Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UVbEpgcB2XF9zXlxrtDszu2dtVOXjz0Epf2EqVbKu8XlHFtAmiw9jlZM0X76YMPu vRs/pkWBrrytqG39Xb1W3A== 0000950123-10-083871.txt : 20100903 0000950123-10-083871.hdr.sgml : 20100903 20100903163646 ACCESSION NUMBER: 0000950123-10-083871 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20100903 DATE AS OF CHANGE: 20100903 GROUP MEMBERS: CHARLES R. KAYE GROUP MEMBERS: JOSEPH P. LANDY GROUP MEMBERS: WARBURG PINCUS AND CO. GROUP MEMBERS: WARBURG PINCUS LLC GROUP MEMBERS: WARBURG PINCUS PARTNERS, LLC GROUP MEMBERS: WARBURG PINCUS PRIVATE EQUITY X, L.P. GROUP MEMBERS: WARBURG PINCUS X PARTNERS, L.P. GROUP MEMBERS: WARBURG PINCUS X, L.P. GROUP MEMBERS: WARBURG PINCUS X, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: STERLING FINANCIAL CORP /WA/ CENTRAL INDEX KEY: 0000891106 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 911572822 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-44103 FILM NUMBER: 101058045 BUSINESS ADDRESS: STREET 1: 111 N WALL ST CITY: SPOKANE STATE: WA ZIP: 99201 BUSINESS PHONE: 509-227-5389 MAIL ADDRESS: STREET 1: 111 NORTH WALL STREET CITY: SPOKANE STATE: WA ZIP: 99201 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Warburg Pincus Private Equity X, L.P. CENTRAL INDEX KEY: 0001414565 IRS NUMBER: 200849130 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O WARBURG PINCUS LLC STREET 2: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 212-878-0600 MAIL ADDRESS: STREET 1: C/O WARBURG PINCUS LLC STREET 2: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 SC 13D 1 c05634sc13d.htm SCHEDULE 13D Schedule 13D

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. )*

STERLING FINANCIAL CORPORATION

(Name of Issuer)

Common Stock, no par value per share

(Title of Class of Securities)

859319105

(CUSIP Number)

SCOTT A. ARENARE, ESQ.
MANAGING DIRECTOR AND GENERAL COUNSEL
WARBURG PINCUS LLC
450 LEXINGTON AVENUE
NEW YORK, NY 10017
(212) 878-0600

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

Copy to:

MITCHELL S. EITEL, ESQ.
ANDREW R. GLADIN, ESQ.
SULLIVAN & CROMWELL LLP
125 BROAD STREET
NEW YORK, NY 10004
(212) 558-4000

August 26, 2010

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No.		859319105

NAMES OF REPORTING PERSONS

Warburg Pincus Private Equity X, L.P.

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

68,366,000⁽¹⁾⁽²⁾

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

68,366,000⁽¹⁾⁽²⁾

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

68,366,000⁽¹⁾⁽²⁾

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

9.46%⁽³⁾

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

(1) The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

(2) Does not include 1,709,150 shares of Convertible Participating Voting Preferred Stock, Series B, no par value per share and liquidation preference $4.60 per share (“Series B Preferred Stock”) (or 786,209,000 shares of Common Stock, no par value per share (the “Common Stock”), on an as-converted basis). The holders of Series B Preferred Stock vote, together as a single class, with the holders of the Common Stock and the holders of Convertible Participating Voting Preferred Stock, Series D, no par value per share and liquidation preference $4.60 per share (“Series D Preferred Stock”). The Series B Preferred Stock is not convertible at the option of the holder, but will mandatorily convert into shares of Common Stock upon approval of the Stockholder Proposals (as defined in Item 4 below). It also does not include the exercise of a warrant, which is exercisable to purchase 86,625,000 shares of Common Stock, if the Stockholder Proposals (as defined in Item 4 below) have been approved, or exercisable to purchase 188,315 shares of Series B Stock, if the Stockholder Proposals (as defined in Item 4 below) have not been approved (the “Warrant”).

(3) Calculation based on 722,940,859 shares of Common Stock, which includes 52,190,859 shares outstanding as of July 29, 2010 as reported in Sterling Financial Corporation’s (“Sterling’s”) Quarterly Report on Form 10-Q filed on August 9, 2010 (the “10-Q”), 155,268,000 shares of Common Stock issued to investors in a private placement on August 26, 2010, 378,750,000 shares of Common Stock issued to the U.S. Department of the Treasury on August 26, 2010, and 68,366,000 shares of Common Stock issued to affiliates of Thomas H. Lee Partners, L.P. on August 26, 2010. It does not include (i) the conversion of all of the outstanding Series B Preferred Stock and outstanding Series D Preferred Stock into Common Stock, which is subject to approval of the Stockholder Proposals (as defined in Item 4 below), or (ii) the exercise of the Warrant.

Page 2 of 20


CUSIP No.		859319105

NAMES OF REPORTING PERSONS

Warburg Pincus X Partners, L.P.

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

68,366,000⁽¹⁾⁽²⁾

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

68,366,000⁽¹⁾⁽²⁾

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

68,366,000⁽¹⁾⁽²⁾

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

9.46%⁽³⁾

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

(1) The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

(2) Does not include 1,709,150 shares of Series B Preferred Stock (or 786,209,000 shares of Common Stock on an as-converted basis). The holders of Series B Preferred Stock vote, together as a single class, with the holders of the Common Stock and the holders of Series D Preferred Stock. The Series B Preferred Stock is not convertible at the option of the holder, but will mandatorily convert into shares of Common Stock upon approval of the Stockholder Proposals (as defined in Item 4 below). It also does not include the exercise of the Warrant.

(3) Calculation based on 722,940,859 shares of Common Stock, which includes 52,190,859 shares outstanding as of July 29, 2010 as reported in the 10-Q, 155,268,000 shares of Common Stock issued to investors in a private placement on August 26, 2010, 378,750,000 shares of Common Stock issued to the U.S. Department of the Treasury on August 26, 2010, and 68,366,000 shares of Common Stock issued to affiliates of Thomas H. Lee Partners, L.P. on August 26, 2010. It does not include (i) the conversion of all of the outstanding Series B Preferred Stock and outstanding Series D Preferred Stock into Common Stock, which is subject to approval of the Stockholder Proposals (as defined in Item 4 below), or (ii) the exercise of the Warrant.

Page 3 of 20


CUSIP No.		859319105

NAMES OF REPORTING PERSONS

Warburg Pincus X, L.P.

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

N/A

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

68,366,000⁽¹⁾⁽²⁾

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

68,366,000⁽¹⁾⁽²⁾

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

68,366,000⁽¹⁾⁽²⁾

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

9.46%⁽³⁾

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

(1) The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

Page 4 of 20


CUSIP No.		859319105

NAMES OF REPORTING PERSONS

Warburg Pincus X, LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

N/A

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

68,366,000⁽¹⁾⁽²⁾

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

68,366,000⁽¹⁾⁽²⁾

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

68,366,000⁽¹⁾⁽²⁾

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

9.46%⁽³⁾

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

(1) The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

Page 5 of 20


CUSIP No.		859319105

NAMES OF REPORTING PERSONS

Warburg Pincus Partners, LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

N/A

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

68,366,000⁽¹⁾⁽²⁾

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

68,366,000⁽¹⁾⁽²⁾

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

68,366,000⁽¹⁾⁽²⁾

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

9.46%⁽³⁾

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

(1) The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

Page 6 of 20


CUSIP No.		859319105

NAMES OF REPORTING PERSONS

Warburg Pincus & Co.

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

N/A

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

68,366,000⁽¹⁾⁽²⁾

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

68,366,000⁽¹⁾⁽²⁾

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

68,366,000⁽¹⁾⁽²⁾

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

9.46%⁽³⁾

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

(1) The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

Page 7 of 20


CUSIP No.		859319105

NAMES OF REPORTING PERSONS

Warburg Pincus LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

N/A

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

68,366,000⁽¹⁾⁽²⁾

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

68,366,000⁽¹⁾⁽²⁾

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

68,366,000⁽¹⁾⁽²⁾

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

9.46%⁽³⁾

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

(1) The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

Page 8 of 20


CUSIP No.		859319105

NAMES OF REPORTING PERSONS

Charles R. Kaye

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

N/A

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

68,366,000⁽¹⁾⁽²⁾

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

68,366,000⁽¹⁾⁽²⁾

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

68,366,000⁽¹⁾⁽²⁾

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

9.46%⁽³⁾

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

(1) The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

Page 9 of 20


CUSIP No.		859319105

NAMES OF REPORTING PERSONS

Joseph P. Landy

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

N/A

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

68,366,000⁽¹⁾⁽²⁾

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

68,366,000⁽¹⁾⁽²⁾

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

68,366,000⁽¹⁾⁽²⁾

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

9.46%⁽³⁾

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

(1) The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

Page 10 of 20


CUSIP No.		859319105

Information in respect of each Reporting Person (as defined below) is given solely by such Reporting Person and no Reporting Person has responsibility for the accuracy or completeness of information supplied by any other Reporting Person.

Item 1. Security and Issuer

This statement on Schedule 13D (this “Statement”) relates to the common stock, no par value per share (the “Common Stock”), of Sterling Financial Corporation, a Washington corporation (“Sterling”). The principal executive offices of Sterling are located at 111 North Wall Street, Spokane, Washington 99201.

Item 2. Identity and Background

(a) This Statement is being filed on behalf of Warburg Pincus Private Equity X, L.P., a Delaware limited partnership (together with Warburg Pincus X Partners, L.P., an affiliated Delaware limited partnership, “WP X”), Warburg Pincus X, L.P., a Delaware limited partnership and the general partner of WP X (“WP X LP”), Warburg Pincus X, LLC, a Delaware limited liability company and the general partner of WP X LP (“WP X LLC”), Warburg Pincus Partners, LLC, a New York limited liability company and the sole member of WP X LLC (“WP Partners”), Warburg Pincus & Co., a New York general partnership and the managing member of WP Partners (“WP”), Warburg Pincus LLC, a New York limited liability company that manages WP X (“WP LLC”), and Messrs. Charles R. Kaye and Joseph P. Landy, each a Managing General Partner of WP and Managing Member and Co-President of WP LLC (each of the foregoing, a “Reporting Person,” and collectively, the “Warburg Pincus Reporting Persons”). The agreement among the Warburg Pincus Reporting Persons to file this Statement jointly in accordance with Rule 13d-1(k) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is attached hereto as Exhibit 1.

(b) The address of the principal business of the Warburg Pincus Reporting Persons is c/o Warburg Pincus LLC, 450 Lexington Avenue, New York, New York 10017. The general partners of WP and the members and managing directors of WP LLC and their respective business addresses are set forth on Schedule I hereto, which is incorporated herein by reference.

(c) The principal business of WP X is that of making private equity and related investments. The principal business of WP X LP is acting as general partner of WP X. The principal business of WP X LLC is acting as general partner of WP X LP. The principal business of WP Partners is acting as general partner to certain private equity funds and as the sole member of WP X LLC. The principal business of WP is acting as the managing member of WP Partners. The principal business of WP LLC is managing certain private equity funds, including WP X. The principal businesses of each of Messrs. Kaye and Landy is acting as Managing General Partner of WP and Co-President and Managing Member of WP LLC. The principal occupation of each of the general partners of WP and the members and managing directors of WP LLC is set forth on Schedule I hereto, which is incorporated herein by reference.

(d) During the last five years, none of the Warburg Pincus Reporting Persons has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), nor, to the knowledge of the Reporting Persons, have any of the partners, members or managing directors named on Schedule I.

(e) During the last five years, none of the Warburg Pincus Reporting Persons, nor, to the knowledge of the Warburg Pincus Reporting Persons, any of the partners, members or managing directors named on Schedule I, has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f) Messrs. Kaye and Landy are citizens of the United States of America, and except as otherwise indicated on Schedule I, each of the individuals referred to on Schedule I is a citizen of the United States of America.

Page 11 of 20


CUSIP No.		859319105

Item 3. Source and Amount of Funds or Other Consideration

As more fully described in Item 4 below, on May 25, 2010, Sterling and WP X entered into an Investment Agreement (as amended on August 19, 2010, the “Investment Agreement”). Pursuant to the Investment Agreement and immediately upon the Closing, as defined therein, WP X purchased 68,366,000 shares of Common Stock, par value $0.00 per share (“Common Stock”), 1,709,150 shares of Series B Mandatorily Convertible Participating Voting Preferred Stock (“Series B Preferred Stock”), and a warrant exercisable, subject to certain conditions, to purchase 86,625,000 shares of Common Stock (the “Warrant”) for an aggregate purchase price of $170,915,000 in cash (the “Investment”)¹. The funds used by WP X were obtained from the working capital of WP X.

Item 4. Purpose of the Transaction

WP X acquired the Securities in the ordinary course of business because of the belief that the Common Stock represented, and continues to represent, an attractive investment. The Warburg Pincus Reporting Persons beneficially own the Common Stock as an investment. Subject to the limitations described below in this Item 4, the Warburg Pincus Reporting Persons from time to time may decide to increase or decrease their investment in Sterling through shares of Common Stock or other capital stock of Sterling in open market or private transactions or otherwise. The timing and amount of any such increase or decrease may depend upon the price and availability of shares of Sterling’s capital stock, subsequent developments affecting Sterling, Sterling’s business and prospects, other investment and business opportunities available to the Warburg Pincus Reporting Persons, general stock market and economic conditions, tax considerations and other factors considered relevant.

The Investment

Pursuant to the Investment Agreement and immediately upon the Closing, as defined therein, WP X purchased (i) 68,366,000 shares of Common Stock, no par value per share (“Common Stock”), (ii) 1,709,150 shares of Series B Mandatorily Convertible Participating Voting Preferred Stock, no par value per share and liquidation preference $4.60 per share, of Sterling (“Series B Preferred Stock”) (the conversion of which is subject to certain conditions described further below), and (ii) a warrant exercisable to purchase 86,625,000 shares of Common Stock, if the Stockholder Proposals (as defined below) have been approved, or exercisable to purchase 188,315 shares of Series B Stock if the Stockholder Proposals (as defined below) have not been approved (the “Warrant”, and collectively with the securities in clauses (i) and (ii), the “Securities”) for an aggregate purchase price of $170,915,000 in cash (the “Investment”). If the shareholders of Sterling approve the Stockholder Proposals (as defined below), and upon such approval, all Series B Preferred Stock will convert automatically into Common Stock at a conversion rate, subject to customary adjustments, of 460 shares of Common Stock for each share of Series B Preferred Stock. WP X has agreed that it and its affiliates will not acquire collectively more than 24.9% of the outstanding shares of any class of Sterling voting securities or make any acquisition that would result in WP X or its affiliates owning, collectively, more than 33.3% of the total equity of Sterling as those terms are defined in the Bank Holding Company Act and the regulations of the Board of Governors of the Federal Reserve System promulgated thereunder (the “Ownership Limit”).

Sterling also entered into an investment agreement with certain affiliates of Thomas H. Lee Partners, L.P. (“TH Lee”) pursuant to which TH Lee made an investment in Sterling (the “TH Lee Investment”) on the same terms and in the same amount as WP X and received the same amount and type of securities as WP X, including a warrant to purchase 86,625,000 shares of Common Stock on the same terms and conditions as the Warrant (the “THL Warrant”, and together with the Warrant, the “Warrants”), pursuant to the second amended and restated investment agreement between Sterling and TH Lee, dated as of May 25, 2010 (as amended on August 19, 2010).

Sterling also entered into an exchange agreement, dated as of April 29, 2010, as amended (the “Exchange Agreement”), between Sterling and the United States Department of Treasury (the “Treasury”), pursuant to which Sterling (i) exchanged 303,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “TARP Preferred Stock”), held by the Treasury for 303,000 shares of Fixed Rate Cumulative Mandatorily Convertible Preferred Stock, Series C (the “Series C Stock”), which shares were then converted into 378,750,000 shares of Common Stock, and (ii) amended the warrant held by Treasury to purchase 6,437,677 shares of the Common Stock at an exercise price of $7.06 per share (the “TARP Warrant”) to, among other things, reduce the exercise price thereof to $0.20 per share (collectively, the “TARP Exchange”).

On August 26, 2010, Sterling also sold (i) 155,268,000 shares of Common Stock, and (ii) 3,881,700 shares of Series D Convertible Participating Voting Preferred Stock, no par value and liquidation preference $4.60 per share (the “Series D Preferred Stock”), in multiple simultaneous private placement transactions to investors (the “Other Private Placements”). The terms of the Series D Preferred Stock are substantially identical to the Series B Preferred Stock, except that the Series D Preferred Stock will not bear cumulative dividends in the event the Shareholder Proposals have not been approved by a certain date.


¹		The Common Stock, Series B Preferred Stock and the Warrant described above (collectively, the “Securities”) are currently held by Warburg Pincus Private Equity X, L.P.; however, Warburg Pincus Private Equity X, L.P. contemplates allocating a portion of the Securities to Warburg Pincus X Partners, L.P.

Page 12 of 20


CUSIP No.		859319105

The following is a description of the material terms of the Investment Agreement and the Securities:

Stockholder Proposals. Pursuant to the Investment Agreement, Sterling is required to seek the approval of its stockholders to (i) amend the Articles of Incorporation to increase the number of authorized shares of Common Stock to at least 10,000,000,000 shares or such larger number as the Board of Directors determines in its reasonable judgment is necessary to effectuate the conversion of the Series B Stock, Series C Stock and the Series D Stock into, and exercise of the Warrants and the TARP Warrant for, Common Stock and (ii) approve the conversion of the Series B Stock and the Series D Stock into, and exercise of the Warrants for, Common Stock in accordance with the respective terms of the Series B Shares, Series D Shares and the Warrant (the “Stockholder Proposals”). In addition, promptly following the receipt of the Stockholder Proposals described in clause (i) above, the Company shall call a special meeting of its stockholders to amend the Articles of Incorporation to adopt certain restrictions on acquisitions and dispositions of securities by persons that hold, or intend to acquire, 5% or more of the value of the Common Shares of the Company (the “Charter Amendment Proposal”).

Board Representation. Pursuant to the Investment Agreement, effective as of August 26, 2010, Sterling appointed David A. Coulter to the Board of Directors of Sterling (the “Board”). WP X’s right to appoint a member of the Board will remain in effect for so long as WP X owns at least 4.9% or more (subject to adjustment as described below) of all of the outstanding shares of Common Stock (counting (i) as shares of Common Stock owned by WP X and outstanding, all shares of Common Stock into which Series B Shares or the Warrant owned by WP X are convertible or exercisable and (ii) as shares outstanding, (A) all shares of Common Stock into which shares of Series D Stock then outstanding are convertible or exercisable and (B) excluding all Common Shares issued by Sterling after the Closing Date other than as contemplated by the Investment Agreement and the Securities) (a “Qualifying Ownership Interest”). In addition, the Investment Agreement contains a provision that requires Sterling to provide WP X with any terms it provides to other investors that are more favorable than the terms it provides to WP X. Because Sterling has provided investors in the Other Private Placements a “Qualifying Ownership Interest” minimum ownership threshold of 3.0% for the one year period following August 26, 2010 (which is more favorable than WP X’s minimum ownership threshold of 4.9%), WP X is also entitled to the 3.0% minimum ownership threshold for this period.

The Board will cause Mr. Coulter to be appointed to the Personnel Committee and Nominating Committee of the Board so long as he or any future designee of WP X qualifies to serve on such committees under applicable rules of the NASDAQ, the Securities Exchange Commission, Sterling’s corporate governance guidelines, the charter of such committees and other applicable regulatory requirements. Sterling is required to recommend to its stockholders the election of Mr. Coulter or another designee of WP X to the Board at Sterling’s annual meeting, subject to satisfaction of all legal and governance requirements, for as long as WP X holds a Qualifying Ownership Interest. So long as it holds a Qualifying Ownership Interest, WP X may also, subject to applicable law, appoint a non-voting Board observer to attend meetings of the Board.

Standstill. Pursuant to the Investment Agreement, WP X has agreed that it, together with its affiliates, will not have the ability to exercise any voting rights of any Securities in excess of 24.9% of the total outstanding voting securities of the Sterling. In addition, WP made certain commitments, which are described more fully in Item 6 below and attached hereto as Exhibit 4. Among these commitments is that the combined voting and nonvoting equity interests owned or controlled by WP, its affiliates (including WP X), and its officers and directors will not exceed 25% of the total equity capital of Sterling or of any of its subsidiaries; however, if WP, its affiliates (including WP X), and its officers and directors own, hold, or have the power to vote, combined less than 15% of the outstanding shares of any classes of voting securities of Sterling, they may own or control up to 33.3% of the total equity capital of Sterling or any of its subsidiaries.

Transfer Restrictions. In addition, WP X may not transfer any direct or indirect interest in any Securities to acquire Securities of Sterling to the extent that such transfer, if effective, would cause the transferee to own or control 4.95% or more of the issued and outstanding securities of Sterling or would cause such ownership of the transferee to increase from 4.95% to a greater percentage of ownership. WP X also may not transfer any securities or options to acquire any securities of Sterling to any individual or entity without the approval of the Board of Directors until August 26, 2013 (subject to extension by the Board for up to three years). Notwithstanding these restrictions, WP X may transfer securities if certain conditions are satisfied, including, without limitation, any of the following: (i) prior to the consummation of such transfer, the Board of Directors, in its sole discretion, approves the transfer, (ii) such transfer is pursuant to any transaction, including a merger or consolidation, in which all holders of Stock receive, or are offered the same opportunity to receive, cash or other consideration for all such Stock, and upon the consummation of which the transferee will own at least a majority of the outstanding shares of Stock or (iii) such transfer is pursuant to the exercise by WP X or a permissible transferee of a warrant issued to WP X pursuant to the Investment Agreement.

Page 13 of 20


CUSIP No.		859319105

Series B Preferred Stock. The rights, preferences and privileges of the Series B Preferred Stock are set forth in the Articles of Amendment to Sterling’s Restated Articles of Incorporation filed with the Secretary of State of Washington on August 26, 2010 (the “Articles of Amendment”), which is set forth in Exhibit 5 hereto. Under the terms of the Series B Preferred Stock holders of the Series B Preferred Stock are entitled to (i) receive non-cumulative dividends and other distributions as declared and paid by Sterling to all holders of Common Stock on the same basis and in the same amount as if the Series B Preferred Stock were converted into Common Stock, (ii) receive, if the Stockholder Proposals are not approved by shareholders by 120 days after closing and until such time that the Stockholder Proposals are approved by shareholders, an additional cumulative cash dividend payment on a quarterly basis, payable in arrears, at a per annum rate of 15% on the stated amount of $92.00 per share of Series B Preferred Stock (“Additional Dividend”), (iii) vote together as a single class with the holders of Common Stock and the holders of any other series or class of stock entitled to vote with the holders of Common Stock in the election of directors and on all other matters submitted to the vote of shareholders of Sterling, except for certain matters for which a separate series or class vote is required by applicable law or by the terms of the Series B Preferred Stock, (iv) receive, in the event of the liquidation, dissolution or winding up of the affairs of Sterling, (x) a liquidation preference equal to $4.60, (y) a payment equal to declared but unpaid dividends and accrued Additional Dividends, and (z) an amount equal to the excess over $4.60, if any, of the amount of assets or proceeds distributable to the Common Stock holders divided by the number of shares of Common Stock outstanding, including Series B Preferred Stock, any series or class of stock at parity with Series B Preferred Stock, and instruments convertible into any of such stock. If the shareholders approve the Stockholders Proposals, and upon such approval, all Series B Preferred Stock will convert automatically into Common Stock at a conversion rate, subject to certain adjustments, of 460 shares of Common Stock for each share of Series B Preferred Stock.

Warrant. The Warrant issued to WP X has a term of seven years and is exercisable, in whole or in part, to purchase 86,625,000 shares of Common Stock at an exercise price of $0.22 per share, subject to certain adjustments. Until such time that the shareholders of Sterling approve the Stockholder Proposals, WP X may exercise the Warrant for a number of shares of Series B Preferred Stock that would, on an as-converted basis according to the terms of the Series B Preferred Stock, be equal to the number of shares of Common Stock for which the Warrant is exercisable. The Warrant may not, however, be exercised to the extent that it would cause WP X, together with its affiliates, to own more than 24.9% of a class of Sterling’s voting securities as defined under the Bank Holding Company Act and the regulations of the Board of Governors of the Federal Reserve System promulgated thereunder.

The foregoing summary of the Investment Agreement, the Series B Preferred Stock and the Warrant is not intended to be complete and is qualified in its entirety by reference to the full text of the Investment Agreement, Articles of Amendment for the Series B Preferred Stock and the Warrant attached hereto as Exhibit 2, Exhibit 5 and Exhibit 6, respectively, and incorporated herein by reference.

On April 14, 2010, Sterling adopted a shareholder rights plan (“Rights Plan”), which provides an economic disincentive for any one person or group to become an owner, for relevant tax purposes, of 5% or more of Sterling’s shares (a “Threshold Holder”) and for any existing Threshold Holder to acquire more than a specified amount of additional shares, subject to certain exceptions. The foregoing summary of the Rights Plan is not intended to be complete and is qualified in its entirety by reference to the full text of the Plan, attached hereto as Exhibit 3 and incorporated herein by reference.

Additional Disclosure

Except as set forth herein, none of the Warburg Pincus Reporting Persons nor, to the best of their knowledge, any person listed in Schedule I, has any plans or proposals that relate to or would relate to or result in any transaction, event or action enumerated in paragraphs (a) through (j) of Item 4 of Schedule 13D.

Item 5. Interest in Securities of the Issuer

(a) On August 26, 2010, WP X may be deemed to beneficially own 68,366,000 shares of Common Stock (or 9.46% of Common Stock, based on 52,190,859 shares of Common Stock outstanding as of July 29, 2010 as reported in the 10-Q, 155,268,000 shares of Common Stock issued in the Other Private Placements, 378,750,000 shares of Common Stock issued in the TARP Exchange and 68,366,000 shares of Common Stock issued to TH Lee in connection with the TH Lee Investment). As described in Item 4, the Warburg Pincus Reporting Persons do not have the right to acquire beneficial ownership of additional shares of Common Stock within sixty days by virtue of WP X’s ownership of (i) 1,709,150 shares of Series B Preferred Stock, which converts into Common Stock only after the Stockholder Proposals have been approved, or (ii) the Warrant, exercisable to purchase 86,625,000 shares of Common Stock, if the Stockholder Proposals have been approved, or exercisable to purchase 188,315 shares of Series B Stock, if the Stockholder Proposals have not been approved. Because of their respective relationships with WP X and each other, each of the Warburg Pincus Reporting Persons may be deemed to share voting and disposition power with respect to the 68,366,000 shares of Common Stock reported herein. Each of WP X LP, WP X LLC, WP Partners, WP, WP LLC, Messrs. Kaye and Landy and the individuals listed on Schedule I hereto disclaims beneficial ownership of the shares of Common Stock, shares of the Series B Preferred Stock, and the Warrant, of which WP X has beneficial ownership, except to the extent of any indirect pecuniary interest therein. Except as described in this Item 5(a), no person listed in Item 2 of this Statement is a beneficial owner of the Common Stock in which WP X has beneficial ownership.

Page 14 of 20


CUSIP No.		859319105

(b) See Item 5(a) above.

(d) No person (other than the Warburg Pincus Reporting Persons) has the right to receive or the power to direct the receipt of distributions with respect to, or the proceeds from the sale of, the Common Stock owned by the Warburg Pincus Reporting Persons.

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

The responses set forth in Item 4 hereof are incorporated by reference in their entirety.

In connection with the Investment, WP X made certain commitments (the “Commitments”) to the Board of Governors of the Federal Reserve System to ensure that WP X will not, among other things, exercise or attempt to exercise a controlling influence over the management or policies of Sterling or any of its subsidiaries for purposes of the Bank Holding Company Act of 1956. The Commitments are attached hereto as Exhibit 4 and are incorporated herein by reference.

Pursuant to Rule 13d-1(k) promulgated under the Exchange Act, the Warburg Pincus Reporting Persons entered into an agreement on September 3, 2010 with respect to the joint filing of this Statement and any amendment or amendments hereto (the “Joint Filing Agreement”). The Joint Filing Agreement is attached hereto as Exhibit 1 and incorporated herein by reference.

Except as referenced above or as described in Item 4 hereof, there are no contracts, arrangements, understandings or relationships among the persons named in Item 2 or between such persons and any other person with respect to any securities of Sterling.

Item 7. Material To Be Filed as Exhibits


Exhibit 1		Joint Filing Agreement, dated as of September 3, 2010, by and among Warburg Pincus Private Equity X, L.P., Warburg Pincus X Partners, L.P., Warburg Pincus X, L.P., Warburg Pincus X, LLC, Warburg Pincus Partners, LLC, Warburg Pincus & Co., Warburg Pincus LLC, Charles R. Kaye and Joseph P. Landy.

Exhibit 2		Investment Agreement, dated as of May 25, 2010, between Sterling Financial Corporation and Warburg Pincus Private Equity X, L.P. (incorporated by reference to Exhibit 10.2 to Sterling’s Current Report on Form 8-K, filed on May 27, 2010) and amendment thereto, dated as of August 19, 2010 (incorporated by reference to Exhibit 10.2 to Sterling’s Current Report on Form 8-K, filed on August 20, 2010).

Exhibit 3		Shareholder Rights Plan, dated as of April 14, 2010, between Sterling Financial Corporation and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.1 to Sterling’s Current Report on Form 8-K, filed on April 15, 2010).

Exhibit 4		Passivity Commitments Letter, dated as of August 23, 2010, from Warburg Pincus Private Equity X, L.P. to the Board of Governors of the Federal Reserve System.

Exhibit 5		Articles of Amendment of Convertible Participating Voting Preferred Stock, Series B, Sterling Financial Corporation (incorporated by reference to Exhibit 3.3 to Sterling’s Current Report on Form 8-K, filed on August 30, 2010).

Exhibit 6		Warrant, dated as of August 26, 2010, between Sterling Financial Corporation and Warburg Pincus Private Equity X, L.P.

Page 15 of 20


CUSIP No.		859319105

SIGNATURES

After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct.

Dated: September 3, 2010


WARBURG PINCUS PRIVATE EQUITY X, L.P.
By:	Warburg Pincus X, L.P., its general partner
By:	Warburg Pincus X, LLC, its general partner
By:	Warburg Pincus Partners, LLC, its sole member
By:	Warburg Pincus & Co., its managing member

By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner

WARBURG PINCUS X PARTNERS, L.P.
By:	Warburg Pincus X, L.P., its general partner
By:	Warburg Pincus X, LLC, its general partner
By:	Warburg Pincus Partners, LLC, its sole member
By:	Warburg Pincus & Co., its managing member

By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner

WARBURG PINCUS X, L.P.
By:	Warburg Pincus X, LLC, its general partner
By:	Warburg Pincus Partners, LLC, its sole member
By:	Warburg Pincus & Co., its managing member

By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner

WARBURG PINCUS X, LLC
By:	Warburg Pincus Partners, LLC, its sole member
By:	Warburg Pincus & Co., its managing member

By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner

Page 16 of 20


CUSIP No.		859319105


WARBURG PINCUS PARTNERS, LLC
By:	Warburg Pincus & Co., its managing member

By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner

WARBURG PINCUS & CO.
By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner

WARBURG PINCUS LLC
By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Managing Director

CHARLES R. KAYE
By:	/s/ Scott A. Arenare
	Scott A. Arenare, Attorney-in-fact*

JOSEPH P. LANDY
By:	/s/ Scott A. Arenare
	Scott A. Arenare, Attorney-in-fact**


*		Power of Attorney given by Mr. Kaye was previously filed with the SEC on March 2, 2006, as an exhibit to a Schedule 13D filed by Building Products, LLC with respect to Builders FirstSource, Inc.

**		Power of Attorney given by Mr. Landy was previously filed with the SEC on March 2, 2006, as an exhibit to a Schedule 13D filed by Building Products, LLC with respect to Builders FirstSource, Inc.

Page 17 of 20


CUSIP No.		859319105

INDEX OF EXHIBITS


Exhibit 1		Joint Filing Agreement, dated as of September 3, 2010, by and among Warburg Pincus Private Equity X, L.P., Warburg Pincus X Partners, L.P., Warburg Pincus X, L.P., Warburg Pincus X LLC, Warburg Pincus Partners, LLC, Warburg Pincus & Co., Warburg Pincus LLC, Charles R. Kaye and Joseph P. Landy.

Exhibit 2		Investment Agreement, dated as of May 25, 2010, between Sterling Financial Corporation and Warburg Pincus Private Equity X, L.P. (incorporated by reference to Exhibit 10.2 to Sterling’s Current Report on Form 8-K, filed on May 27, 2010) and amendment thereto, dated as of August 19, 2010 (incorporated by reference to Exhibit 10.2 to Sterling’s Current Report on Form 8-K, filed on August 20, 2010).

Exhibit 3		Shareholder Rights Plan, dated as of April 14, 2010, between Sterling Financial Corporation and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.1 to Sterling’s Current Report on Form 8-K, filed on April 15, 2010).

Exhibit 4		Passivity Commitments Letter, dated as of August 23, 2010, from Warburg Pincus Private Equity X, L.P. to the Board of Governors of the Federal Reserve System.

Exhibit 5		Articles of Amendment of Convertible Participating Voting Preferred Stock, Series B, Sterling Financial Corporation (incorporated by reference to Exhibit 3.3 to Sterling’s Current Report on Form 8-K, filed on August 30, 2010).

Exhibit 6		Warrant, dated as of August 26, 2010, between Sterling Financial Corporation and Warburg Pincus Private Equity X, L.P.

Page 18 of 20


CUSIP No.		859319105

Schedule I

Set forth below is the name, position and present principal occupation of each of the general partners of Warburg Pincus & Co. (“WP”) and members of Warburg Pincus LLC (including its subsidiaries, “WP LLC”). Except as otherwise indicated, the business address of each of such persons is 450 Lexington Avenue, New York, New York 10017, and each of such persons is a citizen of the United States.

GENERAL PARTNERS OF WP


		PRESENT PRINCIPAL OCCUPATION IN ADDITION
		TO POSITION WITH WP, AND POSITIONS
NAME		WITH THE REPORTING ENTITIES
Scott A. Arenare		Partner of WP; Member and Managing Director of WP LLC
David Barr		Partner of WP; Member and Managing Director of WP LLC
Alain J.P. Belda		Partner of WP; Member and Managing Director of WP LLC
Alexander Berzofsky		Partner of WP; Member and Managing Director of WP LLC
Sean D. Carney		Partner of WP; Member and Managing Director of WP LLC
Mark Colodny		Partner of WP; Member and Managing Director of WP LLC
David A. Coulter		Partner of WP; Member and Managing Director of WP LLC
Timothy J. Curt		Partner of WP; Member and Managing Director of WP LLC
Cary J. Davis		Partner of WP; Member and Managing Director of WP LLC
Dai Feng		Partner of WP; Member and Managing Director of WP LLC
Steven Glenn		Partner of WP; Member and Managing Director of WP LLC
Jeffrey G. Goldfaden		Partner of WP; Member and Managing Director of WP LLC
Cecilia Gonzalo		Partner of WP; Member and Managing Director of WP LLC
Michael Graff		Partner of WP; Member and Managing Director of WP LLC
Patrick T. Hackett		Partner of WP; Member and Managing Director of WP LLC
E. Davisson Hardman		Partner of WP; Managing Director of WP LLC
Jeffrey A. Harris		Partner of WP; Member and Managing Director of WP LLC
In Seon Hwang		Partner of WP; Member and Managing Director of WP LLC
William H. Janeway		Partner of WP; Member and Senior Advisor of WP LLC
Chansoo Joung		Partner of WP; Member and Managing Director of WP LLC
Peter R. Kagan		Partner of WP; Member and Managing Director of WP LLC
Charles R. Kaye		Managing General Partner of WP; Managing Member and Co-President of WP LLC
Henry Kressel		Partner of WP; Member and Managing Director of WP LLC
David Krieger		Partner of WP; Member and Managing Director of WP LLC
Joseph P. Landy		Managing General Partner of WP; Managing Member and Co-President of WP LLC
Kewsong Lee		Partner of WP; Member and Managing Director of WP LLC
Jonathan S. Leff		Partner of WP; Member and Managing Director of WP LLC
Michael Martin		Partner of WP; Member and Managing Director of WP LLC
James Neary		Partner of WP; Member and Managing Director of WP LLC
Dalip Pathak		Partner of WP; Member and Managing Director of WP LLC
Michael F. Profenius		Partner of WP; Managing Director of WP LLC
Justin Sadrian		Partner of WP; Member and Managing Director of WP LLC
Henry B. Schacht		Partner of WP; Member and Senior Advisor of WP LLC
Steven G. Schneider		Partner of WP; Member and Managing Director of WP LLC
Patrick Severson		Partner of WP; Member and Managing Director of WP LLC
John Shearburn		Partner of WP; Member and Managing Director of WP LLC
Christopher H. Turner		Partner of WP; Member and Managing Director of WP LLC
John L. Vogelstein		Partner of WP; Member and Senior Advisor of WP LLC
Elizabeth H. Weatherman		Partner of WP; Member and Managing Director of WP LLC
Daniel Zilberman		Partner of WP; Member and Managing Director of WP LLC
Rosanne Zimmerman		Partner of WP; Member and Managing Director of WP LLC
WP & Co. Partners, L.P.*
Warburg Pincus Principal Partnership, L.P.**
Warburg Pincus Real Estate Principal Partnership, L.P.**
Warburg Pincus 2006 Limited Partnership**
Warburg Pincus 2007 Limited Partnership**


*		New York limited partnership; primary activity is ownership interest in WP

**		Delaware limited partnership; primary activity is ownership interest in WP

Page 19 of 20


CUSIP No.		859319105

MEMBERS OF WP LLC


		PRESENT PRINCIPAL OCCUPATION IN ADDITION
		TO POSITION WITH WP LLC, AND POSITIONS
NAME		WITH THE REPORTING ENTITIES
Scott A. Arenare		Member and Managing Director of WP LLC; Partner of WP
David Barr		Member and Managing Director of WP LLC; Partner of WP
Alain J.P. Belda		Member and Managing Director of WP LLC; Partner of WP
Alexander Berzofsky		Member and Managing Director of WP LLC; Partner of WP
Sean D. Carney		Member and Managing Director of WP LLC; Partner of WP
Julian Cheng (1)		Member and Managing Director of WP LLC
Miao Chi (2)		Member and Managing Director of WP LLC
Stephen John Coates (3)		Member and Managing Director of WP LLC
Mark Colodny		Member and Managing Director of WP LLC; Partner of WP
David A. Coulter		Member and Managing Director of WP LLC; Partner of WP
Timothy J. Curt		Member and Managing Director of WP LLC; Partner of WP
Cary J. Davis		Member and Managing Director of WP LLC; Partner of WP
Martin D. Dunnett (3)		Member and Managing Director of WP LLC
Dai Feng		Member and Managing Director of WP LLC; Partner of WP
Robert Feuer (4)		Member and Managing Director of WP LLC
Rajiv Ghatalia (1)		Member and Managing Director of WP LLC
Steven Glenn		Member and Managing Director of WP LLC; Partner of WP
Jeffrey G. Goldfaden		Member and Managing Director of WP LLC; Partner of WP
Cecilia Gonzalo		Member and Managing Director of WP LLC; Partner of WP
Michael Graff		Member and Managing Director of WP LLC; Partner of WP
Patrick T. Hackett		Member and Managing Director of WP LLC; Partner of WP
Jeffrey A. Harris		Member and Managing Director of WP LLC; Partner of WP
In Seon Hwang		Member and Managing Director of WP LLC; Partner of WP
William H. Janeway		Member and Senior Advisor of WP LLC; Partner of WP
Chansoo Joung		Member and Managing Director of WP LLC; Partner of WP
Peter R. Kagan		Member and Managing Director of WP LLC; Partner of WP
Charles R. Kaye		Managing Member and Co-President of WP LLC; Managing General Partner of WP
Henry Kressel		Member and Managing Director of WP LLC; Partner of WP
David Krieger		Member and Managing Director of WP LLC; Partner of WP
Joseph P. Landy		Managing Member and Co-President of WP LLC; Managing General Partner of WP
Kewsong Lee		Member and Managing Director of WP LLC; Partner of WP
Jonathan S. Leff		Member and Managing Director of WP LLC; Partner of WP
David Li (1)		Member and Managing Director of WP LLC
Vishal Mahadevia (5)		Member and Managing Director of WP LLC
Niten Malhan (5)		Member and Managing Director of WP LLC
Michael Martin		Member and Managing Director of WP LLC; Partner of WP
Luca Molinari (6)		Member and Managing Director of WP LLC
James Neary		Member and Managing Director of WP LLC; Partner of WP
Dalip Pathak		Member and Managing Director of WP LLC; Partner of WP
Leo Puri (5)		Member and Managing Director of WP LLC
Justin Sadrian		Member and Managing Director of WP LLC; Partner of WP
Adarsh Sarma (5)		Member and Managing Director of WP LLC
Henry B. Schacht		Member and Senior Advisor of WP LLC; Partner of WP
Steven G. Schneider		Member and Managing Director of WP LLC; Partner of WP
Joseph C. Schull (2)		Member and Managing Director of WP LLC
Patrick Severson		Member and Managing Director of WP LLC; Partner of WP
John Shearburn		Member and Managing Director of WP LLC; Partner of WP
Chang Q. Sun (1)		Member and Managing Director of WP LLC
Christopher H. Turner		Member and Managing Director of WP LLC; Partner of WP
John L. Vogelstein		Member and Senior Advisor of WP LLC; Partner of WP
Elizabeth H. Weatherman		Member and Managing Director of WP LLC; Partner of WP
Frank Wei (1)		Member and Managing Director of WP LLC
Peter Wilson (3)		Member and Managing Director of WP LLC
Jeremy S. Young (3)		Member and Managing Director of WP LLC
Daniel Zilberman		Member and Managing Director of WP LLC; Partner of WP
Rosanne Zimmerman		Member and Managing Director of WP LLC; Partner of WP


(1)		Citizen of Hong Kong

(2)		Citizen of Canada

(3)		Citizen of United Kingdom

(4)		Citizen of Hungary

(5)		Citizen of India

(6)		Citizen of Italy

As of August 1, 2010

Page 20 of 20

EX-99.1 2 c05634exv99w1.htm EXHIBIT 1 Exhibit 1

EXHIBIT 1

JOINT FILING AGREEMENT

Pursuant to Rule 13d-1(k) promulgated under the Securities Exchange Act of 1934, as amended, the undersigned hereby agree to the joint filing of this Statement on Schedule 13D, including any amendments thereto. This Joint Filing Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

Date: September 3, 2010


WARBURG PINCUS PRIVATE EQUITY X, L.P.
By:	Warburg Pincus X, L.P., its general partner

By:	Warburg Pincus X, LLC, its general partner

By:	Warburg Pincus Partners, LLC, its sole member

By:	Warburg Pincus & Co., its managing member

By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner


WARBURG PINCUS X PARTNERS, L.P.
By:	Warburg Pincus X, L.P., its general partner

By:	Warburg Pincus X, LLC, its general partner

By:	Warburg Pincus Partners, LLC, its sole member

By:	Warburg Pincus & Co., its managing member

By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner


WARBURG PINCUS X, L.P.
By:	Warburg Pincus X, LLC, its general partner

By:	Warburg Pincus Partners, LLC, its sole member

By:	Warburg Pincus & Co., its managing member

By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner



WARBURG PINCUS X, LLC
By:	Warburg Pincus Partners, LLC, its sole member

By:	Warburg Pincus & Co., its managing member

By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner

WARBURG PINCUS PARTNERS, LLC
By:	Warburg Pincus & Co., its managing member

By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner

WARBURG PINCUS & CO.
By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Partner

WARBURG PINCUS LLC
By:	/s/ Scott A. Arenare
	Name:	Scott A. Arenare
	Title:	Managing Director

CHARLES R. KAYE
By:	/s/ Scott A. Arenare
	Scott A. Arenare, Attorney-in-fact

JOSEPH P. LANDY
By:	/s/ Scott A. Arenare
	Scott A. Arenare, Attorney-in-fact

EX-99.4 3 c05634exv99w4.htm EXHIBIT 4 Exhibit 4

Exhibit 4

August 23, 2010

Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, N.W.
Washington, D.C. 20551

Attention: Patricia A. Robinson

Assistant General Counsel

RE:

Warburg Pincus Proposed Investment in Sterling Financial Corporation

Dear Ms. Robinson:

Warburg Pincus (as defined below) respectfully submits this letter to the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) to confirm our acceptance of the passivity commitments below. These commitments are being submitted in connection with the materials provided by Warburg Pincus Private Equity X, LP (“WP X”), to the Federal Reserve Board relating to the proposed investment by Warburg Pincus Private Equity X, LP in Sterling Financial Corporation (the “Company”) on the terms set forth in the Investment Agreement, dated as of May 25, 2009, as amended by the First Amendment to the Investment Agreement, dated as of August 19, 2010, between WP X and the Company.

Warburg Pincus & Co., together with Warburg Pincus Private Equity X, L.P., its top-tier general partner, Warburg Pincus X LLC, and any other entities controlled by Warburg Pincus Partners LLC or Warburg Pincus & Co. (collectively, “Warburg Pincus”) will not, without the prior approval of the Federal Reserve Board or its staff, directly or indirectly:

Exercise or attempt to exercise a controlling influence over the management or policies of the Company or any of its subsidiaries;

Have or seek to have more than one representative of Warburg Pincus serve on the board of directors of the Company or any of its subsidiaries;

Permit any representative of Warburg Pincus who serves on the board of directors of the Company or any of its subsidiaries to serve (i) as the chairman of the board of directors of the Company or any of its subsidiaries, (ii) as the chairman of any committee of the board of directors of the Company or any of its subsidiaries, (iii) as a member of any committee of the board of directors of the Company or any of its subsidiaries if the Warburg Pincus representative occupies more than 25 percent of the seats on the committee, or (iv) as a member of any committee of the board of directors of the Company with authority to act on behalf of the full board of directors between formal meetings, with authority to oversee all of the committees of the board of directors, or with responsibility for internal audit;

Have or seek to have any employee or representative of Warburg Pincus serve as an officer, agent, or employee of the Company or any of its subsidiaries;

Take any action that would cause the Company or any of its subsidiaries to become a subsidiary of Warburg Pincus;

Own, control, or hold with power to vote securities that (when aggregated with securities that the officers and directors of the Warburg Pincus own, control, or hold with power to vote) represent 25 percent or more of any class of voting securities of the Company or any of its subsidiaries;

Own or control equity interests that would result in the combined voting and nonvoting equity interests of the Warburg Pincus and its officers and directors to equal or exceed 25 percent of the total equity capital of the Company or any of its subsidiaries, except that, if Warburg Pincus and its officers and directors own, hold, or have the power to vote less than 15 percent of the outstanding shares of any classes of voting securities of the Company, Warburg Pincus and its officers and directors may own or control equity interests greater than 25 percent, but in no case more than 33.3 percent, of the total equity capital of the Company or any of its subsidiaries;

Propose a director or slate of directors in opposition to a nominee or slate of nominees proposed by the management or board of directors of the Company or any of its subsidiaries;

Enter into any agreement with the Company or any of its subsidiaries that substantially limits the discretion of the Company’s management over major policies and decisions, including, but not limited to, policies or decisions about employing and compensating executive officers; engaging in new business lines; raising additional debt or equity capital; merging or consolidating with another firm; or acquiring, selling, leasing, transferring, or disposing of material assets, subsidiaries, or other entities;

10.

Solicit or participate in soliciting proxies with respect to any matter presented to the shareholders of the Company or any of its subsidiaries;

11.

Dispose or threaten to dispose (explicitly or implicitly) of equity interests of the Company or any of its subsidiaries in any manner as a condition or inducement of specific action or non-action by the Company or any of its subsidiaries; or

12.

Enter into any other banking or nonbanking transactions with the Company or any of its subsidiaries, except that Warburg Pincus may establish and maintain deposit accounts with the Company, provided that the aggregate balance of all such deposit accounts does not exceed $500,000 and that the accounts are maintained on substantially the same terms as those prevailing for comparable accounts of persons unaffiliated with the Company.

With respect to the Investors (as defined below), Warburg Pincus also certifies that:

13.

To its knowledge, Warburg Pincus is not an affiliate of any other investor in the proposed transaction with the Company (individually, each an “Investor,” and, collectively, the “Investors”);

14.

Warburg Pincus has reached its decision to invest in the Company independently from the other Investors;

15.

To its knowledge, Warburg Pincus is not managed or advised by an investment manager or investment advisor who performs the same services for any other Investor;

16.

Warburg Pincus (including any subsidiary or affiliate of a Warburg Pincus) has not engaged and will not engage as part of a group consisting of substantially the same entities as the Investors, in substantially the same combination of interests, in any additional banking or nonbanking activities or business ventures in the United States without prior consultation with the Board;

17.

Warburg Pincus has not and will not enter into any agreements or understandings with any other Investor to act in concert for the purpose of exercising a controlling influence over the Company or any of its subsidiaries, including, but not limited to, any agreements or understandings regarding the voting or transfer of shares of the Company; and

18.

Any director representing Warburg Pincus will not collude or conspire with any other directors or shareholders of the Company with respect to the exercise of any director’s voting rights. Nothing in this commitment shall limit a director’s ability to exercise its legitimate duties/rights as a director of the Company, including the ability to consult with other directors and shareholders as appropriate.

The terms used in these commitments have the same meanings as set forth in the Bank Holding Company Act of 1956, as amended (“BHC Act”), and the Board’s Regulation Y. For purposes of these commitments, “Investor” includes any subsidiary or affiliate of the Investor.

Nothing in these commitments releases the Warburg Pincus from compliance with the Change in Bank Control Act and the Board’s regulations thereunder for any subsequent acquisition or increase in the percentage ownership of any class of voting shares of the Company.

Warburg Pincus understands that these commitments constitute conditions imposed in writing in connection with the Board’s findings and decisions related to Warburg Pincus’s acquisition of up to 24.9 percent of the voting shares of the Company, including a determination that no filing under the BHC Act is required for this transaction by Warburg Pincus, and, as such, may be enforced in proceedings under applicable law.

* * *

Should you have any questions or comments with respect to this matter, please contact our counsel, Mitchell S. Eitel or Andrew R. Gladin of Sullivan & Cromwell LLP, at (212) 558-4960 and 212 558-4080, respectively.


WARBURG PINCUS PRIVATE EQUITY X, L.P.
By:	Warburg Pincus X L.P., its general partner
By:	Warburg Pincus X LLC, its general partner
By:	Warburg Pincus Partners LLC, its sole member
By:	Warburg Pincus & Co., its managing member

By:	/s/ Daniel Zilberman
	Name:	Daniel Zilberman
	Title:	Authorized Signatory

WARBURG PINCUS X, L.P.
By:	Warburg Pincus X LLC, its general partner
By:	Warburg Pincus Partners LLC, its sole member
By:	Warburg Pincus & Co., its managing member

By:	/s/ Daniel Zilberman
	Name:	Daniel Zilberman
	Title:	Authorized Signatory

WARBURG PINCUS X LLC
By:	Warburg Pincus Partners LLC, its sole member
By:	Warburg Pincus & Co., its managing member

By:	/s/ Daniel Zilberman
	Name:	Daniel Zilberman
	Title:	Authorized Signatory

EX-99.6 4 c05634exv99w6.htm EXHIBIT 6 Exhibit 6

Exhibit 6

EXHIBIT B TO INVESTMENT AGREEMENT

Form of Warrant

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS SET FORTH HEREIN AND IN AN INVESTMENT AGREEMENT, DATED AS OF MAY 25, 2010, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE ISSUER.

WARRANT

to purchase

86,625,000

Shares of Common Stock

dated as of August 26, 2010

Sterling Financial Corporation

a Washington Corporation

Issue Date: August 26, 2010

1. Definitions. Unless the context otherwise requires, when used herein the following terms shall have the meanings indicated.

“Adjustment” has the meaning given to it in Section 13(H).

“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with, such other person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any Person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such person, whether through the ownership of voting securities, by contract or otherwise.

“Applicable Price” means 95% of the greater of the Market Price per share of outstanding Common Stock and/or Common Equivalent Preferred Stock, as applicable (A) on the date on which the Company issues or sells any Common Stock and/or Common Equivalent Preferred Stock, as applicable other than Excluded Stock and (B) the first date of the announcement of such issuance or sale.

“Appraisal Procedure” means a procedure whereby the Company and the Warrantholder (or if there is more than one Warrantholder, a majority in interest of Warrantholders) shall mutually agree upon the determinations then the subject of appraisal or dispute, as applicable. If within 30 days after the Appraisal Procedure is invoked, the parties are unable to agree upon the amount or Disputed Adjustment Matter, as applicable, in question, an independent evaluator shall be chosen within 10 days thereafter by the mutual consent of the parties or, if the parties fail to agree upon the appointment of an evaluator, such appointment shall be made by the American Arbitration Association, or any organization successor thereto, from a panel of arbitrators having experience in the appraisal of the subject matter to be appraised or evaluated, as applicable. Within 5 days following the appointment of the evaluator, each of the parties shall submit its determination of the amount or Disputed Adjustment Matter, as applicable, in question to the evaluator and to each other. Each of the parties shall have 15 days following receipt of the other party’s determination to submit a written rebuttal of such determination to the evaluator. Within 30 days following his or her appointment, the appraiser shall render a decision, which decision shall be limited to awarding only one of the two such determinations as the final determination with respect to such matter. The costs of conducting any Appraisal Procedure shall be borne by the Warrantholder or Warrantholders, as applicable, requesting such Appraisal Procedure, except that (A) any costs incurred by the Company shall be borne by the Company and (B) if such Appraisal Procedure shall result in a determination that is disparate by 5% or more from the Company’s initial determination, all costs of conducting such Appraisal Procedure shall be borne by the Company.

“Beneficial Owner” and “Beneficial Ownership” have the meanings given to such terms in Rules 13d-3 and 13d-5 of the Exchange Act.

“BHC Act” means the Bank Holding Company Act of 1956, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“Board” means the Board of Directors of the Company.

“Board Representative” has the meaning given to it in the Investment Agreement.

“Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires adoption by the Company’s stockholders.

“Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York or the State of Washington generally are authorized or required by law or other governmental actions to close.

“Capital Stock” means (A) with respect to any Person that is a corporation or company, any and all shares, interests, participations or other equivalents (however designated) of capital or capital stock of such Person and (B) with respect to any Person that is not a corporation or company, any and all partnership or other equity interests of such Person.

B-2

“CBC Act” means the Change in Bank Control Act of 1978, as amended, and the rules and regulations promulgated thereunder.

“Change of Control” means, with respect to the Company, the occurrence of any one of the following events:

(A) any Person is or becomes a Beneficial Owner (other than the Investor and its Affiliates), directly or indirectly, of 24.9% or more of the aggregate voting power of the outstanding Voting Securities of the Company and, in connection with or subsequent to such acquisition, the Incumbent Directors cease for any reason to constitute at least a majority of the Board; provided, that any person becoming a director subsequent to the date of the Investment Agreement whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the relevant party in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director (except that no individuals who were not directors at the time any agreement or understanding with respect to any Business Combination or contested election is reached shall be treated as Incumbent Directors for the purposes of clause (C) below with respect to such Business Combination or this paragraph in the case of a contested election); provided, further, that the Board Representative will be treated as an Incumbent Director even if the Person designated to be such Board Representative should change;

(B) any Person is or becomes a Beneficial Owner (other than the Investor and its Affiliates), directly or indirectly, of 50% or more of the aggregate voting power of the outstanding Voting Securities of the Company; provided, however, that the event described in this clause (B) will not be deemed a Change of Control by virtue of any holdings or acquisitions: (i) by the Company or any of its Subsidiaries, (ii) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries; and provided, further, that such holdings or acquisitions by any such plan (other than any plan maintained under Section 401(k) of the Internal Revenue Code of 1986, as amended) do not exceed 50% of the then outstanding Voting Securities of the Company, (iii) by any underwriter temporarily holding securities pursuant to an offering of such securities or (iv) pursuant to a Non-Qualifying Transaction;

(D) adoption of a plan of liquidation or dissolution of the Company or a sale of all or substantially all of the Company’s assets.

“Common Equivalent Preferred Stock” means the Series B Preferred Stock, the Series D Preferred Stock or any other class or series of Capital Stock of the Company ranking pari passu with the Common Stock as to dividends or payments upon liquidation.

“Common Stock” means the Company’s common stock, and (except as used in the definition of Non-Qualifying Transaction) any Capital Stock for or into which such Common Stock hereafter is exchanged, converted, reclassified or recapitalized by the Company or pursuant to an agreement or Business Combination to which the Company is a party.

B-3

“Company” means Sterling Financial Corporation, a Washington corporation.

“Disputed Adjustment Matter” has the meaning given to it in Section 13(H).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“Excluded Stock” means (A) shares of Common Stock issued by the Company as a stock dividend payable in shares of Common Stock, or upon any subdivision or split-up of the outstanding shares of Capital Stock, in each case which is subject to Section 13(B), or upon conversion of shares of Capital Stock (but not the issuance of such Capital Stock which will be subject to the provision of Section 13(A)), (B) shares of Common Stock to be issued to directors, employees or consultants of the Company pursuant to options, restricted stock units or other equity-based awards granted prior to the date of issuance of this Warrant and pursuant to options, restricted stock units or other equity-based awards granted after the date of issuance of this Warrant if, in the case of options, the exercise price per share of Common Stock on the date of such grant equals or exceeds the Market Price of a share of Common Stock on the date of such grant, (C) any options, restricted stock units or other equity-based awards to be issued after the date of issuance of this Warrant to directors, employees or consultants hired in connection with, and at or around the same time as, the Recapitalization Transactions of the Company, or the issuance of Common Stock to such persons, including pursuant to any such awards, not to exceed 2.5% of the capital stock of the Company on a fully diluted basis, (D) shares of Common Stock issued upon conversion of the Series B Preferred Stock, (E) shares of Common Stock issued upon conversion of the Series D Preferred Stock, (F) shares of Common Stock issued upon the conversion of the Series C Preferred Stock, (G) the Treasury Warrant, (H) shares of Common Stock issued upon exercise of the Treasury Warrant, (I) shares of Series E Preferred Stock or Common Stock issued under the terms of the Shareholder Rights Plan (including upon exercise of Rights (as defined in the Shareholder Rights Plan) issued pursuant thereto), (J) any shares issued to the Warrantholder or its Affiliates in connection with the exercise by such Person of preemptive rights under the terms of any of the Company’s Capital Stock and (K) any shares of Common Stock, Common Equivalent Preferred Stock or Series C Preferred Stock issued on the day hereof.

“Exercise Price” means $0.22. The Exercise Price shall be subject to adjustment from time to time in accordance with Section 13.

“Expiration Time” has the meaning given to it in Section 3.

“Fair Market Value” means, with respect to any security or other property, the fair market value of such security or other property as determined by the Board, acting in good faith. If the Warrantholder does not accept the Board’s calculation of Fair Market Value and the Warrantholder and the Company are unable to agree on Fair Market Value, the procedures described in Section 15 shall be used to determine Fair Market Value.

“Group” means a “group” within the meaning of Section 13(d)(3) of the Exchange Act.

B-4

“Incumbent Directors” means individuals who, on the date of the Investment Agreement, constitute the Board.

“Investment Agreement” means the Investment Agreement, dated as of May 25, 2010, between the Company and the Investor, including all schedules and exhibits thereto.

“Investor” means Warburg Pincus Private Equity X, L.P.

“Market Price” of the Common Stock (or other relevant capital stock or equity interest) on any date of determination means the closing sale price or, if no closing sale price is reported, the last reported sale price of the shares of the Common Stock (or other relevant capital stock or equity interest) on the NASDAQ on such date. If the Common Stock (or other relevant capital stock or equity interest) is not traded on the NASDAQ on any date of determination, the Closing Price of the Common Stock (or other relevant capital stock or equity interest) on such date of determination means the closing sale price as reported in the composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national or regional securities exchange on which the Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or if the Common Stock (or other relevant capital stock or equity interest) is not so listed or quoted on a U.S. national or regional securities exchange, the last quoted bid price for the Common Stock (or other relevant capital stock or equity interest) in the over-the-counter market as reported by Pink Sheets LLC or similar organization, or, if that bid price is not available, the market price of the Common Stock (or other relevant capital stock or equity interest) on that date as determined by a nationally recognized independent investment banking firm retained by the Company for this purpose.

“NASDAQ” means the Nasdaq National Market.

“Net Income” means net income, excluding the impact of any one-time deferred tax benefit due to the reduction of valuation allowance against deferred tax assets, extraordinary loan loss provisions or other extraordinary items calculated pursuant to generally acceptable accounting principles consistent with past practice.

“Non-Qualifying Transaction” means any Business Combination that satisfies all of the following criteria: (A) more than 50% of the total voting power of the capital stock of the surviving corporation resulting from such Business Combination, or, if applicable, the ultimate parent corporation that directly or indirectly has Beneficial Ownership of 100% of the voting securities eligible to elect directors of the surviving corporation, is represented by shares of Common Stock that were outstanding immediately before such Business Combination (or, if applicable, is represented by shares into which such Common Stock was converted pursuant to such Business Combination) and (B) at least a majority of the members of the board of directors of the parent corporation (or, if there is no parent corporation, the surviving corporation) following the consummation of the Business Combination were Incumbent Directors at the time the Company’s Board approved the execution of the initial agreement providing for such Business Combination.

B-5

“Ordinary Cash Dividends” means the portion, if any, of any cash dividend that (i) is made out of surplus or net profits legally available therefor (determined in accordance with generally accepted accounting principles, consistently applied) and (ii) (a) prior to August 26, 2015, does not exceed $4,500,000 per quarter in the aggregate, and (b) on or after August 26, 2015, does not exceed 20% of the quarterly Net Income of the Company per quarter in the aggregate.

“Ownership Limit” means at the time of determination, 24.9% of any class of Voting Securities of the Company outstanding at such time. Any calculation of a Warrantholder’s percentage ownership of the outstanding Voting Securities of the Company for purposes of this definition shall be made in accordance with the relevant provisions of Regulation Y of the Federal Reserve Board (12 C.F.R. 225 et seq.)

“Person” has the meaning given to it in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act.

“Preliminary Control Event” means, with respect to the Company, (A) the execution of definitive documentation for a transaction or (B) the recommendation that stockholders tender in response to a tender or exchange offer, in each case, that could reasonably be expected to result in a Change of Control upon consummation.

“Pro Rata Repurchases” means any purchase of shares of Common Stock by the Company or any Affiliate thereof pursuant to (A) any tender offer or exchange offer subject to Section 13(e) of the Exchange Act, or (B) pursuant to any other offer available to substantially all holders of Common Stock, in each case whether for cash, shares of Capital Stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other Person or any other property (including, without limitation, shares of Capital Stock, other securities or evidences of indebtedness of a Subsidiary of the Company), or any combination thereof, effected while this Warrant is outstanding; provided, however, that “Pro Rata Repurchase” shall not include any purchase of shares by the Company or any Affiliate thereof made in accordance with the requirements of Rule 10b-18 as in effect under the Exchange Act. The “Effective Date” of a Pro Rata Repurchase shall mean the date of acceptance of shares for purchase or exchange under any tender or exchange offer which is a Pro Rata Repurchase or the date of purchase with respect to any Pro Rata Repurchase that is not a tender or exchange offer.

“Regulatory Approvals” means, as to any Warrantholder, to the extent applicable and required to permit such Warrantholder to exercise this Warrant for Shares and to own such Common Stock without such Warrantholder being in violation of applicable law, rule or regulation (including the BHC Act and the CBC Act), the receipt or making of approvals and authorizations of, filings and registrations with, notifications to, or determinations by any U.S. federal, state or foreign governmental authority or self-regulatory organization with respect to any such exercise, including the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, if any.

“SEC” has the meaning given to it in Section 12.

“Securities” has the meaning given to it in the Investment Agreement.

B-6

“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“Series B Preferred Stock” means the Convertible Participating Voting Preferred Stock, Series B of the Company.

“Series C Preferred Stock” means the Mandatorily Convertible Preferred Stock, Series C of the Company.

“Series D Preferred Stock” means the Convertible Participating Voting Preferred Stock, Series D of the Company.

“Series E Preferred Stock” means the Series E Participating Cumulative Preferred Stock, Series E of the Company.

“Shareholder Rights Plan” means the Shareholder Rights Plan dated as of April 14, 2010 between the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent.

“Shares” is defined in Section 2.

“Stockholder Proposals” means a proposal to amend the restated articles of incorporation, as amended, of the Company to increase the number of authorized shares of Common Stock to 10,000,000,000 or such larger number as the Board determines in its reasonable judgment is necessary to comply with any obligations of the Company pursuant to any agreement entered into in connection with certain recapitalization transactions to occur at or around the date of this Warrant.

“Subsidiary” of a Person means any corporation, bank, savings bank, association or other Person of which such Person owns or controls 51% or more of the outstanding equity securities either directly or indirectly through an unbroken chain of entities, as to each of which 51% or more of the outstanding equity securities is owned directly or indirectly by its parent; provided, however, that there shall not be included any such entity to the extent that the equity securities of such entity were acquired in satisfaction of a debt previously contracted in good faith or are owned or controlled in a bona fide fiduciary capacity.

“Transfer” has the meaning given to it in Section 8(B)(ii).

“Treasury Warrant” means the Amended and Restated Warrant issued by the Company to the United States Department of the Treasury on the date hereof.

“Voting Securities” means, at any time, shares of any class of capital stock of the Company that are then entitled to vote generally in the election of directors.

“Warrantholder” has the meaning given to it in Section 2.

“Warrant” means this Warrant, issued to the Investor pursuant to the Investment Agreement.

B-7

“Widely Dispersed Offering” means (a) a widespread public distribution, (b) a transfer in which no transferee (or group of associated transferees) would receive more than 2% of any class of Voting Securities of the Company or (c) a transfer to a transferee that would control more than 50% of the Voting Securities of the Company without any transfer from the Investor.

2. Number of Shares; Exercise Price. This certifies that, for value received, Warburg Pincus Private Equity X, L.P., its Affiliates or its registered assigns (the “Warrantholder”) is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from the Company, in whole or in part, up to an aggregate of 86,625,000 fully paid and nonassessable shares of Common Stock (the “Shares”), of the Company, at a purchase price equal to the Exercise Price per Share or to acquire from the Company shares of Series B Preferred Stock in accordance with Section 14. The number of Shares and the Exercise Price are subject to adjustment as provided herein, and all references to “Shares,” “Common Stock” and “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments.

3. Exercise of Warrant; Term. (A) To the extent permitted by applicable laws and regulations, and subject to the restrictions set forth in Section 3(B), the right to purchase the Shares represented by this Warrant is exercisable, in whole or in part by the Warrantholder, at any time or from time to time after the execution and delivery of this Warrant by the Company, on the date hereof, but in no event later than 11:59 p.m., New York City time, on the seventh anniversary of the date of issuance of the Warrant (the “Expiration Time”), by (i) the surrender of this Warrant and Notice of Exercise annexed hereto, duly completed and executed on behalf of the Warrantholder, at the office of the Company in Spokane, Washington (or such other office or agency of the Company in the United States as it may designate by notice in writing to the Warrantholder at the address of the Warrantholder appearing on the books of the Company), and (ii) payment of the Exercise Price for the Shares thereby purchased at the election of the Warrantholder in one of the following manners:

(1) by tendering in cash, by certified or cashier’s check payable to the order of the Company, or by wire transfer of immediately available funds to an account designated by the Company; or

(2) by having the Company withhold shares of Common Stock issuable upon exercise of the Warrant equal in value to the aggregate Exercise Price as to which this Warrant is so exercised based on the Market Price of the Common Stock on the trading day immediately prior to the date on which this Warrant and the Notice of Exercise are delivered to the Company.

If the Warrantholder does not exercise this Warrant in its entirety, the Warrantholder will be entitled to receive from the Company within a reasonable time, and in any event not exceeding three (3) Business Days, a new warrant in substantially identical form for the purchase of that number of Shares equal to the difference between the number of Shares subject to this Warrant and the number of Shares as to which this Warrant is so exercised.

(B) Notwithstanding anything herein to the contrary, the Warrant shall be exercisable only as follows:

B-8

(i) by the Investor pursuant to Section 3(A) for shares of Common Stock, provided that in no event shall Investor be entitled to receive shares of Common Stock upon the exercise hereof to the extent (but only to the extent) that at the time the Investor exercises the Warrant (1) the Investor has failed to obtain any applicable Regulatory Approvals or (2) such receipt would cause the Investor to own, or be deemed for applicable bank regulatory purposes to own, Voting Securities of the Company in excess of the Ownership Limit; or

(ii) by any Warrantholder other than the Investor and its Affiliates, if such Warrantholder shall have acquired this Warrant directly or indirectly by a transaction or transactions constituting a Widely Dispersed Offering and not in violation of the provisions of Section 8 hereof, for shares of Common Stock, subject to any restrictions or limitations under applicable laws and regulations.

4. Issuance of Shares; Authorization; Listing. Certificates for Shares or Series B Preferred Stock as the case may be, issued upon exercise of this Warrant will be issued in such name or names as the Warrantholder may designate and will be delivered to such named Person or Persons within a reasonable time, not to exceed 3 Business Days after the date on which this Warrant has been duly exercised in accordance with the terms of this Warrant. The Company hereby represents and warrants that any Shares or Series B Preferred Stock issued upon the exercise of this Warrant in accordance with the provisions of Section 3 and all other provisions of this Warrant will be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges (other than liens or charges created by the Warrantholder or taxes in respect of any transfer occurring contemporaneously therewith). The Company agrees that the Shares or Series B Preferred Stock so issued will be deemed to have been issued to the Warrantholder as of the close of business on the date on which this Warrant and payment of the Exercise Price are delivered to the Company in accordance with the terms of this Warrant, notwithstanding that the stock transfer books of the Company may then be closed or certificates representing such Shares or Series B Preferred Stock, as the case may be, may not be actually delivered on such date. Subject to receipt of the approval by the Company’s stockholders of the Stockholder Proposals, the Company will at all times reserve and keep available, in the case of Common Stock, out of its authorized but unissued Common Stock, and, in the case of the Series B Preferred Stock, out of its authorized but unissued preferred stock, solely for the purpose of providing for the exercise of this Warrant, the aggregate number of shares of Common Stock and Series B Preferred Stock, as the case may be, then issuable upon exercise of this Warrant. The Company will use reasonable best efforts to (i) procure, at its sole expense, the listing of (A) the Shares issuable upon exercise of this Warrant, including but not limited to those Shares issuable pursuant to Section 13 of this Warrant and (B) in the event that the approval by the Company’s stockholders of the Stockholder Proposals has not been received within 120 days of the date of this Warrant, any other securities issuable upon exercise of this Warrant, in each of cases (A) and (B) subject to issuance or notice of issuance on all stock exchanges on which the Common Stock are then listed or traded and (ii) maintain the listing of such Shares after issuance. The Company will use commercially reasonable efforts to ensure that the Shares and the Series B Preferred Stock may be issued without violation of any applicable law or regulation or of any requirement of any securities exchange on which the Shares or Series B Preferred Stock, as the case may be, are listed or traded.

B-9

5. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon any exercise of this Warrant. In lieu of any fractional share to which the Warrantholder would otherwise be entitled, the Warrantholder shall be entitled to receive a cash payment equal to the Market Price of the Common Stock less the pro-rated Exercise Price for such fractional share.

6. No Rights as Shareholders; Transfer Books. This Warrant does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the date of exercise hereof. The Company will at no time close its transfer books against transfer of this Warrant in any manner which interferes with the timely exercise of this Warrant.

7. Charges, Taxes and Expenses. Issuance of certificates for Shares to the Warrantholder upon the exercise of this Warrant shall be made without charge to the Warrantholder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company.

8. Transfer/Assignment. This Warrant and all rights hereunder are transferable, in whole or in part, upon the books of the Company by the registered holder hereof in person or by duly authorized attorney, and a new warrant shall be made and delivered by the Company, of the same tenor and date as this Warrant but registered in the name of the transferee, upon surrender of this Warrant, duly endorsed, to the office or agency of the Company described in Section 2. All expenses (other than stock transfer taxes) and other charges payable in connection with the preparation, execution and delivery of the new warrants pursuant to this Section 8 shall be paid by the Company. Notwithstanding the foregoing, the Investor shall comply with the transfer restrictions set forth in the Charter Amendment Proposal (as defined in the Investment Agreement) as if the Charter Amendment Proposal had been approved and effective as of the Closing Date (as defined in the Investment Agreement) until such time as the Charter Amendment Proposal actually is approved and effective. Following the approval of the Charter Amendment Proposal (or other similar amendment to the Company’s Articles of Incorporation), the Investor shall comply with the transfer restrictions contained therein.

9. Exchange and Registry of Warrant. This Warrant is exchangeable, upon the surrender hereof by the Warrantholder to the Company, for a new warrant or warrants of like tenor and representing the right to purchase the same aggregate number of Shares. The Company shall maintain a registry showing the name and address of the Warrantholder as the registered holder of this Warrant. This Warrant may be surrendered for exchange or exercise, in accordance with its terms, at the office of the Company, and the Company shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

10. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in the case of any such loss, theft or destruction, upon receipt of an indemnity or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company shall make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of Shares as provided for in such lost, stolen, destroyed or mutilated Warrant.

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11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding day that is a Business Day.

12. Rule 144 Information. The Company covenants that it will use its reasonable best efforts to timely file all reports and other documents required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations promulgated by the U.S. Securities and Exchange Commission (the “SEC”) thereunder (or, if the Company is not required to file such reports under the Securities Act or the Exchange Act, it will, upon the request of any Warrantholder, make publicly available such information as necessary to permit sales pursuant to Rule 144), and it will use reasonable best efforts to take such further action as any Warrantholder may reasonably request, all to the extent required from time to time to enable such holder to sell the Warrants without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 or Regulation S under the Securities Act, as such rules may be amended from time to time, or (ii) any successor rule or regulation hereafter adopted by the SEC. Upon the written request of any Warrantholder, the Company will deliver to such Warrantholder a written statement that it has complied with such requirements.

13. Adjustments and Other Rights. The Exercise Price and the number of Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as follows; provided, that no single event shall be subject to adjustment under more than one sub-section of this Section 13 so as to result in duplication; provided, further, that, notwithstanding any provision of this Warrant to the contrary, any adjustment shall be made to the extent (and only to the extent) that such adjustment would not cause or result in any Warrantholder and its Affiliates, collectively, being in violation of the Ownership Limit (excluding for purposes of this calculation any reduction in the percentage of Voting Securities or other capital stock of the Company such Warrantholder and its Affiliates so owns, controls or has the power to vote resulting from transfers by the Investor and its Affiliates of Securities purchased by the Investor pursuant to the Investment Agreement) or any other applicable law, regulation or rule of any governmental authority or self-regulatory organization. Any adjustment (or portion thereof) prohibited pursuant to the foregoing proviso shall be postponed and implemented on the first date on which such implementation would not result in the condition described in such proviso.

(A) Common Stock Issued at Less than the Applicable Price. (i) If the Company issues or sells, or agrees to issue or sell, any Common Stock or other securities that are convertible into or exchangeable or exercisable for or otherwise linked to Common Stock, other than Excluded Stock, for consideration per share less than the Applicable Price then the Exercise Price in effect immediately prior to each such issuance or sale will immediately (except as provided below) be reduced to the price determined by multiplying the Exercise Price in effect immediately prior to such issuance or sale by a fraction, (x) the numerator of which shall be (1) the number of shares of Common Stock outstanding immediately prior to such issuance or sale (including, to the extent applicable, the number of shares of Common Stock into which any shares of Series B Preferred Stock and Series D Preferred Stock then outstanding are convertible and into which this Warrant and the Treasury Warrant are exercisable) plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such additional shares of Common Stock so issued or sold would purchase at the

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Applicable Price, and (y) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such issuance or sale (including, to the extent applicable, the number of shares of Common Stock into which any shares of Series B Preferred Stock and Series D Preferred Stock then outstanding are convertible and into which this Warrant and the Treasury Warrant are exercisable). In such event, the number of shares of Common Stock issuable upon the exercise of this Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Shares issuable upon the exercise of this Warrant before such adjustment and (2) the Exercise Price in effect immediately prior to the issuance or sale giving rise to this adjustment, by (y) the new Exercise Price determined in accordance with the immediately preceding sentence. For the avoidance of doubt, no increase in the Exercise Price or reduction in the number of Shares issuable upon exercise of this Warrant shall be made pursuant to this sub-clause (i) of this Section 13(A).

(ii) For the purposes of any adjustment of the Exercise Price and the number of Shares issuable upon exercise of this Warrant pursuant to this Section 13(A), the following provisions shall be applicable:

(1) In the case of the issuance or sale of equity or equity-linked securities for cash, the amount of the consideration received by the Company shall be deemed to be the amount of the gross cash proceeds received by the Company for such securities before deducting therefrom any discounts or commissions allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof.

(2) In the case of the issuance or sale of equity or equity-linked securities (otherwise than upon the conversion of shares of Capital Stock or other securities of the Company) for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the Fair Market Value, before deducting therefrom any discounts or commissions allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof.

(3) In the case of the issuance of (i) options, warrants or other rights to purchase or acquire equity or equity-linked securities (whether or not at the time exercisable) or (ii) securities by their terms convertible into or exchangeable for equity or equity-linked securities (whether or not at the time so convertible or exchangeable) or options, warrants or rights to purchase such convertible or exchangeable securities (whether or not at the time exercisable):

(a) The aggregate maximum number of shares of securities deliverable upon exercise of such options, warrants or other rights to purchase or acquire equity or equity-linked securities shall be deemed to have been issued at the time such options, warrants or rights are issued and for a consideration equal to the consideration (determined in the manner provided in Section 13(A)(i) and (ii)), if any, received by the Company upon the issuance or sale of such options, warrants or rights plus the minimum purchase price provided in such options, warrants or rights for the equity or equity-linked securities covered thereby.

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(b) The aggregate maximum number of shares of equity or equity-linked securities deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options, warrants or other rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such securities were issued or such options, warrants or rights were issued and for a consideration equal to the consideration, if any, received by the Company for any such securities and related options, warrants or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration (in each case, determined in the manner provided in Section 13(A)(i) and (ii)), if any, to be received by the Company upon the conversion or exchange of such securities, or upon the exercise of any related options, warrants or rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof.

(c) On any change in the number of shares of equity or equity-linked securities deliverable upon exercise of any such options, warrants or rights or conversion or exchange of such convertible or exchangeable securities or any change in the consideration to be received by the Company upon such exercise, conversion or exchange, but excluding changes resulting from the anti-dilution provisions thereof (to the extent comparable to the anti-dilution provisions contained herein), the Exercise Price and the number of Shares issuable upon exercise of this Warrant as then in effect shall forthwith be readjusted to such Exercise Price and number of Shares as would have been obtained had an adjustment been made upon the issuance or sale of such options, warrants or rights not exercised prior to such change, or of such convertible or exchangeable securities not converted or exchanged prior to such change, upon the basis of such change.

(d) If the Exercise Price and the number of Shares issuable upon exercise of this Warrant shall have been adjusted upon the issuance or sale of any such options, warrants, rights or convertible or exchangeable securities, no further adjustment of the Exercise Price and the number of Shares issuable upon exercise of this Warrant shall be made for the actual issuance of Common Stock upon the exercise, conversion or exchange thereof.

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(B) Stock Splits, Subdivisions, Reclassifications or Combinations. If the Company shall (i) declare a dividend or make a distribution on its Common Stock in shares of Common Stock, (ii) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify the outstanding Common Stock into a smaller number of shares, the number of Shares issuable upon exercise of this Warrant at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Warrantholder after such date shall be entitled to purchase the number of shares of Common Stock which such holder would have owned or been entitled to receive after such date had this Warrant been exercised immediately prior to such date. In such event, the Exercise Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted to the number obtained by dividing (x) the product of (1) the number of Shares issuable upon the exercise of this Warrant before such adjustment and (2) the Exercise Price in effect immediately prior to the record or effective date, as the case may be, for such dividend, distribution, subdivision, combination or reclassification giving rise to this adjustment by (y) the new number of Shares issuable upon exercise of this Warrant determined pursuant to the immediately preceding sentence.

(C) Other Distributions. In case the Company shall fix a record date for the making of a distribution to all holders of shares of its Common Stock (i) of shares of any class other than its Common Stock, (ii) of evidence of indebtedness of the Company or any Subsidiary, (iii) of assets or cash (excluding the amount of Ordinary Cash Dividends, and dividends or distributions referred to in Section 13(B)), or (iv) of rights or warrants (other than in connection with the adoption of a shareholder rights plan), in each such case, the Exercise Price in effect prior thereto shall be reduced immediately thereafter to the price determined by dividing (x) an amount equal to the difference resulting from (1) the number of shares of Common Stock outstanding on such record date multiplied by the Exercise Price per Share on such record date, less (2) the Fair Market Value of said shares or evidences of indebtedness or assets or rights or warrants to be so distributed, by (y) the number of shares of Common Stock outstanding on such record date; such adjustment shall be made successively whenever such a record date is fixed. In such event, the number of shares of Common Stock issuable upon the exercise of this Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Shares issuable upon the exercise of this Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the issuance giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence. In the event that such distribution is not so made, the Exercise Price and the number of Shares issuable upon exercise of this Warrant then in effect shall be readjusted, effective as of the date when the Board determines not to distribute such shares, evidences of indebtedness, assets, rights or warrants, as the case may be, to the Exercise Price that would then be in effect and the number of Shares that would then be issuable upon exercise of this Warrant if such record date had not been fixed.

(D) Certain Repurchases of Common Stock. In case the Company effects a Pro Rata Repurchase of Common Stock, then the Exercise Price shall be reduced to the price determined by multiplying the Exercise Price in effect immediately prior to the effective date of such Pro Rata Repurchase by a fraction of which the numerator shall be (i) the product of (x) the number of shares of Common Stock outstanding immediately before such Pro Rata Repurchase and (y) the Market Price of a share of Common Stock on the trading day immediately preceding the first public announcement by the Company or any of its Affiliates of the intent to effect such Pro Rata Repurchase, minus (ii) the aggregate purchase price of the Pro Rata Repurchase, and of which the denominator shall be the product of (i) the number of shares of Common Stock outstanding immediately prior to such Pro Rata Repurchase minus the number of shares of Common Stock so repurchased and (ii) the Market Price per share of Common Stock on the trading day immediately preceding the first public announcement of such Pro Rata Repurchase. In such event, the number of shares of Common Stock issuable upon the exercise of this Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Shares issuable upon the exercise of this Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the Pro Rata Repurchase giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.

B-14

(E) Business Combinations. In case of any Business Combination or reclassification of Common Stock (other than a reclassification of Common Stock referred to in Section 13(B)), any Shares (assuming, for these purposes, that the Stockholder Approval shall have been obtained) issued or issuable upon exercise of this Warrant after the date of such Business Combination or reclassification shall be exchangeable for the number of shares of stock or other securities or property (including cash) to which the Common Stock issuable (at the time of such Business Combination or reclassification) upon exercise of this Warrant immediately prior to the consummation of such Business Combination or reclassification would have been entitled upon consummation of such Business Combination or reclassification; and in any such case, if necessary, the provisions set forth herein with respect to the rights and interests thereafter of the Warrantholder shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. In determining the kind and amount of stock, securities or the property receivable upon consummation of such Business Combination, if the holders of Common Stock have the right to elect the kind or amount of consideration receivable upon consummation of such Business Combination, then the Warrantholder shall have the right to make a similar election upon exercise of this Warrant with respect to the number of shares of stock or other securities or property which the Warrantholder will receive upon exercise of this Warrant.

(F) Rounding of Calculations; Minimum Adjustments. All calculations under this Section 13 shall be made to the nearest one-tenth (1/10th) of a cent. Any provision of this Section 13 to the contrary notwithstanding, no adjustment in the Exercise Price or the number of Shares into which this Warrant is exercisable shall be made if the amount of such adjustment would be less than $0.01, but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate $0.01 or more.

(G) Timing of Issuance of Additional Common Stock Upon Certain Adjustments. In any case in which the provisions of this Section 13 shall require that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event (i) issuing to the Warrantholder of this Warrant exercised after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such exercise by reason of the adjustment required by such event over and above the shares of Common Stock issuable upon such exercise before giving effect to such adjustment and (ii) paying to such Warrantholder any amount of cash in lieu of a fractional share of Common Stock; provided, however, that the Company upon request shall deliver to such Warrantholder a due bill or other appropriate instrument evidencing such Warrantholder’s right to receive such additional shares, and such cash, upon the occurrence of the event requiring such adjustment.

B-15

(H) Adjustment for Unspecified Actions. If the Company takes any action affecting the Common Stock or the Common Equivalent Preferred Stock, other than actions described in this Section 13, which in the reasonable judgment of the Board would adversely affect the exercise rights of the Warrantholder, the Exercise Price for the Warrant and/or the number of Shares received upon exercise of the Warrant shall be adjusted for the Warrantholder’s benefit (the “Adjustment”), to the extent permitted by law, in such manner, and at such time, as the Board after consultation with the Warrantholder shall reasonably determine to be equitable in the circumstances. In the event that an Adjustment or the Board’s failure to make an Adjustment is disputed (each, a “Disputed Adjustment Matter”), such Disputed Adjustment Matter shall be resolved through the Appraisal Procedure mutatis mutandis.

(I) Statement Regarding Adjustments. Whenever the Exercise Price or the number of Shares into which this Warrant is exercisable shall be adjusted as provided in Section 13, the Company shall forthwith file at the principal office of the Company a statement showing in reasonable detail the facts requiring such adjustment and the Exercise Price that shall be in effect and the number of Shares into which this Warrant shall be exercisable after such adjustment, and the Company shall also cause a copy of such statement to be sent by mail, first class postage prepaid, to each Warrantholder at the address appearing in the Company’s records.

(J) Notice of Adjustment Event. In the event that the Company shall propose to take any action of the type described in this Section 13 (but only if the action of the type described in this Section 13 would result in an adjustment in the Exercise Price or the number of Shares into which this Warrant is exercisable or a change in the type of securities or property to be delivered upon exercise of this Warrant), the Company shall give notice to the Warrantholder, in the manner set forth in Section 13(I), which notice shall specify the record date, if any, with respect to any such action and the approximate date on which such action is to take place. Such notice shall also set forth the facts with respect thereto as shall be reasonably necessary to indicate the effect on the Exercise Price and the number, kind or class of shares or other securities or property which shall be deliverable upon exercise of this Warrant. In the case of any action which would require the fixing of a record date, such notice shall be given at least 10 days prior to the date so fixed, and in case of all other action, such notice shall be given at least 15 days prior to the taking of such proposed action. Failure to give such notice, or any defect therein, shall not affect the legality or validity of any such action.

(K) No Impairment. The Company will not, by amendment of its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrantholder.

B-16

(L) Proceedings Prior to Any Action Requiring Adjustment. As a condition precedent to the taking of any action which would require an adjustment pursuant to this Section 13, the Company shall take any action which may be necessary, including obtaining regulatory, NASDAQ or stockholder approvals or exemptions, in order that the Company may thereafter validly and legally issue as fully paid and nonassessable all shares of Common Stock that the Warrantholder is entitled to receive upon exercise of this Warrant pursuant to this Section 13.

(M) Adjustment Rules. Any adjustments pursuant to this Section 13 shall be made successively whenever an event referred to herein shall occur. If an adjustment in Exercise Price made hereunder would reduce the Exercise Price to an amount below par value of the Common Stock, then such adjustment in Exercise Price made hereunder shall reduce the Exercise Price to the par value of the Common Stock.

(N) Notwithstanding anything to contrary set forth herein, the Exercise Price and the number of Shares issuable upon exercise of this Warrant shall also be subject to adjustment from time to time as set forth in this Section 13 as applied to any Common Equivalent Preferred Stock, mutatis mutandis.

14. Exercise for Series B Preferred Stock. Prior to the receipt of all necessary approvals of the Company’s stockholders of the Stockholder Proposals, the Warrantholder may exercise all or any part of this Warrant for a number of shares of Series B Preferred Stock that would be convertible in accordance with the terms thereof into that number of shares of Common Stock it would otherwise be entitled to receive in accordance with Section 3. The Company will at all times reserve and keep available, out of its authorized preferred stock, a sufficient number of shares of preferred stock for the purpose of providing for the exchange of this Warrant for shares of Series B Preferred Stock. It is understood and agreed that, in lieu of delivering shares of Series B Preferred Stock pursuant to this Section 14, the Company may deliver depositary shares for shares of a new series of preferred stock having rights, preferences and privileges identical to the Series B Preferred Stock.

15. Contest and Appraisal Rights. Upon each determination of Market Price or Fair Market Value, as the case may be, hereunder, the Company shall promptly give notice thereof to the Warrantholder, setting forth in reasonable detail the calculation of such Market Price or Fair Market Value, and the method and basis of determination thereof, as the case may be. If the Warrantholder (or if there is more than one Warrantholder, a majority in interest of Warrantholders) shall disagree with such determination and shall, by notice to the Company given within 15 days after the Company’s notice of such determination, elect to dispute such determination, such dispute shall be resolved in accordance with this Section 15. In the event that a determination of Market Price, or Fair Market Value (if such determination solely involves Market Price), is disputed, such dispute shall be submitted, at the Company’s expense, to a NASDAQ member firm selected by the Company and acceptable to the Warrantholder, whose determination of Market Price or Fair Market Value, as the case may be, shall be binding on the Company and the Warrantholder. In the event that a determination of Fair Market Value, other than a determination solely involving Market Price, is disputed, such dispute shall be resolved through the Appraisal Procedure.

16. Governing Law. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall constitute a contract under the laws of the State of New York and for all purposes shall be construed in accordance with and governed by the laws of the State of New York applicable to agreements made and to be performed entirely within such state.

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17. Attorneys’ Fees. In any litigation, arbitration or court proceeding between the Company and the Warrantholder as the holder of this Warrant relating hereto, the prevailing party shall be entitled to reasonable attorneys’ fees and expenses incurred in enforcing this Warrant.

18. Amendments. This Warrant may be amended and the observance of any term of this Warrant may be waived only, in the case of an amendment, with the written consent of the Company and the Warrantholder, or in the case of a waiver, by the party against whom the waiver is to be effective.

19. Notices. All notices hereunder shall be in writing and shall be effective (A) on the day on which delivered if delivered personally or transmitted by telex or telegram or telecopier with evidence of receipt, (B) one Business Day after the date on which the same is delivered to a nationally recognized overnight courier service with evidence of receipt, or (C) five Business Days after the date on which the same is deposited, postage prepaid, in the U.S. mail, sent by certified or registered mail, return receipt requested, and addressed to the party to be notified at the address indicated below for the Company, or at the address for the Warrantholder set forth in the registry maintained by the Company pursuant to Section 9, or at such other address and/or telecopy or telex number and/or to the attention of such other person as the Company or the Warrantholder may designate by ten-day advance written notice.

If to the Investor:

Warburg Pincus Private Equity X, L.P.
450 Lexington Avenue
New York, New York 10017-3140
Attn: Dan Zilberman
Facsimile: (212) 716-8626

with a copy to (which copy alone shall not constitute notice):

Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004
Attn: Mitchell S. Eitel
Andrew R. Gladin
Facsimile: (212) 558-3588

If to the Company:

Sterling Financial Corporation
111 North Wall Street
Spokane, WA 99201
Attn: J. Gregory Seibly
Facsimile: (509) 358-6191

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with a copy to (which copy alone shall not constitute notice):

Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
Attn: John Douglas
Facsimile: (212) 701-5145

20. Prohibited Actions. The Company agrees that it will not take any action which would entitle the Warrantholder to an adjustment of the Exercise Price if the total number of shares of Common Stock issuable after such action upon exercise of this Warrant, together with all shares of Common Stock then outstanding and all shares of Common Stock then issuable upon the exercise of all outstanding options, warrants, conversion and other rights, would exceed the total number of shares of Common Stock then authorized by its certificate of incorporation.

21. Entire Agreement. This Warrant and the forms attached hereto, and the Investment Agreement, contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior and contemporaneous arrangements or undertakings with respect thereto.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by a duly authorized officer.

Dated as of the date set forth above.


Sterling Financial Corporation
By:	/s/ J. Gregory Seibly
	Name:	J. Gregory Seibly
	Title:	President and Chief Executive Officer


Attest:
By:	/s/ Daniel G. Byrne
	Name:	Daniel G. Byrne
	Title:	Executive Vice President and Chief Financial Officer

[Signature Page to WP Warrant]

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Acknowledged and Agreed: Warburg Pincus Private Equity X, L.P.
By:	Warburg Pincus X LLC, its general partner


By:	Warburg Pincus Partners LLC, its sole member


By:	Warburg Pincus & Co., its managing member



By:	/s/ Dan Zilberman
	Name:	Dan Zilberman
	Title:	Partner

[Signature Page to WP Warrant]

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[Form Of Notice Of Exercise]

Date: __________________

TO:		Sterling Financial Corporation

RE:		Election to Subscribe for and Purchase Common Stock

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby agrees to subscribe for and purchase the number of shares of the Common Stock set forth below covered by such Warrant. The undersigned, in accordance with Section 3 of the Warrant, hereby agrees to pay the aggregate Exercise Price for such shares of Common Stock in the manner set forth below. A new warrant evidencing the remaining shares of Common Stock covered by such Warrant, but not yet subscribed for and purchased, should be issued in the name set forth below. If the new warrant is being transferred, an opinion of counsel is attached hereto with respect to the transfer of such warrant.

Number of Shares of Common Stock:

Method of Payment of Exercise Price:

Name and Address of Person to be
Issued New Warrant:


	Holder:

	By:
	Name:
	Title:

[Form of Notice of Exercise]

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