Document:

ex102.htm

    
EXHIBIT
10.2

      SECOND
AMENDED AND RESTATED

      EXECUTIVE
SUPPLEMENTAL COMPENSATION AGREEMENT

      (By
and Between Columbia State Bank and Columbia Banking System, Inc.
and

      Gary
R. Schminkey)

      

      

      THIS
SECOND AMENDED AND RESTATED EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
(hereinafter “Agreement”)  is made and entered into effective as of
this May 27, 2009 by and between COLUMBIA STATE BANK and COLUMBIA BANKING
SYSTEM, INC., its parent holding company (jointly hereafter the “Employer”), and
Gary R. Schminkey, an individual residing in the State of Washington
(“Executive”).

      

      This
Second Amended and Restated Executive Supplemental Compensation Agreement now
hereby amends, supersedes and replaces the First Amended and Restated Executive
Supplemental Compensation Agreement by and between these same parties, effective
as of  December 31, 2008 (which, in turn, amended, superseded and
replaced the Executive Supplemental Compensation Agreement, entered into as of
August 1, 2001).

      

      WHEREFORE,
the parties hereby agree as follows:

      

      
        	
                1.0  

              	
                DEFINITIONS

              

      

      

      For the
purposes of this Agreement, the following terms shall have the meanings
indicated, unless the context clearly indicates otherwise:

      

      1.1           Administrator.  The
Employer shall be the "Administrator" and, solely for the purposes of ERISA, the
"fiduciary" of this Agreement where a fiduciary is required by
ERISA.

      

      1.2           Agreement.
The term “Agreement” shall refer to this Second Amended and Restated Executive
Supplemental Compensation Agreement.

      

      1.3           Change in
Control.   A Change in Control
shall be deemed to have occurred upon any of the following events, as such terms
are defined in IRC 409A:

      

      
        	
                 
      

              	
                A.

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

              

      

      

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                B.

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

              

      

      

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

      

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

      

      
        	
                 
      

              	
                C

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

              

      

      

      In
addition to the forgoing, and in accordance with IRC 409A, in order to
constitute a Change in Control event with respect to a specific Executive, the
Change in Control must relate to (i) the corporation for whom Executive is
performing services at the time of the Change in Control; (ii) the corporation
that is liable for the payment of the deferred compensation (or all corporations
liable for the payment if more than one corporation is liable) but only if
either the deferred compensation is attributable to the performance of service
by Executive for such corporation (or corporations) or there is a bona fide
business purpose for such corporation or corporations to be liable for such
payment and no significant purpose of making such corporation or corporations
liable for such payment is the avoidance of Federal income tax; or (iii) a
corporation that is a majority shareholder of a corporation identified above, or
any corporation in a chain of corporations in which each corporation is a
majority shareholder of another corporation in the chain, ending in a
corporation identified above. (A majority shareholder is a shareholder owning
more than fifty (50%) percent of the total fair market value and total voting
power of such corporation).

      

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      1.4           Disability/Disabled.  For the purpose of this
Agreement, Executive will be considered disabled if:

      

      A.           He
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than Twelve (12) months, or

      

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

      

      1.5           Early
Commencement Reduction Factor. The term “Early Commencement Reduction
Factor” is the amount by which Executive’s benefit shall be reduced based on the
benefit being paid prior to Executive’s attaining the Normal Retirement Age. The
amount of the Early Commencement Reduction Factor shall be determined as
follows: for each year (or partial year) that an Executive’s benefit hereunder
is paid prior to his attainment of the Normal Retirement Age, then the benefit
amount shall be reduced by a factor of Five Percent (5%). Thus, if an executive
with a Normal Retirement Age of Sixty-Two (62) begins receiving payments at age
Fifty-Nine (59), the amount of the annual benefit shall be reduced by 15% (62-
59 = 3; 3 x 5%= 15%).

      

      1.6           Early
Retirement Age.  The term “Early
Retirement Age” shall mean the Executive’s attainment of the age of Fifty-Five
(55).

       

      1.7           Early
Retirement Date. The term “Early Retirement Date” shall mean a date which
satisfies the following: (a) it shall be a date on or after Executive has
attained the Early Retirement Age, and before he attains the Normal Retirement
Age; and (b) and it shall be the date on which Executive Separates From Service
(for any reason other than for Cause).

       

      1.8           Effective
Date.   The term
"Effective Date" shall mean the date identified as such in the opening paragraph
of this Agreement.

      

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

      

      1.10           Executive
Benefit. The term
"Executive Benefit" shall mean the actual amount to be paid to Executive
pursuant to this Agreement, which shall include any reductions or adjustments
(a) required under the other provisions of this Agreement; or  (b)
required by reason of the lawful order of any regulatory agency or body having
jurisdiction over the Employer; or (c) required in order for the Employer to
comply with any and all applicable state and federal laws, including, but not
limited to, income, employment and disability income tax laws (e.g. FICA, FUTA,
SDI).

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

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

      

      1.12         IRC and
IRC 409A. The term “IRC” shall mean the Internal Revenue Code of 1986, as
amended. The term “IRC 409A” shall mean Internal Revenue Code Section 409A and
the Treasury Regulations promulgated thereunder, including any subsequent and
related notices or clarifications.

      

      1.13         Normal
Retirement Age. The term “Normal Retirement Age” shall mean Executive’s
attainment of the age Sixty-Five (65). In the event Executive Separates From
Service pursuant to the provisions of Paragraph 3.5, however, and for the
purposes of calculating the Early Commencement Reduction Factor, Executive’s
Normal Retirement Age shall be the age of Sixty-Two (62).

      

      1.14         Normal
Retirement Date. The term “Normal Retirement Date” shall mean a date
which satisfies the following: (a) it shall be a date on or after Executive
attains the Normal Retirement Age, and (b) it shall be the date on which
Executive Separates From Service (for any reason other than For
Cause).

      

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

      

      1.16         Supplemental
Retirement Benefit. The term “Supplemental Retirement Benefit” shall be
an annual amount equal to Two Hundred Six Thousand, Nine Hundred Fifty-Seven
Dollars ($206,957).

      

      1.17         Termination
for Cause.  The term “Termination for Cause” shall mean a
Termination of Employment of Executive by Employer by reason of any of the
following:

      

      
        	
                 
      

              	
                A.

              	
                Willful
      misfeasance or gross negligence in the performance of Executive’s duties;
      or

              

      

      

      
        	
                 
      

              	
                B.

              	
                Conduct
      demonstrably and significantly harmful to Employer or a financial
      institution subsidiary; or

              

      

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                C.

              	
                Conviction
      of a felony.

              

      

      

      1.18         Termination
for Good Reason.  For the purposes of this Agreement, a
Voluntary Termination by Executive following a Change in Control Event shall be
deemed “for Good Reason” if one or more of the following conditions arise
without the consent of  Executive:

      

      A.           A
material diminution in Executive’s base compensation;

      

      
        	
                 
      

              	
                B.

              	
                A
      material diminution in Executive’s authority, duties, or
      responsibilities;

              

      

      

      
        	
                 
      

              	
                C.

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

              

      

      

      
        	
                 
      

              	
                D.

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

              

      

      

      
        	
                 
      

              	
                E.

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

              

      

      

      
        	
                 
      

              	
                F.

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

              

      

      

      1.19         Termination
of Employment and Separation From Service. The
terms  “Termination of Employment” (or “Terminate” or “Terminates”) as
used in this Agreement shall be used interchangeably with the term “Separation
From Service”, and shall be interpreted in accordance with the provisions of IRC
409A and any related notices, guidance or regulations. Under the current
provisions of IRC 409A, whether a Separation From Service (or a Termination of
Employment) has occurred is determined based on whether the facts and
circumstances indicate that employer and employee reasonably anticipate that no
further services will be performed after a certain date or that the level of
bona fide services the employee will perform after such date (whether as an
employee or as an independent contractor) will permanently decrease to no more
than twenty (20%) percent of the average level of bona fide services performed
(as an employee or an independent contractor) over the immediately preceding
thirty-six (36) month period (or the full period of services to the employer if
the employee has been providing services to the employer less than 36
months).  There shall be no Separation From Service while the
Executive is on military leave, sick leave or other bona fide leave of absence,
as long as such leave does not exceed six (6) months, or if longer, so long as
the individual retains a right to reemployment with the service recipient under
an applicable statute or by contract.

      

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      1.20         Voluntary
Termination. The
term “Voluntary Termination” shall mean a voluntary resignation of employment by
Executive, and not as a result of Disability or a Termination for Good
Reason.

      

      2.0           SCOPE,
PURPOSE AND EFFECT.

      

      2.1           Not
a Contract
of Employment.  Although this
Agreement and the benefit provided herein is intended to provide Executive with
additional incentive to remain in the employ of Employer, this Agreement shall
not constitute a contract of employment between Executive and Employer, nor
shall any provision of this Agreement be applied to restrict or expand the right
of Employer to terminate Executive’s Employment, with or without cause. This
Agreement shall have no impact or effect upon any separate written employment
agreement which Executive may have with Employer, it being the parties’
intention and agreement that unless this Agreement is specifically referenced in
such employment agreement, then this Agreement (and Employer’s
obligations hereunder) shall stand separate and apart and shall have no effect
on, or be affected by, the terms and provisions of any employment agreement.
Events of Termination of Employment shall be characterized, for purposes of
interpreting this Agreement, in accord with the definitions herein.

      

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

      

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

      

      3.0           SUPPLEMENTAL RETIREMENT
BENEFITS

      

      3.1           Separation
From Service on or After Attaining the Normal Retirement Age. In the
event Executive Separates From Service on or after attaining the Normal
Retirement Age (and other than for Cause), then he shall receive an annual
Executive Benefit equal to the Supplemental Retirement Benefit (reduced as
required under Paragraph 1.10 and subject to the non-compete provisions of
Paragraph 3.9). This annual Executive Benefit shall be paid in substantially
equal monthly installments, with payments commencing on the first day of the
first month following Executive’s Separation From Service, and continuing
thereafter until Executive’s death. In addition to the forgoing, the annual
Executive benefit amount shall be increased each year by two percent (2 %).
These annual increases shall take effect each year on the anniversary of the
first payment date and shall continue for as long as the Executive receives a
benefit.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      3.2           Separation
From Service on a Date which Constitutes an Early Retirement Date.  In the event
Executive Separates From Service on a date which constitutes an Early Retirement
Date (and other than pursuant to the provisions of Paragraph 3.5), then he shall
receive an annual Executive Benefit equal to the Supplemental Retirement Benefit
(reduced as required under Paragraph 1.10 and subject to the non-compete
provisions of Paragraph 3.9), reduced by the Early Commencement Reduction Factor
(determined as of the date payments of benefits are to begin). This annual
Executive Benefit shall be paid in substantially equal monthly installments,
with payments commencing on the first day of the first month following
Executive’s Separation From Service, and continuing until Executive’s death. In
addition to the forgoing, the annual Executive benefit amount shall be increased
each year by two percent (2 %). These annual increases shall take effect each
year on the anniversary of the first payment date and shall continue for as long
as the Executive receives a benefit.   

      

      3.3           Separation
From Service Prior to Attaining the Early Retirement Age. In the event
Executive Voluntarily or Involuntarily Separates From Service prior to
qualifying for Early Retirement (and other than pursuant to the terms of
Paragraph 3.5 or for Cause), then (subject to the non-compete provisions of
Paragraph 3.9), he shall be entitled to receive an annual amount equal to the
Supplemental Retirement Benefit. This annual Executive Benefit shall be paid in
substantially equal monthly installments, with payments commencing on the first
day of the first month following Executive’s attainment of the age of Fifty-Five
(55). The annual Executive Benefit amount shall be reduced by the Early
Commencement Reduction Factor, and benefit payments shall continue until
Executive’s death. In addition to the forgoing, the annual Executive Benefit
amount shall be increased each year by two percent (2 %). These annual increases
shall take effect each year on the anniversary of the first payment date and
shall continue for as long as the Executive receives a benefit.

       

      3.4           Disability. In the event Executive
becomes Disabled before Terminating Employment, then, subject to the non-compete
provisions of Paragraph 3.9, Executive shall be entitled to receive an annual
amount equal to the Supplemental Retirement Benefit. Payments shall be made in
substantially equal monthly installments, commencing on the first day of the
first month following the determination of Disability in compliance with IRC
409A, and continuing until death. The annual Executive Benefit amount shall be
increased each year by two percent (2 %). To the extent benefits are duplicated
or paid under Employer’s long term disability plan, then such benefits hereunder
shall be forfeited.

       

      3.5           Involuntary
Termination or Termination for Good Reason Following a Change in Control.
In the event Executive is Involuntarily Terminated or Terminates for Good
Reason following a Change in Control, (and for any reason other than for cause),
then he shall be entitled to an annual amount equal to the Supplemental
Retirement Benefit, reduced by the Early Commencement Reduction Factor. This
annual Executive Benefit shall be paid in substantially equal monthly
installments, with payments commencing on the first day of the first month
following the later of Executive’s Separation From Service or attainment of the
age of Fifty-Five (55). As stated in Paragraph 1.13, for the purposes of
calculating the Early Commencement Reduction Factor, Executive’s Normal
Retirement Age shall be the age of Sixty-Two (62).  In addition, the
annual Executive Benefit amount shall be increased each year by two percent (2
%).

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      These
annual increases shall take effect each year on the anniversary of the first
payment date and shall continue for as long as the Executive receives a
benefit.

      

      3.6           Termination
For Cause. If Executive’s Employment with Employer is Terminated For
Cause, then Executive shall forfeit any and all rights and benefits he may have
under this Agreement, and he shall have no right to be paid any of the amounts
which would otherwise be due or paid to Executive by Employer pursuant to the
terms of this Agreement. 

      

      3.7           Death of
Executive. In the
event Executive dies while employed by Employer, then no death benefits shall be
payable under this Agreement. Death benefits, if any, shall be paid pursuant to
a Joint Beneficiary Designation Agreement, if such plan exists. 

      

      3.8          
Supplemental
Retirement Benefit Payable Pursuant to Single Paragraph. Executive’s Supplemental
Retirement Benefit shall be payable under this Agreement pursuant to only one of
paragraphs 3.1 through 3.7 above and shall not be payable under more than one
such provision. The time and circumstances of Executive’s Separation From
Service shall determine which paragraph shall be used to calculate the
Supplemental Retirement Benefit.

      

      3.9           Forfeiture
in the Event of Breach of Non-Competition Agreement. Notwithstanding any
other provision of this Agreement, the Executive Benefit due the Executive
pursuant hereto (if any) shall be forfeited and no Executive Benefit shall be
due the Executive hereunder if the Executive enters into competitive activity in
the Employer's market area within the three (3) year period beginning on the
date of the Executive's termination of Employment.  Competitive
activity means acting directly or indirectly as an employee, agent, stockholder
(other than passive holdings of less than one percent (1%) of the outstanding
shares of a publicly-traded company), member, director, co-partner or in any
other individual or representative capacity on behalf of any bank or financial
institution (including without limitation trust company, finance company,
leasing company or any entity that provides credit). The Employer's market area
is defined as the following counties in the State of Washington and all counties
bordering on any such county and any county in which the Employer maintains a
branch or other office, now or at the time of the Executive's termination of
Employment:  Cowlitz, King, Kitsap, Pierce and Thurston.

      

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      4.0           FORM AND PAYMENT OF
BENEFITS

       

      
        	
                 
      

              	
                4.1

              	
                Compliance With IRC
      409A

              

      

      

      It is the
intent of the parties to comply with all applicable Internal Revenue Code
Sections, including but not limited to, IRC 409A. Thus, when required by IRC
409A, any benefits payable pursuant to this Agreement and as a result of a
Separation From Service shall be withheld for six (6) months following such
Separation From Service if Executive is a Specified Employee (as defined herein
and/or by the Internal Revenue Service) and Employer is publicly traded at the
time of Separation From Service. For any individual affected by this six (6)
month delay in payment imposed by IRC 409A, and when applicable, the aggregate
amount of the first seven (7) months of installments shall be paid on the first
day of the seventh month following the date of Separation From Service. Monthly
installment payments shall continue thereafter as called for.

      

      In
addition, and in accordance with and subject to IRS Notices 2006-79, 2007-78 and
2007-86, no payment scheduled to be made in 2008 may be delayed to a date later
than 2008, no payment which would not otherwise be scheduled to occur in 2008
may be accelerated into 2008, and no payment scheduled to be made in 2008 may be
delayed to a date later than 2008. If any payout to Executive in this Agreement
is affected by this prohibition, then such payouts shall only be made in
compliance with IRC 409A.

      

      In the
event any provision of this Agreement is ambiguous, then, whenever possible, it
shall be interpreted in a manner that is consistent with
IRC 409A.

      

      4.2           Reduction
for Early Commencement of Benefits. If Executive receives an Executive
Benefit under this Agreement before attaining the Normal Retirement Age, then
the annual Benefit shall be reduced by the Early Commencement Reduction Factor
(other than in the event of Disability).

       

      4.3           Withholding
of Payroll Taxes.  Employer shall withhold from payments made
hereunder, any taxes required to be withheld from Executive’s benefits under
federal, state or local law. 

       

      5.0.           IRS 280G
ISSUES

      

      If all or
any portion of the amounts payable to Executive under this Agreement, either
alone or together with other payments which Executive has the right to receive
from Employer, constitute "excess parachute payments" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), that
are subject to the excise tax imposed by Section 4999 of the Code (or similar
tax and/or assessment), Executive shall be responsible for the payment of such
excise tax and Employer (and its successor) shall be responsible for any loss of
deductibility related thereto; provided, however, that Employer and Executive
shall cooperate with each other and use all reasonable efforts to minimize to
the fullest extent possible the amount of excise tax imposed by Section 4999 of
the Code.  If, at a later date, it is determined (pursuant to final
regulations or published rulings of the Internal Revenue Service,
final

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      judgment
of a court of competent jurisdiction, or otherwise) that the amount of excise
taxes payable by Executive is greater than the amount initially so determined,
then Executive shall pay an amount equal to the sum of such additional excise
taxes and any interest, fines and penalties resulting from such
underpayment.  The determination of the amount of any such excise
taxes shall be made by the independent accounting firm employed by the Employer
immediately prior to the change in control or such other independent accounting
firm or advisor as may be mutually agreeable to Employer and Executive in the
exercise of their reasonable good faith judgment.

      

      6.0           FUNDING AND STATUS AS
UNSECURED CREDITOR

      

      6.1           Right To
Determine Funding Methods. Employer reserves the right to determine, in
its sole and absolute discretion, whether, to what extent and by what method, if
any, to provide for the payment of the amounts which may be payable to
Executive, under the terms of this Agreement.  In the event that
Employer elects to fund this Agreement, in whole or in part, through the use of
life insurance or annuities, or both, Employer shall determine the ownership and
beneficial interests of any such policy of life insurance or
annuity.  Employer further reserves the right, in its sole and
absolute discretion, to terminate any such policy, and any other device used to
fund its obligations under this Agreement, at any time, in whole or in part.
Consistent with Paragraph 6.2 below, Executive shall have no right, title or
interest in or to any funding source or amount utilized by Employer pursuant to
this Agreement, and any such funding source or amount shall not constitute
security for the performance of Employer’s obligations pursuant to this
Agreement.  In connection with the foregoing, Executive agrees to
execute such documents and undergo such medical examinations or tests which
Employer may request and which may be reasonably necessary to facilitate any
funding for this Agreement including, without limitation, Employer’s acquisition
of any policy of insurance or annuity.

      

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

      

      Notwithstanding
provisions (i) through (v) above, Employer and Executive acknowledge and agree
that, in the event that Employer signs a definitive agreement calling for a
transaction that would result in a Change in Control, then upon request of
Executive, or in Employer’s discretion if Executive does not so request and
Employer nonetheless deems it appropriate, Employer shall establish, not later
than the effective date of the Change in Control, a Rabbi Trust or multiple
Rabbi Trusts (the "Trust" or "Trusts") upon such terms and conditions as
Employer, in its sole discretion, deems appropriate. In compliance with
applicable provisions of the Code,

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      and,
pursuant to the Trusts, Employer shall promptly make contributions and/or
transfer assets to the Trusts which facilitate and are appropriate to the
discharge of the Trusts’ obligations pursuant to this Agreement.  The
principal of the Trust or Trusts and any earnings thereon shall be held separate
and apart from other funds of Employer to be used for discharge of Employer’s
obligations pursuant to this Agreement and shall continue to be subject to the
claims of Employer’s general creditors until paid to Executive in such manner
and at such times as specified in this Agreement.

      

      7.0           CLAIMS
PROCEDURE

      

      7.1           Named
Fiduciary and Agreement Administrator. The "Named Fiduciary and Agreement
Administrator" of this plan shall be the Employer until its removal by the board
of directors.  As Named Fiduciary and Administrator, Employer shall be
responsible for the management, control and administration of the executive
supplemental compensation plan as established herein. The Named Fiduciary may
delegate to others certain aspects of the management and operation
responsibilities of the plan including the employment of advisors and the
delegation of ministerial duties to qualified individuals.

      

      7.2           Claims
Procedure.  In the event a dispute arises over the benefits
under this Agreement and benefits are not paid to Executive (or to Executive’s
beneficiary[ies], if applicable) and such claimants feel they are entitled to
receive such benefits, then a written claim must be made to the Named Fiduciary
and Plan Administrator named above  in accordance with the following
procedures:

      

      
        	
                 
      

              	
                A.

              	
                Written
      Claim.  The claimant may file a written request for such
      benefit to the Plan Administrator.

              

      

      

      
        	
                 
      

              	
                B.

              	
                Claim
      Decision.  Upon receipt of such claim, the Plan
      Administrator shall respond to such claimant within ninety (90) days after
      receiving the claim.  If the Plan Administrator determines that
      special circumstances require additional time for processing the claim,
      the Plan Administrator can extend the response period by an additional
      ninety (90) days for reasonable cause by notifying the claimant in
      writing, prior to the end of the initial ninety (90) day period, that an
      additional period is required. The notice of extension must set forth the
      special circumstances and the date by which the Plan Administrator expects
      to render its decision.

              

      

      

      If the
claim is denied in whole or in part, the Plan Administrator shall notify the
claimant in writing of such denial. The Plan Administrator shall write the
notification in a manner calculated to be understood by the
claimant.  The notification shall set forth:

      

      (i)            The
specific reasons for the denial;

      
        	
                 
      

              	
                (ii)

              	
                The
      specific reference to pertinent provisions of the Agreement on which the
      denial is based;

              

      

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (iii)

              	
                A
      description of any additional information or material necessary for the
      claimant to perfect the claim and an explanation of why such material or
      information is necessary;

              

      

      
        	
                 
      

              	
                (iv)

              	
                Appropriate
      information as to the steps to be taken if the claimant wishes to submit
      the claim for review and the time limits applicable to such procedures;
      and

              

      

      
        	
                 
      

              	
                (v)

              	
                A
      statement of the claimant’s right to bring a civil action under ERISA
      Section 502(a) following an adverse benefit determination on
      review.

              

      

      

      
        	
                 
      

              	
                C.

              	
                Request for
      Review.  Within sixty (60) days after receiving notice
      from the Plan Administrator that a claim has been denied (in part or all
      of the claim), then  claimant (or their duly authorized
      representative) may file with the Plan Administrator, a written request
      for a review of the denial of the
claim.

              

      

      

      The
claimant (or his duly authorized representative) shall then have the opportunity
to submit written comments, documents, records and other information relating to
the claim.  The Plan Administrator shall also provide the claimant,
upon request and free of charge, reasonable access to, and copies of, all
documents, records and other information relevant (as defined in applicable
ERISA regulations) to the claimant’s claim for benefits.

      

      
        	
                 
      

              	
                D.

              	
                Decision on
      Review.  The Plan Administrator shall respond in writing
      to such claimant within sixty (60) days after receiving the request for
      review.  If the Plan Administrator determines that special
      circumstances require an extension of time for processing the claim,
      written notice of the extension shall be furnished to the claimant prior
      to the termination of the initial sixty (60) day period. In no event shall
      such extension exceed a period of sixty (60) days from the end of the
      initial period. The notice of extension must set forth the special
      circumstances requiring an extension of time and the date by which the
      Plan Administrator expects to render its
  decision.

              

      

      

      In
considering the review, the Plan Administrator shall take into account all
materials and information the claimant submits relating to the claim, without
regard to whether such information was submitted or considered in the initial
benefit determination.

      

      The Plan
Administrator shall notify the claimant in writing of its decision on
review.  The Plan Administrator shall write the notification in a
manner calculated to be understood by the claimant.  The notification
shall set forth:

      

      
        	
                 
      

              	
                (i)

              	
                The
      specific reasons for the
denial;

              

      

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (ii)

              	
                A
      reference to the specific provisions of the Agreement on which the denial
      is based;

              

      

      
        	
                 
      

              	
                (iii)

              	
                A
      statement that the claimant is entitled to receive, upon request and free
      of charge, reasonable access to, and copies of, all documents, records and
      other information relevant (as defined in applicable ERISA regulations) to
      the claimant’s claim for benefits;
and

              

      

      
        	
                 
      

              	
                (iv)

              	
                A
      statement of the claimant’s right to bring a civil action under ERISA
      Section 502(a).

              

      

      

      7.3           Arbitration
of Disputes.  All claims,
disputes and other matters in question arising out of or relating to this
Agreement and Agreement or the breach or interpretation thereof, other than
those matters which are to be determined by the Employer in its sole and
absolute discretion, shall be resolved by binding arbitration before a
representative member, selected by the mutual agreement of the parties, of the
Judicial Arbitration and Mediation Services, Inc. ("JAMS") located in Tacoma,
Washington.  In the event JAMS is unable or unwilling to conduct the
arbitration provided for under the terms of this paragraph, or has discontinued
its business, the parties agree that a representative member, selected by the
mutual agreement of the parties of the American Arbitration Association ("AAA")
shall conduct the binding arbitration referred to in this paragraph. Notice of
the demand for arbitration shall be filed in writing with the other party to
this Agreement and with JAMS (or AAA, if necessary).  In no event
shall the demand for arbitration be made after the date when institution of
legal or equitable proceedings based on such claim, dispute or other matter in
question would be barred by the applicable statute of
limitations.  The arbitration shall be subject to such rules of
procedure used or established by JAMS, or if there are none, the rules of
procedure used or established by AAA. Any award rendered by JAMS or AAA shall be
final and binding upon the parties, and as applicable, their respective heirs,
beneficiaries, legal representatives, agents, successors and assigns, and may be
entered in any court having jurisdiction thereof.  The obligation of
the parties to arbitrate pursuant to this clause shall be specifically
enforceable in accordance with, and shall be conducted consistently with, the
provisions of the Washington Code of Civil Procedure.  Any arbitration
hereunder shall be conducted in Tacoma, Washington, unless otherwise agreed to
by the parties. The parties hereto agree that they and their heirs, personal
representatives, successors and assigns shall be bound by such arbitration with
respect to any controversy properly submitted to it for
determination.

      

      7.4           Attorneys’
Fees.  In the event of
any arbitration or litigation concerning any controversy, claim or dispute
between the parties hereto, arising out of or relating to this Agreement or the
breach hereof, or the interpretation hereof, (a) each party shall pay his own
attorneys’ arbitration Fees incurred pursuant to 7.3 hereof; (b) if Executive
prevails, he shall be entitled to recover from the other party reasonable
expenses, attorneys’ Fees and costs incurred in the enforcement or collection of
any judgment or award rendered.  The term “prevails” applies if the
arbitrator(s) or court finds that Executive is entitled to contested money
payments from the other, but does not necessarily imply a judgment rendered in
favor of Executive.

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      

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

      

      If to
Employer:                      Columbia
Banking System, Inc.

      Attn:  Corporate
Secretary

      1301 A Street

      Tacoma,
WA  98402

      

      If to
Executive:                      __________________________

      __________________________

      __________________________

      

      

      8.0           MISCELLANEOUS

      

      8.1           Binding
Effect/Merger or Reorganization.  This Agreement shall be
binding upon and inure to the benefit of the Executive and
Employer.  Accordingly, the Employer shall not merge or consolidate
into or with another corporation, or reorganize or sell substantially all of its
assets to another corporation, firm or person, unless and until such succeeding
or continuing corporation, firm or person agrees to assume and discharge the
obligations of the Employer under this Agreement.

      

      8.2           Effect on
Other Benefit Plans. Nothing contained in this Agreement shall affect the
right of the Executive to participate in or be covered by any qualified or
non-qualified pension, profit-sharing, group, bonus or other supplemental
compensation or fringe benefit plan constituting a part of the Employer’s
existing or future compensation structure.

      

      8.3           12 U.S.C.
§ 1828(k). Any payments made
to Executive pursuant to this Agreement, or otherwise, are subject to and
conditioned upon his compliance with 12 U.S.C. § 1828(k) or any regulations
promulgated thereunder.

      

      8.5           Opportunity
To Consult With Independent Advisors. Executive acknowledges that
he has been afforded the opportunity to consult with independent advisors of his
choosing including, without limitation, accountants or tax advisors and counsel
regarding both the benefits granted to him under the terms of this Agreement and
the (i) terms and conditions which may affect Executive’s right to these
benefits and (ii) personal tax effects of such benefits including, without
limitation, the effects of any federal or state taxes, Section 280G of the Code,
and any other taxes, costs, expenses or liabilities whatsoever related to such
benefits, which in any of the

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      foregoing
instances the Executive acknowledges and agrees shall be the sole responsibility
of Executive notwithstanding any other term or provision of this
Agreement.  Executive further acknowledges and agrees that Employer
shall have no liability whatsoever related to any such personal tax effects or
other personal costs, expenses, or liabilities applicable to Executive and
further specifically waives any right for himself or herself, and his or her
heirs, beneficiaries, legal representatives, agents, successor and assign to
claim or assert liability on the part of the Employer related to the matters
described herein.  Executive further acknowledges that he has read,
understands and consents to all of the terms and conditions of this Agreement,
and that he enters into this Agreement with a full understanding of its terms
and conditions.

      

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

      

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

      

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

      

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

      

      8.10         Modifications.  Any modification
of this Agreement shall be effective only if it is in writing and signed by each
party or such party's authorized representative.

      

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

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

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

      

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

      

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

      

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

      

      

      EMPLOYER:

      
        
          
            
              
                	 	 	 	 
	COLUMBIA
      STATE BANK	COLUMBIA
      BANKING SYSTEM, INC.
	By:	
                         

                      	By:	
                      
	Title: 	
                         

                      	Title: 	
                         

                      

              

            

          

        

      

      
 

      

      EXECUTIVE

       

       

       

      
        
          

        

      

      
        
           

        

        
          16ex103.htm

    EXHIBIT
10.3

      SECOND
AMENDED AND RESTATED

      EXECUTIVE
SUPPLEMENTAL COMPENSATION AGREEMENT

      (By
and Between Columbia State Bank and Columbia Banking System, Inc.
and

      Mark
W. Nelson)

      

      THIS
SECOND AMENDED AND RESTATED EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
(hereinafter “Agreement”)  is made and entered into effective as of
this May 27, 2009 by and between COLUMBIA STATE BANK and COLUMBIA BANKING
SYSTEM, INC., its parent holding company (jointly hereafter the “Employer”), and
Mark W. Nelson, an individual residing in the State of Washington
(“Executive”).

      

      This
Second Amended and Restated Executive Supplemental Compensation Agreement now
hereby amends, supersedes and replaces the First Amended and Restated Executive
Supplemental Compensation Agreement by and between these same parties, effective
as of  December 31, 2008 (which, in turn, amended, superseded and
replaced the Executive Supplemental Compensation Agreement, entered into as of
July 1, 2003).

      

      WHEREFORE,
the parties hereby agree as follows:

      

      
        	
                1.0  

              	
                DEFINITIONS

              

      

      

      For the
purposes of this Agreement, the following terms shall have the meanings
indicated, unless the context clearly indicates otherwise:

      

      1.1           Administrator.  The
Employer shall be the "Administrator" and, solely for the purposes of ERISA, the
"fiduciary" of this Agreement where a fiduciary is required by
ERISA.

      

      1.2           Agreement.
The term “Agreement” shall refer to this Second Amended and Restated Executive
Supplemental Compensation Agreement.

      

      1.3           Applicable
Percentage. The
term “Applicable Percentage” means the percentage of the Supplemental Retirement
Benefit that the Executive is entitled to receive based on the date of
Separation From Service, as shown on the schedule set forth below.
Notwithstanding the forgoing, the Applicable Percentage shall be deemed to be
One-Hundred Percent (100%) in the event of Disability or in the event of a
termination pursuant to the provisions of Paragraph 3.5. Subject to the
forgoing, the Applicable Percentage shall be determined as follows:

       

      
        
          
            
              
                
                  
                    
                      	
                              DATE
      OF SEPARATION FROM SERVICE

                            	
                              APPLICABLE
      PERCENTAGE

                            
	
                              January
      1, 2008 through December 31, 2008

                            	
                              50%

                            
	
                              January
      1, 2009 through December 31, 2009

                            	
                              60%

                            

                    

                  

                

              

            

          

        

      

      

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  January
      1, 2010 through December 31, 2010

                                	
                                  70%

                                
	
                                  January
      1, 2011 through December 31, 2011

                                	
                                  80%

                                
	
                                  January
      1, 2012 through December 31, 2012

                                	
                                  90%

                                
	
                                  January
      1, 2013 and thereafter

                                	
                                  100%

                                

                        

                      

                    

                  

                

              

            

          

        

      

      

      1.4           Change in
Control.   A Change in Control
shall be deemed to have occurred upon any of the following events, as such terms
are defined in IRC 409A:

      

      
        	
                 
      

              	
                A.

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

              

      

      

      
        	
                 
      

              	
                B.

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

              

      

      

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

      

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

      

      
        	
                 
      

              	
                C

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

              

      

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      assets
are transferred to certain entities controlled directly or indirectly by the
shareholders of the transferring corporation.

      

      In
addition to the forgoing, and in accordance with IRC 409A, in order to
constitute a Change in Control event with respect to a specific Executive, the
Change in Control must relate to (i) the corporation for whom Executive is
performing services at the time of the Change in Control; (ii) the corporation
that is liable for the payment of the deferred compensation (or all corporations
liable for the payment if more than one corporation is liable) but only if
either the deferred compensation is attributable to the performance of service
by Executive for such corporation (or corporations) or there is a bona fide
business purpose for such corporation or corporations to be liable for such
payment and no significant purpose of making such corporation or corporations
liable for such payment is the avoidance of Federal income tax; or (iii) a
corporation that is a majority shareholder of a corporation identified above, or
any corporation in a chain of corporations in which each corporation is a
majority shareholder of another corporation in the chain, ending in a
corporation identified above. (A majority shareholder is a shareholder owning
more than fifty (50%) percent of the total fair market value and total voting
power of such corporation).

      

      1.5           Disability/Disabled.  For the purpose of this
Agreement, Executive will be considered disabled if:

      

      A.           He
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than Twelve (12) months, or

      

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

      

      1.6           Early
Commencement Reduction Factor. The term “Early Commencement Reduction
Factor” is the amount by which Executive’s benefit shall be reduced based on the
benefit being paid prior to Executive’s attaining the Normal Retirement Age. The
amount of the Early Commencement Reduction Factor shall be determined as
follows: for each year (or partial year) that an Executive’s benefit hereunder
is paid prior to his attainment of the Normal Retirement Age, then the benefit
amount shall be reduced by a factor of Five Percent (5%). Thus, if an executive
with a Normal Retirement Age of Sixty-Two (62) begins receiving payments at age
Fifty-Nine (59), the amount of the annual benefit shall be reduced by 15% (62-
59 = 3; 3 x 5%= 15%).

      

      1.7           Early
Retirement Age.  The term “Early
Retirement Age” shall mean the Executive’s attainment of the age of Fifty-Five
(55).

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      1.8           Early
Retirement Date. The term “Early Retirement Date” shall mean a date which
satisfies the following: (a) it shall be a date on or after Executive has
attained the Early Retirement Age, and before he attains the Normal Retirement
Age; (b) and it shall be the date on which Executive Separates From Service (for
any reason other than for Cause) and (c) it shall be a date on or after which
Executive has attained an Applicable Percentage of One Hundred Percent
(100%).

       

      1.9           Effective
Date.   The term
"Effective Date" shall mean the date identified as such in the opening paragraph
of this Agreement.

      

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

      

      1.11         Executive
Benefit. The term
"Executive Benefit" shall mean the actual amount to be paid to Executive
pursuant to this Agreement, which shall include any reductions or adjustments
(a) required under the other provisions of this Agreement; or  (b)
required by reason of the lawful order of any regulatory agency or body having
jurisdiction over the Employer; or (c) required in order for the Employer to
comply with any and all applicable state and federal laws, including, but not
limited to, income, employment and disability income tax laws (e.g. FICA, FUTA,
SDI).

      

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

      

      1.13         IRC and
IRC 409A. The term “IRC” shall mean the Internal Revenue Code of 1986, as
amended. The term “IRC 409A” shall mean Internal Revenue Code Section 409A and
the Treasury Regulations promulgated thereunder, including any subsequent and
related notices or clarifications.

      

      1.14         Normal
Retirement Age. The term “Normal Retirement Age” shall mean Executive’s
attainment of the age Sixty-Five (65). In the event Executive Separates From
Service pursuant to the provisions of Paragraph 3.5, however, and for the
purposes of calculating the Early Commencement Reduction Factor, Executive’s
Normal Retirement Age shall be the age of Sixty-Two (62).

      

      1.15         Normal
Retirement Date. The term “Normal Retirement Date” shall mean a date
which satisfies the following: (a) it shall be a date on or after Executive
attains the Normal Retirement Age, and (b) it shall be the date on which
Executive Separates From Service (for any reason other than For
Cause).

      

      1.16         Specified
Employee. The term “Specified Employee” means an employee who, as of the
date of his Separation from Service, is a key employee of an employer of which
any stock is publicly traded on an established securities market or otherwise.
An employee is a key

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      employee
if the employee meets the requirements of section 416(i)(1)(A)(i), (ii), or
(iii) (applied in accordance with the regulations thereunder and disregarding
section 416(i)(5)) at any time during the twelve (12) month period ending on a
specified employee identification date. If Executive is a key employee as of a
specified employee identification date, then Executive shall be treated as a key
employee for the entire twelve (12) month period beginning on the specified
employee effective date.

      

      1.17         Supplemental
Retirement Benefit. The term “Supplemental Retirement Benefit” shall be
an annual amount equal to One Hundred Sixty-One Thousand, Six Hundred and
Twenty-Seven Dollars ($161,627).

      

      1.18         Termination
for Cause.  The term “Termination for Cause” shall mean a
Termination of Employment of Executive by Employer by reason of any of the
following:

      

      
        	
                 
      

              	
                A.

              	
                Willful
      misfeasance or gross negligence in the performance of Executive’s duties;
      or

              

      

      

      
        	
                 
      

              	
                B.

              	
                Conduct
      demonstrably and significantly harmful to Employer or a financial
      institution subsidiary; or

              

      

      

      C.           Conviction
of a felony.

      

      1.19         Termination
for Good Reason.  For the purposes of this Agreement, a
Voluntary Termination by Executive following a Change in Control Event shall be
deemed “for Good Reason” if one or more of the following conditions arise
without the consent of  Executive:

      

      A.           A
material diminution in Executive’s base compensation;

      

      
        	
                 
      

              	
                B.

              	
                A
      material diminution in Executive’s authority, duties, or
      responsibilities;

              

      

      

      
        	
                 
      

              	
                C.

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

              

      

      

      
        	
                 
      

              	
                D.

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

              

      

      

      
        	
                 
      

              	
                E.

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

              

      

      

      
        	
                 
      

              	
                F.

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

              

      

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      

      1.20         Termination
of Employment and Separation From Service. The
terms  “Termination of Employment” (or “Terminate” or “Terminates”) as
used in this Agreement shall be used interchangeably with the term “Separation
From Service”, and shall be interpreted in accordance with the provisions of IRC
409A and any related notices, guidance or regulations. Under the current
provisions of IRC 409A, whether a Separation From Service (or a Termination of
Employment) has occurred is determined based on whether the facts and
circumstances indicate that employer and employee reasonably anticipate that no
further services will be performed after a certain date or that the level of
bona fide services the employee will perform after such date (whether as an
employee or as an independent contractor) will permanently decrease to no more
than twenty (20%) percent of the average level of bona fide services performed
(as an employee or an independent contractor) over the immediately preceding
thirty-six (36) month period (or the full period of services to the employer if
the employee has been providing services to the employer less than 36
months).  There shall be no Separation From Service while the
Executive is on military leave, sick leave or other bona fide leave of absence,
as long as such leave does not exceed six (6) months, or if longer, so long as
the individual retains a right to reemployment with the service recipient under
an applicable statute or by contract.

      

      1.21         Voluntary
Termination. The
term “Voluntary Termination” shall mean a voluntary resignation of employment by
Executive, and not as a result of Disability or a Termination for Good
Reason.

      

      2.0           SCOPE,
PURPOSE AND EFFECT.

      

      2.1           Not
a Contract
of Employment.  Although this
Agreement and the benefit provided herein is intended to provide Executive with
additional incentive to remain in the employ of Employer, this Agreement shall
not constitute a contract of employment between Executive and Employer, nor
shall any provision of this Agreement be applied to restrict or expand the right
of Employer to terminate Executive’s Employment, with or without cause. This
Agreement shall have no impact or effect upon any separate written employment
agreement which Executive may have with Employer, it being the parties’
intention and agreement that unless this Agreement is specifically referenced in
such employment agreement, then this Agreement (and Employer’s
obligations hereunder) shall stand separate and apart and shall have no effect
on, or be affected by, the terms and provisions of any employment agreement.
Events of Termination of Employment shall be characterized, for purposes of
interpreting this Agreement, in accord with the definitions herein.

      

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

      

      2.3           Prohibited
Payments. Notwithstanding anything
in this Agreement to the contrary, if any payment made under this Agreement is a
“golden parachute payment” as defined in Section 28(k) of the Federal Deposit
Insurance Act (12 U.S.C. section 1828(k) and Part 359 of

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      the Rules
and Regulations of the Federal Deposit Insurance
Corporation  (collectively, the “FDIC Rules”) or is otherwise
prohibited, restricted or subject to the prior approval of a Bank Regulator, no
payment shall be made hereunder without complying with said FDIC
Rules.

      

      3.0           SUPPLEMENTAL RETIREMENT
BENEFITS

      

      3.1           Separation
From Service on or After Attaining the Normal Retirement Age. In the
event Executive Separates From Service on or after attaining the Normal
Retirement Age (and other than for Cause), then he shall receive an annual
Executive Benefit equal to the Applicable Percentage of the Supplemental
Retirement Benefit (reduced as required under Paragraph 1.11 and subject to the
non-compete provisions of Paragraph 3.9). This annual Executive Benefit shall be
paid in substantially equal monthly installments, with payments commencing on
the first day of the first month following Executive’s Separation From Service,
and continuing thereafter until Executive’s death. In addition to the forgoing,
the annual Executive benefit amount shall be increased each year by two percent
(2 %). These annual increases shall take effect each year on the anniversary of
the first payment date and shall continue for as long as the Executive receives
a benefit.

      

      3.2           Separation
From Service on a Date which Constitutes an Early Retirement Date.  In the event
Executive Separates From Service on a date which constitutes an Early Retirement
Date (and other than pursuant to the provisions of Paragraph 3.5), then he shall
receive an annual Executive Benefit equal to the Applicable Percentage of the
Supplemental Retirement Benefit (reduced as required under Paragraph 1.11 and
subject to the non-compete provisions of Paragraph 3.9), reduced by the Early
Commencement Reduction Factor (determined as of the date payments of benefits
are to begin). This annual Executive Benefit shall be paid in substantially
equal monthly installments, with payments commencing on the first day of the
first month following Executive’s Separation From Service, and continuing until
Executive’s death. In addition to the forgoing, the annual Executive benefit
amount shall be increased each year by two percent (2 %). These annual increases
shall take effect each year on the anniversary of the first payment date and
shall continue for as long as the Executive receives a
benefit.   

      

      3.3           Separation From Service
Prior to Qualifying for Early Retirement.

       

      A.            Involuntary Separation From
Service. In the event Executive Involuntarily Separates From Service
prior to qualifying for Early Retirement (and other than pursuant to the terms
of Paragraph 3.5 or for Cause), then  (subject to the non-compete
provisions of Paragraph 3.9), he shall be entitled to receive an annual amount
equal to the Applicable Percentage of the Supplemental Retirement Benefit. This
annual Executive Benefit shall be paid in substantially equal monthly
installments, with payments commencing on the first day of the first month
following the later of (i) Executive’s Separation From Service or (ii)
Executive’s attainment of the age of Sixty-Two (62). The annual Executive
Benefit amount shall be reduced by the Early Commencement Reduction Factor, and
benefit payments shall continue until Executive’s death. In addition to the
forgoing, the annual Executive Benefit amount shall be increased each year
by

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      two
percent (2 %). These annual increases shall take effect each year on the
anniversary of the first payment date and shall continue for as long as the
Executive receives a benefit.

       

      B.           
Voluntary Separation
From Service. In the event Executive Voluntarily Separates From Service
prior to qualifying for Early Retirement (and other than pursuant to the terms
of Paragraph 3.5), then Executive shall forfeit any and all rights and benefits
he may have under this Agreement, and he shall have no right to be paid any of
the amounts which would otherwise be due or paid to Executive by Employer
pursuant to the terms of this Agreement.

       

       3.4          Disability. In the event Executive
becomes Disabled before Terminating Employment, then, subject to the non-compete
provisions of Paragraph 3.9, Executive shall be entitled to receive an annual
amount equal to the Supplemental Retirement Benefit (as the Applicable
Percentage is advanced to 100% in the event of Disability). Payments shall
commence on the first day of the first month following the determination of
Disability in compliance with IRC 409A, and shall continue until death. The
annual Executive Benefit amount shall be increased each year by two percent (2
%). To the extent benefits are duplicated or paid under Employer’s long term
disability plan, then such benefits hereunder shall be forfeited.

       

      3.5           Involuntary
Termination or Termination for Good Reason Following a Change in Control.
In the event Executive is Involuntarily Terminated or Terminates for Good Reason
following a Change in Control, (and for any reason other than for cause), then
he shall be entitled to an annual amount equal to the Supplemental Retirement
Benefit (as the Applicable Percentage is advanced to 100%), reduced by the Early
Commencement Reduction Factor. This annual Executive Benefit shall be paid in
substantially equal monthly installments, with payments commencing on the first
day of the first month following the later of (i) Executive’s Separation From
Service or (ii) Executive’s attainment of the age of Sixty Two (62). The annual
Executive Benefit amount shall be increased each year by two percent (2 %).
These annual increases shall take effect each year on the anniversary of the
first payment date and shall continue for as long as the Executive receives a
benefit.

       

      3.6           Termination
For Cause. If Executive’s Employment with Employer is Terminated For
Cause, then Executive shall forfeit any and all rights and benefits he may have
under this Agreement, and he shall have no right to be paid any of the amounts
which would otherwise be due or paid to Executive by Employer pursuant to the
terms of this Agreement. 

      

      3.7           Death of
Executive. In the
event Executive dies while employed by Employer, then no death benefits shall be
payable under this Agreement. Death benefits, if any, shall be paid pursuant to
a Joint Beneficiary Designation Agreement, if such plan exists. 

      

      3.8   Supplemental
Retirement Benefit Payable Pursuant to Single Paragraph. Executive’s Supplemental
Retirement Benefit shall be payable under this Agreement pursuant to only one of
paragraphs 3.1 through 3.7 above and shall not be payable under more than one
such provision. The time and circumstances of Executive’s Separation From
Service shall determine which paragraph shall be used to calculate the
Supplemental Retirement Benefit.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      

      3.9           Forfeiture
in the Event of Breach of Non-Competition Agreement. Notwithstanding any
other provision of this Agreement, the Executive Benefit due the Executive
pursuant hereto (if any) shall be forfeited and no Executive Benefit shall be
due the Executive hereunder if the Executive enters into competitive activity in
the Employer's market area within the three (3) year period beginning on the
date of the Executive's termination of Employment.  Competitive
activity means acting directly or indirectly as an employee, agent, stockholder
(other than passive holdings of less than one percent (1%) of the outstanding
shares of a publicly-traded company), member, director, co-partner or in any
other individual or representative capacity on behalf of any bank or financial
institution (including without limitation trust company, finance company,
leasing company or any entity that provides credit). The Employer's market area
is defined as the following counties in the State of Washington and all counties
bordering on any such county and any county in which the Employer maintains a
branch or other office, now or at the time of the Executive's termination of
Employment:  Cowlitz, King, Kitsap, Pierce and Thurston.

      

      4.0           FORM AND PAYMENT OF
BENEFITS

       

      
        	
                 
      

              	
                4.1

              	
                Compliance With IRC
      409A

              

      

      

      It is the
intent of the parties to comply with all applicable Internal Revenue Code
Sections, including but not limited to, IRC 409A. Thus, when required by IRC
409A, any benefits payable pursuant to this Agreement and as a result of a
Separation From Service shall be withheld for six (6) months following such
Separation From Service if Executive is a Specified Employee (as defined herein
and/or by the Internal Revenue Service) and Employer is publicly traded at the
time of Separation From Service. For any individual affected by this six (6)
month delay in payment imposed by IRC 409A, and when applicable, the aggregate
amount of the first seven (7) months of installments shall be paid on the first
day of the seventh month following the date of Separation From Service. Monthly
installment payments shall continue thereafter as called for.

      

      In
addition, and in accordance with and subject to IRS Notices 2006-79, 2007-78 and
2007-86, no payment scheduled to be made in 2008 may be delayed to a date later
than 2008, no payment which would not otherwise be scheduled to occur in 2008
may be accelerated into 2008, and no payment scheduled to be made in 2008 may be
delayed to a date later than 2008. If any payout to a Executive in this
Agreement is affected by this prohibition, then such payouts shall only be made
in compliance with IRC 409A.

      

      In the
event any provision of this Agreement is ambiguous, then, whenever possible, it
shall be interpreted in a manner that is consistent with
IRC 409A.

      

      4.2           Reduction
for Early Commencement of Benefits. If Executive receives an Executive
Benefit under this Agreement before attaining the Normal Retirement Age, then
the annual Benefit shall be reduced by the Early Commencement Reduction Factor
(other than in the event of Disability).

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      4.3           Withholding
of Payroll Taxes.  Employer shall withhold from payments made
hereunder, any taxes required to be withheld from Executive’s benefits under
federal, state or local law. 

       

      5.0.           IRS 280G
ISSUES

      

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

      

      6.0           FUNDING AND STATUS AS
UNSECURED CREDITOR

      

      6.1           Right To
Determine Funding Methods. Employer reserves the right to determine, in
its sole and absolute discretion, whether, to what extent and by what method, if
any, to provide for the payment of the amounts which may be payable to
Executive, under the terms of this Agreement.  In the event that
Employer elects to fund this Agreement, in whole or in part, through the use of
life insurance or annuities, or both, Employer shall determine the ownership and
beneficial interests of any such policy of life insurance or
annuity.  Employer further reserves the right, in its sole and
absolute discretion, to terminate any such policy, and any other device used to
fund its obligations under this Agreement, at any time, in whole or in part.
Consistent with Paragraph 6.2 below, Executive shall have no right, title or
interest in or to any funding source or amount utilized by Employer pursuant to
this Agreement, and any such funding source or amount shall not constitute
security for the performance of Employer’s obligations pursuant to this
Agreement.  In connection with the foregoing, Executive agrees to
execute such documents and undergo such medical examinations or tests which
Employer may request and which may be reasonably necessary to facilitate any
funding for this Agreement including, without limitation, Employer’s acquisition
of any policy of insurance or annuity.

      

      6.2           Status as
an Unsecured General Creditor.  Except as
provided below in this Paragraph, Executive agrees that:  (i) he shall
have no legal or equitable rights, interests or claims in or to any specific
property or assets of Employer as a result of this Agreement; (ii) none
of

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      Employer’s
assets shall be held in or under any trust for the benefit of Executive or held
in any way as security for the fulfillment of the obligations of Employer under
this Agreement; (iii) all of Employer’s assets shall be and remain the general
unpledged and unrestricted assets of the Employer; (iv) Employer’s obligation
under this Agreement shall be that of an unfunded and unsecured promise by
Employer to pay money in the future; and (v) Executive shall be an unsecured
general creditor with respect to any benefits which may be payable under the
terms of this Agreement.

      

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

      

      7.0           CLAIMS
PROCEDURE

      

      7.1           Named
Fiduciary and Agreement Administrator. The "Named Fiduciary and Agreement
Administrator" of this plan shall be the Employer until its removal by the board
of directors.  As Named Fiduciary and Administrator, Employer shall be
responsible for the management, control and administration of the executive
supplemental compensation plan as established herein. The Named Fiduciary may
delegate to others certain aspects of the management and operation
responsibilities of the plan including the employment of advisors and the
delegation of ministerial duties to qualified individuals.

      

      7.2           Claims
Procedure.  In the event a dispute arises over the benefits
under this Agreement and benefits are not paid to Executive (or to Executive’s
beneficiary[ies], if applicable) and such claimants feel they are entitled to
receive such benefits, then a written claim must be made to the Named Fiduciary
and Plan Administrator named above  in accordance with the following
procedures:

      

      
        	
                 
      

              	
                A.

              	
                Written
      Claim.  The claimant may file a written request for such
      benefit to the Plan Administrator.

              

      

      

      
        	
                 
      

              	
                B.

              	
                Claim
      Decision.  Upon receipt of such claim, the Plan
      Administrator shall respond to such claimant within ninety (90) days after
      receiving the claim.  If the Plan Administrator determines that
      special circumstances require

              

      

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      additional
time for processing the claim, the Plan Administrator can extend the response
period by an additional ninety (90) days for reasonable cause by notifying the
claimant in writing, prior to the end of the initial ninety (90) day period,
that an additional period is required. The notice of extension must set forth
the special circumstances and the date by which the Plan Administrator expects
to render its decision.

      

      If the
claim is denied in whole or in part, the Plan Administrator shall notify the
claimant in writing of such denial. The Plan Administrator shall write the
notification in a manner calculated to be understood by the
claimant.  The notification shall set forth:

      

      (i)           The
specific reasons for the denial;

      
        	
                 
      

              	
                (ii)

              	
                The
      specific reference to pertinent provisions of the Agreement on which the
      denial is based;

              

      

      
        	
                 
      

              	
                (iii)

              	
                A
      description of any additional information or material necessary for the
      claimant to perfect the claim and an explanation of why such material or
      information is necessary;

              

      

      
        	
                 
      

              	
                (iv)

              	
                Appropriate
      information as to the steps to be taken if the claimant wishes to submit
      the claim for review and the time limits applicable to such procedures;
      and

              

      

      
        	
                 
      

              	
                (v)

              	
                A
      statement of the claimant’s right to bring a civil action under ERISA
      Section 502(a) following an adverse benefit determination on
      review.

              

      

      

      
        	
                 
      

              	
                C.

              	
                Request for
      Review.  Within sixty (60) days after receiving notice
      from the Plan Administrator that a claim has been denied (in part or all
      of the claim), then  claimant (or their duly authorized
      representative) may file with the Plan Administrator, a written request
      for a review of the denial of the
claim.

              

      

      

      The
claimant (or his duly authorized representative) shall then have the opportunity
to submit written comments, documents, records and other information relating to
the claim.  The Plan Administrator shall also provide the claimant,
upon request and free of charge, reasonable access to, and copies of, all
documents, records and other information relevant (as defined in applicable
ERISA regulations) to the claimant’s claim for benefits.

      

      
        	
                 
      

              	
                D.

              	
                Decision on
      Review.  The Plan Administrator shall respond in writing
      to such claimant within sixty (60) days after receiving the request for
      review.  If the Plan Administrator determines that special
      circumstances require an extension of time for processing the claim,
      written notice of the extension shall be furnished to the claimant prior
      to the termination of the initial sixty (60) day period. In no event shall
      such extension exceed a period
of

              

      

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      sixty
(60) days from the end of the initial period. The notice of extension must set
forth the special circumstances requiring an extension of time and the date by
which the Plan Administrator expects to render its decision.

      

      In
considering the review, the Plan Administrator shall take into account all
materials and information the claimant submits relating to the claim, without
regard to whether such information was submitted or considered in the initial
benefit determination.

      

      The Plan
Administrator shall notify the claimant in writing of its decision on
review.  The Plan Administrator shall write the notification in a
manner calculated to be understood by the claimant.  The notification
shall set forth:

      

      
        	
                 
      

              	
                (i)

              	
                The
      specific reasons for the denial;

              

      

      
        	
                 
      

              	
                (ii)

              	
                A
      reference to the specific provisions of the Agreement on which the denial
      is based;

              

      

      
        	
                 
      

              	
                (iii)

              	
                A
      statement that the claimant is entitled to receive, upon request and free
      of charge, reasonable access to, and copies of, all documents, records and
      other information relevant (as defined in applicable ERISA regulations) to
      the claimant’s claim for benefits;
and

              

      

      
        	
                 
      

              	
                (iv)

              	
                A
      statement of the claimant’s right to bring a civil action under ERISA
      Section 502(a).

              

      

      

      7.3           Arbitration
of Disputes.  All claims,
disputes and other matters in question arising out of or relating to this
Agreement and Agreement or the breach or interpretation thereof, other than
those matters which are to be determined by the Employer in its sole and
absolute discretion, shall be resolved by binding arbitration before a
representative member, selected by the mutual agreement of the parties, of the
Judicial Arbitration and Mediation Services, Inc. ("JAMS") located in Tacoma,
Washington.  In the event JAMS is unable or unwilling to conduct the
arbitration provided for under the terms of this paragraph, or has discontinued
its business, the parties agree that a representative member, selected by the
mutual agreement of the parties of the American Arbitration Association ("AAA")
shall conduct the binding arbitration referred to in this paragraph. Notice of
the demand for arbitration shall be filed in writing with the other party to
this Agreement and with JAMS (or AAA, if necessary).  In no event
shall the demand for arbitration be made after the date when institution of
legal or equitable proceedings based on such claim, dispute or other matter in
question would be barred by the applicable statute of
limitations.  The arbitration shall be subject to such rules of
procedure used or established by JAMS, or if there are none, the rules of
procedure used or established by AAA. Any award rendered by JAMS or AAA shall be
final and binding upon the parties, and as applicable, their respective heirs,
beneficiaries, legal representatives, agents, successors and assigns, and may be
entered in any court having jurisdiction thereof.  The obligation of
the parties to arbitrate pursuant to this clause shall be specifically
enforceable in accordance with, and shall be conducted consistently with, the
provisions of the Washington Code of Civil
Procedure.  Any

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      arbitration
hereunder shall be conducted in Tacoma, Washington, unless otherwise agreed to
by the parties. The parties hereto agree that they and their heirs, personal
representatives, successors and assigns shall be bound by such arbitration with
respect to any controversy properly submitted to it for
determination.

      

      7.4           Attorneys’
Fees.  In the event of
any arbitration or litigation concerning any controversy, claim or dispute
between the parties hereto, arising out of or relating to this Agreement or the
breach hereof, or the interpretation hereof, (a) each party shall pay his own
attorneys’ arbitration Fees incurred pursuant to 7.3 hereof; (b) if Executive
prevails, he shall be entitled to recover from the other party reasonable
expenses, attorneys’ Fees and costs incurred in the enforcement or collection of
any judgment or award rendered.  The term “prevails” applies if the
arbitrator(s) or court finds that Executive is entitled to contested money
payments from the other, but does not necessarily imply a judgment rendered in
favor of Executive.

      

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

      

      If
to  Employer:                     Columbia
Banking System, Inc.

      Attn:  Corporate
Secretary

      1301 A Street

      Tacoma,
WA  98402

      

      If  to  Executive:                    __________________________

      __________________________

      __________________________

      

      

      8.0           MISCELLANEOUS

      

      8.1           Binding
Effect/Merger or Reorganization.  This Agreement shall be
binding upon and inure to the benefit of the Executive and
Employer.  Accordingly, the Employer shall not merge or consolidate
into or with another corporation, or reorganize or sell substantially all of its
assets to another corporation, firm or person, unless and until such succeeding
or continuing corporation, firm or person agrees to assume and discharge the
obligations of the Employer under this Agreement.

      

      8.2           Effect on
Other Benefit Plans. Nothing contained in this Agreement shall affect the
right of the Executive to participate in or be covered by any qualified or
non-qualified

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      pension,
profit-sharing, group, bonus or other supplemental compensation or fringe
benefit plan constituting a part of the Employer’s existing or future
compensation structure.

      

      8.3           12 U.S.C.
§ 1828(k). Any payments made
to Executive pursuant to this Agreement, or otherwise, are subject to and
conditioned upon his compliance with 12 U.S.C. § 1828(k) or any regulations
promulgated thereunder.

      

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

      

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

      

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

      

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

      

      8.9           Entire
Agreement.  This Agreement
supersedes any and all other agreements, either oral or in writing, between the
parties with respect to the subject matter of this Agreement

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

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

      

      8.10         Modifications.  Any modification
of this Agreement shall be effective only if it is in writing and signed by each
party or such party's authorized representative.

      

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

      

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

      

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

      

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

      

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

      

      EMPLOYER:

      
        
          
            
              
                
                  
                    	 	 	 	 
	COLUMBIA
      STATE BANK	COLUMBIA
      BANKING SYSTEM, INC.
	By:	
                             

                          	By:	
                          
	Title: 	
                             

                          	Title: 	
                             

                          

                  

                

              

            

          

        

      

      

      

      EXECUTIVE

       

       

       

      
        
          

      

      
        
           

        

        
          16

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