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Raymond P. Davis		Gary D. Gall
President and Chief Executive Officer		President and Chief Executive Officer
Umpqua Holdings Corporation		Western Sierra Bancorp

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	Umpqua Holdings Corporation

	Western Sierra Bancorp

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1.	Approval of Merger. To consider and vote on a proposal to approve the Agreement and Plan of Reorganization by and among Umpqua, Umpqua Bank, Western Sierra Bancorp, Western Sierra National Bank, Auburn Community Bank, Central California Bank and Lake Community Bank, dated as of February 7, 2006, and the accompanying Plan of Merger, pursuant to which Western Sierra will merge with and into Umpqua, with Umpqua being the surviving corporation, and the issuance of shares of Umpqua common stock to Western Sierra shareholders in connection with the merger, as described in this joint proxy statement-prospectus.
2.	Amendments to Articles of Incorporation. To approve amendments to Umpqua’s Articles of Incorporation that would declassify Umpqua’s board of directors, provide for the annual election of directors and allow directors to be removed without cause.
3.	Election of Directors. To elect 14 members of Umpqua’s board of directors, who shall hold office until the next annual meeting of shareholders and until their successors are duly elected and qualified. Alternatively, if the proposed amendments to Umpqua’s Articles of Incorporation are not approved, shareholders will elect five members of Umpqua’s board of directors who shall hold office until the 2009 annual meeting of shareholders and one member who shall hold office until the 2007 annual meeting of shareholders and until their successors are duly elected and qualified.
4.	Adjournments. To consider and act upon a proposal to adjourn or postpone, if necessary, the annual meeting to solicit additional proxies.
5.	Other Business. To consider and act upon such other business and matters or proposals as may properly come before the annual meeting or any adjournments or postponements thereof.

	By Order of the Board of Directors,
	Steven L. Philpott, Secretary

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	1.	Approval of Merger. To consider and vote on a proposal to approve the principal terms of Agreement and Plan of Reorganization by and among Umpqua, Umpqua Bank, Western Sierra Bancorp, Western Sierra National Bank, Auburn Community Bank, Central California Bank and Lake Community Bank, dated as of February 7, 2006, and the accompanying Plan of Merger.
	2.	Adjournments. To consider and act upon a proposal to adjourn or postpone, if necessary, the special meeting to solicit additional proxies.

	By Order of the Board of Directors,
	Patrick J. Rusnak, Assistant Secretary

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QUESTIONS AND ANSWERS ABOUT VOTING AND THE SHAREHOLDER MEETINGS			1
QUESTIONS AND ANSWERS ABOUT THE MERGER			4
SUMMARY			6
SELECTED FINANCIAL DATA			12
SELECTED UNAUDITED COMPARATIVE PER SHARE DATA			15
MARKET PRICE DATA AND DIVIDEND INFORMATION			16
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION			17
RISK FACTORS			18
UMPQUA ANNUAL MEETING			20
WESTERN SIERRA SPECIAL MEETING			24
THE MERGER			28
DISSENTING SHAREHOLDERS’ RIGHTS			58
THE MERGER AGREEMENT			60
INFORMATION ABOUT UMPQUA			68
INFORMATION ABOUT WESTERN SIERRA			70
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			71
UMPQUA/WESTERN SIERRA PRO FORMA CONDENSED COMBINED BALANCE SHEET			73
UMPQUA/WESTERN SIERRA PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME			74
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			75
DESCRIPTION OF UMPQUA CAPITAL STOCK			78
COMPARISON OF RIGHTS OF SHAREHOLDERS			80
LEGAL MATTERS			85
EXPERTS			85
PROPOSALS OF SHAREHOLDERS			85
UMPQUA ANNUAL MEETING PROPOSALS			86
INCORPORATION OF DOCUMENTS BY REFERENCE			114
APPENDIX A — Agreement and Plan of Reorganization			A-1
APPENDIX B — Plan of Merger			B-1
APPENDIX C — Hoefer & Arnett, Inc. Opinion			C-1
APPENDIX D — Sandler O’Neill & Partners, L.P. Opinion			D-1
APPENDIX E — Excerpt from California General Corporation Law Concerning Dissenter’s Rights			E-1
APPENDIX F — Umpqua’s Restated Articles of Incorporation			F-1

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Q:		What are Umpqua shareholders being asked to vote on at the annual shareholder meeting?
A:		Umpqua shareholders will vote on:
		• a proposal to approve the merger, including the issuance of shares of Umpqua common stock in exchange for outstanding shares of Western Sierra common stock, in accordance with the merger agreement;
		• a proposal to amend Umpqua’s articles of incorporation to declassify the board of directors (eliminating the election of directors for staggered three year terms), provide for the annual election of all directors and allow directors to be removed without cause;
		• the election of fourteen directors or, if the proposed amendments are not approved, the election of six directors; and
		• if necessary, a proposal to approve adjournment or postponement of the annual meeting to solicit additional proxies.
Q:		What are Western Sierra shareholders being asked to vote on at the special shareholder meeting?
A:		Western Sierra shareholders will vote on a proposal to approve the principal terms of the merger agreement and, if necessary, a proposal to approve adjournment or postponement of the special meeting to solicit additional proxies in favor of the merger proposal.
Q:		What do I need to do now?
A:		First, carefully read this document in its entirety. Then, vote your shares by one of the following methods:
		• mark, sign, date and return your proxy card in the enclosed return envelope as soon as possible;
		• call the toll-free number on the proxy card and follow the directions provided;
		• go to the web site listed on the proxy card and follow the instructions provided; or
		• attend the shareholder meeting and submit a properly executed proxy or ballot. If a broker holds your shares in “street name,” you will need to get a legal proxy from your broker to vote in person at the meeting.
Q:		What vote is required to approve the merger agreement?
A:		The merger agreement will be approved if the holders of two-thirds of the outstanding shares of Western Sierra and a majority of the outstanding shares of Umpqua vote in favor of the respective merger proposal. Accordingly, a failure to vote or an abstention will have the same effect as a vote against the applicable merger proposal, except for the purpose of preserving any dissenters’ rights that a Western Sierra shareholder may have.
Q:		Have Umpqua’s and Western Sierra’s boards of directors approved the merger?
A:		Yes. After careful consideration, the board of directors of each of the companies determined the merger to be fair to and in the best interests of its respective shareholders, and unanimously recommend that their respective shareholders vote in favor of the merger proposal.
Q:		What vote is required to approve the other Umpqua annual meeting proposals?
A:		The proposed amendments to Umpqua’s articles of incorporation require the affirmative vote of at least 75% of the outstanding shares of common stock entitled to vote.
		The election of directors requires a plurality of the votes cast for directors. The fourteen (or six, if the proposed amendments are not approved) director positions to be filled at the annual meeting will be filled by the nominees who receive the highest number of votes.

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Q:		Who is eligible to vote?
A:		Holders of record of Umpqua common stock at the close of business on April 7, 2006 are eligible to vote at the Umpqua annual meeting of shareholders.
		Holders of Western Sierra common stock at the close of business on April 7, 2006 are eligible to vote at the Western Sierra special meeting of shareholders.
Q:		Are there dissenters appraisal rights?
A:		Umpqua is an Oregon corporation and under applicable Oregon law, Umpqua’s shareholders do not have dissenters’ appraisal rights.
		Under California law, Western Sierra shareholders may exercise dissenters’ rights as provided in the California General Corporation Law. If you meet all the requirements under California law and follow all of its required procedures, you may receive cash in the amount equal to the fair market value (as determined by mutual agreement between you and Western Sierra, or if there is no agreement, by a court) of your shares of Western Sierra common stock as of the day before the first announcement of the terms of the merger. The procedure for exercising your dissenters’ rights is summarized under the heading “DISSENTING SHAREHOLDERS’ RIGHTS”. The relevant provisions of the California General Corporation Law on dissenters’ rights are attached to this document as Appendix E.
Q:		Can I vote if I hold shares of Umpqua common stock in the Umpqua Bank 401(k) and Profit Sharing Plan?
A:		If you are a participant in the Umpqua 401(k) Plan you will receive with this document a separate voting instruction card for shares of Umpqua common stock allocated to your account as a participant or beneficiary under the Umpqua 401(k) Plan. The card will appoint the trustee of the Umpqua 401(k) Plan to vote shares in accordance with your instructions. Please follow the instructions that accompany the card. See “UMPQUA ANNUAL MEETING — Participants in the Umpqua 401(k) and Profit Sharing Plan.”
Q:		Can I vote if I hold shares of Western Sierra common stock in the Western Sierra Bancorp 401KSOP?
A:		If you have shares allocated to your account under the KSOP, you will receive with this document a separate voting instruction card for those shares. The card will appoint Western Sierra’s compensation committee to vote shares in accordance with your instructions. Please follow the instructions that accompany the card. See “WESTERN SIERRA SPECIAL MEETING — Shares in the Western Sierra 401KSOP.”
Q:		Can I vote if I hold shares of Western Sierra common stock in the Western Sierra Bancorp Employee Stock Ownership Plan?
A:		If you hold shares in an account under the Western Sierra Bancorp Employee Stock Ownership Plan, you will receive with this document a separate voting instruction card for shares of Western Sierra common stock allocated to your account as a participant or beneficiary under this plan. The card will direct the plan’s trustee to vote shares allocated to your account in accordance with your instructions. Please follow the instructions that accompany the card. See “WESTERN SIERRA SPECIAL MEETING — Western Sierra Bancorp Employee Stock Ownership Plan Account Holders.”
Q:		Can I change my vote after I have mailed my signed proxy card or voted by telephone or electronically?
A:		Yes. If you have not voted through your broker, you can do this by:
		• calling the toll-free number on the proxy card at least 24 hours before the meeting and following the directions provided;

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		• going to the web site listed on the proxy card at least 24 hours before the meeting and following the instructions provided;
		• submitting a properly executed proxy prior to the meeting bearing a later date than your previous proxy;
		• notifying Western Sierra’s or Umpqua’s corporate Secretary, as the case may be, in writing of the revocation of your proxy before the meeting; or
		• voting in person at the appropriate shareholder meeting, but simply attending the meeting will not, in and of itself, revoke a proxy.
Q:		Can I attend the shareholder meeting even if I vote by proxy?
A:		Yes. All shareholders are welcome to attend and we encourage you to do so.
Q:		What if I do not vote or I abstain?
A:		If you fail to respond or mark your proxy “abstain”, it will have the same effect as a vote against the merger proposal and, for Umpqua shareholders, a vote against the proposed amendments to Umpqua’s articles of incorporation. Your vote is very important. If you properly submit your proxy but do not indicate how you want to vote, your proxy will be voted in favor of the merger proposal and, with respect to Umpqua shareholders, in favor of each of the other Umpqua annual meeting proposals.
Q:		If my shares are held in “street name” by my broker, will my broker vote my shares for me?
A:		No. If your shares are held by your broker (or other nominee), you should receive this document and an instruction card from your broker. Your broker will vote your shares only if you provide instructions on how to vote. If you do not tell your broker how to vote, your broker cannot vote your shares. This will have the same effect as a vote against the merger proposal and, with respect to Umpqua shareholders, a vote against the proposed amendments to Umpqua’s articles of incorporation.
Q:		Should Western Sierra shareholders send stock certificates at this time?
A:		No, please do not send in your certificates until you receive instructions to do so. If you do not know where your stock certificates are located, you may want to find them now, so you do not experience delays receiving your merger consideration. If you have lost or misplaced your Western Sierra stock certificates, contact Western Sierra’s transfer agent, U.S. Stock Transfer Corporation at (818) 502-1404, extension 124. Promptly after completion of the merger, you will receive instructions for exchanging your Western Sierra stock certificates for Umpqua stock certificates. Holders of Umpqua stock certificates should retain their stock certificates as they will not be exchanged in the merger.
Q:		Where do I get more information?
A:		If you have questions about the merger or submitting your proxy, or if you need additional copies of this document, the proxy card or any documents incorporated by reference, you should contact one of the following:

Steven Philpott, Executive Vice President,		Patrick J. Rusnak, Executive Vice President,
General Counsel and Secretary		Chief Operating Officer and Asst. Secretary
Umpqua Holdings Corporation		Western Sierra Bancorp
Legal Department		4080 Plaza Goldorado Circle
675 Oak Street, Suite 200		Cameron Park, CA 95682
P.O. Box 1560		(530) 698-2286 (voice)
Eugene, OR 97440		(530) 676-2817 (fax)
(541) 434-2997 (voice)		prusnak@wsnb.com
(541) 342-1425 (fax)
stevenphilpott@umpquabank.com

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Q:		What will Western Sierra shareholders receive in the merger?
A:		Western Sierra shareholders will receive 1.61 shares of Umpqua common stock in exchange for each share of Western Sierra common stock.
Q:		Will the exchange ratio of 1.61 shares of Umpqua common stock for one share of Western Sierra common stock adjust under any circumstances?
A:		If the weighted average closing price of Umpqua’s common stock over the fifteen trading day period ending on the fifth business day prior to the projected merger closing date is $22.59 or lower, and that decline in Umpqua’s price is 10% worse than the performance of the NASDAQ Bank Index over the same period, then Western Sierra may elect to terminate the merger agreement. However, if Western Sierra exercises this option, Umpqua has the option to increase the exchange ratio by an amount sufficient to ensure that the merger consideration to Western Sierra shareholders is not less than 80% of the value immediately prior to the date of announcement of the merger agreement.
Q:		Did the Umpqua and Western boards of directors receive fairness opinions?
A:		Yes. Sandler O’Neill & Partners, L.P., issued an opinion to the Western Sierra board of directors as to the fairness, from a financial point of view, of the exchange ratio to Western Sierra shareholders.
		In addition, Hoefer & Arnett, Inc., issued an opinion to the Umpqua board of directors as to the fairness, from a financial point of view, of the consideration to be offered by Umpqua to Western Sierra shareholders.
Q:		What are the tax consequences of the merger?
A:		We have structured the merger so that Umpqua and Western Sierra and most of our respective shareholders will not recognize any gain or loss for federal income tax purposes in the merger, except for taxes payable with respect to cash received by Western Sierra shareholders in lieu of fractional shares or by Western Sierra shareholders who have properly exercised dissenter’s rights.
Q:		What risks should I consider before I vote?
A:		We encourage you to read the detailed information about the merger in this document, including the “RISK FACTORS” section beginning on page 18.
Q:		When do you expect the merger to be completed?
A:		We are working to complete the merger as quickly as possible and we anticipate the merger will be completed in the second quarter of 2006. Because the merger is subject to shareholder and regulatory approval and other factors beyond our control, we cannot predict with accuracy the exact timing for completing the merger.
Q:		What regulatory approvals are required to complete the merger?
A:		Umpqua and Western Sierra must obtain written approvals or waivers from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Oregon Department of Consumer and Business Services acting through the Division of Finance and Corporate Services and the California Commissioner of Financial Institutions.
Q:		Who will manage the combined company?
A:		Umpqua will be the surviving corporation in the merger and the executive officers of Umpqua immediately prior to the merger will be the executive officers of Umpqua until such time as their successors are duly elected and qualified.

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		Following the merger, the board of directors of Umpqua will consist of fifteen directors, one of whom will be selected from among the current Western Sierra and Western Sierra subsidiary bank directors. All of the current Umpqua directors, including Raymond P. Davis, will continue to serve following the merger.
		Raymond P. Davis, President and Chief Executive Officer of Umpqua, and Umpqua’s other executive officers will continue in their respective positions with the combined company. Gary D. Gall, President and Chief Executive Officer of Western Sierra will help William T. Fike, President of Umpqua Bank’s California Region, oversee completion of the merger. Other executive officers of Western Sierra are expected to continue with the combined company during a six to nine month integration period after closing, but few are likely to have a continuing role with the combined company.

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	•	Approve the merger agreement and the issuance of shares of Umpqua common stock to Western Sierra shareholders in connection with the merger.
	•	Approve amendments to Umpqua’s Articles of Incorporation to declassify Umpqua’s board of directors (eliminating the election of directors for staggered three-year terms), provide for the annual election of all directors and allow directors to be removed with or without cause.
	•	Elect 14 members of Umpqua’s board of directors, who shall hold office until the next annual meeting of shareholders and until their successors are duly elected and qualified.

	•	Alternatively, if the proposed amendments to Umpqua’s Articles of Incorporation are not approved, shareholders will elect five members of Umpqua’s board of directors who shall hold office until the 2009 annual meeting of shareholders and one member who shall hold office until the 2007 annual meeting of shareholders and until their successors are duly elected and qualified.

	•	Approve, if necessary, any adjournments or postponements of the annual meeting to solicit additional proxies.

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	•	calling the toll free number on the proxy card and following the directions provided at least one day before the meeting;
	•	going to the web site listed on the proxy card and following the instructions provided at least one day before the meeting;
	•	submitting a properly executed proxy on a later date prior to the meeting;
	•	notifying Umpqua’s corporate Secretary, Steven L. Philpott, in writing of the revocation of your proxy prior to the meeting; or
	•	voting in person at the annual meeting, but simply attending the meeting will not, in and of itself, revoke a proxy.

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	•	Approve the principal terms of the merger agreement; and
	•	Approve any adjournments or postponements of the special meeting, if necessary, to solicit additional proxies.

	•	calling the toll free number on the proxy card and following the directions provided at least 24 hours before the meeting;
	•	going to the web site listed on the proxy card and following the instructions provided at least 24 hours before the meeting;
	•	submitting a properly executed proxy on a later date prior to the meeting;
	•	notifying Western Sierra’s corporate Secretary, Anthony J. Gould, in writing of the revocation of your proxy prior to the meeting; or

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	•	voting in person at the special meeting, but simply attending the meeting will not, of itself, revoke a proxy.

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		Number of
		Western Sierra
		Shares Beneficially
Beneficial Owner		Owned(1)				% of Class
Directors and Named Executive Officers
Charles W. Bacchi, Director			293,363	(2)(3)			3.7	%
Matthew A. Bruno, Sr., Director			299,927	(2)(4)			3.8	%
Lary Davis, Director			54,731	(5)			*
Kirk N. Dowdell, Executive Vice President; President and Chief Executive Officer of Western Sierra National Bank			74,425	(6)			*
William M. Eames, Director			384,598	(2)(7)			4.9	%
William J. Fisher, Director			293,775	(2)(8)			3.7	%
Gary D. Gall, Director, President and Chief Executive Officer			274,507	(9)			3.5	%
Anthony J. Gould, Executive Vice President/ Chief Financial Officer			43,278	(10)			*
Jan T. Haldeman, Director			297,593	(2)(11)			3.8	%
Howard A. Jahn, Director			56,711	(12)			*
Alan J. Kleinert, Director			370,711	(2)(13)			4.7	%
Wayne D. Koonce, Executive Vice President/ Chief Credit Officer			23,308	(14)			*
Patrick J. Rusnak, Executive Vice President/ Chief Operating Officer			30,000	(15)			*
Lori A. Warden, Director			218,284	(16)			2.8	%
All Directors and Named Executive Officers as a Group (14 total)			1,135,123	(17)				%
Principal Shareholders*
Banc Funds Co LLC			410,222	(18)			5.2	%
Caxton Associates, LLC			512,951	(18)			6.5	%

*	Less than 1%.

(1)	Shares held directly with sole voting and investment power, unless otherwise indicated. Includes restricted shares held indirectly in Dividend Reinvestment Plan, Director Deferred Compensation

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	Plans, 401(k) Plans and IRAs. Shares held in these plans have been rounded down to the nearest whole share.
(2)	Includes shared voting and investment powers as to 263,348 shares of which 160,439 shares and 102,909 shares are owned in the person’s capacity as a co-trustee for Western Sierra’s ESOP and Western Sierra’s 401KSOP, respectively. The person disclaims beneficial ownership as to those shares beneficially owned as a co-trustee of the ESOP and 401KSOP to the extent of pass-through voting and investment rights exercised by participants of the ESOP and 401KSOP.
(3)	The total amount also includes 14,451 shares acquirable by exercise of stock options.
(4)	The total amount also includes 1,500 shares acquirable by exercise of stock options.
(5)	Mr. Davis has shared voting and investment powers as to 44,530 of these shares, and the total amount includes 10,201 shares acquirable by exercise of stock options.
(6)	The amount includes 61,741 shares acquirable by exercise of stock options.
(7)	The amount includes 3,000 shares acquirable by exercise of stock options.
(8)	The amount includes 19,242 shares acquirable by exercise of stock options.
(9)	Of this total, Mr. Gall disclaims beneficial ownership of 35,318 shares held solely by his spouse in a separate account, and the amount includes 83,740 shares acquirable by exercise of stock options.

(10)	The amount includes 13,900 shares acquirable by exercise of stock options.
(11)	The amount includes 10,741 shares acquirable by exercise of stock options.
(12)	The amount includes 8,890 shares acquirable by exercise of stock options.
(13)	The amount includes 10,441 shares acquirable by exercise of stock options.
(14)	The amount includes 16,763 shares acquirable by exercise of stock options.
(15)	All 30,000 of these shares are acquirable by exercise of stock options.
(16)	Ms. Warden has shared voting and investment powers as to 215,284 of these shares, and the total amount includes 3,000 shares acquirable by exercise of stock options.
(17)	The amount includes 287,610 shares acquirable by exercise of stock options.
(18)	Based on information filed with the SEC on Schedule 13G.

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	•	The opinion of Hoefer & Arnett, Inc., which is attached as Appendix C, that as of February 7, 2006, the consideration to be paid to Western Sierra shareholders in the merger was fair, from a financial point of view, to Umpqua shareholders. The board considered the factors discussed in Hoefer & Arnett’s analysis but did not assign or consider any specific weighting to those factors.
	•	The effectiveness of the merger in implementing Umpqua’s growth strategy. The board reviewed the markets served by Western Sierra and recognized in the merger the ability for Umpqua to enhance its presence Northern California, particularly along the I-5 corridor in the Sacramento area.
	•	A presentation by management of management’s due diligence review of Western Sierra, including the business, operations, earnings, asset quality, financial condition, and corporate culture of Western Sierra on a historical, prospective, and pro forma basis. These reviews generally found Western Sierra to be financially sound, well capitalized and well managed.
	•	The compatibility of corporate goals and the respective contributions the parties would bring to a combined institution. The board noted the similar community banking philosophies of the management and employees of both institutions.
	•	The complementary customer bases, products and services of Umpqua and Western Sierra could result in opportunities to obtain synergies as products are cross-marketed and distributed over broader customer bases and best practices are compared and applied across the combined company.
	•	The compatibility of each company’s data processing systems that should significantly reduce the integration costs and risk of errors in customer account conversions.
	•	Although Umpqua Bank and Western Sierra National Bank operate in the markets surrounding Sacramento, California, there is little overlap of store locations, which, when coupled with the new markets served by Auburn Community Bank, Central California Bank and Lake Community Bank in surrounding areas, the Umpqua board believed to present a desirable strategic opportunity for

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		expansion of its existing presence and market share. In particular, Umpqua’s board considered that the resulting institution’s branch network and franchise would be enhanced in the Sacramento area, which is expected to continue as a growing market.
	•	The enhanced opportunities for acquisition and growth that the merger makes possible as a result of the greater capitalization of the combined company and the anticipated enhanced liquidity in the market for its stock.
	•	The expanded opportunities for revenue enhancement and synergies that are expected to result from the merger. The board assessed possible synergies and recognized that the combined organization could reduce aggregate expenses that Umpqua and Western Sierra incur in areas such as salaries and benefits, occupancy expense, professional and outside service fees, and communications expense.
	•	The execution of amended and restated employment, severance and salary continuation agreements by officers of Western Sierra and its subsidiary banks, which provide incentives to key employees to remain with Umpqua during the integration period following completion of the merger. The board considered the commitments of such officers as indications that the integration process and Umpqua’s move into new markets would be successful and that the presence of senior management from Western Sierra would help assure continuity in the operation of the combined company.
	•	The terms of the merger agreement and the Voting, Non-Competition and Non-Solicitation Agreements executed by each director of Western Sierra and of its subsidiary banks in connection with the merger. The board viewed the commitment of all directors to support the merger as indications that the merger would likely be consummated.
	•	The tax effects of the merger. The board considered that the merger would qualify as a corporate reorganization entitled to favorable tax treatment for the parties to the merger and for their shareholders.

	•	The opinion of Sandler O’Neill & Partners, L.P., which is attached as Appendix D, that as of February 7, 2006 the exchange ratio, as set forth in the merger agreement, was fair, from a financial point of view, to Western Sierra shareholders.
	•	The terms of the merger, including the exchange ratio, and various other documents related to the merger.
	•	The results of the due diligence review of Umpqua’s business, operations, financial condition, asset quality and corporate culture conducted by Western Sierra management with the assistance of its advisors.
	•	The concerns of the Western Sierra board with regard to the banking environment generally, consolidation in the banking industry, competition, pressure on interest margins and the ability of the company to continue to meet its goals and to execute on its business plan.
	•	The current and prospective economic and competitive environment facing the financial services industry generally, including the continued rapid consolidation in the industry and the increased importance of operational scale and financial resources in maintaining efficiency and remaining competitive over the long term.

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	•	The fact that the merger will allow Western Sierra shareholders, as shareholders of the combined corporation, to share in the potential growth and increased diversification of a significantly larger three-state financial holding company.
	•	The Western Sierra board of directors’ review, based in part on presentations by its financial advisor and Western Sierra’s management, of the business, operations, financial condition and earnings of Umpqua on an historical and prospective basis and of the combined company on a pro forma basis and the historical stock price performance of Umpqua’s common stock and Umpqua’s greater market capitalization and liquidity relative to that of Western Sierra.
	•	The terms of the merger agreement, including a provision permitting Western Sierra to terminate the merger agreement if the weighted average closing price of Umpqua’s common stock over the fifteen trading day period ending on the fifth business day prior to the projected merger closing date is $22.59 or lower, and that decline in Umpqua’s price is 10% worse than the performance of the NASDAQ Bank Index over the same period, thereby limiting the risk to Western Sierra’s shareholders of possible significant and disproportionate declines in the trading price of Umpqua’s common stock.
	•	The fact that, based on the closing price of Umpqua’s common stock on February 6, 2006, the value of the per share merger consideration to be received by Western Sierra shareholders represented a multiple of diluted earnings per share multiple for the 12 months ended December 31, 2005 of 19.7x and 263.0% of book value per share as of December 31, 2005.
	•	The fact that, based on the closing price of Umpqua’s common stock on February 6, 2006, the value of the per share merger consideration to be received by Western Sierra shareholders represented a premium of 8.7% over the closing price of Western Sierra common stock on that date, and a premium of 12% over the average closing price of Western Sierra common stock for the fifteen trading days prior to the announcement of the transaction.
	•	The fact that the merger agreement permits Western Sierra to declare cash dividends prior to the closing at the same time and in the same amount per share as Umpqua’s dividends on its common stock and the probability that Western Sierra’s shareholders, who have not historically received cash dividends on Western Sierra’s common stock, will receive dividend income with respect to the shares of Umpqua’s common stock to be received in the merger.
	•	The Western Sierra board’s belief that a merger with Umpqua would enable Western Sierra shareholders to participate in a combined company that would have better future prospects than Western Sierra was likely to achieve on a stand-alone basis, including a more diversified customer base and, hence, more diversified revenue sources.
	•	The expectation that the Umpqua/ Western Sierra merger will be tax-free for federal income tax purposes to Western Sierra and Western Sierra’s stockholders.
	•	The common business philosophy and compatibility of the management and staff of Western Sierra and Umpqua.
	•	The greater number of shareholders and the increased market capitalization of the combined company, which may result in increased interest in Umpqua stock from institutional investors and market professionals which, in turn, may result in improved liquidity for shareholders.
	•	The provisions of the merger agreement entitling Western Sierra’s board to withdraw its recommendation of the merger to the Western Sierra shareholders and the provisions permitting Western Sierra’s board to terminate the merger agreement with Umpqua to the extent specifically authorized by its board of directors in the good faith exercise of its fiduciary duties after consultation with legal counsel.
	•	The $14 million termination fee that would have to be paid to Umpqua under specified circumstances, including the risk that payment of the termination fee might discourage third parties

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		from offering to acquire Western Sierra, but recognizing that the amount of termination fee was equal to about 4% of the total merger consideration and that the termination fee was a condition to Umpqua’s willingness to enter into the merger agreement with Western Sierra.
	•	The interests of certain Western Sierra directors and officers in the merger, as described under the caption “—Interests of Western Sierra Directors and Executive Officers in the Merger” beginning on page 53 of this document, and the fact some of those interests are different from or are in addition to the interests of Western Sierra shareholders in the merger generally

	•	reviewed the Agreement;
	•	reviewed certain publicly available business and financial information relating to Umpqua and Western Sierra that Hoefer & Arnett deemed to be relevant;
	•	reviewed certain internal information, primarily financial in nature, including financial and operating data relating to the strategic implications and operational benefits anticipated to result from the merger, furnished to Hoefer & Arnett by Umpqua and Western Sierra;
	•	reviewed certain publicly available and other information concerning the reported prices and trading history of, and the trading market for, the common stock of Umpqua and Western Sierra;
	•	reviewed certain publicly available information with respect to other companies that Hoefer & Arnett believed to be comparable in certain respects to Umpqua and Western Sierra;

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	•	considered the financial terms, to the extent publicly available, of selected recent business combinations of companies in the banking industry which Hoefer & Arnett deemed to be comparable, in whole or in part, to the merger;
	•	made inquiries regarding and discussed the merger and the Agreement and other related matters with Umpqua and Umpqua’s legal counsel.

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		Current
																						YTD				Average
		Price/				Price/				Price/				Dividend				Market				Price				Weekly
		TBV				LTM EPS				Assets				Yield				Value				Change				Volume
		(%)				(x)				(%)				(%)				($M)				(%)				(%)
Average			347.69				18.99				24.06				1.65				1,059.54				4.58				2.30
Median			302.80				17.80				24.94				1.97				918.60				4.16				1.58
High			611.00				31.40				34.84				2.55				3,664.50				13.49				7.10
Low			207.20				14.90				10.84				—				360.10				0.58				0.50
UMPQ			380.60				18.20				23.41				1.70				1,255.20				(1.26	)			3.09

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		Current
																						YTD				Average
		Price/				Price/				Price/				Dividend				Market				Price				Weekly
		TBV				LTM EPS				Assets				Yield				Value				Change				Volume
		(%)				(x)				(%)				(%)				($M)				(%)				(%)
Average			301.53				18.18				22.04				1.12				270.83				4.36				0.83
Median			297.95				17.05				21.43				1.11				248.35				5.06				0.52
High			436.30				33.80				30.23				2.55				636.60				15.87				2.73
Low			212.70				12.70				16.58				—				104.50				(4.58	)			0.03
WSBA			338.50				18.80				23.74				—				308.00				9.45				1.19

	Merger and Acquisition Transaction Analysis

																		Price to
						Total								Deal
						Assets				Announce				Value				TBV				LTM Earnings				Prem Core
Buyer/ Target Name		Price Per Fully Diluted Share				($000)				Date				($M)				(%)				(x)				(%)
Comparable Transaction Group Average							958,733								215.1				301.5				26.3				27.9
Comparable Transaction Group Median							634,064								158.3				305.5				24.6				27.5
Comparable Transaction Group High Value							4,076,770								714.7				447.6				57.4				39.7
Comparable Transaction Group Low Value							293,884								103.6				166.7				10.6				11.0
UMPQ/ WSBA			Exchange Ratio = 1.6100				1,292,573				2/8/2006				362.2				373.19				20.75				30.61

	Discounted Cash Flow Analysis

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	Accretion Analysis

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	1.	the agreement;
	2.	certain publicly available financial statements and other historical financial information of Western Sierra that they deemed relevant;
	3.	certain publicly available financial statements and other historical financial information of Umpqua that they deemed relevant;
	4.	earnings per share estimates for Western Sierra for the years ending December 31, 2006 and long-term earnings per share growth rates for the years thereafter, in each case, as provided by, and reviewed with, senior management of Western Sierra;
	5.	earnings per share estimates for Umpqua for the year ending December 31, 2006 provided by and reviewed with senior management of Umpqua and long-term earnings per share growth rates for the years thereafter, in each case, provided by and reviewed with senior management of Umpqua;
	6.	the pro forma financial impact of the merger on Umpqua, based on assumptions relating to transaction expenses, purchase accounting adjustments and cost savings determined by the senior management of Umpqua and reviewed with senior management of Western Sierra;
	7.	the relative contributions of assets, liabilities, equity and earnings of Western Sierra and Umpqua to the resulting institution;
	8.	the publicly reported historical price and trading activity for Western Sierra’s and Umpqua’s common stock, including a comparison of certain financial and stock market information for Western Sierra and Umpqua and similar publicly available information for certain other companies the securities of which are publicly traded;
	9.	the financial terms of certain recent business combinations in the commercial banking industry, to the extent publicly available;

	10.	the current market environment generally and the banking environment in particular; and
	11.	such other information, financial studies, analyses and investigations and financial, economic and market criteria as they considered relevant.

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	Summary of Proposal

Transaction value/ Last 12 months’ earnings per share			19.7	x
Transaction value/ Tangible book value per share			352.9	%
Transaction value/ Stated book value per share			263.0	%
Tangible book premium/ Core deposits1			31.4	%
Premium to Market Price2			8.7	%

1	Assumes Western Sierra’s total core deposits are $826.2 million.
2	Based on Western Sierra’s closing price of $40.50 as of 2/6/06.

	Stock Trading History

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		Beginning Index Value				Ending Index Value
		February 6, 2005				February 6, 2006
Western Sierra			100.0	%			104.9	%
Western Sierra Peer Group			100.0				109.7
S&P 500 Index			100.0				105.2
NASDAQ Bank Index			100.0				99.7
S&P Bank Index			100.0				95.7

		Beginning Index Value				Ending Index Value
		February 6, 2003				February 6, 2006
Western Sierra			100.0	%			230.3	%
Western Peer Group			100.0				236.0
S&P 500 Index			100.0				150.9
NASDAQ Bank Index			100.0				142.2
S&P Bank Index			100.0				137.5

		Beginning Index Value				Ending Index Value
		February 6, 2005				February 6, 2006
Umpqua			100.0	%			110.7	%
Umpqua Peer Group			100.0				110.4
S&P 500 Index			100.0				105.2
NASDAQ Bank Index			100.0				99.7
S&P Bank Index			100.0				95.7

		Beginning Index Value				Ending Index Value
		February 6, 2003				February 6, 2006
Umpqua			100.0	%			140.6	%
Umpqua Peer Group			100.0				180.9
S&P 500 Index			100.0				150.9
NASDAQ Bank Index			100.0				142.2
S&P Bank Index			100.0				137.5

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						Western Sierra
						Peer Group
		Western Sierra				Median
Total assets (in millions)		$	1,293			$	1,196
Tangible equity/tangible assets			7.71	%			7.05	%
Return on average assets			1.43	%			1.45	%
Return on average equity			14.8	%			16.3	%
Return on average tangible equity			21.0	%			19.4	%
Price/tangible book value per share			324.8	%			265.1	%
Price/Last 12 months’ earnings per share			18.2	x			16.0	x
Price/analysts’ estimated 2006 earnings per share			15.9	x			14.5	x
Market capitalization (in millions)			$315				$247

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						Umpqua
						Peer Group
		Umpqua				Median
Total assets (in millions)		$	5,361			$	5,423
Tangible equity/tangible assets			6.66	%			6.12	%
Return on average assets			1.4	%			1.5	%
Return on average equity			9.8	%			17.1	%
Return on average tangible equity			23.0	%			24.0	%
Price/tangible book value per share			369.5	%			412.3	%
Price/last 12 months’ earnings per share			17.6	x			18.2	x
Price/estimated 2005 earnings per share			15.7	x			15.6	x
Market capitalization (in millions)		$	1,218			$	1,263

		Nationwide								California
		Median				Implied				Median				Implied
		Multiple				Value				Multiple				Value
Transaction price/Last 12 months’ earnings per share			23.44	x		$	52.31				20.77	x		$	46.36
Transaction price/Book value			293.26	%		$	49.07				261.21	%		$	43.71
Transaction price/Tangible book value			314.23	%		$	39.19				276.39	%		$	34.47
Tangible book premium/Core deposits			24.86	%		$	37.16				28.39	%		$	40.64
Premium to market			25.72	%		$	50.91				24.17	%		$	50.29

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		Multiple of Price/Last Twelve Months’ Earnings
Discount Rate		14.0x				16.0				18.0				20.0				22.0				24.0
9.00%		$	37.34				42.47				47.60				52.73				57.85				62.98
10.00			36.35				41.34				46.32				51.31				56.30				61.29
11.00			35.39				40.24				45.10				49.95				54.81				59.66
12.00			34.46				39.18				43.91				48.64				53.36				58.09
13.00			33.56				38.16				42.77				47.37				51.97				56.57
14.00			32.70				37.18				41.66				46.14				50.63				55.11
15.00			31.86				36.23				40.60				44.96				49.33				53.69

		Multiple of Price/Tangible Book Value
Discount Rate		150%				200				250				300				350				400
9.00%		$	24.81				32.57				40.34				48.10				55.87				63.63
10.00			24.15				31.71				39.26				46.82				54.37				61.92
11.00			23.52				30.87				38.22				45.57				52.93				60.28
12.00			22.90				30.06				37.22				44.38				51.53				58.69
13.00			22.31				29.28				36.25				43.22				50.19				57.16
14.00			21.74				28.53				35.32				42.11				48.89				55.68
15.00			21.19				27.80				34.42				41.03				47.64				54.25

		Multiple of Price/Last Twelve Months’ Earnings
Discount Rate		14.0x				16.0				18.0				20.0				22.0
9.00%		$	25.15				28.51				31.86				35.22				38.57
10.00			24.49				27.76				31.02				34.28				37.55
11.00			23.85				27.03				30.21				33.39				36.56
12.00			23.24				26.33				29.43				32.52				35.61
13.00			22.65				25.66				28.67				31.68				34.69
14.00			22.08				25.01				27.94				30.88				33.81
15.00			21.52				24.38				27.24				30.10				32.95

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		Multiple of Price/Tangible Book Value
Discount Rate		250%				300				350				400				450				500
9.00%		$	24.47				29.02				33.58				38.13				42.68				47.24
10.00			23.83				28.26				32.69				37.12				41.55				45.98
11.00			23.21				27.52				31.84				36.15				40.46				44.77
12.00			22.62				26.81				31.01				35.21				39.40				43.60
13.00			22.04				26.13				30.21				34.30				38.39				42.47
14.00			21.48				25.46				29.44				33.43				37.41				41.39
15.00			20.95				24.83				28.70				32.58				36.46				40.33

		Contribution Analysis
		Western				Umpqua
Cash and securities			16.06	%			83.94	%
Net loans			20.98	%			79.02	%
Total intangibles			7.51	%			92.49	%
Total assets			19.43	%			80.57	%
Total deposits			19.66	%			80.34	%
Total borrowings			36.06	%			63.94	%
Total equity			15.00	%			85.00	%
Tangible equity			22.74	%			77.26	%
Last twelve months’ net income			20.29	%			79.71	%
Estimated 2006 net income			21.45	%			78.55	%
Pro forma common ownership			22.00	%			78.00	%

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	Possible Adjustment to the Merger Consideration

	•	the average closing price of Umpqua common stock over the fifteen trading day period ending on the fifth business day prior to the projected effective date of the merger is less than $22.59, and
	•	Umpqua’s stock price has underperformed the Nasdaq Bank Index by more than 10%.

	•	an initial Umpqua stock price of $28.24 and initial index of 3,126.17, each of which is equal to the average closing price over the fifteen trading days from January 18, 2006, through and including February 7, 2006, the trading day prior to announcement of the merger, and
	•	the final Umpqua stock price and final index, each of which will be equal to the average closing price over the fifteen trading day period through and including the fifth business day prior to the projected effective date of the merger.

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	Changes to Umpqua’s Common Stock Prior to the Effective Date

	Fractional Shares

	Rights of Holders of Western Sierra Stock Certificates Prior to Surrender

	Conversion of Western Sierra Common Stock

	Lost Certificates

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	•	Each option may be exercised only for Umpqua common stock.
	•	Each option will become an option to purchase the number of shares of Umpqua common stock equal to the exchange ratio multiplied by the number of shares of Western Sierra common stock subject to such option. Following the merger, each option will be fully vested but all other terms and conditions will continue.
	•	The exercise price per share of each option will be equal to exercise price of such option prior to the completion of the merger divided by the exchange ratio.

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	Western Sierra Stock Options

	Indemnification; Directors and Officers Insurance

	Amended and Restated Severance, Employment and/or Salary Continuation Agreements

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	•	remains employed by Umpqua for nine months following the completion of the merger,
	•	is terminated by Umpqua without cause prior to nine months following the completion of the merger, or
	•	leaves Umpqua prior to nine months following the completion of the merger as a result of a decrease in base salary or an office relocation.

	•	solicit, or assist another individual or entity who offers financial services offered by Umpqua within thirty miles of any Umpqua office in soliciting, any Umpqua employees to resign or to apply for or accept employment with any other business unless such person is terminated by Umpqua within twelve months of the merger; or
	•	solicit any person or firm who is, or during the year prior to officer’s termination was, engaged in a business relationship with Umpqua or Western Sierra to terminate the person’s business relationship with Umpqua or to engage in a business relationship with a business that solicits deposits, offers loans, or offers retail brokerage services.

						Paid in Monthly
		Payment upon				Installments
		Change in				over 24 Month
		Control				Period
Gary D. Gall		$	1,503,877			$	1,358,090
Kirk Dowdell		$	576,471			$	397,764
Anthony J. Gould			N/A			$	544,536
Wayne D. Koonce		$	360,000	*		$	310,031
Patrick J. Rusnak			N/A			$	525,267

*	Payable in equal monthly installments over 120 months

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	Retention Bonuses

	Appointment to the Board of Directors of Umpqua

	•	accept a position as a director, founder, incorporator, organizer (including activities leading to the attempted or actual formation of a bank holding company or insured depository institution), officer or employee with any bank holding company or insured depository (other than Umpqua or its affiliates) with branches in the counties in which any of the Western Sierra subsidiary banks have branches on the date the merger is completed;
	•	solicit any customer of Western Sierra or Umpqua to divert its business from Western Sierra or Umpqua;
	•	solicit any employee to leave his or her employment with Western Sierra or Umpqua;
	•	employ or assist in employing any Western Sierra or Umpqua employee to perform services for any bank holding company or insured depository; or
	•	disparage Western Sierra or Umpqua or their affiliates, directors or employees.

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	•	except pursuant to an effective registration statement under the Securities Act of 1933, as amended;
	•	except pursuant to the provisions of Rule 145(d) under the Securities Act of 1933, as amended; or
	•	unless an opinion of counsel reasonably satisfactory to Umpqua states that those shares may be sold pursuant to an exemption from registration.

	•	financial institutions;
	•	insurance companies;
	•	tax-exempt organizations;
	•	dealers in securities or currencies;
	•	traders in securities that use a mark-to-market method of accounting;
	•	persons who are not citizens or residents of the United States;
	•	shareholders who hold their shares as part of a hedge, straddle, or other risk-reduction transaction; or
	•	shareholders who acquired their Western Sierra common stock through stock options or otherwise as compensation.

	Tax Consequences of the Merger

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	•	the merger agreement will qualify as a reorganization within the meaning of Section 368(a);
	•	the parties to the agreement and to the plans of merger will each be “a party to a reorganization” within the meaning of Section 368(b) of the Code;
	•	no taxable gain or loss will be recognized by Umpqua, Umpqua Bank, Western Sierra, Western Sierra National Bank, Auburn Community Bank, Central California Bank or Lake Community Bank as a result of the merger; and
	•	no taxable gain or loss will be recognized by Western Sierra shareholders who exchange all of their shares of Western Sierra common stock for Umpqua common stock in the merger (except with respect to cash, if any, received in lieu of fractional shares of Umpqua common stock).

	Consequences to Western Sierra Shareholders

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	•	his or her shares were outstanding immediately prior to the record date;
	•	the merger is approved by the shareholders of Umpqua and Western Sierra;
	•	demands are made for payment with respect to 5% or more of the outstanding shares of the common stock of Western Sierra; and
	•	such shareholder complies with Sections 1300 through 1312 of the California General Corporation Law, or CGCL.

	•	make a timely written demand upon Western Sierra for purchase in cash of his or her shares at their fair market value as of February 7, 2006, which demand includes:

	•	the number and class of the shares held of record by him or her that he or she demand that Western Sierra purchase, and
	•	what he or she claims to be the fair market value of his or her shares as of February 7, 2006;

	•	have his or her demand received by Western Sierra on or before the date of the Western Sierra special meeting of shareholders;
	•	vote against the approval of the principal terms of the merger agreement;
	•	submit certificates representing his or her shares for endorsement in accordance with Section 1302 of the CGCL; and
	•	comply with such other procedures as are required by the CGCL.

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	•	a copy of Sections 1300, 1301, 1302, 1303 and 1304 of Chapter 13 of the CGCL;
	•	a statement of the price determined by Western Sierra to represent the fair market value as of February 7, 2006 of the dissenting shares; and
	•	a brief description of the procedure to be followed if he or she desires to exercise his or her dissenters’ rights under such sections.

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	•	corporate matters, including due organization, existence under state law, and general corporate power and authority;
	•	capitalization;
	•	timely filing, accuracy and completeness of reports filed with the SEC, FDIC and other regulatory entities;
	•	corporate books and records, articles of incorporation, bylaws and shareholder reports;
	•	legal proceedings;
	•	compliance with applicable law including lending laws and regulations;
	•	environmental matters
	•	the absence of undisclosed liabilities;
	•	the absence of material changes or events since September 30, 2006;
	•	required governmental and third-party approvals;
	•	authority to execute and deliver the merger agreement and the enforceability of the merger agreement;
	•	absence of conflicts with, or violations of, organizational documents or other obligations as a result of the merger;
	•	tax matters;
	•	insurance coverages;
	•	validity of, and the absence of defaults under, material contracts;
	•	reserve for loan losses; and
	•	related party transactions.

	•	lack of joint ventures;
	•	outstanding commitments;
	•	real property;
	•	intellectual property;
	•	employee benefits and relationship with its employees;
	•	shareholder list;
	•	no broker’s or finder’s fees except for fees and costs of Sandler O’Neill & Partners, L.P.

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	•	continue to conduct its business only in the ordinary course;
	•	timely file all governmental reports;
	•	timely file tax returns and pay taxes;
	•	use commercially reasonable efforts to:

	•	preserve its present business organization,
	•	retain its employees,
	•	maintain its assets,
	•	preserve the goodwill of all customers and other persons with whom it has business dealings, and
	•	apply for and receive all approvals required for completion of the merger;

	•	provide access to the other party to its premises, books, files and records; and
	•	call a meeting of shareholders to vote on the proposed merger.

	•	pay or accrue for all merger related expenses;
	•	deliver board minutes and committee reports to Umpqua;
	•	deliver title reports to Umpqua with respect to all real property owned by Western Sierra and its subsidiary banks;
	•	make provisions to its allowance for loan, lease and credit losses that conform to its internal policies and procedures, regulatory requirements and GAAP;
	•	charge-off on a current basis all loans deemed to be uncollectible and charge off all loans classified as loss prior to the closing;
	•	maintain appropriate classification and risk ratings for all loans;
	•	notify Umpqua of renewals or modifications of loans of over $2,500,000 and commitments to lend over $2,500,000;
	•	notify Umpqua of renewals or modifications of loans or commitments to lend to borrowers on Western Sierra’s watch list;
	•	notify Umpqua of commitments or modifications to agreements or arrangements, which alone or together with all similar arrangements exceeds $250,000, with any director or officer of Western Sierra or Western Sierra National Bank; and
	•	provide Umpqua summaries of Suspicious Activity Reports.

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	•	register shares of Umpqua common stock to be issued to Western Sierra shareholders and file a listing application with the Nasdaq National Market covering such securities;
	•	take all actions necessary to appoint the Western Sierra directors to its board and to an Umpqua Bank California divisional board of directors following completion of the merger;
	•	honor outstanding Western Sierra employee benefit or compensation obligations following completion of the merger;
	•	continue Western Sierra employee benefit plans in effect at the completion of the merger, provide substantially similar benefits to Western Sierra employees following completion of the merger or shift Western Sierra employee to Umpqua benefit plans following completion of the merger with credit for years of service with Western Sierra for the purposes of eligibility and levels of benefits;
	•	provide severance to Western Sierra employees who are terminated other than for cause following completion of the merger;
	•	indemnify and hold harmless, to the fullest extent permitted under applicable law, Western Sierra’s present and former directors and officers of Western Sierra and the Western Sierra subsidiary banks against costs or expenses incurred in connection with a claim arising out of matters occurring prior to the completion of the merger;
	•	maintain Western Sierra’s existing officers’ and directors’ liability insurance for a period of three years following completion of the merger, or if the cost of such insurance exceeds $300,000, then for such period that can be purchased for $300,000; and
	•	take such actions as may be necessary pursuant to Rule 16b-3(d) and Rule 16b-3(e) under the Securities Exchange Act of 1934, as amended, to exempt the conversion of shares of Western Sierra common stock and options to purchase Western Sierra common stock into Umpqua common stock and options to purchase Umpqua common stock.

	•	amend its articles of incorporation (other than the proposed amendment to Umpqua’s articles of incorporation to declassify its board of directors and provide for annual election of each director) or bylaws or its respective subsidiaries’ articles or bylaws;
	•	declare any extraordinary dividends;
	•	redeem, repurchase or otherwise acquire its stock (other than pursuant to Umpqua’s share repurchase program);
	•	engage in any activity outside the ordinary course of business that could reasonably be expected to have a material adverse effect on their respective businesses or materially adversely delay the ability to receive regulatory approvals;
	•	adopt any unusual or novel management, lending, personnel, accounting, or investment policies or otherwise materially change its business practices; or
	•	take any action that would prevent the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code.

	•	commit to any shareholder distributions other than permitted quarterly cash dividends in the same amount per share as Umpqua’s regular quarterly cash dividend;
	•	grant stock options, warrants or other rights to purchase shares of any class of stock of Western Sierra or any of its subsidiaries;

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	•	modify the terms, accelerate vesting or extend the exercise date of any outstanding stock option, except as required by the Western Sierra stock option plans;
	•	borrow or guarantee payment of funds outside the ordinary course of its business;
	•	cancel any debts or claims having a value in excess of $100,000;
	•	sell, lease or transfer any material assets, property or rights outside the ordinary course of its business;
	•	amend or terminate any material contract;
	•	mortgage, pledge or subject to a lien or encumbrance any of its material assets other than permitted liens;
	•	willfully violate, commit a breach of or default under any contract or agreement that is material to its business;
	•	knowingly violate any applicable law or regulation;
	•	increase compensation payable to any officer, director, employee or agent that is a party to a severance, employment or salary continuation agreement with Western Sierra or any of its subsidiary banks;
	•	increase compensation payable to any other officer, director, employee or agent other than:

	•	annual merit salary and bonus increases made in the ordinary course of business consistent with past practices not exceeding 5% in the aggregate based upon December 31, 2005 aggregate salaries or 6% for any individual employee; or
	•	in connection with incentive bonuses awarded in the ordinary course of business consistent with past practices.

	•	enter into any employment contract for a period greater than 30 days or providing for severance payments upon termination of employment or upon the occurrence of any other event;
	•	make or commit to any stay, retention or conversion bonus;
	•	enter into or make any material change to any employee benefit plan except as required by law;
	•	pay any annual incentive or bonus compensation for a partial year;
	•	acquire control or ownership interests in any other corporation or other entity, except in the ordinary course of business through foreclosure or transfer in lieu of foreclosure;
	•	acquire an ownership or leasehold interest in any real property without making an environmental evaluation that, in its opinion, is reasonably appropriate;
	•	make any payment in excess of $250,000 in settlement of any pending or threatened legal proceeding;
	•	acquire, open or close any office or branch;
	•	make any capital expenditures in excess of $100,000;
	•	make, renew, commit to make or materially modify any loan or series of loans or commitments over $2,500,000 without providing Umpqua a copy of the report made to Western Sierra’s loan committee;
	•	extend the maturity of any loan risk-rated substandard or worse beyond September 30, 2006 or six months beyond the expected effective date of the merger, whichever is later;
	•	extend the maturity of any loan on non-accrual beyond June 30, 2006 or three months following the expected effective date of the merger, whichever is later;
	•	reverse any provision taken for loan losses;
	•	sell investment securities at a gain except as necessary to provide liquidity, in accordance with past practices;

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	•	sell loans or purchase loan participations except as required for liquidity concerns and in amounts consistent with past practice; or
	•	adopt any unusual or novel marketing policies.

	•	each of Western Sierra’s and Umpqua’s shareholders approve the merger agreement; and
	•	Umpqua and Western Sierra procure all required regulatory consents, orders and approvals, and satisfy legal requirements of regulators including the Federal Reserve Board, the FDIC, the Director of the Oregon Department of Consumer and Business Services, and the California Department of Financial Institutions.

	•	there are no actions or proceedings commenced or threatened against any party to restrain, prohibit or invalidate the merger or restrict the operations of the business of the parties;
	•	there is no banking moratorium or other suspension of payment by banks in the United States;
	•	each party has received good standing certificates or certificates of existence of the other party;
	•	each party has received certified resolutions of the board of directors and shareholders of the other party evidencing approval of the proposed merger
	•	the representations and warranties given by each party are true in all material respects as of the effective date of the merger;
	•	each party has complied in all material respects with its covenants in the merger agreement;
	•	there has been no material adverse change in the business or financial condition of either party since February 7, 2006, the date on which the parties entered into the merger agreement;

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	•	each party has received a certificate of the other party’s President and Chief Financial Officer certifying the fulfillment of conditions to completion of the merger; and
	•	each party has received an opinion of Foster Pepper Tooze LLP as to the tax treatment of the merger.

	•	less than 12.5% of the outstanding shares of Western Sierra common stock have perfected their right to become dissenting shareholders under California law;
	•	the SEC has issued an order of registration relating to the shares of Umpqua common stock to be issued in the merger to Western Sierra shareholders and no stop order suspending the effectiveness of the registration statement relating to such shares has been issued or is pending or threatened;
	•	each amended and restated severance, employment or salary continuation agreement entered into by certain officers of Western Sierra immediately prior to execution of the merger agreement has not been amended or restated and remains in full force and effect; and
	•	each Voting, Non-Competition and Non-Solicitation Agreement entered into by directors of Western Sierra and of its subsidiary banks has not been amended or rescinded and is in full force and effect.

	•	by the mutual consent of the boards of directors of Western Sierra and Umpqua acknowledged in writing;
	•	by either Western Sierra or Umpqua acting through their respective board of directors any time after October 31, 2006, if the merger has not been consummated by that date through no fault of the terminating party;
	•	by either Western Sierra or Umpqua acting through their respective board of directors in the event of a material breach by the other party of its representations, warranties or covenants in the merger agreement, which has not been cured within thirty days notice to the breaching party;
	•	by Western Sierra upon a determination by its board of directors that such action is required for the directors to comply with their fiduciary duties; or
	•	by Western Sierra if Umpqua’s stock price, based on average closing prices, is less than $22.59 and such decline in Umpqua’s stock price is disproportionate to the performance of the Nasdaq Bank Index, as described below.

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	•	the average closing price of Umpqua common stock over the fifteen trading day period ending on the fifth business day prior to the projected effective date of the merger is less than $22.59;
	•	Umpqua’s stock price has underperformed the Nasdaq Bank Index by more than 10%; and
	•	Western Sierra notifies Umpqua within 48 hours following the date of such events.

	•	an initial Umpqua stock price of $28.24 and initial index of 3,126.17, each of which is equal to the average closing price over the fifteen trading days from January 18, 2006, through and including February 7, 2006, the trading day prior to announcement of the merger, and
	•	the final Umpqua stock price and final index, each of which will be equal to the average closing price over the fifteen trading day period through and including the fifth business day prior to the projected effective date of the merger.

	•	either party terminates the merger agreement due to the failure of Western Sierra’s shareholders to approve the merger proposal, provided that no failure or any covenant, condition, representation or warranty on the part of Umpqua shall have contributed to the failure of Western Sierra’s shareholders to approve the merger;
	•	Umpqua terminates the merger agreement due to Western Sierra’s uncured material breach; or
	•	Western Sierra terminates the merger agreement pursuant to a determination by its board that such action is required in order for the directors to comply with their fiduciary duties.

	•	either party terminates the merger agreement due to the failure of Umpqua’s shareholders to approve the merger proposal, provided that no failure of any covenant, condition, representation or warranty on the part of Western Sierra shall have contributed to the failure of Umpqua’s shareholders to approve the merger; or
	•	Western Sierra terminates the merger agreement due to Umpqua’s uncured material breach.

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	•	the merger agreement is terminated:

	•	by either party because Western Sierra shareholders fail to approve the merger proposal,
	•	by Western Sierra pursuant to a good faith determination by its board of directors after consultation with Sullivan & Cromwell LLP, its legal counsel, that such action is required for the directors to comply with their fiduciary duties, or
	•	by Umpqua because of an uncured material breach by Western Sierra;

	•	Western Sierra enters into an alternative acquisition transaction prior to twelve months after the date of termination;
	•	the alternative acquisition transaction had been proposed:

	•	prior to or at the time of Western Sierra’s special meeting of shareholders concerning the proposed merger with Umpqua if either party terminates the merger agreement because Western Sierra shareholders fail to approve the merger proposal, or
	•	prior to the date of termination if Umpqua terminates the merger agreement because of an uncured material breach by Western Sierra or if Western Sierra terminates the merger agreement to comply with their fiduciary duties;

	•	there was no material failure by Umpqua to comply with its covenants in the merger agreement at the time of Western Sierra’s special meeting of shareholders; and
	•	there was no material failure by Umpqua to satisfy the conditions to closing that:

	•	Umpqua’s shareholders approve the proposed merger (if Umpqua’s shareholders have met by the date of termination),
	•	Umpqua’s representations and warranties are true in all material respects as of the effective date of the merger, and
	•	there has been no material adverse change in the business or financial condition of Umpqua since February 7, 2006, the date on which the parties entered into the merger agreement.

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	•	capitalize on an innovative product delivery system;
	•	deliver superior quality service;
	•	establish strong brand awareness;
	•	use technology to expand customer base; and
	•	increase market share in existing markets and expand into new markets through a marketing and sales plan comprising the following key components:

	•	comprehensive media advertising campaigns showcasing Umpqua’s innovative style of banking and commitment to quality customer service;

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	•	applying a retail store concept and atmosphere to Umpqua Bank stores; and
	•	establishing and emphasizing a sales culture among Umpqua Bank associates through training and incentives.

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	•	Roseville 1st National Bank (April 1999), which merged with Western Sierra National Bank in May 2000;
	•	Lake Community Bank (April 1999);
	•	Sentinel Community Bank (May 2000), whose branches were transferred to Central California Bank in July 2002;
	•	Central California Bank (April 2002);
	•	Central Sierra Bank (July 2003), which was merged with Central California Bank.
	•	Auburn Community Bank (December 2003)

	•	Western Sierra National Bank — $606 million in assets and $501 million in deposits,
	•	Lake Community Bank — $109 million in assets and $96 million in deposits,
	•	Central California Bank — $433 million in assets and $367 million in deposits, and
	•	Auburn Community Bank — $137 million in assets and $94 million in deposits.

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	Merger and Integration Costs

	Capital

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	Operating Costs Savings and Revenue Enhancements

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		December 31, 2005
		Umpqua
		Holdings				Western Sierra				Pro Forma				Pro Forma
		Corporation				Bancorp				Adjustments				Combined
		(dollars in thousands)
Cash and balances due from banks		$	151,521			$	41,972			$	—			$	193,493
Fed funds sold and interest-bearing deposits			10,233				39,535				—				49,768
Investment securities held to maturity			8,677				2,888				—				11,565
Investment securities available for sale			671,868				74,958				—				746,826
Trading account assets			601				41				—				642
Mortgage loans held for sale			9,061				3,190				—				12,251
Loans and leases receivable			3,921,631				1,043,972				(9,900	)(a1)			4,955,703
Less: Allowance for loan and lease losses			(43,885	)			(15,505	)			—				(59,390	)
Federal Home Loan Bank stock			14,263				4,561				—				18,824
Premises and equipment, net			88,865				19,466				—				108,331
Mortgage servicing rights			10,890				—				—				10,890
Goodwill and other intangibles			408,503				33,177				254,043	(a2)			695,723
Other assets			108,411				44,318				(145	)(a3)			152,584
Total assets		$	5,360,639			$	1,292,573			$	243,998			$	6,897,210
Non-interest bearing deposits		$	987,714			$	276,667			$	—				1,264,381
Interest bearing deposits			3,298,552				772,028				(1,300	)(a1)			4,069,280
Total deposits			4,286,266				1,048,695				(1,300	)			5,333,661
Borrowed funds			117,049				66,000				(200	)(a1)			182,849
Junior subordinated debentures			165,725				37,116				—				202,841
Other liabilities			53,338				10,530				20,526	(a4)			84,394
Total liabilities			4,622,378				1,162,341				19,026				5,803,745
Stock and surplus			564,579				71,042				284,162	(a5)			919,783
Retained earnings			183,591				58,855				(58,855	)(a6)			183,591
Accumulated other comprehensive income			(9,909	)			335				(335	)(a6)			(9,909	)
Total shareholders’ equity			738,261				130,232				224,972				1,093,465
Total liabilities and shareholders’ equity		$	5,360,639			$	1,292,573			$	243,998			$	6,897,210

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			For the Twelve Months Ended December 31, 2005
			Umpqua
			Holdings				Western Sierra				Pro Forma				Pro Forma
			Corporation				Bancorp				Adjustments				Combined
			(dollars in thousands except per share data)
Interest income			$	282,276			$	76,729			$	1,302	(b1)		$	360,307
Interest expense				72,994				17,301				1,500	(b1)			91,795
	Net interest income			209,282				59,428				(198	)			268,512
Provision for credit losses				2,468				2,050				—				4,518
Non-interest income				47,782				13,198				—				60,980
Non-interest expense				146,794				42,358				2,440	(b2)			191,592
Merger expense				262				400				—				662
	Income before provision for income taxes			107,540				27,818				(2,638	)			132,720
Provision for income tax				37,805				10,072				(1,055	)(b3)			46,822
	Net income		$	69,735			$	17,746			$	(1,583	)		$	85,898
Earnings per common share — basic			$	1.57			$	2.30							$	1.51
Earnings per common share — diluted			$	1.55			$	2.23							$	1.49
Weighted average shares — basic				44,438,021				7,706,824				4,701,163				56,846,008
Weighted average shares — diluted				45,010,563				7,950,964				4,732,023				57,693,550

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	Note 1 — Basis of Presentation

	Note 2 — Merger-Related Costs and Expenses

		Umpqua/
		Western
		Sierra
		(in thousands)
Employee severance and continuation costs		$	9,724
Investment banking and other professional fees			4,761
Contract termination fees and other costs			6,041
Total merger costs			20,526
Less estimated tax benefit			6,306
Merger-related costs after tax		$	14,220

	Note 3 — Pro Forma Adjustments

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	Unaudited Pro Forma Condensed Combined Balance Sheet

					December 31, 2005
					(dollars and shares in
					thousands)
Western Sierra common stock outstanding					7,804 Shares
Exchange Ratio					1.610
	Total Umpqua Common Stock to be issued				12,564 Shares
Purchase price per Umpqua common share					$27.26
							$	342,489
Fair value of outstanding employee and non-employee stock options								12,715
	Total purchase price							355,204
Net assets acquired
	Western Sierra stockholders’ equity							130,232
	Western Sierra goodwill and intangible assets							(33,177	)
	Estimated adjustments to reflect assets acquired at fair value:
		Securities						—
		Loans and leases						(9,900	)
		Core deposit intangible						29,289
		Other assets						(145	)
	Estimated amounts allocated to liabilities assumed at fair value:
		Deposits						1,300
		Long-term debt						200
		Other liabilities						(20,526	)
								97,273
			Goodwill resulting from merger				$	257,931

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	Unaudited Pro Forma Condensed Combined Statement of Income

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	•	number of directors,
	•	classified board of directors,
	•	removal of directors,
	•	board vacancies,
	•	limitation of director liability,
	•	indemnification of directors, and
	•	anti-takeover provisions.

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UMPQUA		WESTERN SIERRA
AUTHORIZED CAPITAL STOCK
Common Stock. 100,000,000 shares authorized, of which 44,723,982 were issued and outstanding as of April 7, 2006. Preferred Stock. 2,000,000 shares authorized, none of which have been issued. The board of directors may issue preferred stock and designate the rights and preferences.		Common Stock. 15,000,000 shares authorized, of which 7,864,902 were issued and outstanding as of April 7, 2006. Preferred Stock. 10,000,000 shares authorized, none of which have been issued. The board of directors may issue preferred stock and designate the rights and preferences.
BOARD OF DIRECTORS
Umpqua’s bylaws set the number of directors at not less than 6 nor more than 19 directors with the number of directors to be set by the board. The number of directors is currently set at 14 but will be increased to 15 upon completion of the merger.		Western Sierra’s bylaws set the number of directors at not less than 8 nor more than 15 directors with the number of directors set by the board, by approval of shareholders or by a bylaw or amendment approved by a majority of the shares entitled to vote or by the written consent of a majority of the outstanding shares entitled to vote. The number of directors is currently set at 11.
ELECTION OF DIRECTORS; CUMULATIVE VOTING
The OBCA provides that shareholders do not have a right to cumulate their votes unless the corporation’s articles of incorporation so provide. Umpqua’s shareholders are not entitled to cumulate their votes for the election of directors. Directors are elected by a plurality of the votes cast.		Western Sierra’s shareholders are entitled to cumulate their votes for the election of directors. The CGCL provides for cumulative voting for directors, unless the corporation’s articles or bylaws provide otherwise. Western Sierra’s bylaws specifically provide for cumulative voting. Cumulative voting allows a shareholder to cast a number of votes equal to the number of directors to be elected, multiplied by the number of shares held in the shareholder’s name on the record date. This total number of votes may be cast for one nominee or may be distributed among as many of the candidates as the shareholder desires.

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UMPQUA		WESTERN SIERRA
CLASSIFIED BOARD OF DIRECTORS
The OBCA permits classification of an Oregon corporation’s board of directors. Umpqua’s board is divided into three classes, with as close as possible to one-third of the directors elected annually for three-year terms. Generally, only one class of directors is elected in any particular year. Proposed Amendment. Umpqua’s board of directors has proposed an amendment to the articles of incorporation that would eliminate classification of the board. The amendment must be approved by the affirmative vote of 75% of all of the votes entitled to be cast. If the amendment is approved, Umpqua’s directors would be elected at each annual meeting of shareholders for a term of one year.		The CGCL permits classification of a California corporation’s board of directors. Western Sierra does not have a classified board of directors. Western Sierra’s bylaws require that all directors be elected at each annual meeting of shareholders for a term of one year.
REMOVAL OF DIRECTORS
The OBCA provides that directors may be removed with or without cause, unless the corporation’s articles of incorporation provide that directors may be removed only for cause. Under Umpqua’s articles of incorporation, shareholders holding a majority of shares entitled to vote for election of directors may remove any director only for cause. “Cause” means a breach of the duty of loyalty to Umpqua or its shareholders; acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law; an unlawful distribution under applicable state or federal law; or a transaction from which the director received improper personal benefit. Proposed Amendment. Umpqua’s board of directors has proposed an amendment to Umpqua’s articles of incorporation that would eliminate the provision that directors may only be removed for cause. The amendment must be approved by the affirmative vote of 75% of all the votes entitled to be cast. If the amendment is approved, a director may be removed by a majority vote with or without cause.		The CGCL provides that directors may be removed without cause, if the removal is approved by the holders of a majority of the outstanding shares entitled to vote. The CGCL further provides that, with respect to directors of corporations not having classified boards of directors, no director can be removed (unless the entire board is removed) if the votes cast against removal of the director would be sufficient to elect the director if voted cumulatively (without regard to whether cumulative voting is permitted) at an election at which the same total number of votes were cast and the entire number of directors authorized at the time of the director’s most recent election were then being elected. Western Sierra’s bylaws substantially restate the applicable CGCL provisions.

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UMPQUA		WESTERN SIERRA
FILLING VACANCIES ON BOARD OF DIRECTORS
The OBCA provides that, unless the corporation’s articles of incorporation provide otherwise, a vacancy on the board of directors may be filled by shareholders or the board of directors. Umpqua’s articles of incorporation provide that only the board of directors may fill vacancies.		The CGCL provides that vacancies created by removal of a director may be filled only by shareholder approval unless the corporation’s articles of incorporation or bylaws provide otherwise. The CGCL provides that in other cases, vacancies may be filled by approval of the board. Shareholders may elect a director at any time to fill any vacancy not filled by the directors. Western Sierra’s bylaws substantially restate the statutory provisions.
SHAREHOLDER NOMINATIONS
Umpqua’s bylaws provide that shareholder nominations may be brought before an annual meeting only upon delivery of a notice to Umpqua’s Secretary not later than the close of business 90 calendar days before the calendar date of Umpqua’s proxy statement released to shareholders in connection with the previous year’s annual meeting.		Western Sierra’s bylaws provide that shareholder nominations for election of directors must be delivered to Western Sierra’s President by the later of (i) the close of business 21 days prior to any meeting of shareholders called for the election of directors, or (ii) 10 days after the date of mailing of notice of a meeting to shareholders.
SHAREHOLDER VOTING
Election of Directors. Directors are elected by a plurality of the votes cast. Vote for Approval of Action. Actions other than the election of directors are approved if the votes cast in favor exceed the votes opposed, unless a greater number is required by the OBCA or the articles of incorporation. Extraordinary Transactions. The OBCA generally requires approval of a merger, consolidation, dissolution or sale of all or substantially all of a corporation’s assets by the affirmative vote of the holders of a majority of the outstanding shares entitled to vote on the matter.		Election of Directors. Directors are elected by a plurality of the votes cast. Vote for Approval of Action. Actions other than the election of directors are approved by the affirmative vote of the majority of the shares represented and voting at a meeting at which a quorum is present, unless a greater number is required by the CGCL or the articles of incorporation. Extraordinary Transactions. The CGCL generally requires approval of a merger, consolidation, dissolution or sale of all or substantially all of a corporation’s assets by the affirmative vote of the holders of a majority of the outstanding shares entitled to vote on the matter. Western Sierra’s articles of incorporation require the affirmative vote of 66-2/3% of the outstanding shares for mergers or consolidations, upon consummation of which Western Sierra’s shareholders will own less than 50% of the voting power of the surviving entity, or for the sale or other disposition of 50% or more of the corporation’s assets or the combined assets of the corporation and its subsidiaries.

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UMPQUA		WESTERN SIERRA
SPECIAL MEETINGS OF SHAREHOLDERS
Under the OBCA, a corporation’s board of directors, shareholder(s) (holding at least 10% of the votes entitled to be cast for any proposition at the special meeting, by a demand in writing) and other persons designated in the corporation’s articles or bylaws have the authority to call special meetings of shareholders. Umpqua’s bylaws also authorize the Chief Executive Officer to call a special meeting. The OBCA permits a corporation, in its articles of incorporation, to require a greater percentage than 10%, up to 25%, but Umpqua’s articles of incorporation do not require more than 10%.		Under the CGCL, the board of directors, chair of the board, president, shareholder(s) (holding at least 10% of the votes entitled to be cast for any proposition at the special meeting, by a demand in writing), and such other persons designated in the corporation’s articles or bylaws have the authority to call special meetings of shareholders. Western Sierra’s bylaws substantially restate the statutory provisions and do not specify any additional persons.
ACTION BY SHAREHOLDERS WITHOUT A MEETING
Under the OBCA and Umpqua’s bylaws, any action required or permitted to be taken at a shareholder meeting may be taken without a meeting if all shareholders entitled to vote execute a written consent describing the action. The OBCA permits a corporation to provide in its articles of incorporation that action may be taken without a meeting if the action is taken by not less than the minimum number of votes that would be necessary to take such action at a meeting at which all shareholders entitled to vote on the action were present and voted. Umpqua’s articles do not include such a provision.		The CGCL provides that, unless otherwise provided in the articles of incorporation, any action that may be taken at a special or annual meeting of shareholders may be taken without a meeting and without prior notice if a consent in writing, setting forth the action taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Except with respect to filling vacancies on the board of directors, other than vacancies created by removal, the CGCL does not permit election of directors by written consent except by unanimous written consent of all shares entitled to vote in the election of directors.
ANTI-TAKEOVER PROVISIONS
Umpqua’s articles of incorporation permit the board to consider factors in determining what is in the best interest of the corporation including a merger’s or reorganization’s social, legal, and economic effect on employees, suppliers, customers, the community, the economy of the state and nation, short- and long-term interests Umpqua and its shareholders, and other relevant factors.		Western Sierra’s articles of incorporation require the affirmative vote of 66-2/3% of the outstanding shares to effect a merger or consolidation, upon consummation of which Western Sierra’s shareholders will own less than 50% of the voting power of the surviving entity, or for the sale or other disposition of 50% or more of the corporation’s assets or the combined assets of the corporation and its subsidiaries.

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UMPQUA		WESTERN SIERRA
AMENDMENT TO CHARTER DOCUMENTS
Articles of Incorporation. The OBCA provides that amendments to the articles of incorporation must be approved by the board of directors and by the holders of a majority of the shares entitled to vote on the amendment (if the amendment gives rise to dissenters’ rights) or by a vote of shareholders with the votes cast in favor of the amendment exceeding the votes cast in opposition to the amendment (if the amendment does not give rise to dissenters’ rights). The board alone may adopt immaterial amendments. Umpqua’s articles of incorporation require a supermajority vote to amend provisions relating to board size, classified board, removal of directors, filling of board vacancies, the limitation of director’s liability and indemnification, and consideration of other constituencies in the context of a merger or similar extraordinary transaction. These provisions may be amended or revised only by approval of holders of at least 75% of the shares entitled to vote. Amendments to include other terms that would be inconsistent with the provisions above must also be approved by holders of at least 75% of the shares entitled to vote. Bylaws. The OBCA provides that the corporation’s board may amend or repeal the corporation’s bylaws unless the articles of incorporation reserve the power exclusively to the shareholders in whole or in part or the shareholders in amending or repealing a particular bylaw provide expressly that the directors may not amend or repeal that bylaw. The OBCA permits shareholders to amend or repeal bylaws. Umpqua’s bylaws substantially restate the statutory provisions.		Articles of Incorporation. To amend the articles of incorporation, the CGCL requires the approval of the corporation’s board of directors and a majority of the outstanding shares entitled to vote. Western Sierra’s articles also require 66-2/3% to amend the provision requiring a supermajority for certain business combinations and sale of all or substantially all of the corporation’s assets. Bylaws. The CGCL provides that holders of a majority of the outstanding shares entitled to vote and the corporation’s board of directors each have the power to adopt, amend or repeal a corporation’s bylaws, although the articles or bylaws of the corporation may restrict or eliminate the power of the board to take such action. The fixed number or the minimum number of directors may not be reduced to less than five if the votes cast against adoption of the amendment to the bylaws or articles are equal to or more than 66-2/3% of the outstanding shares entitled to vote. Neither Western Sierra’s articles nor bylaws restrict the power of the board to adopt, amend or repeal its bylaws, other than amendments to the bylaws specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable board or vice versa.

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	Proposal 2. Annual Election of Directors

	Vote Required to Approve the Amendments

	Reasons for the Recommended Amendments

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	“B.     Election of Directors. Each director shall be elected to serve a term of one year, with each director’s term to expire at the next annual meeting following the director’s election as a director. Notwithstanding the expiration of the term of a director, the director shall continue to hold office until his or her successor has been elected and qualified. A decrease in the number of directors will not have the effect of shortening the term of any incumbent director. At each annual meeting, the shareholders will elect directors by a plurality of the votes cast by the shares entitled to vote in the election.
	C.     Removal of Directors. Notwithstanding any other provision of these Articles, any director of the Corporation may be removed at any time with or without cause, and except as otherwise required by law, only by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Corporation entitled to elect such director, at a meeting of the shareholders called for that purpose, and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director. If the director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove the director.”

	Board Recommendation

	Proposal 3. Election of Directors

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	Board Recommendation

	Directors

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	Executive Officers

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	Statement of Governance Principles and Charters

	Meetings and Committees of the Board of Directors

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C Chairperson  V Vice Chair  l Member

Executive/

Audit and

Governance

Financial

Loan and

Compliance

Budget

Compensation

Committee

Services

Investment

Nominating

Ronald F. Angell

l

l

C

l

Scott D. Chambers

l

l

l

C

l

Raymond P. Davis

l

l

l

l

Allyn C. Ford

C

C

David B. Frohnmayer

l

l

Stephen M. Gambee

l

l

l

Dan Giustina

C

l

l

Diana E. Goldschmidt

V

V

l

Lynn K. Herbert

l

V

William A. Lansing

C

C

l

l

Theodore S. Mason

l

l

Diane D. Miller

l

V

V

Bryan L. Timm

l

l

l

Thomas W. Weborg

l

l

l

	Audit and Compliance Committee

	Budget Committee

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	Compensation Committee

	Executive/ Governance Committee

	Financial Services Committee

	Loan and Investment Committee

	Nominating Committee

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	Family Relationships

	Changes in Nomination Procedures

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						Annual Compensation												Long Term Compensation
																		Awards								Payouts
																		Restricted				Securities
														Other annual				stock				Underlying				LTIP				All other
		Year				Salary($)				Bonus($)				compensation				award(s)($)				Options/SAR				Payouts				compensation($)
Name and principal position		(1)				(2)				(3)				($)				(4)				(#)				($)				(5)
Raymond P. Davis			2005			$	608,000			$	513,000			$	18,300				—				75,000				—			$	577,623
President and Chief			2004			$	446,875			$	267,188			$	15,330				—				—				—			$	925,512
Officer, Executive			2003			$	374,339			$	195,000			$	17,810				—				150,000				—			$	321,877
Umpqua Holdings
Corporation/Umpqua Bank
David M. Edson			2005			$	275,000			$	162,500			$	18,060				—				40,000				—			$	16,580
Executive Vice President,			2004			$	238,500			$	150,000			$	11,120				—				—				—			$	16,330
Umpqua Holdings			2003			$	197,313			$	79,500			$	39,482			$	95,050				10,000				—			$	47,493	(6)
Corporation President,
Umpqua Bank-Oregon
William T. Fike			2005			$	213,076			$	120,000			$	19,970				—				50,000				—			$	7,680
Executive Vice President,
Umpqua Holdings
Corporation President,
Umpqua Bank-California
Daniel A. Sullivan			2005			$	265,000			$	132,500			$	10,752				—				40,000				—			$	15,826
Executive Vice			2004			$	223,500			$	135,000			$	8,052				—				—				—			$	15,575
President/Chief Financial			2003			$	195,989			$	78,800			$	8,944			$	95,050				10,000				—			$	13,729
Officer, Umpqua Holdings
Corporation/Umpqua Bank
Brad F. Copeland			2005			$	265,000			$	166,000			$	14,969				—				40,000				—			$	15,895
Sr. Executive Vice			2004			$	223,000			$	135,000			$	12,364				—				—				—			$	15,646
President/Chief Credit			2003			$	189,037			$	80,000			$	11,295			$	95,050				15,000				—			$	13,313
Officer, Umpqua Holdings
Corporation/Umpqua Bank

(1)	Mr. Fike commenced employment with the Company on May 12, 2005.
(2)	Includes salary deferred by Mr. Fike pursuant to a deferred compensation plan.
(3)	Includes bonuses paid, or to be paid, during the subsequent year but attributable to the year indicated.
(4)	At December 31, 2005, the value of these 2003 restricted stock awards, if they were fully vested, is $142,650 for Mr. Edson, Mr. Sullivan and Mr. Copeland calculated at $28.53 per share, the closing price on December 30, 2005, for 5,000 shares each. Each of the restricted stock grants vests 1,000 shares per year commencing September 30, 2004.
(5)	Includes amounts contributed to a supplemental (“Top Hat”) non-qualified retirement plan and/or to Umpqua’s 401(k) and Profit Sharing Plan for the executive’s benefit. For Mr. Davis, this also includes the annual accrual for his supplemental retirement plan. See “Supplemental Retirement (Top Hat) Plan” and “Retirement Plan for Mr. Davis” for more information.
(6)	A housing allowance of $35,493 was paid on Mr. Edson’s behalf in 2003.

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																						Bank Owned
		Annual Car				Annual Auto				Annual Paid				Annual Club								Life
Executive		Allowance				Use Value				Parking				Memberships				Total				Insurance(1)
Raymond P. Davis		$	9,000			$	0			$	2,700			$	6,600			$	18,300				Y
David M. Edson		$	0			$	10,500			$	2,700			$	4,860			$	18,060				Y
William T. Fike		$	0			$	11,750			$	0			$	8,220			$	19,970				N
Daniel A. Sullivan		$	6,000			$	0			$	2,700			$	2,052			$	10,752				Y
Brad F. Copeland		$	0			$	10,500			$	0			$	4,469			$	14,969				Y

(1)	BOLI plans pay $100,000 to the executive’s beneficiary upon the death of the executive

	Executive Compensation Plans and Agreements

	Employment Agreement with Raymond P. Davis

	Retirement Plan for Mr. Davis

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		17 Years of				18 Years of				19 Years of				20 or More
Final Average Compensation		Service				Service				Service				Years of Service
$ 570,000		$	290,700			$	307,800			$	324,900			$	342,000
$ 710,000		$	362,100			$	383,400			$	404,700			$	426,000
$ 850,000		$	433,500			$	459,000			$	484,500			$	510,000
$ 990,000		$	504,900			$	534,600			$	564,300			$	594,000
$1,130,000		$	576,300			$	610,200			$	644,100			$	678,000
$1,270,000		$	647,700			$	685,800			$	723,900			$	762,000
$1,410,000		$	719,100			$	761,400			$	803,700			$	846,000

		Voluntary Termination by				Termination by
		Mr. Davis or				Umpqua Without Cause
		Termination by Umpqua				or by Mr. Davis for
Prior to 12 Months Ended		with Cause(1)				Good Reason(1)
6/30/2004			20	%			30	%
6/30/2005			25	%			40	%
6/30/2006			30	%			50	%
6/30/2007			35	%			60	%
6/30/2008			40	%			80	%
6/30/2009			60	%			100	%
6/30/2010			80	%			100	%
6/30/2011			90	%			100	%
Thereafter			100	%			100	%

(1)	Vesting percentage represents the percentage of the amounts actually accrued by the Company as of that date to which Mr. Davis is entitled, not the percentage of the projected retirement benefit.

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	Employment Agreements with Other Named Executive Officers

	Supplemental Retirement (“Top Hat”) Plan

	Deferred Compensation Agreement with Mr. Fike

	Incentive Plan for Senior Management

	•	Company financial goals based on earnings per share, and
	•	supervisory ratings issued by regulatory agencies for the Company and its subsidiaries.

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	2003 Stock Incentive Plan

	Option and Restricted Stock Grants

																		Potential Realizable Value at
																		Assumed Annual Rates of
																		Stock Price Appreciation for
		Individual Grants																Option Term
(a)		(b)				(c)				(d)				(e)				(f)				(g)
		Number of				Percentage of
		Securities				Total
		Underlying				Options/SARs				Exercise
		Options/				Granted to				of Base
		SARs				Employees in				Price				Expiration
Name		Granted (#)				Fiscal Year				($/Sh)				Date				5%($)				10%($)
Raymond P. Davis			75,000				14.22	%		$	24.71				01/02/2015			$	1,165,499			$	2,953,603
David M. Edson			40,000				7.58	%		$	23.49				01/20/2015			$	590,909			$	1,497,480
William T. Fike			50,000				9.48	%		$	21.95				05/11/2015			$	690,212			$	1,749,132
Daniel A. Sullivan			40,000				7.58	%		$	23.49				01/20/2015			$	590,909			$	1,497,480
Brad F. Copeland			40,000				7.58	%		$	23.49				01/20/2015			$	590,909			$	1,497,480

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		Aggregate Option Exercises in 2005 and Year-End Option Values(1)
										Number of Securities								Value of Unexercised In-the-
										Underlying Unexercised								Money Options at
										Options at Year-End (#)								Year-End ($) (2)
		Shares
		Acquired on				Value				Shares				Shares				Value				Value
		Exercise (#)				Realized (3)				Exercisable				Unexercisable				Exercisable				Unexercisable
Raymond P. Davis			60,000			$	1,302,652				181,829				190,000			$	2,962,430			$	1,360,550
David M. Edson			—				—				19,000				56,000			$	236,660			$	368,140
William T. Fike			—				—				—				50,000				—			$	302,500
Daniel A. Sullivan			10,000			$	105,800				69,000				51,000			$	1,169,610			$	307,640
Brad F. Copeland			—				—				42,630				52,750			$	700,821			$	316,285

(1)	All share amounts have been adjusted to reflect any stock dividends and stock splits subsequent to the date of grant.
(2)	The value of unexercised in-the-money options is calculated as follows for each grant: (the closing price of Umpqua common stock at December 30, 2005 minus the option exercise price), multiplied by the number of shares subject to the option. On December 30, 2005, the closing price of Umpqua’s common stock was $28.530 per share.
(3)	Based on two exercises by Mr. Davis: (i) 51,595 shares on February 15, 2005 at an exercise price of $2.6956 per share and a closing price of $24.4142 per share and (ii) 8,405 shares on February 16, 2005 at an exercise price of $2.6956 per share and a closing price of $24.25 per share. Based on two exercises by Mr. Sullivan: (i) 5,000 shares on April 21, 2005 at an exercise price of $12.00 per share and a closing price of $22.94 per share and (ii) 5,000 shares on May 2, 2005 at an exercise price of $12.00 per share and a closing price of $22.22 per share.

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						Board				Committee
Name		Retainer				Participation				Participation				Total
Ronald F. Angell		$	10,000			$	15,000			$	9,900			$	34,900
Scott D. Chambers		$	10,000			$	15,000			$	7,400			$	32,400
Allyn C. Ford		$	12,000			$	17,500			$	3,000			$	32,500
David B. Frohnmayer		$	10,000			$	15,000			$	4,500			$	29,500
Stephen M. Gambee		$	5,000			$	9,000			$	3,000			$	17,000
Dan Giustina		$	10,000			$	15,000			$	10,900			$	35,900
Diana E. Goldschmidt		$	10,000			$	15,000			$	9,500			$	34,500
Lynn K. Herbert		$	10,000			$	15,000			$	7,000			$	32,000
William A. Lansing		$	10,000			$	12,000			$	7,300			$	29,300
Theodore S. Mason		$	10,000			$	15,000			$	6,000			$	31,000
Diane D. Miller		$	10,000			$	15,000			$	10,000			$	35,000
Bryan L. Timm		$	10,000			$	15,000			$	6,500			$	31,500
Thomas W. Weborg		$	10,000			$	15,000			$	6,500			$	31,500

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1.		Individual and Company Performance. A significant component of compensation should be related to performance. We believe that an employee’s compensation should be tied to how well the employee’s team and the Company perform against both financial and non-financial goals and objectives. The Board annually establishes the financial goals for the incentive compensation program. Non-financial goals include satisfactory performance on all internal and external regulatory exams and audits and achievement of the personal goals assigned to each executive.
2.		Short-Term and Long-Term Incentives. Incentive compensation should balance short and long term performance. We look to balance the focus of all employees on achieving strong short-term or annual results in a manner that will ensure the Company’s long-term viability and success. Therefore, to reinforce the importance of balancing these perspectives, senior management is regularly provided with both annual and long-term incentives. Participation in long-term incentive programs increases with higher levels of responsibility, as employees in these leadership roles have the greatest influence on the Company’s strategic direction and results over time.
3.		Competitiveness. Compensation levels should be competitive to achieve our goals. The Committee reviews compensation survey data from multiple external sources to ensure that our total compensation program is competitive and sound. The Committee often asks outside counsel to attend its meetings for advice on best practices. All compensation programs are reviewed annually to gauge their effectiveness in attracting and retaining executive management.
4.		Equity Orientation. Our executive officers are expected to be Company shareholders and to maintain a material ownership position in Company stock while they are employed with the Company. We provide our employees at all levels with various methods to become shareholders. We make stock option grants to valued employees from time to time and we make restricted stock grants to employees who are outstanding performers, but not necessarily executives or managers. In addition, we sponsor a 401(k) and profit sharing plan that provides for discretionary matching and profit sharing contributions by the Company to eligible employees. The Company’s plan contributions are made 50% in Company stock and 50% in cash.

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5.		Components of Executive Compensation. The basic components of executive compensation are:

	•	Annual cash compensation, including base salary and annual incentive payments;
	•	Long-term incentive compensation, including stock options and grants of restricted shares;
	•	Deferred compensation plans, SERP benefits (for the CEO only) and a supplemental retirement (“top hat”) plan;
	•	Competitive fringe benefits, such as group health, life and disability insurance and perquisites.

6.		Annual Cash Compensation.

	6.1     Base Salary. The purpose of base salary is to create a secure base of cash compensation for executives that is competitive with the market. Executive salary increases do not necessarily follow a preset schedule or formula; however, the following are considered when determining appropriate salary levels and increases:

	•	The individual’s current and sustained performance results and the methods utilized to achieve those results; and
	•	Non-financial performance indicators to include strategic developments for which an executive has responsibility (such as product development, expansion of markets, increase in same-store loan or deposit growth and acquisitions) and managerial performance (such as service quality, sales objectives and regulatory compliance).

	On an annual basis, at the end of each fiscal year, the Company’s CEO recommends the compensation of individual executive officers reporting to him, as well as the compensation of executive officers covered by NASD Rule 4350, and the Committee reviews that compensation and compares it with market information to ensure that executive compensation is competitive and that the CEO is exercising his discretion appropriately. The Committee reviews, and ratifies or approves, all components of the compensation for executive officers covered by NASD Rule 4350, including salary, bonus, equity and long-term incentive compensation. Based on this review, the Committee found the CEO’s 2006 recommendations for the Named Executive Officers’ total compensation to be appropriate and approved them.
	6.2     Annual Incentives. The purpose of annual incentive plans is to provide cash compensation on an annual basis that is at risk and contingent on the achievement of annual business and operating objectives, as well as personal goals and objectives.
	Each of the Named Executive Officers (excluding the CEO) was eligible for target incentives in 2005 up to 50% of their base salary. Achievement of the target bonus in 2005 was based on success in three performance areas: (i) corporate financial targets (50%); (ii) leadership and personal goals (35%); and (iii) regulatory and compliance goals (15%).

7.		Long-Term Incentive Compensation. There are two forms of long-term incentives normally granted to our executives: stock options and the award of restricted shares.

	•	Stock Options. The purpose of stock options is to provide equity compensation whose value is directly related to the creation of shareholder value and the increase in Company stock price. Stock options provide executives a vehicle (subject to vesting requirements) to increase equity ownership and share in the appreciation of the value of Company stock.
	•	Restricted Stock Grants. Restricted stock grants are awarded subject to vesting requirements and, in some cases, subject to the Company achieving predetermined financial goals. Restricted shares serve to help retain key executive talent, as well as retain non-executive employees who make a significant contribution to the Company.

	45 employees received option grants in 2005, totaling 507,500 shares. 13 employees received restricted share grants in 2005, totaling 8,000 shares.

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8.		Compensation for the Chief Executive Officer. Mr. Davis led the Company to solid financial performance in 2005, a year that also saw the Company’s stock price reach an all-time high. At the same time, Mr. Davis continued to emphasize the Company’s vision and mission, which is to create a unique and memorable banking environment in which our customers perceive the bank as an indispensable partner in achieving their financial goals; our people achieve unparalleled personal and professional success; our shareholders achieve the exceptional rewards of ownership; and our communities benefit from our involvement and investment in their future.

	At meetings in December 2005 and January 2006, the Committee reviewed all components of Mr. Davis’s compensation including salary, bonus, equity and long-term incentive compensation, accumulated realized and unrealized stock option, restricted stock gains, SERP plan benefits and various perquisites and other personal benefits. The Committee reviewed tally sheets setting forth the components of Mr. Davis’s compensation prepared by outside counsel, together with tally sheets from peer companies, a compensation review of specified peer financial institutions performed by a nationally recognized third party compensation consultant, as well as salary survey data provided by that consultant. The peer group of companies was selected by the Committee based on recommendations of the compensation consultant. The Committee also looked at the benefits that the CEO would receive pursuant to his employment agreements under various severance and change in control scenarios. Throughout this process, the Committee received advice from the Company’s outside counsel.
	Based on this information, the Committee felt that an adjustment to Mr. Davis’s compensation was appropriate. Effective January 1, 2006, Mr. Davis’s base salary increased from $608,000 to $658,000 and his targeted annual incentive remains at 75% of base salary. For 2006, Mr. Davis’s incentive compensation is based on success in three performance areas: corporate financial targets (65%), leadership and personal goals (20%) and regulatory and compliance goals (15%). In addition, effective January 18, 2006, the Committee awarded Mr. Davis a stock option grant of 25,000 shares at the then current market price vesting over a four year period.

9.		Internal Pay Equity. In December 2005 and January 2006, the Committee performed an internal pay equity review of the total compensation paid to the CEO, as compared to the other Named Executive Officers and the CEO’s other direct reports. The Committee commissioned a nationally recognized compensation consultant to survey the compensation paid to the Named Executive Officers by the same peer group of companies that the Committee used to review the CEO’s compensation. That survey demonstrated that the compensation paid to the Named Executive Officers, as compared with the CEO’s compensation (excluding the CEO’s SERP) is in the same percentage range as the peer group companies.

	When the Committee considers the compensation payable to the CEO and the other Named Executive Officers the aggregate amounts and mix of all components, including accumulated (realized and unrealized) option and restricted stock gains are taken into consideration.

10.		Performance-Based Executive Incentive Plan. Section 162(m) of the Internal Revenue Code generally disallows federal income tax deductions by publicly traded companies for compensation in excess of $1 million per year paid to those executive officers whose compensation is detailed in the Summary Compensation Table. Under an exception to the general rule of non-deductibility, the $1 million deduction limit does not apply to qualified performance-based compensation. In 2005, the Company’s shareholders approved the Umpqua Holdings Corporation 2005 Performance-Based Executive Incentive Plan (the “2005 Plan”), which the Company believes will qualify the short-term incentive compensation it makes available to its executive officers for the performance-based exception to non-deductibility under Section 162(m). The Committee believes that the Company will not be subject to any Section 162(m) limitations on the deductibility of compensation paid to the Named Executive Officers for fiscal year 2005.

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	At this time, it is the policy of the Compensation Committee to ensure that all compensation payable to the CEO and the other Named Executive Officers is fully deductible for federal income tax purposes consistent with Section 162(m).

11.		Director Compensation. The Committee’s practice is to engage an outside advisor once every three years to review director compensation paid by a peer group of companies to ensure that the compensation we pay to our directors is competitive given Company performance, Board performance and our community bank philosophy. As noted above, the Compensation Committee recommended increasing director compensation and the Board approved an increase to the Board meeting participation fee by $1,000 per meeting. The Committee reported to the Board that even with this increase in the Board meeting participation fee, total compensation paid to each director is below the median paid by the peer group of companies.

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			Period Ending
Index			12/31/01					12/31/02					12/31/03					12/31/04				12/31/05
Umpqua Holdings Corporation			$	161.13				$	220.02				$	252.70				$	309.85			$	354.26
Nasdaq Bank Stocks			$	108.27				$	110.84				$	142.58				$	163.17			$	159.40
Nasdaq U.S.			$	79.32				$	54.84				$	81.99				$	89.22			$	91.12
S&P 500			$	86.96				$	66.64				$	84.22				$	91.79			$	94.55

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		Number of Shares
		Beneficially				Percentage
Name and Position		Owned (1)				of Class
Lynn K. Herbert, Director			570,525	(2)			1.28	%
Raymond P. Davis, Director, President/ Chief Executive Officer			332,981	(3,4)			*
Allyn C. Ford, Chairman			161,000	(5)			*
Theodore S. Mason, Director			155,151	(6)			*
Ronald F. Angell, Director			131,783	(7)			*
Daniel A. Sullivan, EVP/ Chief Financial Officer			121,280	(8)			*
Dan Giustina, Director			113,107	(9)			*
Brad Copeland, SEVP/ Chief Credit Officer			74,356	(3,10)			*
David Edson, President — Umpqua Bank-Oregon			42,731	(11)			*
Thomas W. Weborg, Director			35,623	(12)			*
William Lansing, Director			32,735	(3)			*
William Fike, President — Umpqua Bank-California			20,158	(13)			*
David Frohnmayer, Director			13,126	(3)			*
Scott Chambers, Director			11,058				*
Stephen M. Gambee, Director			6,202				*
Diana Goldschmidt, Director			5,681				*
Diane D. Miller, Director			4,896	(3)			*
Bryan L. Timm, Director			1,736				*
All directors and executive officers as a group (21 persons)			1,900,971	(2–14)			4.25	%
Capital Research and Management Company 333 South Hope Street, 55th Floor, Los Angeles, CA			3,099,700	(15)			6.93	%
Select Equity Group, Inc., Select Offshore Advisors, LLC and George S. Loening (combined) 380 Lafayette Street, 6th Floor, New York, NY			3,583,325	(16)			8.01	%

*	Less than 1.0%

(1)	Shares held directly with sole voting and investment power, unless otherwise indicated. Shares held in the Dividend Reinvestment Plan have been rounded down to the nearest whole share. Includes shares held indirectly in Director Deferred Compensation Plans, 401(k) Plans and IRAs.
(2)	Includes shares held jointly with his spouse. Also includes shares held as trustee.
(3)	Includes shares held with or by his/her spouse.
(4)	Includes 182,500 shares covered by options exercisable within 60 days.
(5)	Includes 129,643 shares held as Agent for Ford Family Investment Pool.
(6)	Includes 67,517 shares covered by options exercisable within 60 days.
(7)	Includes 20,208 shares covered by options exercisable within 60 days.
(8)	Includes 70,000 shares covered by options exercisable within 60 days.
(9)	Includes 8,510 shares covered by options exercisable within 60 days.

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(10)	Includes 52,880 shares covered by options exercisable within 60 days.
(11)	Includes 27,000 shares covered by options exercisable within 60 days.
(12)	Includes 10,227 shares covered by options exercisable within 60 days.
(13)	Includes 10,000 shares covered by options exercisable within 60 days.
(14)	Includes 24,296 shares covered by options exercisable within 60 days.
(15)	This information is taken from a Form 13G filed February 10, 2006 with respect to holdings as of December 31, 2005. The reporting person has disclaimed beneficial ownership pursuant to Rule 13d-1.
(16)	This information is taken from a Form 13G/ A filed February 15, 2006 with respect to holdings as of December 31, 2005.

Equity Compensation Plan Information

(a)

(b)

(c)

Number of securities remaining

Number of securities to be

Weighted-average exercise

available for future issuance

issued upon exercise of

price of outstanding

under equity compensation

outstanding options,

options, warrants

plans excluding securities

Plan category

warrants and rights (1)

and rights

reflected in column (a)(2)(3)

Equity compensation plans approved by security holders

1,892,710

$

13.41

1,349,780

Equity compensation plans not approved by security holders

0

0

0

Total

1,892,710

$

13.41

1,349,780

(1)	Includes 240,575 shares issued under Centennial Bancorp’s stock option plans, having a weighted average exercise price of $7.252 per share at December 31, 2005. Includes 449,345 shares issued under Humboldt Bancorp’s stock option plans, having a weighted average exercise price of $8.1391 per share at December 31, 2005. In connection with mergers, Umpqua assumed Centennial’s and Humboldt’s obligations under their respective stock option plans.
(2)	Includes 3,000 unvested restricted stock award shares under Humboldt Bancorp plans that were assumed in connection with the acquisition of Humboldt Bancorp in July 2004.
(3)	At Umpqua’s 2003 Annual Meeting, shareholders approved the 2003 Stock Incentive Plan. The plan authorized the issuance of 2,000,000 shares of stock through awards of incentive stock options, nonqualified stock options or restricted stock grants; provided awards of stock options and restricted stock grants under the 2003 Stock Incentive Plan, when added to options outstanding under all other plans, are limited to a maximum 10% of the outstanding shares on a fully diluted basis.

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		2005				2004
		Moss Adams				Deloitte Entities
		($ in thousands)
Audit Fees(a)		$	545							$	800
Audit-Related Fees(b)			5								26
All other fees(c)		$	5
Tax Fees(d)						$	66
Planning and Advising-Tax Fees(e)							22
Total Tax Fees										$	88
Total Fees		$	555							$	914

(a)		Fees for audit services billed in 2005 are:

	•	For audit of the Company’s annual financial statements
	•	For reviews of the Company’s quarterly financial statements
	•	Accrual-basis fees related to the year-end audit, whether paid prior or subsequent to December 31.

	•	Audit of the Company’s annual financial statements
	•	Reviews of the Company’s quarterly financial statements

(b)		Fees for audit-related services billed in 2005 are:

	•	Modified cash-basis fees — represents all billings during the 12-months ended December 31
	•	Include fees billed for out of pocket costs

	•	Due diligence associated with mergers/acquisitions
	•	Financial accounting and reporting consultations
	•	Employee benefit plan audits
	•	Agreed-upon procedures engagements

(c)		All other fees for 2005:

	•	Include consulting services regarding implementation of SFAS 123R and attendance at Audit Committee Meetings
	•	Modified cash basis fees — represents all billings during the 12 months ended December 31

(d)		Fees for tax services billed in 2004 consisted of tax compliance and tax planning and advice:

	•	Tax compliance services are services rendered based upon facts already in existence or transactions that have already occurred to document, compute, and obtain government approval for amounts to be included in tax filings and consisted of:

	i.	Federal, state and local income tax return assistance
	ii.	Sales and use, property and other tax return assistance

	iii.	Assistance with tax return filings in certain foreign jurisdictions

	iv.	Research & Development tax credit documentation and analysis for purposes of filing amended returns
	v.	Transfer pricing documentation
	vi.	Requests for technical advice from taxing authorities

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(e)		Tax planning and advice are services rendered with respect to proposed transactions or that alter a transaction to obtain a particular tax result. Such services consisted of:

	i.	Tax advice related to structuring certain proposed mergers, acquisitions and disposals

		2005				2004
Memo: Ratio of Tax Planning and Advice Fees and All Other Fees to Audit Fees, Audit-Related Fees and Tax Compliance Fees			0.9	%			2.8	%

	1.	The service is not an audit, review or other attest service;
	2.	The aggregate amount of all such services provided under this provision does not exceed the lesser of $5,000 or five percent of total fees paid to the independent auditor in a given fiscal year;
	3.	Such services were not recognized at the time of the engagement to be non-audit services (to date the SEC has not provided any guidance with respect to determining whether or not a service was “recognized” at the time of the engagement. We believe that the SEC intended the term “recognized” to mean “identified”);
	4.	Such services are promptly brought to the attention of the Audit and Compliance Committee and approved by the Audit and Compliance Committee or its designee; and

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	5.	The service and fee are specifically disclosed in the Proxy Statement as meeting the de minimis requirements.

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1.	Annual Report on Form 10-K for the year ended December 31, 2005.
2.	Current Reports on Form 8-K filed on March 21, 2006; March 10, 2006; March 8, 2006; February 8, 2006; January 25, 2006; and January 4, 2006.
3.	The description of Umpqua common stock contained in the registration statement filed by Umpqua pursuant to Section 12 of the Exchange Act, and any amendment or reports filed for the purpose of updating that description.

1.	Annual Report on Form 10-K for the year ended December 31, 2005.
2.	Current Reports on Form 8-K filed on February 13, 2006; February 8, 2006; and February 3, 2006.
3.	The description of Western Sierra common stock set forth in the registration statement filed pursuant to Section 12 of the Exchange Act and any amendment or report filed for the purpose of updating that description.

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Umpqua Holdings Corporation		Western Sierra Bancorp
Michelle Bressman, Investor Relations		Patrick J. Rusnak, Executive Vice President
Umpqua Bank Plaza		and Chief Operations Officer
One SW Columbia Street, Suite 1200		4080 Plaza Goldorado Circle
Portland, OR 97258		Cameron Park, CA 95682
(503) 727-4109		(530) 698-2286
michellebressman@umpquabank.com		prusnak@wsnb.com

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1. Definitions				A-2
2. Mergers				A-5
	2.1 Transactions Pursuant to the Holding Company Plan of Merger			A-5
	2.2 Transactions Pursuant to the Bank Plans of Merger			A-6
	2.3 Exchange Procedures			A-6
	2.4 Dissenters’ Shares			A-7
	2.5 Anti-Dilution Provision			A-8
	2.6 Reservation of Right to Revise Transaction			A-8
3. Directors				A-8
	3.1 Election of Director			A-8
	3.2 California Divisional Boards			A-8
4. Representations and Warranties of WSB				A-8
	4.1 Organization, Existence, and Authority			A-8
	4.2 Authorized and Outstanding Stock, Options, and Other Rights			A-9
	4.3 Public Reports; Sarbanes-Oxley Compliance			A-9
	4.4 Articles of Incorporation, Bylaws, Minutes			A-10
	4.5 No Holding Company, Joint Venture, or Other Subsidiaries			A-10
	4.6 Shareholder Reports			A-11
	4.7 Books and Records			A-11
	4.8 Legal Proceedings			A-11
	4.9 Compliance with Laws and Regulations			A-11
	4.10 Commitments			A-12
	4.11 Hazardous Materials			A-12
	4.12 Contingent and Other Liabilities			A-13
	4.13 No Material Adverse Effects			A-13
	4.14 Regulatory Approvals Required			A-13
	4.15 Corporate and Shareholder Approval of Agreement, Binding Obligations			A-14
	4.16 No Defaults from Transaction			A-14
	4.17 Tax Returns			A-14
	4.18 Real Property, Leased Personal Property			A-15
	4.19 Insurance			A-15
	4.20 Intellectual Property			A-15
	4.21 Contracts and Agreements			A-16
	4.22 Employee Benefits			A-16
	4.23 Employment Disputes			A-18
	4.24 Reserve for Loan Losses			A-18
	4.25 Repurchase Agreement			A-18
	4.26 Shareholder List			A-18
	4.27 Interests of Directors and Others			A-18
	4.28 WSB Disclosure Schedule to this Agreement			A-18
	4.29 Brokers and Finders			A-19

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	4.30 Bank Secrecy Act; Patriot Act; Transactions with Affiliates			A-19
5. Representations and Warranties of Umpqua				A-19
	5.1 Organization, Existence, and Authority			A-19
	5.2 Authorized and Outstanding Stock, Options, and Other Rights			A-19
	5.3 Public Reports; Sarbanes-Oxley Compliance			A-20
	5.4 Articles of Incorporation, Bylaws, Minutes			A-21
	5.5 Shareholder Reports			A-21
	5.6 Books and Records			A-21
	5.7 Legal Proceedings			A-21
	5.8 Compliance with Laws and Regulations			A-22
	5.9 Hazardous Materials			A-23
	5.10 Contingent and Other Liabilities			A-23
	5.11 No Material Adverse Effects			A-23
	5.12 Regulatory Approvals Required			A-23
	5.13 Corporate and Shareholder Approval of Agreement, Binding Obligations			A-24
	5.14 No Defaults from Transaction			A-24
	5.15 Tax Returns			A-24
	5.16 Insurance			A-25
	5.17 Contracts and Agreements			A-25
	5.18 Reserve for Loan Losses			A-25
	5.19 Repurchase Agreement			A-25
	5.20 Interests of Directors and Others			A-25
	5.21 Umpqua Disclosure Schedule to this Agreement			A-26
	5.22 Bank Secrecy Act; Patriot Act; Transactions with Affiliates			A-26
6. Covenants of WSB				A-26
	6.1 Certain Actions			A-26
	6.2 No Solicitation			A-28
	6.3 Filing Reports and Returns, Payment of Taxes			A-28
	6.4 Preservation of Business			A-28
	6.5 Commercially Reasonable Efforts			A-29
	6.6 Updating the WSB Disclosure Schedule			A-29
	6.7 Rights of Access			A-30
	6.8 Proxy Statement			A-30
	6.9 Availability of Reports			A-30
	6.10 Shareholder Meeting			A-30
	6.11 Title Reports			A-31
	6.12 Loan Loss Reserve			A-31
	6.13 Agreements and Plans			A-31
	6.14 Other Actions			A-31
7. Covenants of Umpqua				A-31
	7.1 Certain Actions			A-31
	7.2 Filing Reports and Returns, Payment of Taxes			A-31
	7.3 Preservation of Business			A-32
	7.4 Commercially Reasonable Efforts			A-32
	7.5 Updating the Umpqua Disclosure Schedule			A-32

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	7.6 Rights of Access			A-33
	7.7 Proxy Statement			A-33
	7.8 Shareholder Meeting			A-33
	7.9 Listing of Securities			A-33
	7.10 Other Actions			A-33
	7.11 Appointment of Directors			A-34
	7.12 Employee Matters			A-34
	7.13 Indemnification of Directors and Officers; D&O Insurance			A-35
	7.14 Section 16 Matters			A-36
8. Conditions to Obligations of Umpqua				A-36
	8.1 Shareholder Approvals			A-36
	8.2 No Litigation			A-36
	8.3 No Banking Moratorium			A-36
	8.4 Regulatory Approvals			A-36
	8.5 Compliance with Securities Laws			A-37
	8.6 Other Consents			A-37
	8.7 Corporate Documents			A-37
	8.8 Continuing Accuracy of Representations and Warranties			A-37
	8.9 Compliance with Covenants and Conditions			A-37
	8.10 No Material Adverse Effects			A-37
	8.11 Certificate			A-37
	8.12 Tax Opinion			A-37
	8.13 Employee Agreements			A-38
	8.14 Director Agreements			A-38
9. Conditions to Obligations of WSB				A-38
	9.1 Shareholder Approvals			A-38
	9.2 No Litigation			A-38
	9.3 No Banking Moratorium			A-38
	9.4 Regulatory Approvals			A-38
	9.5 Other Consents			A-38
	9.6 Corporate Documents			A-38
	9.7 Continuing Accuracy of Representations and Warranties			A-38
	9.8 Compliance with Covenants and Conditions			A-39
	9.9 No Adverse Changes			A-39
	9.10 Tax Opinion			A-39
	9.11 Certificate			A-39
10. Closing				A-39
11. Termination				A-39
	11.1 Procedure for Termination			A-39
	11.2 Effect of Termination			A-41
	11.3 Documents from WSB			A-42
	11.4 Documents from Umpqua			A-42
12. Miscellaneous Provisions				A-42
	12.1 Amendment or Modification			A-42
	12.2 Public Statements			A-42

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	12.3 Confidentiality			A-42
	12.4 Waivers and Extensions			A-42
	12.5 Expenses			A-42
	12.6 Financial Advisors			A-42
	12.7 Binding Effect, No Assignment			A-42
	12.8 Representations and Warranties			A-42
	12.9 Remedies			A-42
	12.10 No Benefit to Third Parties			A-42
	12.11 Notices			A-43
	12.12 Governing Law			A-43
	12.13 Entire Agreement			A-43
	12.14 Headings			A-43
	12.15 Counterparts			A-43
	12.16 Restrictions On Transfer			A-44
	12.17 Material Change			A-44
	12.18 Survival			A-44
Exhibit A — Holding Company Plan of Merger
Exhibit B — Bank Plan of Merger
Exhibit C — Voting, Non-Competition and Non-Solicitation Agreement
Exhibit D — Rule 145 Affiliate Letter

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A-1

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Table of Contents

	(a) “Agreement” has the meaning set forth in the Preamble.
	(b) “Alternative Acquisition Transaction” means any event or series of events pursuant to which a party or its board of directors enters into an agreement or recommends to its shareholders any agreement (other than this Agreement) pursuant to which any Person would (i) merge or consolidate with such party, with the result that the shareholders of such party hold less than 50% of the stock of the surviving entity, (ii) acquire 50% or more of the assets or liabilities of such party or any of its subsidiaries, or (iii) purchase or otherwise acquire (including by merger, consolidation, share exchange or any similar transaction) stock or other securities representing or convertible into 50% or more of the stock of such party or any one or more of its subsidiaries.
	(c) “Bank Mergers” means the mergers of each of the WSB Banks with and into Umpqua Bank in accordance with the Bank Plans of Merger.
	(d) “Bank Plans of Merger” means each of the Plans of Merger to be executed by Umpqua Bank and each of the WSB Banks and delivered to the Oregon Director and the California Commissioner for filing substantially in the form attached hereto as Exhibit B.
	(e) “Benefits Integration” has the meaning set forth in Section 7.12.
	(f) “Broker Dealer Reports” means such reports filed by Strand, Atkinson, Williams & York, Inc. with the SEC or with the NASD.
	(g) “California Commissioner” means the Commissioner of the California Department of Financial Institutions.
	(h) “Call Reports” means the final reports filed by such bank with the FDIC or the OCC, as the case may be.
	(i) “CGCL” means the California General Corporation Law.
	(j) “COBRA” has the meaning set forth in Section 4.22(e).
	(k) “Code” means the Internal Revenue Code of 1986, as amended.
	(l) “Confidentiality Agreement” means the confidentiality agreement, dated as of November 15, 2005, by and between Umpqua and WSB.
	(m) “Converted Option” has the meaning set forth in Section 2.1.6.
	(n) “Core Deposits” means all non-brokered deposits and all time deposits under $100,000 of each of the WSB Banks.
	(o) “Dissenters’ Shares” has the meaning set forth in Section 2.1.4.
	(p) “Dissenting Shareholder” means any holder of Dissenters’ Shares.
	(q) “Effective Date” is the date on which the Articles of Merger for the Holding Company Merger are filed with the Oregon Secretary of State.
	(r) “Effective Time” is the time set forth in the Holding Company Plan of Merger at which the Holding Company Merger is effective.
	(s) “Employee Benefit Plans” means all benefit and compensation plans, contracts, policies or arrangements covering current or former employees of WSB or any of the WSB Banks and current or former directors of WSB or any of the WSB Banks including, but not limited to, “employee benefit

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	plans” as defined by Section 3(3) of ERISA, and deferred compensation, severance, stock option, stock purchase, stock appreciation rights, stock based, incentive and bonus plans.
	(t) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
	(u) “ERISA Affiliate” has the meaning set forth in Section 4.22.
	(v) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and, to the extent the context requires, the rules promulgated thereunder.
	(w) “Exchange Agent” has the meaning set forth in Section 2.3.1.
	(x) “Exchange Ratio” means 1.61, subject to adjustment in accordance with Section 2.5 and Section 11(e).
	(y) “FDIC” means the Federal Deposit Insurance Corporation.
	(z) “FHA” means the Federal Housing Administration.
	(aa) “FHLMC” means the Federal Home Loan Mortgage Corporation.
	(bb) “FNMA” means the Federal National Mortgage Association.
	(cc) “FRB” means the Board of Governors of the Federal Reserve System.
	(dd) “GAAP” has the meaning set forth in Section 4.3.
	(ee) “GNMA” means the Government National Mortgage Association.
	(ff) “Hazardous Material” has the meaning set forth in Section 4.11.
	(gg) “Holding Company Merger” means the merger of WSB with and into Umpqua at the Effective Time in accordance with the Holding Company Plan of Merger.
	(hh) “Holding Company Plan of Merger” means the Plan of Merger to be executed by Umpqua and WSB and delivered together with Articles of Merger to the Oregon Secretary of State and California Secretary of State for filing on the Effective Date substantially in the form attached hereto as Exhibit A.
	(ii) “Knowledge” means, as to a party, the actual knowledge of an Officer of such party, and does not include information of which they may be deemed to have constructive knowledge only.
	(jj) “Material Adverse Effect” has the meaning set forth in Section 12.17.
	(kk) “Material Contracts” has the meaning set forth in Section 4.21.
	(ll) “Mergers” means the Holding Company Merger and the Bank Mergers.
	(mm) “Minimum Adjustment Price” has the meaning set forth in Section 11.1
	(nn) “NASD” means the National Association of Securities Dealers, Inc.
	(oo) “New Certificate” has the meaning set forth in Section 2.3.3.
	(pp) “OCC” means the Office of the Comptroller of the Currency.
	(qq) “Officer” means the individuals listed on Schedule 8.13.
	(rr) “Old Certificate” has the meaning set forth in Section 2.3.2.
	(ss) “Order” has the meaning set forth in Section 8.2.
	(tt) “Oregon Bank Act” means Chapters 706 through 716 of the Oregon Revised Statutes.
	(uu) “Oregon Director” means the Director of the Oregon Department of Consumer and Business Services acting by and through the Administration of the Division of Finance and Corporate Securities.

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	(vv) “PBGC” means the Pension Benefit Guaranty Corporation.
	(ww) “Pension Benefit Plan” has the meaning set forth in Section 4.22(c).
	(xx) “Permitted Liens” has the meaning set forth in Section 4.18.
	(yy) “Person” means any natural person or any other entity, person, or group. For purposes of this definition, the meaning of the term “group” shall be determined in accordance with Section 13(d)(3) of the Exchange Act.
	(zz) “Plans of Merger” means the Bank Plans of Merger and the Holding Company Plan of Merger.
	(aaa) “Proxy Statement” has the meaning set forth in Section 6.8.
	(bbb) “SAWY” means Strand, Atkinson, William & York, Inc., an Oregon corporation.
	(ccc) “SBA” means the Small Business Administration of the Department of Commerce.
	(ddd) “SEC” means the Securities and Exchange Commission.
	(eee) “Securities Act” means the Securities Act of 1933, as amended, and to the extent the context requires, the rules promulgated thereunder.
	(fff) “S-4 Registration Statement” has the meaning set forth in Section 6.8.
	(ggg) “Umpqua” has the meaning set forth in the Preamble.
	(hhh) “Umpqua Bank” has the meaning set forth in the Preamble.
	(iii) “Umpqua Common Stock” means shares of common stock, no par value, of Umpqua.
	(jjj) “Umpqua Disclosure Schedule” has the meaning set forth in Section 5.
	(kkk) “Umpqua Initial Price” has the meaning set forth in Section 11.1.
	(lll) “Umpqua Measuring Period” has the meaning set forth in Section 11.1.
	(mmm) “Umpqua Measuring Price” has the meaning set forth in Section 11.1.
	(nnn) “Umpqua Property” has the meaning set forth in Section 5.9.
	(ooo) “Umpqua Public Reports” means the reports and other information required to be filed by Umpqua with the SEC pursuant to the Exchange Act, together with the reports to shareholders required to be delivered by Umpqua to its shareholders pursuant to Exchange Act Rule 14a-3, in each case from and after January 1, 2004.
	(ppp) “Umpqua Subsidiary” means, with respect to Umpqua and Umpqua Bank, any entity in which Umpqua or Umpqua Bank owns, directly or indirectly, more than 50% of the voting securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions, other than in such party’s capacity as a fiduciary or a secured party.
	(qqq) “VA” means the Veterans Administration.
	(rrr) “Welfare Benefit Plan” has the meaning set forth in Section 4.22(a).
	(sss) “WSB” has the meaning set forth in the Preamble.
	(ttt) “WSB Banks” has the meaning set forth in the Preamble.
	(uuu) “WSB Common Stock” means the shares of common stock, without par value, of WSB.
	(vvv) “WSB Disclosure Schedule” has the meaning set forth in Section 4.
	(www) “WSB Option” has the meaning set forth in Section 2.1.6.

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	(xxx) “WSB Property” has the meaning set forth in Section 4.11.
	(yyy) “WSB Public Reports” means the reports and other information required to be filed by WSB with the SEC pursuant to the Exchange Act, together with the reports to shareholders required to be delivered by WSB to its shareholders pursuant to Exchange Act Rule 14a-3, in each case from and after June 30, 2004.
	(zzz) “WSB Stock Plans” has the meaning set forth in Section 2.1.6.
	(aaaa) “WSB Subsidiary” means, with respect to WSB, any entity in which WSB owns, directly or indirectly, more than 50% of the voting securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions, other than in such party’s capacity as a fiduciary or a secured party.
	(bbbb) “WSB Trust Subsidiaries” means Western Sierra Statutory Trust I, Western Sierra Statutory Trust II, Western Sierra Statutory Trust III and Western Sierra Statutory Trust IV.

	2.1.1 WSB shall be merged with and into Umpqua under Oregon law on the terms and conditions set forth in the Holding Company Plan of Merger. The Holding Company Plan of Merger and the Holding Company Articles of Merger shall be filed with the Secretary of State of the State of Oregon to effect the Holding Company Merger and the Secretary of State of the State of California as required under California law.
	2.1.2 Umpqua shall be the surviving corporation in the Holding Company Merger. The articles of incorporation and bylaws of Umpqua shall be the articles of incorporation and bylaws of the surviving corporation.
	2.1.3 As of the Effective Time, each share of Umpqua capital stock outstanding immediately prior to the Holding Company Merger shall remain outstanding and shall be deemed to be one share of the capital stock of the surviving corporation.
	2.1.4 All shares of WSB Common Stock that are “dissenting shares” within the meaning of CGCL § 1300 (“Dissenters’ Shares”) shall not be converted into or represent a right to receive Umpqua Common Stock unless and until such shares have lost their status as dissenting shares under CGCL § 1300, at which time such shares shall be converted into Umpqua Common Stock pursuant to Section 2.1.5.
	2.1.5 As of the Effective Time, each outstanding share of WSB Common Stock (other than Dissenters’ Shares) shall be converted into the right to receive the number of shares of Umpqua Common Stock equal to the Exchange Ratio and the right to receive cash in lieu of any resulting fractional shares and any dividend or distribution pursuant to Section 2.3.3. Notwithstanding any other provision of this Agreement, no fractional shares of Umpqua Common Stock will be issued and any holder of shares of WSB Common Stock entitled to receive a fractional share of Umpqua Common Stock but for this sentence shall be entitled to receive a cash payment in lieu thereof, which payment shall be calculated by the Exchange Agent and shall represent such holder’s proportionate interest in a share of Umpqua Common Stock based on the average of the per share closing prices of Umpqua Common Stock as quoted on the NASDAQ Stock Market (as reported in The Wall Street Journal or another authoritative source) for ten full trading days ending on the second trading day prior to the date of the Effective Time.
	2.1.6 (a) As of the Effective Time, by virtue of the Holding Company Merger and without any action on the part of any holder of any such option, each outstanding option to acquire WSB Common Stock (each a “WSB Option”) shall be automatically converted into an option to purchase Umpqua Common Stock (each, a “Converted Option”) as follows: (i) the number of shares of

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	Umpqua Common Stock issuable upon exercise of the Converted Option shall be equal to the product of (A) the number of shares of WSB Common Stock issuable upon exercise of the WSB Option, and (B) the Exchange Ratio; and (ii) the exercise price per share of Umpqua Common Stock shall be equal to the quotient of (A) the exercise price of the WSB Option, divided by (B) the Exchange Ratio. Other than with respect to any WSB Options contractually required to become fully vested upon a change of control of WSB, all other terms and conditions of the Converted Options shall remain the same as the terms and conditions of the WSB Options. With respect to any WSB Option that is an incentive stock option within the meaning of Section 422 of the Code, the foregoing adjustments shall be effected in a manner consistent with Section 424(a) of the Code.
	(b) Umpqua shall, as of the Effective Time, assume the obligations of WSB under all plans and agreements pursuant to which a WSB Option has been issued (the “WSB Stock Plans”) and shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Umpqua Common Stock for delivery upon exercise of the Converted Options. Umpqua shall cause the registration of the shares of Umpqua Common Stock subject to the Converted Options to become effective as part of a registration statement on Form S-8, or any successor or other appropriate forms, with respect to the shares of Umpqua Common Stock subject to the Converted Options promptly after the Effective Time; and, thereafter, Umpqua shall deliver to holders of Converted Options any applicable prospectus and shall maintain the effectiveness of such registration statement or registration statements, including the current status of any related prospectus, for so long as the Converted Options remain outstanding.

	2.2.1     Each of the WSB Banks will be merged with and into Umpqua Bank in accordance with the provisions of the Oregon Bank Act. The Bank Plans of Merger shall be filed with the Oregon Director for purposes of obtaining a Certificate of Merger.
	2.2.2     As of the date set forth in the Certificate of Merger, each of the WSB Banks will merge with Umpqua Bank, with Umpqua Bank being the resulting bank and having its head office in Roseburg, Oregon.
	2.2.3     Umpqua Bank’s Articles of Incorporation and Umpqua Bank’s Bylaws and the banking charter of Umpqua Bank in effect immediately before the date set forth on the Certificate of Merger shall be the articles of incorporation, bylaws and banking charter of the resulting bank.

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4.1     Organization, Existence, and Authority. WSB is a corporation duly organized and validly existing under the laws of the State of California and has all requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business in the manner now being conducted. Each of LCB, ACB and CCB is a state chartered bank, duly organized, validly existing, and in good standing under the laws of the State of California and has all requisite corporate power and authority to own, lease, and operate its properties and assets and carry on its business in the manner now being conducted. WSNB is a national banking association, duly organized, validly existing, and in good standing under the federal laws of the United States of America and has all requisite corporate power and authority to own, lease, and operate its properties and assets and carry on its business in the manner now being conducted. Each of WSB and the WSB Banks is qualified to do business and is in good standing in every jurisdiction in which such qualification is required except where the failure to so qualify or be in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to WSB. Western Sierra Statutory Trust I and Western Sierra Statutory Trust II are statutory trusts organized and validly existing under Connecticut law. Western Sierra Statutory Trust III and Western Sierra Statutory Trust IV are statutory trusts organized and validly existing under Delaware law. The WSB Trust Subsidiaries’ activities do not require them to be qualified to do business in any jurisdiction

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	other than Connecticut with respect to Western Sierra Statutory Trust I and Western Sierra Statutory Trust II, and Delaware with respect to Western Sierra Statutory Trust III and Western Sierra Statutory Trust IV. Sentinel Associates, Inc. is a corporation duly organized and validly existing under the laws of the State of California and has all requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business in the manner now being conducted. Sentinel Associates, Inc.’s activities do not require it to be qualified to do business in any jurisdiction other than California.
	4.2     Authorized and Outstanding Stock, Options, and Other Rights. The authorized capital stock of WSB consists of (i) 10,000,000 shares of preferred stock, without par value, of which no preferred shares are issued or outstanding, and (ii) 10,000,000 shares of common stock, without par value, of which 7,803,590 shares are outstanding as of the close of business on February 6, 2006, all of which are validly issued, fully paid and nonassessable. All outstanding shares of capital stock of the WSB Banks are validly issued, fully paid and nonassessable (other than directors’ qualifying shares) and held by WSB. Other than 565,420 shares of WSB Common Stock issuable upon exercise of WSB Options under WSB Stock Plans, and as disclosed in Section 4.2 of the WSB Disclosure Schedule, no subscriptions, options, warrants, convertible securities or other rights or commitments which would enable the holder to acquire any shares of capital stock or other investment securities of WSB or the WSB Banks, or which enable or require WSB or the WSB Banks to acquire shares of its capital stock or of investments issued by WSB or the WSB Banks from any holder, are authorized, issued or outstanding.
	4.3     Public Reports; Sarbanes-Oxley Compliance.
	(a) Since June 30, 2004, WSB has timely filed with the SEC all WSB Public Reports required to be so filed, and each of ACB, CCB and LCB have timely filed with the FDIC and the California Commissioner all Call Reports required to be so filed and, until the Effective Date, each of ACB, CCB and LCB will continue to file such reports and furnish copies thereof to Umpqua reasonably promptly thereafter. Since June 30, 2004, WSNB has timely filed with the OCC all Call Reports required to be so filed and, until the Effective Date, will continue to file such reports and furnish copies thereof to Umpqua reasonably promptly thereafter.
	(b) The financial statements included in the WSB Public Reports have been and will be prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), consistently applied, and fairly presents the financial position and results of operation of WSB and the WSB Banks on the dates and for the periods covered thereby.
	(c) As of their respective dates, all WSB Public Reports and all WSB Banks’ Call Reports complied in all material respects with all requirements applicable to such filing. As of their respective dates, the WSB Public Reports and all WSB Banks’ Call Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.
	(d) Section 4.3 of the WSB Disclosure Schedule lists, and WSB has delivered to Umpqua copies of the documentation creating or governing, all securitization transactions and “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC) effected by WSB or any WSB Subsidiary since June 30, 2004 through the date hereof.
	(e) Perry-Smith LLP is, and has been throughout the periods covered by the WSB Public Reports, (a) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002), (b) “independent” with respect to WSB within the meaning of Regulation S-X of the SEC, and (c) in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and the related rules of the SEC and the Public Company Accounting Oversight Board. Section 4.3 of the WSB Disclosure Schedule lists all non-audit services performed by Perry-Smith LLP for WSB and the WSB Subsidiaries since June 30, 2004 through the date hereof.

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	(f) WSB and the WSB Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate actions are taken with respect to any differences. WSB has implemented “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). WSB’s “disclosure controls and procedures” are reasonably designed to ensure that all information required to be disclosed by WSB in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and regulations of the SEC, and that such information is accumulated and communicated to WSB’s management as appropriate to allow timely decisions regarding required disclosure.
	(g) Each WSB Public Report that was required to be accompanied by the certifications contemplated by Item 601 of Regulation S-K was so accompanied, and at the time of filing or submission of each such certification, such certification complied with such item and was accurate in all material respects as of the date of such certificate.
	(h) The audit committee of the WSB Board of Directors has established procedures for the receipt, retention and treatment of complaints regarding the accounting, internal accounting controls and auditing matters and the confidential, anonymous submission by employees of WSB of concerns regarding questionable accounting or auditing practices. No attorney representing WSB or any WSB Subsidiary, whether or not employed by WSB or any WSB Subsidiary, has reported “evidence of a material violation” (within the meaning of Part 205 of the Standards of Professional Conduct for Attorneys Appearing and Practicing Before the Commission in the Representation of an Issuer) by WSB or any of its officers, directors, employees or agents to the WSB Board of Directors or any committee thereof, to WSB’s chief legal officer, or to WSB’s chief legal officer and chief executive officer. Section 4.3 of the WSB Disclosure Schedule lists all investigations conducted prior to the date hereof regarding any reported “evidence of a material violation” by WSB or any of its officers, directors, employees or agents and all WSB audit committee investigations conducted prior to the date hereof of complaints by WSB employees regarding accounting, internal accounting controls, or auditing matters.
	(i) WSB is in compliance in all material respects with all current listing and corporate governance requirements of the NASDAQ National Market, and is in compliance in all material respects with the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC.
	4.4     Articles of Incorporation, Bylaws, Minutes. The copies of WSB’s Articles of Incorporation, WSB’s Bylaws, the WSB Banks’ respective Articles of Incorporation or Articles of Association and the WSB Banks’ respective Bylaws delivered to Umpqua are true and correct copies of such documents, each as amended and restated as of the date hereof. WSB is not in violation of any provision of WSB’s Articles of Incorporation or WSB’s Bylaws. None of the WSB Banks are in violation of any provision of their respective Articles of Incorporation, Articles of Association or Bylaws. WSB has delivered to Umpqua copies of the minute books of WSB and the WSB Banks from January 1, 2004 through the date hereof. The minute books of WSB and the WSB Banks, including those that will be made available to Umpqua for its review, contain minutes of all meetings and all consents evidencing actions taken without a meeting by its Board of Directors (and any committees thereof) and by its shareholders and such minutes and consents are accurate in all material respects.
	4.5     No Holding Company, Joint Venture, or Other Subsidiaries. Other than as to WSB with respect to the WSB Banks, no corporation or other entity is registered or, to the Knowledge of WSB or the WSB Banks, is required to be registered as a bank holding company under the Bank Holding Company Act of 1956, as amended, because of ownership or control of WSB or the WSB Banks.

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	Except for WSB with respect to the WSB Banks and WSB Trust Subsidiaries, neither WSB nor the WSB Banks, directly or indirectly, beneficially owns (within the meaning of Section 13 of the Exchange Act and the rules and regulations of the SEC thereunder) any shares of capital stock of any other corporation or entity, other than shares held in a fiduciary or custodial capacity in the ordinary course of business, and shares representing less than five percent of the outstanding shares of such corporation acquired in partial or full satisfaction of debts previously contracted. None of WSB, ACB, CCB, LCB or WSNB is a part of or has any ownership interest in any joint venture, limited liability company, or general or limited partnership, or a member of any unincorporated association.
	4.6     Shareholder Reports. WSB has delivered to Umpqua copies of all of WSB’s and the WSB Banks’ reports and other written communications to shareholders since January 1, 2005, including all proxy statements and notices of shareholder meetings, to the extent such reports and communications have not been filed with any or do not consist of WSB Public Reports. Until the Effective Date, WSB will deliver to Umpqua copies of all future written communications reasonably promptly after WSB first sends such materials to its shareholders.
	4.7     Books and Records. The books and records of WSB and the WSB Banks accurately reflect in all material respects the transactions and obligations to which it is a party or by which it or its properties are bound or subject. Such books and records comply in all material respects with applicable legal, regulatory and accounting requirements.
	4.8     Legal Proceedings. Section 4.8 of the WSB Disclosure Schedule lists, as of the date hereof, all actions, suits, proceedings, claims or governmental investigations pending or, to the Knowledge of WSB, threatened against or affecting WSB or any WSB Subsidiary before any court, administrative officer or agency, other governmental body, or arbitrator that, if determined adversely to WSB or any WSB Subsidiary, would reasonably be likely to result individually in an adverse award in excess of $100,000. Except for regulatory examinations conducted in the normal course of regulation of WSB and the WSB Banks, there are no actions, suits, proceedings, claims or governmental investigations pending or, to the Knowledge of WSB, threatened against or affecting WSB or any WSB Subsidiary before any court, administrative officer or agency, other governmental body, or arbitrator that, if determined adversely to WSB or any WSB Subsidiary, would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to WSB or to materially hinder or delay the consummation of the transactions contemplated by this Agreement.
	4.9     Compliance with Laws and Regulations. Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to WSB:

	(a) The conduct by each of WSB and the WSB Banks of its respective business and the operation of the properties or other assets owned or leased by it does not violate or infringe any domestic laws, statutes, ordinances, rules or regulations or, to the Knowledge of WSB, any foreign laws, statutes, ordinances, rules or regulations including, but without limitation, every local, state or federal law or ordinance, and any regulation or order issued thereunder, now in effect and applicable to it governing or pertaining to fair housing, anti-redlining, equal credit opportunity, truth-in-lending, real estate settlement procedures, fair credit reporting and every other prohibition against unlawful discrimination in residential lending, or governing consumer credit, including, but not limited to, the Community Reinvestment Act, the Consumer Credit Protection Act, Truth-in-Lending Act, Regulation Z promulgated by the FRB, and the Real Estate Settlement Procedures Act of 1974.
	(b) All loans, leases, contracts and accounts receivable (billed and unbilled), security agreements, guarantees and recourse agreements, of WSB or any of the WSB Banks, as held in their respective portfolios or as sold with recourse into the secondary market since January 1, 2003, represent and are valid and binding obligations of their respective parties and debtors, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating

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	to or affecting creditors’ rights and to general equity principles. Each of them has been executed and delivered in compliance, in form and substance, with any and all federal, state or local laws applicable to WSB or any of the WSB Banks, or to the other party or parties to the contract(s) or commitment(s), including without limitation the Truth-in-Lending Act, Regulations Z and U of the FRB, laws and regulations providing for nondiscriminatory practices in the granting of loans or credit, applicable usury laws, and laws imposing lending limits; and all such contracts or commitments have been administered in compliance with all applicable federal, state or local laws or regulations.
	(c) All Uniform Commercial Code filings, or filings of trust deeds or mortgages, or of liens or other security interest documentation that are required by any applicable federal, state or local governmental laws and regulations to perfect the security interests referred to in any and all of such documents or other security agreements have been made, and all security interests under such deeds, documents or security agreements have been perfected, and all contracts related to such filings and documents have been entered into or assumed in full compliance with all applicable material legal or regulatory requirements.
	(d) All loan files of each of the WSB Banks are complete and accurate in all material respects and have been maintained in accordance with good banking practice.
	(e) All notices of default, foreclosure proceedings or repossession proceedings against any real or personal property collateral have been issued, initiated and conducted by the WSB Banks in material formal and substantive compliance with all applicable federal, state or local laws and regulations, and no loss or impairment of any material security interest, or exposure to meritorious lawsuits or other proceedings against WSB or any of the WSB Banks with respect to any such material security interest, has been or will be suffered or incurred by WSB or any of the WSB Banks.
	(f) Neither WSB nor any of the WSB Banks is in material violation of any applicable services or any other requirements of the FHA, VA, FNMA, GNMA, FHLMC, SBA or any private mortgage insurer which insured or guaranteed any loans owned by WSB or WSB Banks or as to which either has sold to other investors, and with respect to such loans none of WSB or WSB Banks has done or failed to do, or caused to be done or omitted to be done, any act the effect of which act or omission impairs or invalidates (i) any FHA insurance or commitments of the FHA to insure, (ii) any VA guarantee or commitment of the VA to guarantee, (iii) any SBA guarantees or commitments of the SBA to guarantee, (iv) any private mortgage insurance or commitment of any private mortgage insurer to insure, (v) any title insurance policy, (vi) any hazard insurance policy, or (vii) any flood insurance policy required by the National Flood Insurance Act of 1968, as amended.
	(g) Neither WSB nor any of the WSB Banks has knowingly engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any margin stock.

	4.10     Commitments. Section 4.10 of the WSB Disclosure Schedule sets forth a list of each outstanding commitment, including outstanding letters of credit, repurchase agreements and unfunded agreements to lend of each of the WSB Banks, as of February 3, 2006, in an amount of $250,000.00 or more.
	4.11     Hazardous Materials. To the Knowledge of WSB, and except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to WSB, neither WSB nor any of the WSB Banks, nor any other person having an interest in any property which WSB or any of the WSB Banks owns or leases, or has owned or leased, or in which either holds any security interest, mortgage, or other liens or interest including but not limited to as beneficiary of a deed of trust (“WSB Property”), has engaged in the generation, use, manufacture, treatment, transportation, storage (in tanks or otherwise), or disposal of Hazardous Material on or

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	from such WSB Property. To the Knowledge of WSB, and except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to WSB, there has been no: (i) presence, use, generation, handling, treatment, storage, release, threatened release, migration or disposal of Hazardous Material on an WSB Property; (ii) condition that could result in any use, ownership or transfer restriction; or (iii) condition of nuisance on or from such WSB Property. During the past six years, neither WSB nor any of the WSB Banks has received any written notice of a condition that could reasonably be expected to give rise to any private or governmental suit, claim, action, proceeding or investigation against WSB, any of the WSB Banks, any such other person or such WSB Property as a result of any of the foregoing events or has Knowledge of any condition that could reasonably be expected to give rise to any such material private or governmental suit, claim, action, proceeding or investigation. “Hazardous Material” means any substance that is (A) listed, classified or regulated pursuant to any Environmental Law; (B) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive material or radon; and (C) any other substance which may be the subject of regulatory action by any government entity in connection with any Environmental Law. “Environmental Law” means any federal, state, local or foreign statute, law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) the protection, investigation or restoration of the environment, health, safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Material or (C) noise, odor, indoor air, employee exposure, wetlands, pollution, contamination or any injury or threat of injury to persons or property relating to any Hazardous Material.
	4.12     Contingent and Other Liabilities. Section 4.12 of the WSB Disclosure Schedule is a list, to the Knowledge of WSB and as of the date hereof, of all contingent and other liabilities reasonably expected to be in excess of $100,000 which are not set forth or reflected in other sections of the WSB Disclosure Schedule, in the WSB Public Reports or in the WSB Banks’ Call Reports. Except as set forth in any financial statements (including the notes thereto) included in any WSB Public Reports, neither WSB nor any of the WSB Banks has any obligations or liabilities of any nature (whether accrued, absolute, contingent or otherwise) which would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to WSB.
	4.13     No Material Adverse Effects. Since September 30, 2005 through the date hereof, (a) there has been no event or occurrence that would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to WSB; (b) no cash, stock or other dividends, or other distributions with respect to capital stock, have been declared or paid by WSB or WSB Banks, nor has WSB or any of the WSB Banks purchased or redeemed any of its shares or shares of a Subsidiary or other affiliate; and (c) there has not been any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any asset material to WSB or any of the WSB Banks. Since September 30, 2005 through the date hereof, neither WSB nor any of the WSB Banks have sold any investment securities at a gain except as necessary to provide liquidity, consistent with past practices.
	4.14     Regulatory Approvals Required. The nature of the business and operations of WSB and each of the WSB Banks does not require any approval, authorization, consent, license, clearance or order of, any declaration or notification to, or any filing or registration with, any governmental or regulatory authority in order to permit any of them to perform their obligations under this Agreement, or to prevent the termination of any material right, privilege, license or agreement of WSB or any of the WSB Banks, or any material loss or disadvantage to their business, as a result of consummation of the Holding Company Merger or Bank Mergers, except for:

	(a) approval from, or waiver of jurisdiction by, the Oregon Director, FDIC and California Commissioner of the Bank Mergers;
	(b) approval from, or waiver of jurisdiction by, the FRB of the Holding Company Merger;

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	(c) filing of the Holding Company Plan of Merger and Articles of Merger with the Oregon Secretary of State and California Secretary of State; and
	(d) filing and effectiveness of a registration statement of which the Proxy Statement is a part, under the Securities Act.
	As of the date hereof, WSB has no Knowledge of any reason why the approvals set forth in this Section 4.14 and in Section 8.4 will not be received without the imposition of a condition, restriction or requirement of the type described in Section 8.4.

	4.15     Corporate and Shareholder Approval of Agreement, Binding Obligations. WSB and each of the WSB Banks each has all requisite corporate power to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement, and the transactions contemplated hereby, have been duly authorized by the Board of Directors of each of WSB and each of the WSB Banks. No other corporate action on the part of WSB or any of the WSB Banks other than shareholder approval is required to authorize this Agreement or the Holding Company Plan of Merger or Bank Plans of Merger or the consummation of the transactions contemplated thereby. This Agreement has been duly executed and delivered by WSB and each of the WSB Banks, and assuming the accuracy of Umpqua’s representations and warranties, constitutes the legal, valid and binding obligation of each of them enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
	4.16     No Defaults from Transaction. Subject to compliance with the matters referred to in Section 4.14 and Section 4.21 of the WSB Disclosure Schedule, neither the execution, delivery and performance of this Agreement and the Holding Company Plan of Merger or Bank Plans of Merger by WSB and each of the WSB Banks, as the case may be, nor the consummation of the transactions contemplated thereby will conflict with, result in any material breach or violation of, or result in any default or any acceleration of performance under, or will result in the declaration or imposition of any lien, charge or encumbrance upon any of the assets of WSB or any of the WSB Banks under, any of the terms, conditions or provisions of (a) WSB’s Articles of Incorporation, WSB’s Bylaws, each of the WSB Banks’ respective Articles of Incorporation or Articles of Association and each of the WSB Banks’ respective Bylaws, (b) any statute, regulation or existing order, writ, injunction or decree of any court or governmental agency, or (c) any contract, agreement or instrument to which any of WSB or the WSB Banks is a party or by which any of WSB or the WSB Banks is bound, except in the case of clauses (b) and (c) as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to WSB or to materially hinder or delay the consummation of the transactions contemplated by this Agreement.
	4.17     Tax Returns. WSB and each WSB Subsidiary have filed all material federal, state and other income, franchise or other tax returns, required to be filed by them; each such return is complete and accurate in all material respects; and all taxes and related interest and liabilities to be paid in connection therewith have been paid or adequate reserve has been established for the timely payment thereof. WSB and each of the WSB Banks have timely and accurately filed all material currency transaction reports required by the Bank Secrecy Act, as amended, and have timely and accurately filed all material required information returns and reports, including without limitation Forms 1099. WSB has not received notice of any federal, state or other income, franchise or other tax assessment or notice of a deficiency to date which has not been paid or for which adequate reserve has not been provided, and the Officers of WSB and each WSB Bank have no Knowledge of any pending or threatened (in writing) audit or investigation of WSB or any of the WSB Banks with respect to any tax liabilities. There are currently no agreements in effect with respect to WSB or any of the WSB Banks to extend the period of limitations for assessment or collection of any tax. WSB has delivered to Umpqua true and correct copies of WSB’s and any of the WSB Banks’

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	unconsolidated or uncombined federal and state income or franchise tax returns for the years 2003 and 2004.
	4.18     Real Property, Leased Personal Property. Section 4.18 of the WSB Disclosure Schedule includes a list of all real property owned or leased by WSB or any of the WSB Banks as present, former or future bank premises and all real property held as of the date hereof as other real estate owned. Except for disposition of other real estate owned in the ordinary course of business, WSB or the WSB Banks will own all of such real property, presently owned, on the Effective Date. All owned real property reflected in the WSB Public Reports or the WSB Banks’ Call Reports as of September 30, 2005 is included in that schedule. The leases pursuant to which WSB or any of the WSB Banks leases real property and material personal property, copies of which have also been delivered to Umpqua, are the legal, valid and binding obligation of WSB or the applicable WSB Bank, enforceable against such entity in accordance with its terms, and, to the Knowledge of WSB, are the legal, valid and binding obligation of the other party thereto, enforceable against such entity in accordance with its terms, in each case subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles valid, and neither WSB nor the applicable WSB Bank nor, to the Knowledge of WSB, the other party thereto is in material default, and no event has occurred that would, with the giving of notice, lapse of time or both, constitute a material default under such leases. No material waiver or indulgence has been granted by any landlord under any such leases. All real and material personal property owned by WSB or any of the WSB Banks is free of any adverse claims, except for (1) statutory liens not yet delinquent which are being contested in good faith by appropriate proceedings, and liens for taxes not yet due, for which WSB maintains reserves as required by GAAP consistently applied with the WSB Public Reports, (2) pledges of assets in the ordinary course of business to secure public deposits, (3) defects and irregularities of title and encumbrances that do not materially impair the use thereof for the purposes for which they are held, (4) mechanics’, materialmen’s, workmen’s, repairmen’s, warehousemen’s, carriers’ and other similar liens, for sums not yet delinquent or which are being contested in good faith by appropriate proceedings, arising in the ordinary course of business for which WSB maintains reserves as required by GAAP consistently applied with the WSB Public Reports and (5) adverse claims with respect to properties and assets the loss of which would not reasonably be expected to have, individually or in the aggregate, have a Material Adverse Effect with respect to WSB (“Permitted Liens”). All buildings and structures on the real property, the equipment located thereon, and the real and personal property leased by WSB or any of the WSB Banks, are in all material respects in good operating condition and repair (ordinary wear and tear excepted). WSB and the WSB Banks have good and marketable title to all of their owned real and personal property, subject to no mortgages, pledges, encumbrances, liens or charges of any kind, except for Permitted Liens.
	4.19     Insurance. For each of the past three years and continuing through the date hereof, WSB and each of the WSB Banks have insured their business and real and personal property against all risks of a character usually insured against, including but not limited to financial institution bond, directors and officers liability, property and casualty and commercial liability insurance, with customary amounts of coverage, deductibles and exclusions by reputable insurers authorized to transact insurance in the State of California and such other jurisdictions where they do business or own property. WSB and each of the WSB Banks are in material compliance with all existing insurance policies and have not failed to give timely notice of, or present properly, any material claim thereunder of which WSB has Knowledge. Section 4.19 of the WSB Disclosure Schedule includes a list of all insurance policies in force as of the date hereof with respect to WSB’s and each of the WSB Banks’ business and real and personal property.
	4.20     Intellectual Property. WSB and each of the WSB Banks own or have valid licenses to use all patents, trademarks, copyrights, software or trade names which they consider to be material to their business taken as a whole, and have not received written notice of infringement or violation of

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	any patent, trademark, copyright or trade name which would reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect with respect to WSB.
	4.21     Contracts and Agreements. Section 4.21 of the WSB Disclosure Schedule is a list of (i) all existing oral or written contracts, agreements or leases to which WSB or any of the WSB Banks is a party or to which any of their properties are subject that individually or together with all related existing oral or written contracts, agreements or leases that involve a commitment of WSB or any of the WSB Banks in excess of $100,000, except for any contracts or agreements entered into with its customers in the ordinary course of business, and (ii) all oral or written agreements, contracts or leases with current officers and directors and any persons who have been an officer or director within the past three years of WSB or any of the WSB Banks, other than documentation regarding deposits and documentation regarding loans that are fully performing in accordance with their terms, which terms are no more favorable than those available to unaffiliated parties made at or about the same time (collectively, “Material Contracts”).
	Neither WSB nor any of the WSB Banks is in material default or breach, and there has not occurred any event which with notice or lapse of time would constitute a material breach or default by any such entity, under any Material Contract, and to the Knowledge of WSB, no other party thereto is in material default thereof. No consent or approval by the other parties to any Material Contract is required by reason of this Agreement to maintain such oral or written contracts, agreements or leases in effect.
	4.22     Employee Benefits.
	(a) Each Employee Benefit Plan sponsored or maintained by WSB, or any entity which is considered one employer with WSB as determined under Section 414(b), (c), (m) or (o) of the Code (“ERISA Affiliate”), is disclosed in the WSB Disclosure Schedule. Neither WSB nor any ERISA Affiliate maintains nor sponsors any other pension, profit sharing, thrift, savings, bonus, retirement, vacation, life insurance, health insurance, severance, sickness, disability, medical or death benefit plans, whether or not subject to ERISA. There are no other compensation, employment, stock options, stock purchase agreements, life, health, accident or other insurance, bonus, deferred or incentive compensation, change-in-control, severance or separation, profit sharing, retirement, or other employee fringe benefit policies or arrangements of any kind that could result in the payment to any current or former employees, consultants or any of their beneficiaries of WSB or any of the WSB Banks of any money or other property. The only “employee welfare benefit plans” (as defined in Section 3(1) of ERISA) sponsored or maintained by WSB or any ERISA Affiliate, or to which WSB or any ERISA Affiliate contributes (“Welfare Benefit Plan”) or are required to contribute, are as set forth Section 4.22 of the WSB Disclosure Schedule.
	(b) There are no employment contracts entered into by WSB or any of the WSB Banks and no other deferred compensation contracts, agreements, arrangements or commitments maintained or agreed to by either of them that provides for or could result in the payment to any WSB, ACB, CCB, LCB, WSNB employee or former employee of any money or other property rights, in either case in an amount that would be material, or that would accelerate the vesting or payment of such amounts or rights to any employee as a result of the transactions contemplated herein. No such payment or acceleration set forth in Section 4.22 of the WSB Disclosure Schedule would constitute an “excess parachute payment” within the meaning of Code Section 280G.
	(c) Neither WSB nor any ERISA Affiliate has maintained a single-employer pension benefit plan that is subject to title 1, subtitle B, part 3 of ERISA within six years of the date hereof (each, a “Pension Benefit Plan”). With respect to any such Pension Benefit Plan, the amount of liability for any contribution paid or owing with respect to such Pension Benefit Plan for the last or current plan year and the plan year in which the Effective Date occurs will be provided as Section 4.22 of the WSB Disclosure Schedule within two business days. Under each Pension Benefit Plan, as of the last day of the most recent plan year ended prior to the date hereof, the actuarially determined present value of all “benefit liabilities”, within the meaning of Section 4001(a)(16) of ERISA (as

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	determined on the basis of the actuarial assumptions contained in such Pension Benefit Plan’s most recent actuarial valuation), did not exceed the then current value of the assets of such Pension Benefit Plan, and there has been no material change in the financial condition, whether or not as a result of a change in the funding method, of such Pension Benefit Plan since the last day of the most recent plan year.
	(d) WSB and, to the Knowledge of WSB, all persons having fiduciary or other responsibilities or duties with respect to any Employee Benefit Plan, are, and have since inception been, in substantial compliance in all material respects with, and each such Employee Benefit Plan is and has been operated substantially in accordance with its provisions and in compliance with the applicable laws, rules and regulations governing such Employee Benefit Plan, including, without limitation, the rules and regulations promulgated by the Department of Labor, the Pension Benefit Guaranty Corporation and the Internal Revenue Service under ERISA or the Code. Each Pension Benefit Plan and any related trust agreements or annuity contracts (or any other funding instruments) substantially comply both as to form and operation, with the provisions of ERISA and the Code (including Section 410(b) of the Code relating to coverage), where required in order to be tax-qualified under Section 401(a) or 403(a) or other applicable provisions of the Code, and all other applicable laws, rules and regulations; all material governmental approvals for the Employee Benefit Plans have been obtained; and a favorable determination or opinion as to the qualification under the Code of each Pension Benefit Plan described in Section 4.22 of the WSB Disclosure Schedule has been made or given by the Internal Revenue Service covering all tax law changes prior to the Economic Growth and Tax Relief Reconciliation Act of 2001 or such letter or opinion has been applied for within the applicable remedial amendment period under Section 401(b) of the Code. No Employee Benefit Plan or Pension Benefit Plan is a “multi-employer pension plan,” as such term is defined in Section 3(37) of ERISA. To the Knowledge of WSB, all contributions or other amounts payable by WSB or any of the WSB Banks as of the date hereof with respect to each Employee Benefit Plan in respect of current or prior plan years have been paid or accrued in accordance with generally accepted accounting principles and, to the extent applicable, Section 412 of the Code, and there are no pending or, to the Knowledge of WSB, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any Employee Benefit Plan, or any trusts related thereto which would, individually or in the aggregate, have or be reasonably expected to have a Material Adverse Effect with respect to WSB.
	(e) Each Welfare Benefit Plan and each Pension Benefit Plan has been administered to date in material compliance with the requirements of the claims procedure of the Code and ERISA. All reports required by any government agency and disclosures to participants with respect to each Welfare Benefit Plan and each Pension Benefit Plan have been timely made or filed. Each Employee Benefit Plan is in material compliance with the governing instruments and applicable federal or state law. In particular, but without limitation, each Welfare Benefit Plan is in material compliance with federal law, including without limitation the health care continuation requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”). No Employee Benefit Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees of WSB or any ERISA Affiliate beyond their retirement or other termination of service, other than (i) coverage mandated by applicable law, (ii) death benefits or retirement benefits under any “employee pension plan,” as that term is defined in Section 3(2) of ERISA, (iii) any deferred compensation benefits fully accrued as liabilities on the books of WSB or any ERISA Affiliate or (iv) benefits the full cost of which is borne by the current or former employee (or his beneficiary).
	(f) Neither WSB nor, to the Knowledge of WSB, any plan fiduciary of any Welfare Benefit Plan or Pension Benefit Plan, has engaged in any transaction in violation of Section 406(a) or (b) of ERISA (for which no exemption exists under Section 408 of ERISA or for which no exemption has been granted by the Department of Labor or the Internal Revenue Service) or any “prohibited transaction” (as defined in Section 4975(c)(1) of the Code) for which no exemption exists under

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	Section 4975(c)(2) or (d) of the Code or for which no exemption has been granted by the Department of Labor or the Internal Revenue Service. To the Knowledge of WSB, neither WSB nor any ERISA Affiliate has engaged in a transaction in connection with which WSB or any ERISA Affiliate could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code.
	(g) Complete and correct copies of the following documents have been furnished to Umpqua:

	(1) Each current Employee Benefit Plan and any related trust agreements;
	(2) The most recent summary plan description of each current Employee Benefit Plan for which a summary plan description is required under ERISA;
	(3) The most recent determination or opinion letters of the Internal Revenue Service with respect to the qualified status of the current Pension Benefit Plan;
	(4) Annual Reports (on form 5500 series) required to be filed by WSB or any of the WSB Banks with any governmental agency for the last two years;
	(5) Financial information which identifies to the Knowledge of WSB (x) all material claims arising under any Employee Benefit Plan, (y) all claims presently outstanding against any Employee Benefit Plan (other than normal claims for benefits), and (z) a description of any material future compliance action required with respect to any Employee Benefit Plan under ERISA, or federal or state law; and
	(6) Any actuarial reports and PBGC Forms 1 for the last two years.

	4.23     Employment Disputes. There is no labor strike, material dispute, slowdown or stoppage pending or, to the Knowledge of WSB, threatened against WSB or any of the WSB Banks, and to the Knowledge of WSB there is no attempt to organize any employees of WSB or any of the WSB Banks into a collective bargaining unit.
	4.24     Reserve for Loan Losses. WSB’s reserve for loan losses, as established from time to time, equals or exceeds the amount required of WSB and the WSB Banks as determined (i) by internal policies and procedures of WSB and the WSB Banks for determining the reserve for loan losses; (ii) by applicable SEC rules and guidance; (iii) by applicable bank regulatory agencies; and (iv) pursuant to GAAP. Since September 30, 2005, WSB has not reversed any provision taken for loan losses. WSB and the WSB Banks have properly accounted for all impaired loans in accordance with internal policies of WSB and the WSB Banks and in accordance with SFAS 114.
	4.25     Repurchase Agreement. WSB and the WSB Banks have valid and perfected first position security interests in all government securities subject to repurchase agreements and the market value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt secured by such collateral under such agreement.
	4.26     Shareholder List. The list of shareholders of WSB, provided to Umpqua, is a true and correct list of the names, addresses and holdings of all record holders of WSB common stock as of the date of such list.
	4.27     Interests of Directors and Others. Except as disclosed in any WSB Public Reports, no officer or director of WSB or any of the WSB Banks has any material interest in any assets or property (whether real or personal, tangible or intangible), of or used in the business of WSB or any of the WSB Banks other than as an owner of outstanding securities or deposit accounts of WSB or any of the WSB Banks, or as borrowers under loans fully performing in accordance with their terms, which terms are no more favorable than those available to unaffiliated parties made at or about the same time.
	4.28     WSB Disclosure Schedule to this Agreement. The information contained in the WSB Disclosure Schedule to this Agreement prepared by or on behalf of WSB or the WSB Banks

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	constitutes additional representations and warranties made by WSB hereunder and is incorporated herein by reference. The copies of documents furnished as part of the WSB Disclosure Schedule are true and correct copies and include all amendments, supplements and modifications thereto and all written waivers applicable thereunder.
	4.29     Brokers and Finders. WSB has received the opinion of Sander O’Neill & Partners, L.P., to the effect that, as of the date hereof, the Exchange Ratio is fair to the holders of WSB Common Stock from a financial point of view. Except for the fees and related costs payable to Sandler O’Neill  & Partners, L.P., pursuant to an engagement letter dated August 22, 2005, as amended and restated as of the date hereof, and provided to Umpqua, no action has been taken by WSB that would give rise to any valid claim against any party hereto for a brokerage commission, finder’s fee or other like payment with respect to the transactions contemplated by this Agreement.
	4.30     Bank Secrecy Act; Patriot Act; Transactions with Affiliates. WSB has not been advised of any regulatory concerns regarding its compliance with the Bank Secrecy Act (31 U.S.C. § 5322 et seq.) or related state or federal anti-money-laundering laws, regulations and guidelines, including without limitation those provisions of federal regulations requiring (i) the filing of reports, such as Currency Transaction Reports and Suspicious Activity Reports, (ii) the maintenance of records and (iii) the exercise of diligence in identifying customers. WSB has adopted such procedures and policies as are necessary or appropriate to comply with Title III of the USA Patriot Act and, to WSB’s Knowledge, is in compliance with such law in all material respects. WSB has no transactions with affiliates within the meaning of Sections 23A and 23B of the Federal Reserve Act.

	5.1     Organization, Existence, and Authority. Umpqua is a corporation duly organized and validly existing under the laws of the State of Oregon and has all requisite corporate power and authority to own, lease, and operate its properties and assets and carry on its business in the manner now being conducted and as proposed to be conducted. Umpqua Bank is a bank duly organized, validly existing, and in good standing under the laws of the State of Oregon and has all requisite corporate power and authority to own, lease, and operate its properties and assets and carry on its business in the manner now being conducted and as proposed to be conducted. SAWY is a registered broker-dealer duly organized and validly existing under the laws of the State of Oregon and has all requisite corporate power and authority to own, lease and operate its properties and assets and carry on its business in the manner now being conducted and as proposed to be conducted. Each of Umpqua, Umpqua Bank and SAWY is qualified to do business and is in good standing in every jurisdiction in which such qualification is required except where the failure to so qualify or be in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Umpqua.
	5.2     Authorized and Outstanding Stock, Options, and Other Rights. The authorized capital stock of Umpqua consists of (i) 2,000,000 shares of undesignated preferred stock, with no par value per share, of which no shares are issued or outstanding, and (ii) 100,000,000 shares of common stock, with no par value per share, of which 44,627,280 shares are outstanding as of the close of business on February 6, 2006, all of which are validly issued, fully paid and nonassessable. The authorized capital stock of Umpqua Bank consists of 2,000,000 shares of undesignated preferred stock, with no par value per share, of which no shares are issued and outstanding and 20,000,000 shares of common stock with no par value per share, of which 7,664,752 shares are outstanding, all of which are validly issued, fully paid and nonassessable and all of which are held by Umpqua. Umpqua owns all of the outstanding capital stock of SAWY. Other than as disclosed in the Umpqua Public Reports or Section 5.2 of the Umpqua Disclosure Schedule, no subscriptions, options, warrants, convertible securities or other rights or commitments which would enable the holder to acquire any shares of capital stock or other

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	investment securities of Umpqua or any Umpqua Subsidiary, or which enable or require Umpqua to acquire shares of its capital stock or other investment securities issued by Umpqua or any Umpqua Subsidiary from any holder, are authorized, issued or outstanding.
	5.3     Public Reports; Sarbanes-Oxley Compliance.
	(a) Since June 30, 2004, Umpqua has timely filed with the SEC all Umpqua Public Reports required to be filed, Umpqua Bank has timely filed with the FDIC and the Oregon Director all Umpqua Bank Call Reports required to be filed, and SAWY has timely filed with the SEC and NASD all Broker Dealer Reports required to be filed.
	(b) The financial statements included in the Umpqua Public Reports has been prepared in accordance GAAP, consistently applied, and fairly present, the financial position and results of operation of Umpqua and its subsidiaries on the dates and for the periods covered thereby.
	(c) As of their respective dates, all Umpqua Public Reports, Umpqua Bank Call Reports and SAWY Broker Dealer Reports complied in all material respects with all requirements applicable to such filing. As of their respective dates, the Umpqua Public Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.
	(d) In the Umpqua Public Reports, Umpqua has disclosed all securitization transactions and “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC) effected by Umpqua or any Umpqua Subsidiaries since June 30, 2004.
	(e) Deloitte & Touche LLP, which has expressed its opinion with respect to the year-end financial statements of Umpqua and Umpqua Subsidiaries, is and has been throughout the periods covered by the Umpqua Public Reports (a) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002), (b) “independent” with respect to Umpqua within the meaning of Regulation S-X, and (c) in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and the related rules of the SEC and the Public Company Accounting Oversight Board. Moss Adams LLP is (a) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002), (b) “independent” with respect to Umpqua within the meaning of Regulation S-X, and (c) in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and the related rules of the SEC and the Public Company Accounting Oversight Board. Section 5.3 of the Umpqua Disclosure Schedule, lists all non-audit services performed by Deloitte & Touche LLP and Moss Adams LLP for Umpqua and Umpqua Subsidiaries since June 30, 2004 through the date hereof.
	(f) Umpqua and the Umpqua Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate actions are taken with respect to any differences. Umpqua has implemented “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Umpqua’s “disclosure controls and procedures” are reasonably designed to ensure that all information required to be disclosed by Umpqua in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and regulations of the SEC, and that such information is accumulated and communicated to Umpqua’s management as appropriate to allow timely decisions regarding required disclosure.
	(g) Each Umpqua Public Report that was required to be accompanied by the certifications contemplated by Item 601 of Regulation S-K was so accompanied, and at the time of filing or

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	submission of each such certification, such certification complied with such item and was accurate in all material respects as of the date of such certificate.
	(h) The audit committee of the Umpqua Board of Directors has established procedures for the receipt, retention and treatment of complaints regarding the accounting, internal accounting controls, and auditing matters and the confidential, anonymous submission by employees of Umpqua of concerns regarding questionable accounting or auditing practices. No attorney representing Umpqua or any Umpqua Subsidiary, whether or not employed by Umpqua or any Umpqua Subsidiary, has reported “evidence of a material violation” (within the meaning of Part 205 of the Standards of Professional Conduct for Attorneys Appearing and Practicing Before the Commission in the Representation of an Issuer) by Umpqua or any of its officers, directors, employees or agents to the Umpqua Board of Directors or any committee thereof, to Umpqua’s chief legal officer, or to Umpqua’s chief legal officer and chief executive officer. Section 5.3 of the Umpqua Disclosure Schedule lists all investigations conducted prior to the date hereof of any reported “evidence of a material violation” by Umpqua or any of its officer, directors, employees or agents and all Umpqua audit committee investigations conducted prior to the date hereof of complaints by Umpqua employees regarding accounting, internal accounting controls or auditing matters.
	(i) Umpqua is in compliance in all material respects with all current listing and corporate governance requirements of the NASDAQ National Market, and is in compliance in all material respects with the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC.
	5.4     Articles of Incorporation, Bylaws, Minutes. The copies of the articles of incorporation, as amended, and the bylaws of each of Umpqua, Umpqua Bank and SAWY delivered to WSB are true and correct copies of existing articles of incorporation and bylaws of Umpqua, Umpqua Bank and SAWY, as the case may be, as amended as of the date hereof. None of Umpqua, Umpqua Bank or SAWY are in violation of any provision of its articles of incorporation or bylaws. Umpqua has delivered to WSB copies of the minute books of Umpqua, Umpqua Bank and SAWY from January 1, 2004 through the date hereof. The minute books of Umpqua, Umpqua Bank and SAWY, including those that will be made available to WSB for its review, contain minutes of all meetings and all consents evidencing actions taken without a meeting by its Board of Directors (and any committees thereof) and by its shareholders that are accurate in all material respects.
	5.5     Shareholder Reports. Umpqua has delivered to WSB copies of all of Umpqua’s reports and other written communications to shareholders since January 1, 2005, including all proxy statements and notices of shareholder meetings, to the extent such reports and communications have not been filed with any or do not consist of Umpqua Public Reports. Until the Effective Date, Umpqua will furnish to WSB copies of all future written communications reasonably promptly after Umpqua first sends such materials to its shareholders.
	5.6     Books and Records. The books and records of Umpqua, Umpqua Bank and SAWY accurately reflect in all material respects the transactions and obligations to which it is a party or by which it or its properties are bound or subject. Such books and records comply in all material respects with applicable legal, regulatory and accounting requirements.
	5.7     Legal Proceedings. Except for regulatory examinations conducted in the normal course of regulation of Umpqua and Umpqua Subsidiaries, there are no actions, suits, proceedings, claims or governmental investigations pending or, to the Knowledge of Umpqua, threatened against or affecting Umpqua or any Umpqua Subsidiary before any court, administrative officer or agency, other governmental body, or arbitrator that, if determined adversely to Umpqua or an Umpqua Subsidiary, would reasonably be expected to result individually or in the aggregate in any Material Adverse Effect with respect to Umpqua or any Umpqua Subsidiary or to materially hinder or delay the consummation of the transactions contemplated by this Agreement.

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	5.8     Compliance with Laws and Regulations. Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Umpqua:

	(a) The conduct by each of Umpqua and Umpqua Bank of its respective business and the operation of the properties or other assets owned or leased by it does not violate or infringe any domestic laws, statutes, ordinances, rules or regulations or, to the Knowledge of Umpqua, any foreign laws, statutes, ordinances, rules or regulations, including, but without limitation, with every local, state or federal law or ordinance, and any regulation or order issued thereunder, now in effect and applicable to it governing or pertaining to fair housing, anti-redlining, equal credit opportunity, truth-in-lending, real estate settlement procedures, fair credit reporting and every other prohibition against unlawful discrimination in residential lending, or governing consumer credit, including, but not limited to, the Community Reinvestment Act, the Consumer Credit Protection Act, Truth-in-Lending Act, Regulation Z promulgated by the FRB, and the Real Estate Settlement Procedures Act of 1974.
	(b) All loans, leases, contracts and accounts receivable (billed and unbilled), security agreements, guarantees and recourse agreements, of either Umpqua or Umpqua Bank, as held in its portfolios, or as sold with recourse into the secondary market since January 1, 2003, represent and are valid and binding obligations of their respective parties and debtors, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. Each of them is has been executed and delivered in compliance, in form and substance, with any and all federal, state or local laws applicable to Umpqua or Umpqua Bank, or to the other party or parties to the contract(s) or commitment(s), including without limitation the Truth-in-Lending Act, Regulations Z and U of the FRB, laws and regulations providing for nondiscriminatory practices in the granting of loans or credit, applicable usury laws, and laws imposing lending limits; and all such contracts or commitments have been administered in compliance with all applicable federal, state or local laws or regulations.
	(c) All Uniform Commercial Code filings, or filings of trust deeds, or of liens or other security interest documentation that are required by any applicable federal, state or local government laws and regulations to perfect the security interests referred to in any and all of such documents or other security agreements have been made, and all security interests under such deeds, documents or security agreements have been perfected, and all contracts related to such filings and documents have been entered into or assumed in full compliance with all applicable material legal or regulatory requirements.
	(d) Umpqua’s registered broker dealer is in substantial compliance with all SEC and NASD rules and regulations.
	(e) All loan files of Umpqua Bank are complete and accurate in all material respects and have been maintained in accordance with good banking practice.
	(f) All notices of default, foreclosure proceedings or repossession proceedings against any real or personal property collateral have been issued, initiated and conducted by Umpqua Bank in material formal and substantive compliance with all applicable federal, state or local laws and regulations, and no loss or impairment of any material security interest, or exposure to meritorious lawsuits or other proceedings against Umpqua or Umpqua Bank, with respect to any such material security interest, has been or will be suffered or incurred by Umpqua or Umpqua Bank.
	(g) Neither Umpqua nor Umpqua Bank is in material violation of any applicable services or any other requirements of the FHA, VA, FNMA, GNMA, FHLMC, SBA or any private mortgage insurer which insured or guaranteed any loans owned by Umpqua or Umpqua Bank or as to which either has sold to other investors, and with respect to such loans neither Umpqua nor

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	Umpqua Bank has done or failed to do, or caused to be done or omitted to be done, any act the effect of which act or omission impairs or invalidates (i) any FHA insurance or commitments of the FHA to insure, (ii) any VA guarantee or commitment of the VA to guarantee, (iii) any SBA guarantees or commitments of the SBA to guarantee, (iv) any private mortgage insurance or commitment of any private mortgage insurer to insure, (v) any title insurance policy, (vi) any hazard insurance policy, or (vii) any flood insurance policy required by the National Flood Insurance Act of 1968, as amended.
	(h) Umpqua Bank has not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any margin stock.

	5.9     Hazardous Materials. To the Knowledge of Umpqua, and except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Umpqua, neither Umpqua nor any Umpqua Subsidiary, nor any other person having an interest in any property which Umpqua or any Umpqua Subsidiary owns or leases, or has owned or leased, or in which either holds any security interest, mortgage, or other liens or interest including but not limited to as beneficiary of a deed of trust (“Umpqua Property”), has engaged in the generation, use, manufacture, treatment, transportation, storage (in tanks or otherwise), or disposal of Hazardous Material on or from such Umpqua Property. To the Knowledge of Umpqua, and except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Umpqua, there has been no: (i) presence, use, generation, handling, treatment, storage, release, threatened release, migration or disposal of Hazardous Material on any Umpqua Property; (ii) condition that could result in any use, ownership or transfer restriction; or (iii) condition of nuisance on or from Umpqua Property. During the past six years, neither Umpqua nor any Umpqua Subsidiary has received any written notice of a condition that could reasonably be expected to give rise to any private or governmental suit, claim, action, proceeding or investigation against Umpqua, any Umpqua Subsidiary, any such other person or such Umpqua Property as a result of any of the foregoing events or has Knowledge of any condition that could reasonably be expected to give rise to any such material private or governmental suit, claim, action, proceeding or investigation.
	5.10     Contingent and Other Liabilities. Section 5.10 of the Umpqua Disclosure Schedule is a list, to the Knowledge of Umpqua and as of the date hereof, of all contingent and other liabilities reasonably expected to be in excess of $100,000 which are not set forth or reflected in other Sections of the Umpqua Disclosure Schedule, in the Umpqua Public Reports, in the Umpqua Bank Call Reports or in the SAWY Broker Dealer Reports. Except as set forth in any financial statements (including the notes thereto) included in any Umpqua Public Reports, neither Umpqua nor any Umpqua Subsidiary has any obligations or liabilities of any nature (whether accrued, absolute, contingent or otherwise) which would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Umpqua.
	5.11     No Material Adverse Effects. Since September 30, 2005 through the date hereof, (a) there has been no event or occurrence that would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Umpqua; (b) no cash, stock or other dividends, or other distributions with respect to capital stock, have been declared or paid by Umpqua, nor has Umpqua purchased or redeemed any of its shares except in accordance with Umpqua’s stock repurchase program; and (c) there has not been any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any asset material to Umpqua or Umpqua Bank.
	5.12     Regulatory Approvals Required. The nature of the business and operations of Umpqua and each of the Umpqua Subsidiaries does not require any approval, authorization, consent, license, clearance or order of, any declaration or notification to, or any filing or registration with, any governmental or regulatory authority in order to permit any of them to perform their obligations under this Agreement, or to prevent the termination of any material right, privilege, license or agreement of

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	Umpqua or any Umpqua Subsidiary, or any material loss or disadvantage to their business, as a result of consummation of the Holding Company Merger or the Bank Mergers, except for:

	(a) approval from, or waiver of jurisdiction by, the Oregon Director, FDIC and California Commissioner of the Bank Mergers;
	(b) approval from, or waiver of jurisdiction by, the FRB of the Holding Company Merger;
	(c) filing of the Holding Company Plan of Merger and Articles of Merger with the Oregon Secretary of State and California Secretary of State;
	(d) filing and effectiveness of a registration statement of which the Proxy Statement is a part, under the Securities Act;
	(e) registration with, the issuance of permits from, or the perfection of exemptions from registration from applicable state blue sky administrators of the Umpqua Common Stock to be issued to WSB shareholders; and
	(f) approval by the NASDAQ Stock Market of the listing application relating to the Umpqua Common Stock to be issued in connection with the Holding Company Merger.

	As of the date hereof, Umpqua has no Knowledge of any reason why the approvals set forth in this Section 5.12 and in Section 9.4 will not be received without the imposition of a condition, restriction or requirement of the type described in Section 9.4.
	5.13     Corporate and Shareholder Approval of Agreement, Binding Obligations. Umpqua and Umpqua Bank each has all requisite corporate power to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement, and the transactions contemplated hereby, have been duly authorized by the Board of Directors of each of Umpqua and Umpqua Bank. No other corporate action on the part of Umpqua or Umpqua Bank other than shareholder approval is required to authorize this Agreement or the Holding Company Plan of Merger or Bank Plans of Merger or the consummation of the transactions contemplated thereby. This Agreement has been duly executed and delivered by Umpqua and Umpqua Bank and, assuming the accuracy of WSB’s representations and warranties, constitutes the legal, valid and binding obligation of each of them enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
	5.14     No Defaults from Transaction. Subject to compliance with the matters referred to in Section 5.12, neither the execution, delivery and performance of this Agreement and the Holding Company Plan of Merger or Bank Plans of Merger by Umpqua and Umpqua Bank, as the case may be, nor the consummation of the transactions contemplated thereby will conflict with, result in any breach or violation of, or result in any default or any acceleration of performance under, or will result in the declaration or imposition of any lien, charge or encumbrance upon any of the assets of Umpqua or any Umpqua Subsidiary under, any of the terms, conditions or provisions of (a) Umpqua’s Articles of Incorporation, Umpqua’s Bylaws, each of Umpqua Bank’s and SAWY’s respective Articles of Incorporation, each of Umpqua Bank’s and SAWY’s respective Bylaws, (b) any statute, regulation or existing order, writ, injunction or decree of any court or governmental agency, or (c) any contract, agreement or instrument to which any of Umpqua, Umpqua Bank or SAWY is a party or by which any of Umpqua, Umpqua Bank or SAWY is bound, except in the case of clauses (b) and (c) as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Umpqua or to materially hinder or delay the consummation of the transactions contemplated by this Agreement.
	5.15     Tax Returns. mpqua and Umpqua Subsidiaries have filed all material federal, state and other income, franchise or other tax returns, required to be filed by them; each such return is complete and accurate in all material respects; and all taxes and related interest and liabilities to be paid in connection therewith have been paid or adequate reserve has been established for the timely

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	payment thereof. Umpqua and Umpqua Bank have timely and accurately filed all material currency transaction reports required by the Bank Secrecy Act, as amended, and have timely and accurately filed all material required information returns and reports, including without limitation Forms 1099. Umpqua has not received notice of any federal, state or other income, franchise or other tax assessment or notice of a deficiency to date which has not been paid or for which adequate reserve has not been provided, and the Officers of Umpqua have no Knowledge of any pending or threatened (in writing) audit or investigation of Umpqua or Umpqua Bank with respect to any tax liabilities. There are currently no agreements in effect with respect to Umpqua or Umpqua Bank to extend the period of limitations for assessment or collection of any tax. Umpqua has delivered to WSB true and correct copies of Umpqua’s tax returns, including any unconsolidated or uncombined federal and state income or franchise tax returns, for the years 2003 and 2004.
	5.16     Insurance. For each of the past three years and continuing through the date of this Agreement, Umpqua and each of the Umpqua Subsidiaries have insured their business and real and personal property against all risks of a character usually insured against, including but not limited to financial institution bond, directors and officers liability, property and casualty and commercial liability insurance, with customary amounts of coverage, deductibles and exclusions by reputable insurers authorized to transact insurance in the State of Oregon and such other jurisdictions where they operate or own property. Umpqua and each of the Umpqua Subsidiaries are in material compliance with all existing insurance policies and have not failed to give timely notice of, or present properly, any material claim thereunder of which Umpqua has Knowledge. Section 5.16 of the Umpqua Disclosure Schedule, includes a list of all insurance policies in force as of the date hereof with respect to Umpqua’s and each of the Umpqua Subsidiaries’ business and real and personal property.
	5.17     Contracts and Agreements. Neither Umpqua nor any Umpqua Subsidiary is in material default or breach, and there has not occurred any event which with notice or lapse of time would constitute a material breach or default by any such entity, under any material contract, agreement, instrument, lease or understanding and, except with respect to loan agreements or notices with Umpqua Bank customers reflected in Umpqua’s delinquent loan reports, to the Knowledge of Umpqua no other party thereto is in material default thereof. No consent or approval by the other parties to any such material contract is required by reason of this Agreement to maintain such oral or written contracts, agreements, instruments or leases in effect.
	5.18     Reserve for Loan Losses. Umpqua’s reserve for loan losses, as established from time to time, equals or exceeds the amount required of Umpqua and Umpqua Bank as determined (i) by internal policies and procedures of Umpqua and Umpqua Bank for determining the reserve for loan losses; (ii) by applicable SEC rules and guidance; (iii) by applicable bank regulatory agencies; and (iv) pursuant to GAAP. Since September 30, 2005, Umpqua has not reversed any provision taken for loan losses. Umpqua and the Umpqua Banks have properly accounted for all impaired loans in accordance with internal policies of Umpqua and the Umpqua Banks and in accordance with SFAS 114.
	5.19     Repurchase Agreement. Umpqua and Umpqua Bank have valid and perfected first position security interests in all government securities subject to repurchase agreements and the market value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt secured by such collateral under such agreement.
	5.20     Interests of Directors and Other. Except as disclosed in any Umpqua Public Reports, no officer or director of Umpqua or Umpqua Bank has any material interest in any assets or property, whether real or personal, tangible or intangible, of or used in the business of Umpqua or any of its Subsidiaries, other than as an owner of outstanding securities or deposit accounts of Umpqua or Umpqua Bank, as borrowers under loans fully performing in accordance with their terms, which terms are no more favorable than those available to unaffiliated parties made at or about the same time, or as customers in the ordinary course of SAWY’s business.

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	5.21     Umpqua Disclosure Schedule to this Agreement. The information contained in the Umpqua Disclosure Schedule to this Agreement prepared by or on behalf of Umpqua constitutes additional representations and warranties made by Umpqua hereunder and is incorporated herein by reference. The copies of documents furnished as part of the Umpqua Disclosure Schedule are true and correct copies and include all amendments, supplements, and modifications thereto and all written waivers applicable thereunder.
	5.22     Bank Secrecy Act; Patriot Act; Transactions with Affiliates. Umpqua has not been advised of any regulatory concerns regarding its compliance with the Bank Secrecy Act (31 U.S.C. § 5322 et seq.) or related state or federal anti-money-laundering laws, regulations and guidelines, including without limitation those provisions of federal regulations requiring (i) the filing of reports, such as Currency Transaction Reports and Suspicious Activity Reports, (ii) the maintenance of records and (iii) the exercise of diligence in identifying customers. Umpqua has adopted such procedures and policies as are necessary or appropriate to comply with Title III of the USA Patriot Act and, to Umpqua’s Knowledge, is in compliance with such law in all material respects. Umpqua has no transactions with affiliates within the meaning of Sections 23A and 23B of the Federal Reserve Act.

	(a) It shall not amend the WSB Articles of Incorporation or the WSB Bylaws or approve any amendment to the any of the WSB Banks’ Articles of Incorporation or any of the WSB Banks’ Bylaws;
	(b) It shall not declare or pay any dividend (except quarterly cash dividends on shares of WSB Common Stock, which WSB agrees to declare, set the record date of and pay on the same dates as Umpqua declares, sets the record date of and pays its regular quarterly dividend and to pay in the same amount as the Umpqua quarterly dividend, provided that Umpqua in each case provides reasonable and sufficient advance notice thereof), redeem, repurchase or otherwise acquire or agree to acquire any of WSB’s or any WSB Subsidiaries’ stock; or make or commit to make any other distribution on any capital stock to WSB’s or any WSB Subsidiaries’ shareholders; provided that this Section 6.1(b) shall not preclude the ordinary course payment of dividends by WSB Banks to WSB, consistent with past practice;
	(c) It shall not, except under options and convertible securities identified in Section 4.2 of the WSB Disclosure Schedule, issue, sell, or deliver; agree to issue, sell or deliver; or grant or agree to grant any shares of any class of stock of WSB or any of the WSB Subsidiaries; any securities convertible into any of such shares; or any options, warrants, or other rights to purchase such shares, or to modify, accelerate vesting or extend the exercise date of any outstanding options, warrants or other rights to purchase such shares, except as may be required by the WSB Stock Plans;
	(d) It shall not, except in the ordinary course of business, borrow or agree to borrow any funds or Knowingly incur, assume or become subject to, whether directly or by way of guarantee or otherwise, any liabilities of any other person;
	(e) It shall not cancel or agree to cancel any debts or claims having a value in excess of $100,000;
	(f) It shall not, except in the ordinary course of business, lease, sell or transfer, agree to lease, sell or transfer, or grant or agree to grant any preferential rights to lease or acquire, any material assets, property or rights, or make or permit any amendment or termination of any Material Contract;

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	or mortgage, pledge or subject to a lien or any other encumbrance (other than a Permitted Lien) any of its material assets, tangible or intangible;
	(g) It shall not willfully violate, commit a breach of or default under any Material Contract to which it is a party or to which any of its assets may be subject or Knowingly violate any applicable law, regulation, ordinance, order, injunction or decree of any other requirements of any governmental body or court, relating to its assets or business;
	(h) Other than as maybe required by agreements in effect on the date of this Agreement, it shall not (A) increase or agree to increase the compensation payable to any officer, director, employee or agent with a Severance Agreement, Employment Agreement or Salary Continuation Agreement; (B) increase or agree to increase the compensation payable to any officer, director, employee or agent, other than (i) annual merit salary and bonus increases made in the ordinary course of business consistent with past practices but not exceeding 5% in the aggregate (based upon December 31, 2005 aggregate salary figures) or 6% for any individual employee or (ii) in connection with incentive bonuses awarded in the ordinary course of business consistent with past practices; (C) enter into any contract of employment (i) for a period greater than 30 days or (ii) providing for severance payments upon termination of employment or upon the occurrence of any other event including but not limited to the consummation of the Plans of Merger; (D) make, or commit to make, any stay, retention or conversion bonus (except as may be agreed to by Umpqua); (E) enter into or make any material change in any Employee Benefit Plan except as required by law; or (F) pay any annual incentive or bonus compensation for a partial years (except as may be agreed to by Umpqua); provided, however, that WSB shall be authorized to amend the WSB 401KSOP and the WSB Employee Stock Ownership Plan to provide for pro-rata employer contributions to be made as of the Effective Date covering the period from the beginning of each such plan’s 2006 plan year through the Effective Date.
	(i) It shall not, except in the ordinary course of business through foreclosure or transfer in lieu thereof in the collection of loans to customers, acquire control of or any other ownership interest in any other corporation, association, joint venture, partnership, business trust or other business entity; acquire control or ownership of all or a substantial portion of the assets of any of the foregoing; merge, consolidate or otherwise combine with any other corporation; or enter into any agreement providing for any of the foregoing except in connection with the enforcement of bona fide security interests;
	(j) It shall not acquire an ownership or leasehold interest in any real property whether by foreclosure, deed in lieu of foreclosure or otherwise without making an environmental evaluation that, in its opinion, is reasonably appropriate;
	(k) It shall not make any payment in excess of $250,000 in settlement of any pending or threatened legal proceeding involving a claim against WSB or any WSB Subsidiary;
	(l) It shall not engage in any activity or transaction (i) which is other than in the ordinary course of business including the sale of any properties, securities, servicing rights, loans or other assets except as specifically contemplated hereby or (ii) which it engages with Knowledge and which would reasonably be expected to have a Material Adverse Effect with respect to WSB or to materially adversely delay the ability of Umpqua, Umpqua Bank, WSB or the WSB Banks to obtain any necessary approvals, consents or waivers of any governmental or regulatory authorities required for the Mergers or to perform its covenants or agreements under this Agreement on a timely basis;
	(m) It shall not acquire, open or close any office or branch;
	(n) It shall not make or commit to make any capital expenditures, capital additions or capital improvements involving an amount in excess of $100,000, provided, however, written consent shall not be required if prior consultation with Umpqua has taken place;

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	(o) It shall not (i) make, renew, commit to make, or materially modify any loan over $2,500,000 or a series of loans or commitments over $2,500,000 to any person or group of related persons, or renew, modify, amend or advance additional funds (except under preexisting commitments) on loans or to borrowers on any of the WSB Banks’ loan watch lists, without in each case furnishing to Umpqua, within three (3) business days after such approval, a copy of the report provided to such WSB Bank’s loan committee, or (ii) extend the loan maturity on any loan risk-rated substandard or worse beyond September 30, 2006 or six months following the expected Effective Date, whichever is later, or extend the loan maturity on any loan on non-accrual beyond June 30, 2006 or three months following the expected Effective Date, whichever is later;
	(p) Except for booking loans committed prior to the date of this Agreement, it shall not enter into or modify any agreement (except for renewals of previously disclosed indebtedness) which alone or together with all similar arrangements exceeds $250,000, with any director or officer of WSB or any of the WSB Banks, any person who, to the Knowledge of WSB, owns more than five percent (5%) of the outstanding capital stock of WSB or any business or entity in which such director, officer or beneficial owner has an ownership interest in excess of ten percent (10%) without furnishing a copy of the report provided to the WSB Bank’s loan committee to Umpqua within three (3) business days after such approval;
	(q) It will not reverse any provision taken for loan losses;
	(r) It will not sell any investment securities at a gain except as necessary to provide liquidity, consistent with past practices; and
	(s) It shall not take any action or cause to be taken any action that would prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

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	(a) It shall not amend its articles of incorporation or bylaws or approve any amendment to the articles of incorporation or bylaws of any Umpqua Subsidiary (except an amendment to Umpqua’s Articles of Incorporation to provide for annual election of directors);
	(b) It shall not declare or pay any dividend (except its regular quarterly cash dividend in an amount to be determined by Umpqua’s Board of Directors), redeem, repurchase or otherwise acquire or agree to acquire any of Umpqua’s capital stock (except in connection with a share repurchase program undertaken in compliance with SEC Rule 10-18 and SEC Regulation M, limited to 2,000,000 shares of Umpqua Common Stock and suspended during the period beginning one day before the Proxy Statement is first mailed to WSB shareholders and continuing through the consummation of the transactions contemplated by this Agreement), or make or commit to make any other distribution to Umpqua’s shareholders, provided this Section 7.1(b) shall not preclude the payment of dividends by Umpqua Bank to Umpqua;
	(c) It shall not engage in any activity or transaction that is other than in the ordinary course of business, including the sale of any properties, securities, servicing rights, loans or other assets, which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Umpqua or to materially adversely delay the ability of Umpqua, Umpqua Bank, WSB or the WSB Banks to obtain any necessary approvals, consents or waivers of any governmental or regulatory authorities required for the Mergers or to perform its covenants or agreements under this Agreement on a timely basis; and
	(d) It shall not take any action or cause to be taken any action that would prevent or impede the Holding Company Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

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	8.1     Shareholder Approvals. Approval of (i) the principal terms of this Agreement by the shareholders of WSB with WSB shareholders holding fewer than 12.5% of the WSB Common Stock having perfected their right to become Dissenting Shareholders and (ii) this Agreement, the Holding Company Plan of Merger and the issuance of Umpqua Common Stock contemplated hereby by the shareholders of Umpqua.
	8.2     No Litigation. No court or other governmental entity of competent jurisdiction having enacted, issued, promulgated, enforced or entered any law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the Mergers or the other transactions contemplated by this Agreement (collectively, an “Order”).
	8.3     No Banking Moratorium. Absence of a banking moratorium or other suspension of payment by banks in the United States or any new material limitation on extension of credit by commercial banks in the United States.
	8.4     Regulatory Approvals. Procurement of all consents, orders and approvals required by law including but not limited to approvals by the FRB, the FDIC, the Oregon Director and the California Commissioner of the transactions contemplated by the Agreement and the Plans of Merger, without any conditions or requirements included in any such required consents, orders or approvals which impose any condition or restriction on Umpqua or WSB, including without limitation, requirements relating to the raising of additional capital or the disposition of assets, which Umpqua reasonably determines to be materially burdensome in the context of the transactions contemplated by this Agreement, or would reasonably be expected to have, individually or in the aggregate, a Material

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	Adverse Effect with respect to Umpqua or WSB; and the expiration of all applicable regulatory waiting periods.
	8.5     Compliance with Securities Laws. The S-4 Registration Statement having become effective under the Securities Act. No stop order suspending the effectiveness of the S-4 Registration Statement shall have issued, and no proceedings for that purpose shall have been initiated or be threatened, by the SEC.
	8.6     Other Consents. Receipt of other consents and approvals necessary for consummation of the transactions contemplated by this Agreement and the Plans of Merger as listed in Schedule 8.6.
	8.7     Corporate Documents. Receipt by Umpqua of:

	(a) Current certificates of good standing for WSB and the WSB Banks issued by the appropriate governmental officer as of a date immediately prior to the Effective Date; and
	(b) A copy, certified by each Secretary of WSB and the WSB Banks, of resolutions adopted by the Board of Directors and shareholders of each entity approving this Agreement and the applicable Plan of Merger.

	8.8     Continuing Accuracy of Representations and Warranties. (i) The representations and warranties of WSB that are qualified by reference to Material Adverse Effect being true at and as of the Effective Date as though such representations and warranties were made at and as of the Effective Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date); and (ii) the representations and warranties of the WSB set forth in this Agreement that are not qualified by reference to Material Adverse Effect being true and correct as of the Effective Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), provided, however, that notwithstanding anything herein to the contrary, the condition set forth in this Section 8.8(a)(ii) shall be deemed to have been satisfied even if any representations and warranties of the WSB are not so true and correct unless the failure of such representations and warranties of the WSB to be so true and correct, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect with respect to WSB.
	8.9     Compliance with Covenants and Conditions. Compliance in all material respects by WSB with all agreements and covenants on its part required by this Agreement to be performed or complied with prior to or at the Effective Date.
	8.10     No Material Adverse Effects. Between the date hereof and the Effective Date, the absence of any event or circumstance that would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to WSB.
	8.11     Certificate. Receipt by Umpqua of a Certificate of the Chief Executive Officer and the Chief Financial Officer of WSB, dated as of the Effective Date, certifying to the best of their knowledge the fulfillment of the conditions specified in Sections 8.1(i), 8.2, 8.6, 8.8, 8.9 and 8.10 hereof, that the average daily balance of consolidated Core Deposits for the month preceding the Effective Date is not less than the product of 92.0% and the average daily balance of Core Deposits for the month of January 2006, and such other matters with respect to the fulfillment by WSB of any of the conditions of this Agreement as Umpqua may reasonably request.
	8.12     Tax Opinion. Receipt of a favorable opinion of Foster Pepper Tooze LLP, special counsel to Umpqua, dated as of the Effective Date, in form and substance reasonably satisfactory to Umpqua to the effect that, on the basis of facts, representations and assumptions set forth in such opinion, the transactions contemplated by the Agreement and the Plans of Merger will be reorganizations within the meaning of Section 368(a) of the Code; that the parties to the Agreement and to the Plans of Merger will each be “a party to a reorganization” within the meaning of

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	Section 368(b) of the Code; and that no taxable gain or loss will be recognized by WSB, the WSB Banks, Umpqua or Umpqua Bank as a result of the Mergers; that no taxable gain or loss will be recognized by the shareholders of WSB who exchange all of their WSB Common Stock for Umpqua Common Stock pursuant to the Holding Company Merger (except with respect to cash, if any, received for any fractional share interest in Umpqua Common Stock). In rendering its opinion, Foster Pepper Tooze LLP may require and rely upon representations contained in letter from WSB and Umpqua.
	8.13     Employee Agreements. Each amended and restated severance, employment and salary continuation agreement entered into by those executives listed in Section 8.13 has not been amended or rescinded and remains in full force and effect.
	8.14     Director Agreements. Each Voting, Non-Competition and Non-Solicitation Agreement entered into by the directors of WSB, ACB, CCB, LCB and WSNB as described in the Recitals to this Agreement has not been amended or rescinded and remains in full force and effect as of the Effective Date.

	9.1     Shareholder Approvals. Approval of (i) the principal terms of this Agreement by the shareholders of WSB and (ii) approval of this Agreement, the Holding Company Plan of Merger and the issuance of Umpqua Common Stock contemplated hereby by the shareholders of Umpqua.
	9.2     No Litigation. No court or other governmental entity of competent jurisdiction having enacted, issued, promulgated, enforced or entered any Order.
	9.3     No Banking Moratorium. Absence of a banking moratorium or other suspension of payment by banks in the United States or any new material limitation on extension of credit by commercial banks in the United States.
	9.4     Regulatory Approvals. Procurement of all consents, orders and approvals required by law including but not limited to approvals by the FRB, the FDIC, the Oregon Director and the California Commissioner of the transactions contemplated by the Agreement and the Plans of Merger, without any conditions or requirements included in any such required consents, orders or approvals which impose any condition or restriction on Umpqua or WSB, including without limitation, requirements relating to the raising of additional capital or the disposition of assets, which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Umpqua or WSB; and the expiration of all applicable waiting periods.
	9.5     Other Consents. Receipt of other consents and approvals necessary for consummation of the transactions contemplated by this Agreement and the Plans of Merger as listed in Schedule 9.5.
	9.6     Corporate Documents. Receipt by WSB of:

	(a) A certificate of existence for Umpqua and a good standing certificate for Umpqua Bank issued by the appropriate governmental officer dated as of a date immediately prior to the Effective Date;
	(b) A copy, certified by each Secretary of Umpqua and Umpqua Bank, of the resolutions adopted by the Board of Directors of each approving this Agreement and the respective Plan of Merger.

	9.7     Continuing Accuracy of Representations and Warranties. (i) The representations and warranties of Umpqua that are qualified by reference to Material Adverse Effect being true at and as of the Effective Date as though such representations and warranties were made at and as of the

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	Effective Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date); and (ii) the representations and warranties of the WSB set forth in this Agreement that are not qualified by reference to Material Adverse Effect being true and correct as of the Effective Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), provided, however, that notwithstanding anything herein to the contrary, the condition set forth in this Section 9.7(a)(ii) shall be deemed to have been satisfied even if any representations and warranties of the Umpqua are not so true and correct unless the failure of such representations and warranties of Umpqua to be so true and correct, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect with respect to Umpqua.
	9.8     Compliance with Covenants and Conditions. Umpqua having complied in all material respects with all agreements and covenants on its part required by this Agreement to be performed or complied with prior to or at the Effective Date.
	9.9     No Adverse Changes. Between the date hereof and the Effective Date, the absence of any event or circumstance that would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Umpqua.
	9.10     Tax Opinion. Receipt of a favorable opinion of Foster Pepper Tooze LLP, special counsel to Umpqua, dated as of the Effective Date, in form and substance satisfactory to WSB to the effect that on the basis of facts, representations and assumptions set forth in such opinion, the Holding Company Merger will be a reorganization within the meaning of Section 368(a) of the Code; that each of WSB and Umpqua will be “a party to a reorganization” within the meaning of Section 368(b) of the Code; and that no taxable gain or loss will be recognized by the shareholders of WSB who exchange all of their WSB Common Stock for Umpqua Common Stock pursuant to the Holding Company Merger (except with respect to cash, if any, received for any fractional share interest in Umpqua Common Stock). In rendering its opinion, Foster Pepper Tooze LLP may require and rely upon representations contained in letters from WSB and Umpqua.
	9.11     Certificate. Receipt by WSB of a Certificate of the President and Chief Financial Officer of Umpqua, dated as of the Effective Date, certifying to the best of their knowledge the fulfillment of the conditions specified in Sections 9.1(ii), 9.2, 9.4, 9.5, 9.7, 9.8, and 9.9 hereof and such other matters with respect to the fulfillment by Umpqua of any of the conditions of this Agreement as WSB may reasonably request.

	(a) By the mutual consent of the Boards of Directors of Umpqua and WSB acknowledged in writing;
	(b) By Umpqua or WSB acting through their Boards of Directors upon written notice to the other party, if at the time of such notice the Mergers shall not have become effective by October 31, 2006 (or such later date as shall have been agreed to in writing by Umpqua and WSB acting through their respective Boards of Directors) except to the extent that the failure of the Mergers then to be consummated arises out of or results from the knowing action or inaction of such party, which action or inaction is in violation of its obligations under this Agreement;

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	(c) By Umpqua, acting through its Board of Directors upon written notice to WSB, if there has been a breach by WSB in its representations, warranties or covenants set forth herein such that Section 8.8 or 8.9 would not be satisfied and which misrepresentation, breach or failure is not cured within thirty (30) days notice to WSB of such misrepresentation, breach or failure; or by WSB, acting through its Board of Directors upon written notice to Umpqua, if there has been a breach by Umpqua in its representations, warranties or covenants set forth herein such that Section 9.7 or 9.8 would not be satisfied and which misrepresentation, breach or failure is not cured within thirty (30) days notice to Umpqua of such misrepresentation, breach or failure;
	(d) By WSB, if its Board of Director determines in good faith (after consultation with Sullivan & Cromwell LLP) that such action is required in order for the directors to comply with their respective fiduciary duties under applicable law; or
	(e) By WSB, if (1) there has been a significant decline in the price of Umpqua Common Stock, measured by the Umpqua Measuring Price, (2) such decline is not proportionate relative to the Index, (3) WSB delivers written notice to Umpqua of its intention to terminate this Agreement within forty-eight (48) hours following the date of such event and (4) Umpqua does not elect to pursue a Decline Adjustment as set forth below; provided, however, that, if Umpqua effects a stock dividend, stock split, combination, exchange of shares or similar transaction after the date hereof and prior to the date on which the Umpqua Measuring Price is determined, the provisions of this Section 11.1(e) shall be appropriately adjusted so that such event does not in and of itself trigger a termination right on behalf of WSB. For purposes hereof, the following terms have the following meanings:

	(i) “Index” means the NASDAQ Bank Index.
	(ii) “Initial Index” shall mean 3,126.17.
	(iii) “Final Index” shall mean the average of the closing prices of the Index for the Umpqua Measuring Period.
	(iv) “Minimum Adjustment Price” means $22.59, which represents 80% of the Umpqua Initial Price.
	(v) A “significant decline” shall be deemed to have occurred if the Umpqua Measuring Price is less than the Minimum Adjustment Price.
	(vi) A decrease is not “proportionate relative to the Index” if the quotient obtained by dividing the Umpqua Measuring Price by the Umpqua Initial Price is less than the quotient obtained by dividing the Final Index by the Initial Index and subtracting 0.10 from the quotient.
	(vii) “Umpqua Initial Price” means $28.24.
	(viii) “Umpqua Measuring Period” means the fifteen day trading day period ending on the fifth business day prior to the Effective Date.
	(ix) “Umpqua Measuring Price” means the average closing price of Umpqua Common Stock on NASDAQ over the Umpqua Measuring Period.

Notwithstanding any decrease in the price of Umpqua Common Stock, as set forth in this Section 11.1(e), WSB shall not be entitled to terminate this Agreement pursuant to this Section 11.1(e) if Umpqua elects, no later than the close of business on the second succeeding Business Day after the close of the Umpqua Measuring Period, to adjust the Exchange Ratio (a “Decline Adjustment”) such that the Exchange Ratio shall equal the number derived by multiplying the unadjusted Exchange Ratio times the quotient obtained by dividing the Minimum Adjustment Price by the Umpqua Measuring Price.

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	(f) By WSB or Umpqua, acting through its Board of Directors, if any Order permanently restraining, enjoining or otherwise prohibiting consummation of any of the Mergers shall become final and non-appealable (whether before or after the approval by the shareholders of WSB or Umpqua).
	(g) By either party if (i) WSB shareholders fail to approve the principal terms of this Agreement at a meeting held pursuant to Section 6.10 or any adjournments or postponements thereof or (ii) Umpqua shareholders fail to approve this Agreement, the Holding Company Plan of Merger or the issuance of shares of Umpqua Common Stock contemplated hereby at a meeting held pursuant to Section 7.8 or any adjournments or postponements thereof.

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	If to Umpqua:

	Copies of Notices to Umpqua to:

	If to WSB:

	Copies of Notices to WSB to:

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UMPQUA HOLDINGS CORPORATION				WESTERN SIERRA BANCORP
By:		/s/ Raymond P. Davis Raymond P. Davis, President and Chief Executive Officer		By:		/s/ Gary D. Gall Gary D. Gall, President and Chief Executive Officer
By:		/s/ Steven L. Philpott Steven L. Philpott, Executive Vice President, General Counsel and Secretary		By:		/s/ Patrick J. Rusnak Patrick J. Rusnak Executive Vice President, Chief Operating Officer and Assistant Secretary

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UMPQUA BANK				WSB BANKS AUBURN COMMUNITY BANK
By:		/s/ Raymond P. Davis Raymond P. Davis, President and Chief Executive Officer		By:		/s/ Jeff Birkholz Jeff Birkholz, President and Chief Executive Officer
By:		/s/ Steven L. Philpott Steven L. Philpott, Secretary		By:		/s/ Anthony Gould Secretary
				CENTRAL CALIFORNIA BANK
				By:		/s/ Clyde Frederick Rowden Clyde Frederick Rowden, President and Chief Executive Officer
				By:		/s/ Anthony Gould Anthony Gould, Secretary
				LAKE COMMUNITY BANK
				By:		/s/ Douglas A. Nordell Douglas A. Nordell, President and Chief Executive Officer
				By:		/s/ Anthony Gould Anthony Gould Secretary
				WESTERN SIERRA NATIONAL BANK
				By:		/s/ Kirk N. Dowdell Kirk N. Dowdell, President and Chief Executive Officer
				By:		/s/ Anthony Gould Anthony Gould, Secretary

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	4.1     Until changed by the Surviving Corporation’s Board of Directors, at the Effective Time all corporate acts, plans, policies, contracts, approvals and authorizations of Umpqua and WSB, and their shareholders, officers, agents, Boards of Directors, and committees elected or appointed thereby, which were valid and effective immediately prior to the Effective Date shall be taken for all purposes as the acts, plans, policies, contracts, approvals and authorizations of the Surviving Corporation and shall be as effective and binding thereon as the same were with respect to Umpqua and WSB prior to the Effective Time.
	4.2     At the Effective Time, the corporate existence of Umpqua and WSB shall, as provided by Oregon and California law, be merged into and continued in the Surviving Corporation, and the separate existence of WSB shall terminate. All rights, franchises and interests of WSB in and to every type of property (whether real, personal, tangible or intangible) and choses in action shall be transferred to and vested in the Surviving Corporation by virtue of the Merger without any deed or

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	other transfer, and the Surviving Corporation, without any order or action on the part of any court or otherwise, shall hold and enjoy all such rights and property, franchises, and interests, including appointments, designations and nominations, and in every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises, and interests were held or enjoyed by Umpqua and WSB, respectively, prior to the Effective Time.
	4.3     At the Effective Time, the liabilities of Umpqua and WSB shall become the Surviving Corporation’s liabilities, and all debts, liabilities, and contracts of Umpqua and WSB, respectively, matured or unmatured, whether accrued, absolute, contingent or otherwise, and whether or not reflected or reserved against on balance sheets, books of accounts, or records of Umpqua and WSB, shall be those of the Surviving Corporation and shall not be released or impaired by the Merger; and all rights of creditors and other obligees and all liens on property shall be preserved unimpaired.

	7.1     Umpqua Common Stock. Each share of Umpqua Common Stock outstanding immediately prior to the Merger shall remain outstanding.
	7.2     Merger Consideration; WSB Common Stock. Each outstanding share of WSB Common Stock (other than Dissenters’ Shares) shall, subject to the limitations set forth herein, be converted into the right to receive the number of shares of Umpqua Common Stock determined by applying the Exchange Ratio, except that cash shall be paid in lieu of any resulting fractional shares. Subject to Section 10, “Exchange Ratio” means 1.61 shares of Umpqua Common Stock for each share of WSB Common Stock.
	7.3     WSB Stock Options.
	7.3.1     As of the Effective Time, by virtue of the Holding Company Merger and without any action on the part of any holder of any such option, each outstanding option to acquire WSB Common Stock (each a “WSB Option”) shall be automatically converted into an option to purchase Umpqua Common Stock (each, a “Converted Option”) as follows: (i) the number of shares of Umpqua Common Stock issuable upon exercise of the Converted Option shall be equal to the product of (A) the number of shares of WSB Common Stock issuable upon exercise of the WSB Option, and (B) the Exchange Ratio; and (ii) the exercise price per share of Umpqua Common Stock shall be equal to the result of (A) the exercise price of the WSB Option, divided by (B) the Exchange Ratio. All other terms and conditions of the Converted Options shall remain the same as the terms and conditions of the WSB Options. With respect to any WSB Option that is an incentive stock option within the meaning of Section 422 of the Code, the foregoing adjustments shall be effected in a manner consistent with Section 424(a) of the Code.
	7.3.2     Umpqua shall, as of the Effective Time, assume the obligations of WSB under all plans and agreements pursuant to which a WSB Option has been issued (the “WSB Stock Plans”) and

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shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Umpqua Common Stock for delivery upon exercise of the Converted Options. Umpqua shall cause the registration of the shares of Umpqua Common Stock subject to the Converted Options to become effective as part of a registration statement on Form S-8, or any successor or other appropriate forms, with respect to the shares of Umpqua Common Stock subject to the Converted Options promptly following the Effective Time; and, thereafter, Umpqua shall deliver to holders of Converted Options any applicable prospectus and shall maintain the effectiveness of such registration statement or registration statements, including the current status of any related prospectus, for so long as the Converted Options remain outstanding.

	9.1     Upon surrender for cancellation to the Exchange Agent of one or more certificates for shares of WSB Common Stock (“Old Certificates”), accompanied by a duly executed letter of transmittal in proper form, the Exchange Agent shall deliver to each holder of such surrendered Old Certificates new certificates representing the appropriate number of shares of Umpqua Common Stock (“New Certificates”), together with checks for payment of cash in lieu of fractional shares to be issued in respect of the Old Certificates.
	9.2     Until Old Certificates have been surrendered and exchanged for New Certificates as herein provided, each outstanding Old Certificate shall be deemed, for all corporate purposes of Umpqua to be whole shares of Umpqua Common Stock. No dividends or other distributions which are declared on Umpqua Common Stock into which shares of WSB Common Stock have been converted after the Effective Date, will be paid to persons otherwise entitled to receive the same until the Old Certificates have been surrendered in exchange for New Certificates in the manner herein provided. In no event shall the persons entitled to receive such dividends or other distributions be entitled to receive interest on such dividends or other distributions.
	9.3     Any Umpqua Common Stock or cash delivered to the Exchange Agent (together with any interest or dividends thereon) and not issued pursuant to this Section 9 at the end of twelve months from the Effective Date shall be returned to Umpqua, in which event the persons entitled thereto shall look only to Umpqua for payment thereof.
	9.4     Notwithstanding anything to the contrary set forth herein, if any holder of WSB Common Stock shall be unable to surrender his or her Old Certificates because such certificates have been lost or destroyed, such holder may deliver in lieu thereof a lost stock certificate affidavit and, unless waived, at the sole option of Umpqua or the Exchange Agent, an indemnity bond together with a surety, each in a form and substance reasonably satisfactory to Umpqua or the Exchange Agent.
	9.5     The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares of Umpqua Common Stock or WSB Common Stock held by it from time to time hereunder, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares of Umpqua Common Stock for the account of the persons entitled hereto.

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	11.1     The shareholders of Umpqua have no rights under Oregon law to dissent from this Plan of Merger.
	11.2     All shares of WSB Common Stock that are “dissenting shares” within the meaning of California General Corporation Law § 1300 (“Dissenters’ Shares”) shall not be converted into or represent a right to receive Umpqua Common Stock unless and until such shares have lost their status as dissenting shares under CGCL § 1300, at which time such shares shall be converted into Umpqua Common Stock pursuant to Section 7.2. Any Dissenting Shareholder who shall be entitled to be paid the value of such shareholder’s shares of WSB Common Stock, as provided in Section 1300 of the CGCL, shall not be entitled to shares of Umpqua Common Stock at the Exchange Ratio in respect thereof unless and until such Dissenting Shareholder shall have failed to perfect or shall have effectively withdrawn or lost such Dissenting Shareholder’s right to dissent from the Holding Company merger under the CGCL, and shall be entitled to receive only the payment provided for by Section 1300 of the CGCL with respect to such Dissenters’ Shares.

UMPQUA HOLDINGS CORPORATION				WESTERN SIERRA BANCORP
By:				By:
		Raymond P. Davis, President and				Gary D. Gall, President and
		Chief Executive Officer				Chief Executive Officer
By:				By:
		Steven L. Philpott, Executive Vice President, General Counsel and Secretary				, Secretary

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	Sincerely,
	HOEFER & ARNETT, INC.

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+ Sandler O’Neil & Partners L.P. 455 Market Street, Suite 2070, San Francisco, CA 95105 T: (415) 978-5050 F: (415) 978-5094		+ www. SandlerOneil.com

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		-2-

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		-3-

	Very truly yours,

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	1) Which were not immediately prior to the reorganization or short-form merger either (A) listed on any national securities exchange certified by the Commissioner of Corporations under subdivision (o) of Section 25100 or (B) listed on the National Market System of the NASDAQ Stock Market, and the notice of meeting of shareholders to act upon the reorganization summarizes this section and Sections 1301, 1302, 1303 and 1304; provided, however, that this provision does not apply to any shares with respect to which there exists any restriction on transfer imposed by the corporation or by any law or regulation; and provided, further, that this provision does not apply to any class of shares described in subparagraph (A) or (B) if demands for payment are filed with respect to 5 percent or more of the outstanding shares of that class.
	2) Which were outstanding on the date for the determination of shareholders entitled to vote on the reorganization and (A) were not voted in favor of the reorganization or, (B) if described in subparagraph (A) or (B) of paragraph (1) (without regard to the provisos in that paragraph), were voted against the reorganization, or which were held of record on the effective date of a short-form merger; provided, however, that subparagraph (A) rather than subparagraph (B) of this paragraph applies in any case where the approval required by Section 1201 is sought by written consent rather than at a meeting.
	3) Which the dissenting shareholder has demanded that the corporation purchase at their fair market value, in accordance with Section 1301.
	4) Which the dissenting shareholder has submitted for endorsement, in accordance with Section 1302.

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	(a) The corporation abandons the reorganization. Upon abandonment of the reorganization, the corporation shall pay on demand to any dissenting shareholder who has initiated proceedings in good faith under this chapter all necessary expenses incurred in such proceedings and reasonable attorneys’ fees.
	(b) The shares are transferred prior to their submission for endorsement in accordance with Section 1302 or are surrendered for conversion into shares of another class in accordance with the articles.
	(c) The dissenting shareholder and the corporation do not agree upon the status of the shares as dissenting shares or upon the purchase price of the shares, and neither files a complaint or intervenes in a pending action as provided in Section 1304, within six months after the date on which notice of the approval by the outstanding shares or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder.
	(d) The dissenting shareholder, with the consent of the corporation, withdraws the shareholder’s demand for purchase of the dissenting shares.

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	2,000,000 shares of preferred stock (“Preferred Stock”). The Preferred Stock may be further divided into one or more series of Preferred Stock. Each series of Preferred Stock will have the preferences, limitations and relative rights as may be set forth for such series either in these Articles or in an amendment to these Articles (“Preferred Stock Designation”). A Preferred Stock Designation may be adopted either by action of the Board of Directors of the Corporation pursuant to Section G of this Article III or by action of the shareholders of the Corporation; and
	100,000,000 shares of common stock (“Common Stock”).

	1. Common Stock Voting Rights. Subject to the voting rights, if any, of any Preferred Stock that may be outstanding, the outstanding shares of Common Stock will (a) each have one vote, (b) vote together as a single voting group and (c) together have unlimited voting rights.

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	2. Preferred Stock Voting Rights. Except as otherwise provided by the Oregon Business Corporation Act or in a Preferred Stock Designation, each share of Preferred Stock will, on each matter which that series of Preferred Stock is entitled to vote, (a) either have (i) one vote if that series of Preferred Stock is not by its terms convertible into Common Stock, or (ii), if that series of Preferred Stock is convertible into Common Stock, one vote for each share of Common Stock into which that series of Preferred Stock may be converted as of the record date for the meeting at which the vote is to be taken, and (b) vote together with shares of the Common Stock as a single voting group.
	3. Nonvoting Preferred Stock. Shares of any series of Preferred Stock which are designated as being “nonvoting” will nonetheless have such voting rights as are required by the Oregon Business Corporation Act.
	4. Noncumulative Voting for Directors. The holders of shares of Common Stock and the holders of shares of any series of Preferred Stock which is entitled to vote with respect to the election of directors will not have the right to cumulate votes in the election of directors.

	1. Voting. The voting rights of the shares of that series of Preferred Stock, including whether the shares have special, conditional or limited voting rights. Alternatively, the Preferred Stock Designation may include a statement to the effect that the shares of that series of Preferred Stock are “nonvoting” except to the extent voting rights are required by the Oregon Business Corporation Act.
	2. Dividends. The dividend rate and preference, if any, of the shares of that series of Preferred Stock. The Preferred Stock Designation will also state (a) whether the dividend rights of shares of

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	that series of Preferred Stock are cumulative, noncumulative or partially cumulative and (b) whether or not the shares of that series of Preferred Stock will participate in any dividends that may be declared with respect to the Common Stock.
	3. Liquidations. The amount of the liquidation preference, if any, of the shares of that series of Preferred Stock. The Preferred Stock Designation will also state whether or not and, if so, when the shares of that series of Preferred Stock will participate with the Common Stock in any liquidating distributions.
	4. Redemption. Whether the shares of that series of Preferred Stock are redeemable at the option of the Corporation, at the option of the holder of the shares or another person or upon the occurrence of a designated event and whether the redemption price for the shares of that series of Preferred Stock will be a designated amount or determined by a designated formula or by reference to an extrinsic event or extrinsic data, whether the redemption price for the shares of such series of Preferred Stock will be paid in cash, indebtedness or other property. The Preferred Stock Designation will also state (a) the terms and conditions, if any, of any redemption, (b) the procedures for effecting any redemption and (c) whether or not and, if so, where and in what manner a sinking fund must be created by the Corporation for the purpose of funding any redemption.
	5. Conversion. Whether the shares of that series of Preferred Stock are convertible at the option of the Corporation, at the option of the holder of the shares or another person or upon the occurrence of a designated event into other securities of the Corporation in a designated amount or in an amount determined by a designated formula or by reference to an extrinsic event or extrinsic data. The Preferred Stock Designation will also state the terms and conditions of the conversion, if any, and the procedures for effecting such a conversion.
	6. Other Terms. Such other preferences, limitations and relative rights as the Board of Directors of the Corporation may determine.

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	(i) any breach of a director’s duty of loyalty to the Corporation or its shareholders;
	(ii) acts or omissions, which are not in good faith or which, involve intentional misconduct or a knowing violation of the law;
	(iii) any unlawful distribution under the provisions of the Oregon Bank Act or other applicable state or federal laws; or
	(iv) any transaction from which the director derived an improper personal benefit.

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	(a) Any breach of the director’s duty of loyalty to the Corporation or its shareholders;
	(b) Acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
	(c) Any distribution to shareholders that is unlawful under the Oregon Business Corporation Act or successor statute; or
	(d) Any transaction from which the director derived an improper personal benefit.

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	(a) By the Board of Directors by majority vote of a quorum consisting of directors who are not or were not parties to the action, suit or proceeding;
	(b) If a quorum cannot be obtained under paragraph (a) of this subsection, by majority vote of a committee duly designated by the Board of Directors consisting solely of two or more directors not at the time parties to the action, suit or proceeding (directors who are parties to the action, suit or proceeding may participate in designation of the committee);
	(c) By special legal counsel selected by the Board of Directors or its committee in the manner prescribed in (a) or (b) or, if a quorum of the Board of Directors cannot be obtained under (a) and a committee cannot be designated under (b) the special legal counsel shall be selected by majority vote of the full Board of Directors, including directors who are parties to the action, suit or proceeding;
	(d) If referred to them by Board of Directors of the Corporation by majority vote of a quorum (whether or not such quorum consists in whole or in part of directors who are parties to the action, suit or proceeding), by the shareholders; or
	(e) By a court of competent jurisdiction.

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	Gordon E. Crim
	One Main Place, 15th Floor
	101 S.W. Main Street
	Portland, Oregon 97204-3223
	(503) 221-0607
	Gordon E. Crim, Incorporator

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