Bank are parties; (b) any taking over of the Customer or any of
         its assets by a supervising agency, or an application for or the
         appointment of a conservator, receiver, trustee or liquidator for it or
         any of its assets; (c) an adjudication of the Customer's bankruptcy or
         insolvency; (d) an assignment by the Customer for the benefit of
         creditors, a general transfer of its assets for any purpose or any
         other form of liquidation, merger, sale of assets or dissolution of or
         by the Customer; (e) existence of facts indicating a representation,
         statement or warranty made or furnished to the Seattle Bank by or on
         behalf of the Customer in connection with all or part of any
         Indebtedness or other transaction was or is false in any material
         respect; (f) damage, loss, sale or encumbrance of any of the Security
         except as permitted by the Agreement; (g) any levy, seizure,
         garnishment (as the debtor), execution, attachment or other process
         issued against the Customer; (h) any event which results in
         acceleration of the maturity of any debt of the Customer to others; (i)
         good faith determination by the Seattle Bank that the Customer's
         ability to repay any Indebtedness has become impaired or that a
         material adverse change has occurred in the financial condition of the
         Customer from that disclosed to the Seattle Bank at the time of
         creation of any Indebtedness or subsequently; (j) termination of the
         Customer's membership in the Seattle Bank; or (k) good faith
         determination by the Seattle Bank that there is a reasonable
         possibility that the Indebtedness would not be paid in full from the
         proceeds of a liquidation of the Security if the Seattle Bank did not
         declare a Default.

8.       At any time after Default, the Customer may not substitute Security
         without permission of the Seattle Bank, and the Seattle Bank shall have
         all of the rights and remedies of a secured party under the Act, the
         Uniform Commercial Code of the State of Washington and/or as otherwise
         provided by law, by this Agreement or by any other agreement between
         the parties ("Default Rights") including, without limitation, the
         Seattle Bank's

<PAGE>   3

         right to take immediate possession of any or all Security wherever
         located and to dispose of the Security in accordance with applicable
         law. If any notice of disposition of Security is required by law, such
         notification shall be deemed reasonable and properly given if mailed,
         postage prepaid, at least five calendar days before such disposition to
         the last address of the Customer then appearing on the records of the
         Seattle Bank. The proceeds of any disposition of Security shall be
         applied in the following order to payment of: (a) all reasonable
         expenses incurred by or on behalf of the Seattle Bank for the
         collection, care, safekeeping, sale, foreclosure, delivery or other
         disposition of Security including, without limitations, insurance,
         commissions, guarantees, security valuation fees, expenses, costs and
         reasonable attorneys' fees incurred in connection therewith; (b)
         interest on all Indebtedness, whether due or accrued; (c) the principal
         amount of all Indebtedness; (d) any secondarily secured debt of the
         Customer to any third party who proves its subordinate security
         interest in the Security to the reasonable satisfaction of the Seattle
         Bank; and (e) any remainder to the Customer. If there is a deficiency,
         the Customer shall be liable to the Seattle Bank therefor. No delay by
         the Seattle Bank in the exercise of its Default Rights shall operate as
         a waiver, and a wavier of any specific Default Right shall not
         constitute a waiver of any other Default Right not specifically waived.
         The Customer hereby irrevocably appoints the Seattle Bank and/or its
         designee as its true and lawful attorney in fact to deal in any manner
         with the Security in the event of a Default.

9.       The Customer may open Accounts with the Seattle Bank subject to the
         Regulations of the Seattle Bank. Any Customer's funds deposited in
         Accounts shall be subject to withdrawal or charge at any time and from
         time to time upon wire transfers or any other orders for the payment of
         money when made and drawn on behalf of the Customer by a person or
         persons authorized by the Customer. The Seattle Bank is authorized to
         pay any such wire transfers or other orders, provided they are in the
         form prescribed by it, and to charge the Customer's Accounts therefor,
         without inquiry as to the circumstances of issue or the disposition of
         the proceeds, even if drawn to the individual order of any authorized
         person or payable to others for his account.

10.      The Seattle Bank, if it acts in good faith and with ordinary care (and
         without liability if it does so act), can charge the Accounts with
         orders received by the Seattle Bank from any person acting for or
         purporting to act for the Customer by telephone, or otherwise orally,
         for the transfer of funds to others, including the person giving such
         instructions or payable to others for his account, or between Accounts
         of the Customer. All authorized Seattle Bank charges and fees will be
         charged monthly to such Accounts.

11.      The Customer shall maintain a net positive collected balance in all of
         its Accounts. The Seattle Bank shall have the option of closing or
         restricting the use of Accounts in which positive balances are not
         maintained. For each day the aggregate collected balance of an Account
         is negative, the Customer shall pay such charges as are consistent with
         the Seattle Bank's published schedules.

12.      The Customer agrees to provide to the Seattle Bank, with five days
         after a request, its business plans and other financial data. In
         connection with, and as an extension of, any other informational rights
         of the Seattle Bank relating to examination of the Customer by a
         supervising agency and reports relating thereto, the Customer agrees
         that all Security shall always be subject to audit and verification, at
         the Customer's expense, by or on behalf of the Seattle Bank and that
         the Seattle Bank shall have access to the Customer's premises and
         records for that purpose.

13.      If the services of an attorney, either with or without suit, are
         engaged by the Seattle Bank in connection with any Default or any
         dispute relating to this Agreement, the Customer agrees to pay the
         Seattle Bank's reasonable attorneys' fees, expenses and cost incurred
         in connection therewith.

14.      This Agreement shall be construed and enforced according to the laws of
         the State of Washington and the Act. I f any provision hereof is
         inconsistent with the Act, this Agreement shall be deemed amended to
         the end that such provision is not in conflict with the Act. In the
         event any such provision cannot be so amended and is found to be
         contrary to law, the balance of this Agreement shall remain in full
         force and effect if so elected by the Seattle Bank.

<PAGE>   4

15.      This Agreement shall continue until terminated by written notice from
         one party to the other, provided that this Agreement shall remain
         applicable to all then outstanding Indebtedness and duties of the
         Customer and to the documents relating thereto.

  Bank of Southern Oregon
         (Name of Customer)

By    John L. Anhorn                     President & CEO
   -----------------------------------------------------
         (Name)                             (Title)

/s/ John L. Anhorn
         (Signature)

Its President & CEO                             Date: February 1, 1999
   ---------------------------------------------     -----------------
         (Title)
and

By Richard Hieb                              EVP & COO
  ----------------------------------------------------
         (Name)                             (Title)

/s/ Richard Hieb
         (Signature)

Its EVP & COO                                      Date: February 1, 1999
   ------------------------------------------------     -----------------
         (Title)

FEDERAL HOME LOAN BANK OF SEATTLE

By
  ---------------------------------------------------------------------
         (Name)                             (Title)

-----------------------------------------------------------------------
         (Signature)

Its                                         Date:                   , 199
   ----------------------------------------      -------------------     --

Form 1991-3
(Rev. 10/98)
<PAGE>   5

                        FEDERAL HOME LOAN BANK OF SEATTLE
                            Seattle, Washington 98101

                            PROMISSORY NOTE NO. 78146
                               Amortizing Advance
For purpose of this promissory note the:

<TABLE>
<S>                                 <C>
Issue Date shall be:                August 28, 1998
Maturity Date shall be:             August 28, 2008
Principal Sum shall be:             SIX MILLION AND NO/100 DOLLARS ($6,000,000.00)
Interest Rate shall be:             FIVE AND EIGHTY TWO HUNDREDTHS PER CENTUM PER ANNUM (5.82000%)
                                    calculated on the actual number of days in the year
</TABLE>

For value received and in monthly installments, the undersigned maker
("Customer") promises to pay to the order of the FEDERAL HOME LOAN BANK OF
SEATTLE ("Bank") the Principal Sum, with interest payable from the Issue Date at
the Interest Rate on the unpaid principal. The amount of each monthly
installment of principal is determined by dividing the Principal Sum by the
number of calendar months between the Issue Date and Maturity Date set forth
above. Installments of principal and interest are payable at the Bank's office
on the first day of each month that is a business day for the Bank. If the Issue
Date and Maturity Date are other than the first day of a month, one otherwise
full installment of principal and interest will be prorated and payable in two
portions between and for (i) the first partial month (the day following the
Issue Date to the first day of the following month) and (ii) the last partial
month (the first day of that month through the Maturity Date). The final
interest and principal payments are payable on the last day this Note is
outstanding.

This Note is governed by and is subject to the agreements, terms and conditions
contained in an instrument entitled "Advances, Security and Deposit Agreement"
between the Customer and the Bank, the provisions of which are incorporated
herein by reference. Advances are to provide funds which support residential
housing finance. Any Savings Association which does not meet qualified thrift
lender requirements is to notify the bank of its ineligibility.

This Note may be prepaid in full. The Bank will charge a prepayment fee equal to
the present value, at the time of such prepayment ("Prepayment Date"), of the
difference between (a) the interest that would have been payable on the amount
prepaid at the Interest Rate provided herein from the Prepayment Date to the
Maturity Date and (b) the interest that would have been chargeable on a similar
amortizing advance equal to the amount prepaid at a rate ("CO Rate") quoted by
the Bank on the Prepayment Date for Federal Home Loan Bank Consolidated
Obligations with a similar amortization schedule and remaining term to maturity.
Said present value shall be computed using such CO Rate as the discount rate,
compounded monthly. At no time will the prepayment fee for this Note by less
than zero.

IN WITNESS WHEREOF, the Customer, by authority of its Board of Directors or
other governing body, confirms its application for the Advance evidenced hereby
and has caused this Note to be executed and delivered by its duly designated and
authorized Officers.

                   Bank of Southern Oregon, Medford, OR 13650
                                   (Customer)

<TABLE>
<S>                                              <C>
By: /s/ John L. Anhorn                       ,   its Chief Executive Officer & President
    -----------------------------------------        -----------------------------------
    (Signature)                (Title)

         John L. Anhorn
    (Typed Name)

By: /s/ Richard Hieb                           , its Executive Vice President & Chief Operating Officer
    -------------------------------------------      --------------------------------------------------
</TABLE>

<PAGE>   6

    (Signature)                         (Title)

          Richard Hieb
    ---------------------------------------------------
    (Typed Name)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00001-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00001-of-00352.parquet"}]]