<PAGE>

                                                                    Exhibit 10.9

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement") is between STERLING
FINANCIAL CORPORATION, a Washington corporation ("Sterling") and _______________
("Employee").

         Employee has been employed as an officer of Sterling and/or an
affiliate. Because of Employee's importance to Sterling and the value to be
derived from Employee's continued employment, it is the desire of Sterling and
Employee to set forth certain terms and conditions relating to Employee's
employment as an inducement for Employee continuing his or her employment for so
long as Sterling desires to employ Employee.

         Therefore, the parties agree as follows:

         1. EMPLOYMENT. Sterling agrees to, and does hereby, employ Employee,
and Employee agrees to, and does hereby, accept such employment, on the terms in
this Agreement.

         2. DUTIES. Employee shall perform such duties as the Chairman, the
President or the Board of Directors of Sterling (the "Board") may from time to
time direct. Employee shall initially have the title of Senior Vice President
with duties principally in the area of Finance but this may be changed from time
to time as the Chairman, the President or the Board may determine.

         3. COMPENSATION. During Employee's employment under this Agreement,
Employee shall receive base salary compensation in the amount determined by the
Chairman and the President of Sterling, payable semi-monthly or in such manner
as is consistent with Sterling's policy relating to salaried employees. In
addition, Employee is eligible to participate in Sterling's stock option or
incentive plan(s) then in effect subject to the terms and conditions of such
plan(s). Employee's compensation shall be reviewed by the Chairman and the
President of Sterling annually and, in the sole discretion of the Chairman and
the President of Sterling, such compensation may be adjusted either upward or
downward.

         4. OTHER BENEFITS. Subject to the respective eligibility requirements
and other terms and provisions of the applicable benefit or insurance plans
(including relevant waiting periods), Employee shall be enrolled as a
participant in all employee benefit plans (including retirement and insurance
plans) generally available to other officers of Sterling, as the same may from
time to time be adopted or amended. Employee shall also be entitled to receive
such other perquisites as the Chairman, the President or the Board may from time
to time deem appropriate.

         5. PERFORMANCE OF DUTIES. Employee agrees that during his or her
employment with Sterling: (a) Employee will faithfully perform the duties of
such office or offices as he or she may occupy, which duties shall be such as
may be assigned to him or her by the Chairman, the President or the Board; (b)
Employee will devote to the performance of his or her duties all such time and
attention as the Chairman, the President or the Board shall reasonably require,
taking, however, from

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<PAGE>

time to time such reasonable vacations as are consistent with his or her duties
and Sterling policy; and (c) Employee will do nothing inconsistent with his or
her duties to Sterling.

         6.       TERMINATION.

                  (a) Either Sterling or Employee may terminate Employee's
         employment at any time in their sole discretion. Except as expressly
         provided in this Agreement, upon termination of employment Sterling
         shall have no liability to pay any further compensation or any other
         benefit or sum whatsoever to Employee.

                  (b) Upon termination of employment, Employee's rights under
         all employee pension plans, employee benefit plans, and stock option or
         incentive plans shall be determined under the terms of the plans and
         grants themselves except as otherwise specifically provided in this
         Agreement.

                  (c) If (i) Employee's employment is terminated by Sterling for
         any reason upon or within three years after a Change in Control (as
         defined below) or (ii) Employee resigns for Good Cause (as defined
         below) upon or within three years after a Change in Control, then (but
         in no other circumstances) Employee shall be entitled to receive,
         within five business days after the effective date of such termination
         or resignation, from Sterling or its successor, an amount equal to
         three times Employee's Annual Compensation (as defined below). In
         addition, upon such an event: all stock options held by Employee shall
         become immediately vested and exercisable notwithstanding any
         provisions in the grant of such options regarding vesting, and the
         lapse of the restrictions on Employee's restricted stock, if any, shall
         automatically be accelerated; provided that the provision in this
         Section 6(c) shall be effective only if the Board has taken action
         approving the acceleration; and provided further that the Board may
         exclude any particular grant(s) of restricted stock from the
         acceleration provided for in this subsection (2), either at the time it
         approves the acceleration or in connection with making any particular
         grant of restricted stock.

                  (d) Employee's "Annual Compensation" shall include (i) the
         greater of: (1) the total of Employee's salary and target bonus for the
         calendar year in which the termination occurs (if established before
         the termination) or (2) Employee's salary and actual bonus for the
         prior calendar year (annualized if Employee was not employed by
         Sterling for the entire previous calendar year); (ii) the amount of the
         contributions made or anticipated to have been made on Employee's
         behalf to Sterling's benefit plans for the calendar year in which the
         termination occurs, including without limitation contributions to
         pension plans and plans qualified under Section 125 of the Internal
         Revenue Code of 1986 (cafeteria plans). Annual Compensation shall not
         include the value of any stock options or restricted stock granted to
         Employee.

                  (e) If Employee becomes entitled to the payments and equity
         acceleration described in Section 6(c) (collectively, the "Severance
         Payments"), and if any of the

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         Severance Payments constitute a "parachute payment" under Section 280G
         of the Internal Revenue Code of 1986 (the "Code"), as amended, or any
         successor statute then in effect, then Sterling shall pay an additional
         amount (the "Gross-Up Payment") to Employee at the time specified in
         the following paragraph. The Gross-Up Payment shall be equal to the
         amount necessary so that the net amount retained by Employee, after
         subtracting the parachute excise tax imposed by Section 4999 of the
         Code, as amended, or any successor statute then in effect (the "Excise
         Tax"), and after also subtracting all federal, state or local income
         tax, FICA tax and Excise Tax on the Gross-Up Payment, shall be equal to
         the net amount Employee would have retained if no Excise Tax had been
         imposed and no Gross-Up Payment had been paid. The amount of the
         Gross-Up Payment shall be determined in good faith by independent
         accountants or tax counsel selected by Sterling and acceptable to
         Employee, who shall apply the following assumptions: (i) Employee shall
         be treated as paying federal income taxes at the highest marginal rate
         in the calendar year in which the Gross-Up Payment is made, and (ii)
         Employee shall be treated as paying state and local income taxes at the
         highest marginal rate(s) in the calendar year in which the Gross-Up
         Payment is made in the locality of Employee's residence as of the
         effective date of Employee's termination or resignation, net of the
         maximum reduction in federal income taxes that could be obtained from
         deducting those state and local taxes.

                  (f) The Gross-Up Payment shall be made within five business
         days after the effective date of Employee's termination or resignation,
         provided that if the Gross-Up Payment cannot be determined within that
         time, Sterling shall pay Employee within that time an estimate,
         determined in good faith by Sterling, of the minimum amount of the
         Gross-Up Payment and shall pay the remainder (plus interest at the rate
         provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
         can be determined but in no event later than the 30th day after the
         effective date of Employee's termination or resignation. If the
         estimated payment is more than the amount later determined to have been
         due, the excess (plus interest at the rate provided in Section
         1274(b)(2)(B) of the Code) shall be repaid by Employee within five
         business days after written demand.

                  (g) If the actual Excise Tax imposed is less than the amount
         that was taken into account in determining the amount of the Gross-Up
         Payment, Employee shall repay at the time that the amount of the
         reduced Excise Tax is finally determined the portion of the Gross-Up
         Payment attributable to that reduction (plus the portion of the
         Gross-Up Payment attributable to the Excise Tax, FICA tax and federal,
         state and local income tax imposed on the portion of the Gross-Up
         Payment being repaid by Employee, to the extent the repayment results
         in a reduction in or refund of Excise Tax, FICA tax or federal, state
         or local income tax), plus interest on the amount of the repayment at
         the rate provided in Section 1274(b)(2)(B) of the Code. If the actual
         Excise Tax imposed is more than the amount that was taken into account
         in determining the amount of the Gross-Up Payment, Sterling shall make
         an additional gross-up payment in respect of such excess (plus interest
         at the rate provided in Section 1274(b)(2)(B) of the Code) at the time
         that the amount of the excess is finally determined.

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<PAGE>



         7. CONTINUATION OF MEDICAL INSURANCE. If Employee's employment by
Sterling terminates for any reason (including early retirement) other than gross
misconduct, Employee shall be entitled to continue to participate in Sterling's
self-funded group medical plan, at Employee's expense, to the extent provided in
the plan and under the Consolidated Omnibus Budget Reconciliation Act of 1985
(COBRA).

         8. DEATH OR DISABILITY. If Employee should die or become disabled at
any time during his or her employment hereunder this Agreement shall terminate
and neither Employee nor anyone claiming by, through or under him or her shall
be entitled to any further compensation or other sum under this Agreement (other
than payments made by insurers under policies of life and disability insurance
and any sums which may become available under any employee benefit plan).

         9.       CONFIDENTIALITY; NON-COMPETITION.

                  (a) Employee 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"), including without
         limitation all trade secrets, proprietary information, customer lists,
         customer information, records, memoranda, letters, books, papers,
         reports, accountings, experience or other data, 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 Employee's duties under this Agreement. Employee shall
         not, except to the extent reasonably necessary in the performance of
         his or her duties under this Agreement, divulge to any 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 or her reasonable best efforts to prevent the disclosure of any
         such information by others. Confidential Information is and shall
         remain the property of the Business. No copies thereof shall be made
         which are not retained by the Business, and Employee agrees, on
         termination of his or her employment or on demand of Sterling, to
         deliver the same to Sterling.

                  (b) For a period of one year following termination of
         employment, Employee shall not, without express prior written approval
         of Sterling's Board, directly or indirectly own or hold any proprietary
         interest in any corporation, partnership, sole proprietorship or other
         entity engaged in competition with Sterling or any of its affiliates (a
         "Competitor"). For a period of two years following termination of
         employment, Employee shall not without the prior written consent of
         Sterling: (a) solicit for the account of any Competitor, any customer
         or client of Sterling, its Subsidiaries or affiliates; (b) act on
         behalf of any Competitor to interfere with the relationship between
         Sterling, its Subsidiaries or affiliates

                                       4

<PAGE>



         and their employees; or (c) solicit employees of Sterling, its
         Subsidiaries or affiliates for new employment. 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 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.
         This non-competition provision shall not be deemed to create rights for
         Employee which rights are independent of those otherwise set forth in
         this Agreement.

                  (c) 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. This Section shall: (a) continue
         throughout the duration of the Employee's employment with Sterling,
         except as amended or modified by written agreement of the parties; and
         (b) survive the termination of this Agreement and Employee's
         termination of employment with Sterling.

                  (d) Employee acknowledges and agrees that Sterling has no
         adequate remedy at law for a breach or threatened breach of any of the
         provisions of this Section and, in recognition of this fact, Employee
         agrees that, in the event of such a breach or threatened breach, in
         addition to any remedies at law and notwithstanding the provisions of
         Section 12 hereof, Sterling: (i) without posting any bond, shall be
         entitled to obtain equitable relief in the form of specific
         performance, temporary restraining order, temporary or permanent
         injunction or any other equitable remedy which may then be available
         and (ii) shall have no further obligation to make any payments to
         Employee.

         10. ADDITIONAL DEFINITIONS. For purposes of this Agreement:

                  (a)       "Change in Control" shall mean:

                           (i) The acquisition of ownership, directly or
                  indirectly, beneficially or of record, by any Person (within
                  the meaning of the Securities Exchange Act of 1934 and the
                  rules of the Securities and Exchange Commission thereunder as
                  in effect on the date of this Agreement), other than Sterling,
                  a Subsidiary or any employee benefit plan of Sterling or its
                  Subsidiaries, of shares representing more than 25% of the
                  aggregate voting power of Sterling's voting securities;

                           (ii) 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

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<PAGE>



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;

                           (iii) The good-faith determination by the Board , in
                  its sole discretion, that any Person (other than a Subsidiary
                  or any employee benefit plan of Sterling or a Subsidiary) has
                  acquired direct or indirect possession of the power to direct
                  or cause to direct the management or policies of Sterling,
                  whether through the ability to exercise voting power, by
                  contract or otherwise;

                           (iv) The merger, consolidation, share exchange or
                  similar transaction between Sterling and another Person (other
                  than a Subsidiary) other than a merger in which Sterling is
                  the surviving corporation; or

                           (v) The sale or transfer (in one transaction or a
                  series of related transactions) of all or substantially all of
                  Sterling's assets to another Person (other than a Subsidiary)
                  whether assisted or unassisted, voluntary or involuntary.

                  (b) "Good Cause" for Employee to resign shall mean:

                           (i) A material adverse change, without the prior
                  written consent of Employee, in the duties of the Employee
                  following a Change in Control;

                           (ii) The removal of Employee from the position held
                  immediately prior to the Change in Control, except where such
                  removal is for Cause (as defined below) or by reason of
                  Employee's disability; or

                           (iii) A reduction in the overall level of Employee's
                  total compensation by more than 25% below the average
                  Compensation paid by Sterling to Employee for the 24 months
                  immediately preceding the Change in Control.

                  (c) The removal of Employee from his or her position will be
         considered to be for "Cause" if, but only if, the removal is because
         (i) Employee engages in abusive use of alcohol or other drugs on a
         continuing or recurring basis, (ii) Employee is convicted of any felony
         or of a misdemeanor involving moral turpitude (including forgery,
         fraud, theft or embezzlement), or is convicted or enters into a
         pretrial diversion or similar program in connection with the
         prosecution for an offense involving dishonesty, breach of trust or
         money laundering, or (iii) Employee has engaged in dishonesty, fraud,
         destruction or theft of property of Sterling or a Subsidiary, physical
         attack on another employee, willful nonfeasance, malfeasance or gross
         negligence in the performance of his or her duties, or misconduct
         materially injurious to Sterling or a Subsidiary.

                                       6

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         11. TITLE. Although it is the intention of the parties that during the
term of this Agreement Employee shall be an executive employee of Sterling with
the title and duties described here, it is specifically understood that, subject
to the provisions of Section 10, the employment and the nature and situs of
services to be rendered shall be subject to the authority of the Chairman, the
President or the Board to change the same from time to time and at any time and
to provide for the operation of Sterling as specified by applicable banking laws
and regulations.

         12. RESOLUTION OF DISPUTES. Any dispute arising out of or relating to
this Agreement or Employee's employment (or termination of employment) shall be
submitted to and resolved by final and binding arbitration as provided in the
Binding Arbitration Agreement attached as Exhibit A, whether the claimant is
Employee or Sterling. In any dispute in arbitration or court arising out of or
relating to this Agreement, the losing party shall pay the prevailing party's
reasonable attorneys' fees, costs and expenses.

         13.      MISCELLANEOUS.

                  (a) This Agreement is the entire agreement between the parties
         and may not be modified or abrogated orally or by course of dealing,
         but only by another instrument in writing duly executed by the parties.
         This Agreement replaces and supersedes all prior agreements that
         Employee may have with Sterling, or any Subsidiary of Sterling.
         Employee acknowledges that Employee shall be entitled to change in
         control benefits, severance benefits or other employment separation
         benefits only as specifically provided in this Agreement,
         notwithstanding the terms of any other representation, policy, benefit
         plan or agreement.

                  (b) This Agreement has been drafted in contemplation of and
         shall be construed in accordance with and governed by Washington law.
         Jurisdiction and venue of any court action in connection with this
         Agreement shall be had exclusively in the Superior Court for Spokane
         County, Washington or the U.S. District Court in Spokane.

                  (c) Employee acknowledges that this Agreement has been drafted
         by counsel for Sterling, and that Employee has not relied upon such
         counsel with respect to this Agreement.

                  (d) If a court or arbitrator of competent jurisdiction or
         governmental authority declares any term or provision hereof invalid,
         unenforceable or unacceptable, the remaining terms and provisions
         hereof shall be unimpaired and the invalid, unenforceable or
         unacceptable term or provision shall be replaced by a term or provision
         that is valid, enforceable and acceptable and that comes closest to
         expressing the intention of the invalid, unenforceable or unacceptable
         term or provision.

                  (e) Employee may not assign Employee's rights or delegate
         Employee's duties under this Agreement.

                                       7

<PAGE>



         DATED effective as of the 1st day of July, 1999.

                                            STERLING FINANCIAL CORPORATION

                                            By:
                                               ---------------------------------
                                               NED M. BARNES
                                               Secretary

                                            EMPLOYEE:
                                                     ---------------------------
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                                    EXHIBIT A

                          BINDING ARBITRATION AGREEMENT

         This Binding Arbitration Agreement is in consideration of, and
incorporated into, that certain Employment Agreement between the parties
effective as of July 1, 1999. I, the employee who is a party to the Employment
Agreement to which this Exhibit is attached, as well as Sterling, in
consideration of the Employment Agreement and the mutual provisions hereof,
agree as follows:

         Any and all disputes which involve or relate in any way to my
employment (or termination of employment) with Sterling shall be submitted to
and resolved by final and binding arbitration.

         Sterling and I understand that by entering into this Binding
Arbitration Agreement, we are each waiving any right we may have to file a
lawsuit or other civil action or proceeding relating to my employment with
Sterling, and are waiving any right we may have to resolve employment disputes
through trial by jury. We agree that arbitration shall be in lieu of any and all
lawsuits or other civil legal proceedings relating to my employment.

         This Binding Arbitration Agreement is intended to cover all civil
claims which involve or relate in any way to my employment (or termination of
employment) with Sterling, including, but not limited to, claims of employment
discrimination or harassment on the basis of race, sex, age, religion, color,
national origin, sexual orientation, disability and veteran status (including
claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination
in Employment Act, the Americans with Disabilities Act, the Employee Retirement
Income Security Act ("ERISA"), the Fair Labor Standards Act, the Immigration
Reform and Control Act and any other local, state or federal law concerning
employment or employment discrimination), claims based on violation of public
policy or statute, and claims against individuals or entities employed by,
acting on behalf of, or affiliated with Sterling. However, ERISA plan benefit
issues and claims for workers compensation or for unemployment compensation
benefits are not covered by this Binding Arbitration Agreement. The statutes of
limitations otherwise applicable under law shall apply to all claims made in the
arbitration.

         I understand and agree that despite anything in this Binding
Arbitration Agreement to the contrary, I am not waiving the right to file or
institute a complaint or charge with any government agency authorized to
investigate or resolve employment-related matters, including but not limited to
the United States Equal Employment Opportunity Commission, the Department of
Labor, the Occupational Safety and Health Commission, the National Labor
Relations Board, the Immigration and Naturalization Service, and any other
comparable local, state or federal agency. I also understand and agree that
despite anything in this Binding Arbitration Agreement to the contrary, either
party may request a court to issue such temporary or interim relief (including
temporary restraining orders and preliminary injunctions) as may be appropriate,
either before or after arbitration is commenced. The temporary or interim relief
may remain in effect pending the

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outcome of arbitration. No such request shall be a waiver of the right to submit
any dispute to arbitration.

         This Binding Arbitration Agreement does not constitute an employment
contract, require discharge only for cause, or require any particular corrective
action or discharge procedures.

         Arbitration under this Binding Arbitration Agreement shall be conducted
before a single arbitrator and shall take place within the state where I am
currently employed by Sterling, or where I was so employed at the time of
termination.

         In order to initiate arbitration, Sterling or I must so notify the
other party in writing of their decision to initiate arbitration, either by
personal delivery or certified mail. The notification should include the
following information about the employee: name, home address, work address, work
and home phone number, and the following information about the occurrence: date,
location, nature of the claims or dispute, facts upon which the claims are made,
and remedy requested. Any notice of arbitration initiated by Sterling shall be
sent to my last known residence address as reflected in my personnel file at
Sterling. Notice of arbitration initiated by me shall be sent to Sterling c/o
the Chief Executive Officer.

         Within thirty (30) days after receipt of notice of arbitration,
Sterling and I will attempt to agree upon a mutually acceptable arbitrator. If
Sterling and I are unable to agree upon an arbitrator, we will submit the
dispute to the American Arbitration Association ("AAA"). If AAA is, for some
reason, unable or unwilling to accept the matter, we will submit the matter to a
comparable arbitration service. The arbitration shall be conducted in accordance
with the laws of the state in which the arbitration is conducted and the rules
and requirements of the arbitration service being utilized, to the extent that
such rules and requirements do not conflict with the terms of this Binding
Arbitration Agreement.

         At the request of either Sterling or myself, the arbitrator will
schedule a pre-hearing conference to, among other things, agree on procedural
matters, obtain stipulations, and attempt to narrow the issues.

         During the arbitration process, Sterling and I may each make a written
demand on the other for a list of witnesses, including experts, to be called
and/or copies of documents to be introduced at the hearing. The demand must be
served at least thirty (30) days prior to the hearing. The list and copies of
documents must be delivered within twenty-five (25) days of service of the
demand.

         Either party shall be entitled to conduct a limited amount of discovery
prior to the arbitration hearing. Either party may take a maximum of two (2)
depositions. Either party may apply to the arbitrator for further discovery.
Such further discovery may, in the discretion of the arbitrator, be awarded upon
a showing of sufficient cause. If any documents to be produced or requested for
production contain or refer to matters which are private, proprietary and/or
confidential, the arbitrator shall make an appropriate protective order
prohibiting or limiting use and disclosure of

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<PAGE>



such documents and providing for return of documents produced after the
arbitration is concluded.

         Either party may file a brief with the arbitrator. Each brief must be
served on the arbitrator and the other party at least five (5) working days
prior to the hearing, and if not timely served must be disregarded by the
arbitrator. The brief shall specify the facts the party intends to prove,
analyze the applicable law or policy, and specify the remedy sought. At the
close of the hearing, each party shall be given leave to file a post-hearing
brief. The time for filing the post-hearing brief shall be set by the
arbitrator.

         I understand that, at my expense, I have the right to hire an attorney
to represent me in the arbitration, and Sterling has that same right. I also
understand that all parties shall have the right to present evidence at the
arbitration, through testimony and documents, and to cross-examine witnesses
called by another party. Each party agrees to pay the fees of any witnesses
testifying at that party's request. Each party also agrees to pay the cost of
any stenographic record of the arbitration hearing should that party request any
such record. The requesting party must notify the other of such arrangements at
least two (2) working days in advance of the hearing.

         Any postponement or cancellation fee imposed by the arbitration service
will be paid by the party requesting the postponement or cancellation. During
the time the arbitration proceedings are ongoing, Sterling will advance any
required administrative or arbitrator's fees. Each party will pay its own
witness fees.

         At the conclusion of the arbitration, each party agrees to promptly pay
any arbitration award against it.

         We agree that the decision of the arbitrator shall be final and binding
on all parties and shall be the exclusive remedy of the parties. The arbitrator
shall issue a written and signed statement of the basis of his or her decision,
including findings of fact and conclusions of law. In making the decision and
award, if any, the arbitrator shall apply applicable substantive law. The
arbitrator may only award any remedy that would have been available in court.
The decision and award, if any, shall be consistent with the terms of this
Binding Arbitration Agreement and shall include an allocation of the costs of
the arbitration proceeding between the parties.

         This Binding Arbitration Agreement may be enforced by a court of
competent jurisdiction through the filing of a petition to compel arbitration,
or otherwise. The decision and award of the arbitrator may also be judicially
enforced pursuant to applicable law.

         Because of the interstate nature of Sterling's business, this Binding
Arbitration Agreement is governed by the Federal Arbitration Act, 9 U.S.C.
Section 1 et seq. (the "FAA"). The provisions of the FAA (and to the extent not
preempted by the FAA, the provisions of the law of the state of my principal
place of employment with Sterling that generally apply to commercial arbitration
agreements, such as provisions granting stays of court actions pending
arbitration) are incorporated

                                       11

<PAGE>


into this Binding Arbitration Agreement to the extent not inconsistent with the
other terms of this Binding Arbitration Agreement.

         We agree that if any provision of this Binding Arbitration Agreement is
found to be unenforceable to any extent or in violation of any statute, rule,
regulation or common law, it will not affect the enforceability of the remaining
provisions and the court shall enforce the affected provision and all remaining
provisions to the fullest extent permitted by law.

         This Binding Arbitration Agreement shall remain in full force and
effect at all times during and subsequent to my employment with Sterling, or any
successor in interest to Sterling.

                                            STERLING FINANCIAL CORPORATION

                                            By
                                              ----------------------------------
                                              NED M. BARNES
                                              Secretary

                                            EMPLOYEE:
                                                     ---------------------------

                                       12