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                                                                    Exhibit 10.7

                              AMENDED AND RESTATED

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT, made effective as of July 1, 1999, by and between
STERLING FINANCIAL CORPORATION ("Sterling") and HAROLD B. GILKEY (the
"Executive"),

                              W I T N E S S E T H :
         WHEREAS, the Executive is Chairman of the Board and Chief Executive
Officer of Sterling and Sterling desires to retain the Executive and the
Executive is willing to continue to serve in such capacities on the terms and
conditions herein set forth; and
         WHEREAS, the parties desire to enter into this Agreement, which is
intended to amend and supersede an existing Employment Agreement, as amended
(the "Prior Agreement");
         NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
         1. EMPLOYMENT. Sterling agrees to continue to employ the Executive, and
the Executive agrees to continue to be employed by Sterling, upon the terms and
conditions hereinafter provided until June 30, 2004 (the "Term").
         2. POSITION AND DUTIES. During the Term, Sterling agrees to employ the
Executive to serve as the Chairman of the Board and Chief Executive Officer of
Sterling and the Executive will have such powers and duties as are commensurate
with such position and as may be conferred upon him by the Board of Directors of
Sterling (the "Board"). During the Term, and except for illness or incapacity
and reasonable vacation periods of no more than four weeks in any fiscal year
(or such other period as shall be consistent with Sterling's policies for other
key executives), the Executive shall devote all of his business time, attention,
skill and efforts exclusively to the business and affairs of Sterling and its
subsidiaries and affiliates, provided, however, that the Executive may serve on
other boards as a director or trustee if such service does not interfere with
his ability to discharge his duties and responsibilities to Sterling.

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         3. COMPENSATION. For all services rendered by the Executive in any
capacity required hereunder during the Term, including, without limitation,
services as an executive, officer, director, or member of any committee of
Sterling, or any subsidiary, affiliate or division thereof, the Executive shall
be compensated as follows:
         (a) Base Salary. Sterling shall pay the Executive a fixed minimum
         salary of $280,000 per annum (such amount or such higher annual amount
         as is being paid from time to time pursuant to the terms hereof being
         referred to as the "Base Salary"). The Base Salary shall be subject to
         such periodic review (which shall occur at least annually) and such
         periodic increases as the Board shall deem appropriate in accordance
         with Sterling's customary procedures and practices regarding the
         salaries of senior officers. The Base Salary shall be payable in
         accordance with the customary payroll practices of Sterling, but in no
         event less frequently than monthly.
         (b) Bonus Awards. The Executive shall be entitled to receive an
         incentive bonus (the "Incentive Bonus") for each fiscal year during
         the Term. The Incentive Bonus shall be paid within thirty days of the
         end of each fiscal year. The Incentive Bonus shall be a minimum of ten
         percent of the Executive's Base Salary and the Executive shall be
         awarded a minimum of 5,000 incentive stock options under Sterling's
         stock option or incentive plan(s) then in effect. The Incentive Bonus
         may be increased, upon the recommendation of the Personnel Committee
         and the approval of the Board, to a maximum of one hundred percent of
         the Executive's Base Salary depending, among other factors, upon the
         attainment of performance goals set by the Board for the Executive and
         for Sterling. At the Executive's sole election, made before the
         beginning of each calendar year in which an Incentive Bonus is paid,
         up to one hundred percent of such Incentive Bonus shall be paid into
         Sterling's deferred compensation plan then in effect.
         (c) Stock Options. The Executive shall be eligible to receive grants
         under Sterling's stock option or incentive plan(s) then in effect
         subject to the terms and conditions of such plan(s).
         (d) Perquisites. Sterling also will furnish the Executive during each
         fiscal year of the Term, without cost to him except any associated tax
         liability, with reasonable (i) payment for

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         tax preparation and financial planning; (ii) payment for an annual
         physical examination of the Executive by a physician selected by the
         Executive; (iii) reimbursement for club membership fees or dues; and
         (iv) payment of an automobile allowance, it being understood that the
         club membership fees or dues and the automobile allowance shall be
         primarily to further the business of Sterling.
         (e) Split Dollar Life Insurance Plan. Sterling shall continue in force,
         for the benefit of the Executive, a split-dollar life insurance plan
         which is, or is substantially similar to, the split dollar life
         insurance plan which is currently in effect.
         (f) Goodwill Lawsuit. Sterling is the plaintiff in a lawsuit in the
         United States Court of Federal Claims (the "Goodwill Lawsuit").
         Notwithstanding anything to the contrary herein, if and when a
         settlement or judgment amount is received by Sterling or its
         affiliates, successors or assigns, as a result of the Goodwill Lawsuit
         or a related lawsuit, the Executive shall be paid three percent of the
         gross amount received, in recognition of the Executive's substantial
         contribution in bringing about the settlement or judgment. The parties
         recognize and agree that any material decisions regarding the
         management, settlement or dismissal of the Goodwill Lawsuit will be
         made by the Board. This provision shall survive any termination of
         this Agreement.
         (g) Additional Benefits. Except as modified by this Agreement, the
         Executive shall be entitled to participate in all compensation or
         employee benefit plans or programs, and to receive all benefits,
         perquisites and emoluments, for which any salaried employees of
         Sterling are eligible under any plan or program now or hereafter
         established and maintained by Sterling for senior officers, to the
         fullest extent permissible under the general terms and provisions of
         such plans or programs and in accordance with the provisions thereof,
         including group hospitalization, health, dental care, life or other
         insurance, tax-qualified pension, savings, thrift, 401(k) and
         profit-sharing plans, termination pay programs, sick-leave plans,
         travel or accident insurance, salary continuation plans, disability
         insurance, automobile allowance or automobile lease plans, and
         executive contingent compensation plans, including, without
         limitation, stock option or incentive plan(s) then in effect. In
         addition, the Executive shall be entitled to receive such fees as are
         established and paid from time to

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         time to members of the Board generally for their attendance at
         Sterling Board and Committee meetings.
         4. BUSINESS EXPENSES. It is understood that for the Executive to
successfully perform his duties hereunder so as to produce the greatest economic
return to Sterling, it is necessary for the Executive to entertain persons
having an existing or prospective business relationship with Sterling and to
attend seminars, conventions and continuing education programs. Sterling,
therefore, shall pay directly or reimburse the Executive for all reasonable
travel, entertainment or other expenses incurred by the Executive (and his
spouse where there is a legitimate business reason for his spouse to accompany
him) in connection with the performance of his duties and obligations under this
Agreement, subject to the Executive's presentation of appropriate vouchers in
accordance with such procedures as Sterling may from time to time establish for
senior officers and to preserve any deductions for Federal income taxation
purposes to which Sterling may be entitled.
         5. EFFECT OF TERMINATION OF EMPLOYMENT OTHER THAN IN CONNECTION WITH A
            CHANGE IN CONTROL.
         (a) Certain Terminations. In the event the Executive's employment
         hereunder terminates due to either Permanent Disability, a Without
         Cause Termination or a Constructive Discharge, Sterling shall, as
         severance pay continue, subject to the provisions of Section 7 below,
         to pay the Executive's Base Salary as in effect at the time of such
         termination until (A) the expiration of the Term or (B) for a
         three-year period beginning on the date of Termination of Employment,
         whichever is longer (the "Severance Period"), provided, that in the
         case of Permanent Disability, such payments shall be offset by any
         amounts otherwise paid to the Executive under Sterling's disability
         program generally available to other employees. In addition, earned but
         unpaid Base Salary and Incentive Bonus amounts and amounts (whether
         vested or not) held for the Executive's account in Sterling's deferred
         compensation plan then in effect as of the date of Termination of
         Employment shall be payable in full. Group hospitalization, health,
         dental care, life or other insurance, including travel or accident
         insurance, disability insurance and the perquisites set forth in
         Section 3(d) shall continue through the end of the Severance Period.
         All stock

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          options and other incentive awards held by the Executive shall become
          fully exercisable during the Severance Period.
          (b) Other Terminations. In the event that the Executive's employment
          hereunder terminates due to a Termination for Cause or the Executive's
          death, or the Executive voluntarily terminates employment with
          Sterling for reasons other than a Constructive Discharge or Permanent
          Disability, earned but unpaid Base Salary and Incentive Bonus amounts
          as of the date of Termination of Employment shall be payable in full.
          However, no other payments shall be made, or benefits provided, by
          Sterling under this Agreement except for stock options and other
          incentive awards held by the Executive pursuant to the terms of the
          grant(s) thereof, vested benefits payable under the terms of the
          deferred compensation plan then in effect, and any other benefits
          which the Executive is entitled to receive under the terms of employee
          benefit programs maintained by Sterling or its affiliates for its
          employees.
          (c) Definitions. For purposes of this Agreement, the following terms
          have the following meanings:
                  (i) The term "Termination for Cause" means, to the maximum
                  extent permitted by applicable law, a termination of the
                  Executive's employment by Sterling because the Executive has
                  (A) breached this Agreement or, having received reasonable
                  notice of and an opportunity to cure any deficiency, failed to
                  perform his duties under applicable law or the Bylaws of
                  Sterling, and such breach or failure to perform constitutes
                  self-dealing, willful misconduct or recklessness; (B) been
                  convicted of a felony, as evidenced by a binding and final
                  judgment, order or decree of a court of competent
                  jurisdiction, in effect after exhaustion or lapse of all right
                  of appeal; or (C) violated the provisions of Section 7 herein.
                  (ii) The term "Constructive Discharge" means a termination of
                  the Executive's employment by the Executive due to a failure
                  of Sterling or its successors, without the prior consent of
                  the Executive, to fulfill the obligations under this Agreement
                  in any material respect, including (A) any failure of the
                  shareholders of Sterling to elect or reelect, or of Sterling
                  to appoint or reappoint, the Executive as a member of the

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                  Board, or to the offices of Chairman of the Board and Chief
                  Executive Officer of Sterling, or (B) any other material
                  adverse change by Sterling in the functions, duties or
                  responsibilities of the Executive's position with Sterling.
                  (iii) The term "Without Cause Termination" means a termination
                  of the Executive's employment by Sterling, for a reason other
                  than Permanent Disability, retirement, expiration of the Term,
                  or Termination for Cause. (iv) The term "Permanent Disability"
                  means the inability of the Executive to work for a period of
                  six full calendar months during any twelve consecutive
                  calendar months due to illness or injury of a physical or
                  mental nature. Any questions as to the existence of the
                  Disability of Executive as to which Executive and Sterling
                  cannot agree shall be determined in writing by a qualified
                  independent physician mutually acceptable to Executive and
                  Sterling. If Executive and Sterling cannot agree as to a
                  qualified independent physician, each shall appoint such a
                  physician and those two physicians shall select a third who
                  shall make such determination in writing. The determination of
                  Disability made in writing to Sterling and Executive shall be
                  final and conclusive for all purposes under this Agreement.
         6. EFFECT OF TERMINATION OF EMPLOYMENT IN CONNECTION WITH A CHANGE IN
         CONTROL. (a) Definitions. For purposes of this Agreement, the following
         terms shall have the following meanings:
                  (i)       The term "Change in Control" means any of the
                            following events:
                            (A) the acquisition by any person, (as such term is
                            used in Section 13(d) and 14(d) of the Securities
                            Exchange Act of 1934) other than Sterling, its
                            affiliates or benefit plans sponsored by Sterling,
                            or its affiliates of ownership of stock possessing
                            twenty percent or more of the total voting power of
                            Sterling;
                            (B) the approval by the shareholders of  Sterling of
                            (1) any consolidation, merger, or other similar type
                            of transaction involving Sterling in which the
                            holders of voting stock of Sterling immediately
                            before the consolidation, merger, or similar
                            transaction, will not own fifty percent or more of
                            the

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                            voting shares of the continuing or surviving
                            corporation immediately after such consolidation,
                            merger, or similar transaction, or (2) any sale,
                            lease, exchange or other transfer (in one
                            transaction or a series of related transactions) of
                            all or substantially all of the assets of Sterling;
                            or
                           (C) a change of twenty-five percent (rounded to the
                           next whole person) in the membership of the Board of
                           Directors of Sterling or any successor within a
                           twelve-month period, unless the election or
                           nomination for election by shareholders of each new
                           director within such period is approved by the vote
                           of eighty-five percent (rounded to the next whole
                           person) of the directors then still in office who
                           were in office at the beginning of the said
                           twelve-month period.
                  (ii) "Separation Period" means the three-year period beginning
                  on the date of the Executive's Termination of Employment.
                  (iii) "Termination of Employment" shall mean the termination
                  of the Executive's actual employment with Sterling.
                  (iv) "Termination Upon a Change of Control" shall mean a
                  Termination of Employment upon or within eighteen months after
                  a Change of Control.
         (b) Payments for Termination upon a Change of Control. Within twenty
         days of the Executive's Termination upon a Change in Control, Sterling
         shall pay to the Executive in a single payment in cash and/or provide
         to the Executive, as applicable, the following:
                  (i) the Executive's earned but unpaid Base Salary and
                  Incentive Bonus amounts and amounts (whether vested or not)
                  held for the Executive's account in the deferred compensation
                  plan then in effect as of the date of Termination of
                  Employment;
                  (ii) the benefits, if any, to which the Executive is entitled
                  as a former employee under the employee benefit programs and
                  compensation plans and programs maintained for the benefit of
                  Sterling's officers and employees;
                  (iii) continued group hospitalization, health, dental care,
                  life or other insurance, including travel or accident
                  insurance and disability insurance, and the perquisites set
                  forth in Section 3(d) throughout the Separation Period, with
                  coverage equivalent to

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                  the coverage to which the Executive  would have been entitled
                  had the Executive continued working for Sterling during the
                  Separation Period at the highest annual rate of Base Salary
                  achieved during the Executive's period of actual employment
                  with Sterling, provided, however, that the Executive may upon
                  written notice elect to receive the present value of such
                  coverage in cash in a lump sum, computed using a discount rate
                  of 6% per year compounded monthly.
                  (iv) an amount equal to the Base Salary and Incentive Bonus
                  amounts the Executive would have earned if the Executive had
                  continued working for Sterling during the Separation Period,
                  at the highest annual rate of Base Salary, and the highest
                  annual Incentive Bonus achieved during the Executive's period
                  of actual employment with Sterling; and
                  (v) an amount equal to Sterling's contributions to which the
                  Executive would have been entitled under Sterling's 401(k)
                  Plan if the Executive had continued working for Sterling
                  during the Separation Period at the highest annual rate of
                  Base Salary achieved during the Executive's period of actual
                  employment with Sterling, and the Executive making the maximum
                  amount of employee contributions as are permitted under such
                  plans.
         (c) Options and Stock Appreciation Rights. All stock options and other
         incentive awards held by the Executive shall become fully exercisable
         during the Separation Period.
         (d) Adjustment for Taxes. In the event that either Sterling's
         independent public accountants or the Internal Revenue Service
         determines that any payment, coverage, benefit or benefit acceleration
         provided to Executive, whether specifically provided for in this
         Agreement or otherwise, is subject to the excise tax imposed by Section
         4999 (or any successor provision) ("Section 4999") of the Internal
         Revenue Code of 1986, as amended (the "Code"), Sterling, within 30 days
         thereafter, shall pay to Executive, in addition to any other payment,
         coverage or benefit due and owing hereunder, an amount determined by
         multiplying the rate of excise tax then imposed by Section 4999 by the
         amount of the "excess parachute payment" received by Executive
         (determined without regard to any payments made to the Executive
         pursuant to this paragraph) and dividing the product so obtained by the

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         amount obtained by subtracting the aggregate local, state and Federal
         income tax rate applicable to the receipt by Executive of the "excess
         parachute payment" (taking into account the deductibility for Federal
         income tax purposes of the payment of state and local income taxes
         thereon) from the amount obtained by subtracting from 1.00 the rate of
         excise tax then imposed by Section 4999 of the Code, it being
         Sterling's intention that the Executive's net after tax position be
         identical to that which would have obtained had Sections 280G and 4999
         not been part of the Code.
         (e) In the event that, on or after the occurrence of a Change in
         Control, Sterling fails to make any payment or provide any coverage to
         Executive arising out of or relating in any way to this Agreement or to
         the Executive's employment by Sterling (collectively, "Employment
         Rights"), then Sterling shall pay to the Executive and reimburse the
         Executive for the Executive's full costs (including, without
         limitation, the fees and expenses of the Executive's attorneys and
         court and related costs) of enforcing the Executive's Employment
         Rights. In addition, if the enforceability of this Agreement or the
         payment of any benefit to the Executive hereunder is disputed by
         Sterling on or after the occurrence of a Change in Control, then the
         Term of this Agreement shall be extended for the period of the dispute
         in the event of a final judicial determination that the Executive is
         entitled to at least fifty percent (in dollar amount) of the benefits
         which he claimed from, and which were disputed by, Sterling.
         7. OTHER DUTIES OF EXECUTIVE DURING AND AFTER TERM.
         (a) Confidential Information. The Executive recognizes and acknowledges
         that all information pertaining to the affairs, business, clients, or
         customers of Sterling or any of its subsidiaries or affiliates (any or
         all of such entities being hereinafter referred to as the "Business"),
         as such information may exist from time to time, other than information
         that Sterling has previously made publicly available or which is in the
         public domain, is confidential information and is a unique and valuable
         asset of the Business, access to and knowledge of which are essential
         to the performance of the Executive's duties under this Agreement. The
         Executive shall not, through the end of the Term, except to the extent
         reasonably necessary in the performance of his duties under this
         Agreement, divulge to any

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         person, firm, association, corporation, or governmental agency, any
         information concerning the affairs, business, clients, or customers of
         the Business (except such information as is required by law to be
         divulged to a government agency or pursuant to lawful process), or make
         use of any such information for his own purposes or for the benefit of
         any person, firm, association or corporation (except the Business) and
         shall use his reasonable best efforts to prevent the disclosure of any
         such information by others. All records, memoranda, letters, books,
         papers, reports, accountings, experience or other data, and other
         records and documents relating to the Business, whether made by the
         Executive or otherwise coming into his possession, are confidential
         information and are, shall be, and shall remain the property of the
         Business. No copies thereof shall be made which are not retained by the
         Business, and the Executive agrees, on termination of his employment or
         on demand of Sterling, to deliver the same to Sterling.
         (b) Non-Compete. Through the end of the Term, the Executive shall not
         without express prior written approval of Sterling's Board, directly or
         indirectly own or hold any proprietary interest in, or be employed by
         or receive remuneration from, any corporation, partnership, sole
         proprietorship or other entity engaged in competition with Sterling or
         any of its affiliates (a "Competitor"), other than severance-type or
         retirement-type benefits from entities constituting prior employers of
         the Executive. The Executive also agrees that he will not solicit for
         the account of any Competitor, any customer or client of Sterling or
         its affiliates, or, in the event of the Executive's Termination of
         Employment, any entity or individual that was such a customer or client
         during the 12-month period immediately preceding the Executive's
         Termination of Employment. The Executive also agrees not to act on
         behalf of any Competitor to interfere with the relationship between
         Sterling or its affiliates and their employees. In addition, if the
         Executive obtains non-competitive employment during the Term, for such
         period the Executive agrees not to solicit employees of Sterling or its
         affiliates for new employment without the prior written consent of
         Sterling. For purposes of this section, (i) the term "proprietary
         interest" means legal or equitable ownership, whether through
         stockholdings or otherwise, of greater than a 20% equity interest in a
         business, firm or entity, and (ii) an entity shall be considered to be
         "engaged in competition" if such entity

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         is, or is a holding company for, a bank, savings and loan association
         or other financial services business engaged in a business that
         competes with Sterling in the States of Washington, Idaho, Montana or
         Oregon.
         (c) Remedies. Sterling's obligation to make payments, deliver shares of
         stock or provide for any benefits under this Agreement (except to the
         extent vested or exercisable) shall cease upon a violation of the
         preceding provisions of this section. The Executive's Agreement as set
         forth in this Section 7 shall: (a) survive the termination of this
         Agreement, and continue throughout the duration of the Executive's
         employment with Sterling, except as amended or modified by written
         agreement of the parties; and (b) survive the Executive's Termination
         of Employment with Sterling.
         (d) Modification of Terms. If any restriction in this Section 7 is
         finally adjudicated by a court of competent jurisdiction to exceed the
         time, geographic, service or other limitations permitted by applicable
         law in any jurisdiction, such restriction may be modified and narrowed
         by a court to the maximum time, geographic, service or other
         limitations permitted by applicable law so as to preserve and protect
         Sterling's legitimate business interest, without negating or impairing
         any other restrictions or undertaking set forth in the Agreement. (e)
         Change in Control. The provisions of this Section 7 shall be
         inapplicable if the Executive's Termination of Employment is a
         "Termination upon a Change in Control" as defined in Section 6 of this
         Agreement.
         8. WITHHOLDING TAXES. Sterling may directly or indirectly withhold from
any payments made under this Agreement all Federal, state, city or other taxes
as shall be required pursuant to any law or governmental regulation or ruling.
         9. CONSOLIDATION, MERGER, OR SALE OF ASSETS. Nothing in this Agreement
shall preclude Sterling from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another corporation
which assumes this Agreement and all obligations and undertakings of Sterling
hereunder. Upon such a consolidation, merger or transfer of assets and
assumption, the term "Sterling" as used herein shall mean such other corporation
and this Agreement shall continue in full force and effect.

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         10. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be given in writing and shall be deemed to
have been duly given if delivered or mailed, postage prepaid, by same day or
overnight mail as follows:

                    (a)    To Sterling:

                           111 Wall Street
                           Spokane, WA 99201

                           Attention: Chief Financial Officer

                           With a copy to:

                           Witherspoon, Kelley, Davenport & Toole, P.S.
                           422 West Riverside, Ste 1100
                           Spokane, WA  99201-0390

                           (b) To the Executive:

                           At his regular office and to

                           South 3924 Eastgate Court
                           Spokane, WA  99203

or to such other address as either party shall from time-to-time specify in
writing to the other.
         11. NO ATTACHMENT. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect; provided, however, that nothing in this Section
11 shall preclude the assumption of such rights by executors, administrators or
other legal representatives of the Executive or his estate and their assigning
any rights hereunder to the person or persons entitled thereto.
         12. NO MITIGATION. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this Agreement be reduced by any compensation earned by other employment
or otherwise, except as provided herein.

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         13. SOURCE OF PAYMENT. All payments provided for under this Agreement
shall be paid in cash from the general funds of Sterling. To the extent that any
person acquires a right to receive payments from Sterling hereunder, such right,
without prejudice to rights which employees may have, shall be no greater than
the right of an unsecured creditor of Sterling.
         14. FURTHER ACTION. Sterling shall perform all acts and execute all
documents as may be reasonably necessary to effect performance of this Agreement
by Sterling. In the event Sterling's Deferred Compensation Plan, the 1992 Stock
Option Plan and the 1998 Long-Term Incentive Plan or plans which are
substantially similar to such plans are not maintained, Sterling shall provide
the Executive with compensation which is substantially similar in financial
effect to the compensation which would otherwise have been provided through such
plans. References herein to deferred compensation, stock option or incentive
plan(s) and any other benefit plans shall be deemed to include all successor
plans. Nothing in this Agreement shall be deemed to be a modification of
Sterling's stock option or incentive plans.
         15. SEVERABILITY. If any provision of this Agreement or application
thereof to anyone or under any circumstances is finally adjudicated by a court
of competent jurisdiction to be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect any other provision or
application and shall not invalidate or render unenforceable such provision or
application in any other jurisdiction.
         16. CONTENTS OF AGREEMENT. This Agreement supersedes all prior
agreements and sets forth the entire understanding among the parties hereto with
respect to the subject matter hereof and cannot be changed, modified, extended
or terminated except upon written amendment approved by the parties hereto.
         17. GOVERNING LAW. The validity, interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the State of
Washington, and the Executive consents to the jurisdiction of the state and
federal courts of Washington in any dispute arising under this Agreement.
         18. SURVIVAL OF BENEFITS. Any section of this Agreement which provides
a benefit to the Executive and which does not expressly provide for its
termination upon the expiration of the Term shall survive the expiration of the
Term and the obligation to provide benefits to the Executive as

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set forth in such Section shall remain binding upon Sterling until such time as
the Executive's employment relationship with Sterling is terminated and the
benefits provided under such Section are paid in full to the Executive. Anything
to the contrary herein notwithstanding, following any Termination of Employment
including retirement, Sterling shall continue to provide medical, dental,
disability and travel accident insurance coverages for the Executive and his
spouse to the same extent as if the Executive had continued in Sterling's
employ, provided that such coverages shall be offset by the receipt of any
alternate benefits under Medicare or similar programs.
         19. REPRESENTATIONS. The Executive hereby represents and warrants that
he has the legal capacity to execute and perform this Agreement, that it is a
valid and binding agreement against him according to its terms, and that its
execution and performance by him does not and will not violate the terms of any
existing agreement or understanding to which the Executive is a party. In
addition, the Executive represents and warrants that he knows of no reason why
he is not physically capable of performing his obligations under this Agreement
in accordance with its terms.
         20. MISCELLANEOUS. All section headings are for convenience only. This
Agreement may be executed in any number of counterparts, each of which when
executed shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or account for any
of the other counterparts.
         IN WITNESS WHEREOF, and intending to be legally bound, Sterling has
caused this Agreement to be executed by its duly authorized representatives and
the Executive has signed this Agreement, all as of the first date above written.

                                                  STERLING FINANCIAL CORPORATION

                                                  BY: /s/ Robert B. Larrabee
                                                     ---------------------------
                                                     ROBERT B. LARRABEE

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ATTEST:

STERLING FINANCIAL CORPORATION

BY: /s/ Daniel G. Byrne
   -----------------------------------
       DANIEL G. BYRNE
       Senior Vice President - Finance

                                                     /s/ Harold B. Gilkey
                                                --------------------------------
                                                         HAROLD B. GILKEY

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