EMPLOYMENT AGREEMENT - ROGER MOYER, JR

                                                                   

                              EMPLOYMENT AGREEMENT

 

         THIS AGREEMENT is made as of the18th day of December, 2001, among

STERLING FINANCIAL CORPORATION ("Corporation"), a Pennsylvania business

corporation having a place of business at 101 North Pointe Boulevard, Lancaster,

Pennsylvania 17601, BANK OF LANCASTER COUNTY, N.A. ("Bank"), a national banking

association having a place of business at, 101 North Pointe Boulevard,

Lancaster, Pennsylvania 17601 and J. ROGER MOYER, JR. ("Executive"), an

individual residing at 38 Canterbury Court, Lititz, Pennsylvania 17543.

 

                                   WITNESSETH:

 

         WHEREAS, the Corporation is a registered financial holding company with

Bank of Lancaster County as one of its subsidiaries;

 

         WHEREAS, Corporation and Bank desire to employ Executive to serve in

the capacity of President and Chief Operating Officer of Corporation as of

January 1, 2002, and as President and Chief Executive Officer of Corporation as

of May 1, 2002, under the terms and conditions set forth herein;

 

         WHEREAS, Executive desires to accept employment with Corporation and

Bank on the terms and conditions set forth herein.

 

                                   AGREEMENT:

 

         NOW, THEREFORE, the parties hereto, intending to be legally bound,

agree as follows:

 

1.       EMPLOYMENT. Corporation and Bank hereby employ Executive and Executive

         hereby accepts employment with Corporation and Bank, under the terms

         and conditions set forth in this Agreement.

 

2.       DUTIES OF EMPLOYEE. Executive shall perform and discharge well and

         faithfully such duties as an executive officer of Corporation and Bank

         as may be assigned to Executive from time to time by the Board of

         Directors of Corporation and the Chairman of the Corporation so long as

         the assignment is consistent with the Executive's office and duties.

         Executive shall be employed as President and Chief Operating Officer of

         Corporation, effective January 1, 2002, and shall be promoted to

         President and Chief Executive Officer of Corporation effective May 1,

         2002, and shall hold such other titles as may be given to him from time

         to time by the Board of Directors of Corporation. Executive shall

         devote his full time, attention and energies to the business of

         Corporation and its subsidiaries during the Employment Period (as

         defined in Section 3 of this Agreement); provided, however, that this

         Section 2 shall not be construed as preventing Executive from (a)

         engaging in activities incident or necessary to personal investments so

         long as such investment does not exceed 5% of the outstanding shares of

         any publicly held company, (b) acting as a member of the Board of

         Directors of any other corporation or as a member of the Board of

         Trustees of any other

         organization, with the prior approval of the Board of Directors of

         Corporation, or (c) being involved in any other activity with the prior

         approval of the Board of Directors of Corporation. The Executive shall

         not engage in any business or commercial activities, duties or pursuits

         which compete with the business or commercial activities of Corporation

         or its subsidiaries, nor may the Executive serve as a director or

         officer or in any other capacity in a company which competes with

         Corporation or its subsidiaries.

 

3.       TERM OF AGREEMENT.

 

         (a)      This Agreement shall be for a three (3) year period (the

                  "Employment Period") beginning on January 1, 2002, and if not

                  previously terminated pursuant to the terms of this Agreement,

                  the Employment Period shall end three (3) years later;

                  provided however, that this Agreement will be automatically

                  renewed one year later on the first anniversary date of

                  January 1, 2002 (the "Renewal Date") for the three-year period

                  commencing on such date and ending three years later, unless

                  either party gives written notice of non-renewal to the other

                  party at least ninety (90) days prior to the Renewal Date (in

                  which case this Agreement will continue in effect for a term

                  ending two (2) years from the Renewal Date). If this Agreement

                  is renewed on the Renewal Date, it will be automatically

                  renewed on the first anniversary date of the Renewal Date and

                  each subsequent year (the "Annual Renewal Date") for a period

                  ending three years from each Annual Renewal Date, unless

                  either party gives written notice of non-renewal to the other

                  party at least ninety (90) days prior to an Annual Renewal (in

                  which case this Agreement will continue in effect for a term

                  ending two (2) years from the Annual Renewal Date immediately

                  following such notice).

 

         (b)      Notwithstanding the provisions of Section 3(a) of this

                  Agreement, this Agreement shall terminate automatically for

                  Cause (as defined herein) upon written notice from the Board

                  of Directors of Corporation to Executive. As used in this

                  Agreement, "Cause" shall mean any of the following:

 

                  (i)      Executive's conviction of or plea of guilty or nolo

                           contendere to a felony, a crime of falsehood or a

                           crime involving moral turpitude, or the actual

                           incarceration of Executive for a period of forty-five

                           (45) consecutive days or more;

 

                  (ii)     Executive's failure to follow the good faith lawful

                           instructions of the Board of Directors of Corporation

                           with respect to its operations, after written notice

                           from Corporation and a failure to cure such violation

                           within thirty (30) days of said written notice;

 

                  (iii)    Executive's willful failure to substantially perform

                           Executive's duties to Corporation or its

                           subsidiaries, other than a failure resulting from

                           Executive's incapacity because of physical or mental

                           illness, as provided in Section 3 (d)

                           of this Agreement, after written notice from

                           Corporation or Bank and a failure to cure such

                           violation within thirty (30) days of said written

                           notice;

 

                  (iv)     Executive's intentional violation of the provisions

                           of this Agreement, after written notice from

                           Corporation and a failure to cure such violation

                           within thirty (30) days of said written notice;

 

                  (v)      Dishonesty of the Executive in the performance of his

                           duties;

 

                  (vi)     Executive's removal or prohibition from being an

                           institutional-affiliated party by a final order of an

                           appropriate federal banking agency pursuant to

                           Section 8(e) of the Federal Deposit Insurance Act or

                           by the Office of the Comptroller of the Currency

                           pursuant to national law;

 

                  (vii)    Conduct on the part of the Executive which brings

                           public discredit to Corporation or its subsidiaries,

                           as determined by an affirmative vote of seventy

                           percent (70%) of the disinterested members of the

                           Boards of Directors of Corporation and Bank;

 

                  (viii)   Executive's breach of fiduciary duty involving

                           personal profit.

 

                  (ix)     Unlawful discrimination by the Executive, including

                           harassment against Corporation's or Corporation's

                           subsidiary's employees, customers, business

                           associates, contractors, or vendors, which could

                           result in liability to Corporation or one of its

                           subsidiaries; or

 

                  (x)      Theft or material abuse by executive of Corporation's

                           property or the property of one of Corporation's

                           subsidiaries, or the property of Corporation's or

                           Bank's customers, employees, subsidiaries,

                           contractors, vendors, or business associates.

 

                  If this Agreement is terminated for Cause, all of Executive's

                  rights under this Agreement shall cease as of the effective

                  date of such termination.

 

         (c)      Notwithstanding the provisions of Section 3(a) of this

                  Agreement, this Agreement shall terminate automatically upon

                  Executive's voluntary termination of employment (other than in

                  accordance with Section 5 of this Agreement) for Good Reason.

                  The term "Good Reason" shall mean (i) the assignment of duties

                  and responsibilities inconsistent with Executive's status as

                  President and Chief Operating Officer of Corporation and,

                  after May 1, 2002, Chief Executive Officer of the Corporation,

                  (ii) a reassignment which requires Executive to move his

                  principal residence more than fifty (50) miles from the

                  location of Corporation's or Bank's principal executive office

                  immediately prior to this Agreement, (iii) any removal of the

                  Executive from office or any adverse change in the terms and

                  conditions of the Executive's employment, except for any

                  termination of the Executive's employment under the

                  provisions of Section 3(b) of this Agreement, (iv) any

                  reduction in the Executive's Annual Base Salary as in effect

                  on the date this Agreement is executed or as the same may be

                  increased from time to time, except such reductions that are

                  the result of a national financial depression, or national or

                  bank emergency, or (v) any failure of Corporation or Bank to

                  provide the Executive with benefits at least as favorable as

                  those enjoyed by the Executive during the Employment Period

                  under any of the pension or other qualified retirement, life

                  insurance, medical, health and accident, disability or other

                  employee plans of Corporation or Bank, or the taking of any

                  action that would materially reduce any such benefits, unless

                  such reduction is part of a reduction applicable to all

                  employees.

 

                  At the option of the Executive, exercisable by the Executive

                  within ninety (90) days after the occurrence of the event

                  constituting "Good Reason," the Executive may resign from

                  employment under this Agreement by a notice in writing (the

                  "Notice of Termination") delivered to Corporation and Bank and

                  the provisions of this Section 3(c) of this Agreement shall

                  thereupon apply.

 

                  If such termination occurs for Good Reason, then Corporation

                  or Bank shall pay Executive an amount equal to the remaining

                  balance of the Agreed Compensation otherwise due to the

                  Executive for the remainder of the then existing Employment

                  Period, which amount shall be payable in equal monthly

                  installments and shall be subject to federal, state and local

                  tax withholdings. In addition, for the remainder of the then

                  existing Employment Period, or until Executive secures

                  substantially similar benefits through other employment,

                  whichever shall first occur, Executive shall receive a

                  continuation of all life, disability, medical insurance and

                  other normal health and welfare benefits in effect with

                  respect to Executive during the two (2) years prior to his

                  termination of employment, or, if Corporation and Bank cannot

                  provide such benefits because Executive is no longer an

                  employee, a dollar amount equal to the cost to Executive of

                  obtaining such benefits (or substantially similar benefits).

                  If permitted under the terms of the plan, Executive may

                  continue to participate in all qualified and non-qualified

                  retirement benefit plans as if his employment had continued

                  through the remaining term of the Agreement. If Executive is

                  not eligible to continue to participate in qualified or

                  non-qualified retirement plans, Executive will receive a lump

                  sum cash payment equal to 29% of the payments to be received

                  for termination of this Agreement under this provision.

                  However, in the event that the payment described herein, when

                  added to all other amounts or benefits provided to or on

                  behalf of the Executive in connection with his termination of

                  employment, would result in the imposition of an excise tax

                  under Code Section 4999, such payments shall be retroactively

                  (if necessary) reduced to the extent necessary to avoid such

                  excise tax imposition. Upon written notice to Executive,

                  together with calculations of Corporation's independent

                  auditors, Executive shall remit to Corporation the amount of

                  the reduction plus such interest as may be necessary to avoid

                  the imposition of such excise tax. Notwithstanding the

                  foregoing or any other provision of this contract to the

                  contrary, if any portion of the amount herein payable to the

                  Executive is determined to be non-deductible, pursuant

                  to the regulations promulgated under Section 280G of the

                  Internal Revenue Code of 1986, as amended (the "Code"), the

                  Corporation shall be required only to pay to Executive the

                  amount determined to be deductible under Section 280G.

 

         (d)      Notwithstanding the provisions of Section 3(a) of this

                  Agreement, this Agreement shall terminate automatically upon

                  Executive's Disability and Executive's rights under this

                  Agreement shall cease as of the date of such termination;

                  provided, however, that Executive shall nevertheless be

                  entitled to receive any benefits that may be available under

                  any disability plan of Corporation and Bank, until the

                  earliest of (i) Executive's return to employment, (ii) his

                  attainment of age 65, or (iii) his death. In addition,

                  Executive shall receive for such period a continuation of all

                  life, disability, medical insurance and other normal health

                  and welfare benefits in effect with respect to Executive

                  during the two (2) years prior to his disability, or, if

                  Corporation and Bank cannot provide such benefits because

                  Executive is no longer an employee, a dollar amount equal to

                  the cost to Executive of obtaining such benefits (or

                  substantially similar benefits). For purposes of this

                  Agreement, the Executive shall have a Disability if, as a

                  result of physical or mental injury or impairment, Executive

                  is unable to perform all of the essential job functions of his

                  position on a full time basis taking into account any

                  reasonable accommodation required by law, and without posting

                  a direct threat to himself and others, for a period of one

                  hundred eighty (180) days or more. The Executive shall have no

                  duty to mitigate any payment provided for in this Section 3(d)

                  by seeking other employment.

 

         (e)      Executive agrees that in the event his employment under this

                  Agreement is terminated, regardless of the reason for

                  termination, Executive shall resign as a director of

                  Corporation and Bank, or any affiliate or subsidiary thereof,

                  if he is then serving as a director of any of such entities.

 

         (f)      The term "Agreed Compensation" shall equal the sum of (A) the

                  Executive's highest Annual Base Salary under the Agreement,

                  and (B) the average of the Executive's annual bonuses with

                  respect to the three (3) calendar years immediately preceding

                  the Executive's termination; provided, however, that if the

                  Executive is terminated after January 1, 2003, but before

                  January 1, 2004, then Agreed Compensation shall equal the sum

                  of (A) the Executive's highest Annual Base Salary under the

                  Agreement and (B) the Executive's annual bonus for 2002. If

                  the Executive is terminated after January 1, 2004, but before

                  January 1, 2005, then Agreed Compensation shall equal the sum

                  of (A) the Executive's highest Annual Base Salary under the

                  Agreement and (B) the average of the Executive's annual

                  bonuses for 2002 and 2003.

 

4.       EMPLOYMENT PERIOD COMPENSATION.

 

         (a)      Annual Base Salary. For services performed by Executive under

                  this Agreement, Corporation shall pay Executive an Annual Base

                  Salary during the Employment Period at the rate of Two Hundred

                  Seventy Thousand Dollars ($270,000.00) per year

                  (subject to applicable withholdings and deductions) payable at

                  the same times as salaries are payable to other executive

                  employees of Corporation. Corporation may, from time to time,

                  increase Executive's Annual Base Salary, and any and all such

                  increases shall be deemed to constitute amendments to this

                  Section 4(a) to reflect the increased amounts, effective as of

                  the date established for such increases by the Board of

                  Directors of Corporation or any committee of such Board in the

                  resolutions authorizing such increases.

 

         (b)      Bonus. For services performed by Executive under this

                  Agreement, Corporation may, from time to time, pay a bonus or

                  bonuses to Executive as Corporation, in its sole discretion,

                  deems appropriate. The payment of any such bonuses shall not

                  reduce or otherwise affect any other obligation of Corporation

                  or Bank to Executive provided for in this Agreement. Executive

                  is entitled to participate in the bonus programs available to

                  senior executives.

 

         (c)      Paid Time Off and/or Vacations. During the term of this

                  Agreement, Executive shall be entitled to paid time off in

                  accordance with the policies as established from time to time

                  by the Boards of Directors of Corporation and Bank for the

                  Corporation's and Bank's senior management.

 

         (d)      Automobile. During the term of this Agreement, Corporation and

                  Bank shall provide Executive with exclusive use of an

                  automobile mutually agreed upon by Corporation and Bank and

                  reasonably consistent with Executive's position. Corporation

                  and Bank shall be responsible and shall pay for all costs of

                  insurance coverage, repairs, maintenance and other operating

                  and incidental expenses, including license, fuel and oil.

                  Corporation and Bank shall provide Executive with a

                  replacement automobile at approximately the time Executive's

                  automobile reaches three (3) years of age or 50,000 miles,

                  whichever is first, and approximately every three (3) years or

                  50,000 miles thereafter, upon the same terms and conditions.

 

         (e)      Employee Benefit Plans. During the term of this Agreement,

                  Executive shall be entitled to participate in or receive the

                  benefits of any employee benefit plan currently in effect at

                  Corporation and Bank, subject to the terms of said plan, until

                  such time that the Boards of Directors of Corporation and Bank

                  authorize a change in such benefits. Corporation and Bank

                  shall not make any changes in such plans or benefits which

                  would adversely affect Executive's rights or benefits

                  thereunder, unless such change occurs pursuant to a program

                  applicable to all executive officers of Corporation and Bank

                  and does not result in a proportionately greater adverse

                  change in the rights of or benefits to Executive as compared

                  with any other executive officer of Corporation and Bank.

                  Nothing paid to Executive under any plan or arrangement

                  presently in effect or made available in the future shall be

                  deemed to be in lieu of the salary payable to Executive

                  pursuant to Section 4(a) hereof.

 

         (f)      Business Expenses. During the term of this Agreement,

                  Executive shall be entitled to receive prompt reimbursement

                  for all reasonable expenses incurred by him, which

                  are properly accounted for, in accordance with the policies

                  and procedures established by the Boards of Directors of

                  Corporation and Bank for their executive officers. Corporation

                  shall reimburse Executive for any and all initiation fees,

                  membership dues, assessments, and reasonable related business

                  expenses associated with the Executive's membership in a

                  mutually agreeable country club and the Hamilton Club of

                  Lancaster.

 

         (g)      Stock Options. Executive shall be entitled to participate in

                  the Corporation's stock option plans consistent with his

                  position as a member of Corporation's and Bank's senior

                  management. Upon a Change in Control (as defined in Section

                  5(b) of this Agreement), all options theretofore granted to

                  the Executive by the Corporation and not previously

                  exercisable shall become fully exercisable to the same extent

                  and in the same manner as if they had become exercisable by

                  passage of time or by virtue of the Corporation achieving

                  certain performance objectives in accordance with the relevant

                  provisions of any plan and any agreement.

 

5.       TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL.

 

         (a)      If a Change in Control (as defined in Section 5(b) of this

                  Agreement) shall occur, then, at the option of Executive,

                  exercisable by Executive within three hundred sixty five (365)

                  days of the Change in Control, Executive may resign from

                  employment with Corporation and Bank (or, if involuntarily

                  terminated, give notice of intention to collect benefits under

                  this Agreement) by delivering a notice in writing (the "Notice

                  of Termination") to Corporation and Bank and the provisions of

                  Section 6 of this Agreement shall apply.

 

         (b)      As used in this Agreement, "Change in Control" shall mean the

                  occurrence of any of the following:

 

                  (i)      (A) a merger, consolidation or division involving

                           Corporation or Bank, (B) a sale, exchange, transfer

                           or other disposition of substantially all of the

                           assets of Corporation or Bank, or (C) a purchase by

                           Corporation or Bank of substantially all of the

                           assets of another entity, unless (y) such merger,

                           consolidation, division, sale, exchange, transfer,

                           purchase or disposition is approved in advance by

                           seventy percent (70%) or more of the members of the

                           Board of Directors of Corporation or Bank (of the

                           entity affected by the transaction) who are not

                           interested in the transaction and (z) a majority of

                           the members of the Board of Directors of the legal

                           entity resulting from or existing after any such

                           transaction and of the Board of Directors of such

                           entity's parent corporation, if any, are former

                           members of the Board of Directors of Corporation or

                           Bank (of the entity affected by the transaction);

 

                  (ii)     any "person" (as such term is used in Sections 13(d)

                           and 14(d) of the Securities Exchange Act of 1934 (the

                           "Exchange Act")), other than Corporation or Bank or

                           any "person" who on the date hereof is a director or

                           officer of Corporation or Bank is or becomes the

                           "beneficial owner" (as defined in Rule 13d-3 under

                           the Exchange Act), directly or indirectly, of

                           securities of Corporation or Bank representing

                           twenty-five (25%) percent or more of the combined

                           voting power of Corporation or Bank's then

                           outstanding securities; or

 

                  (iii)    during any period of two (2) consecutive years during

                           the term of Executive's employment under this

                           Agreement, individuals who at the beginning of such

                           period constitute the Board of Directors of

                           Corporation or Bank cease for any reason to

                           constitute at least a majority thereof, unless the

                           election of each director who was not a director at

                           the beginning of such period has been approved in

                           advance by directors representing at least two-thirds

                           of the directors then in office who were directors at

                           the beginning of the period; or

 

                  (iv)     any other change in control of Corporation and Bank

                           similar in effect to any of the foregoing.

 

6.       RIGHTS IN EVENT OF TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN

         CONTROL.

 

         (a)      In the event that Executive delivers a Notice of Termination

                  (as defined in Section 5(a) of this Agreement) to Corporation

                  and Bank, Executive shall be entitled to receive the

                  compensation and benefits set forth below:

 

                  If, at the time of termination of Executive's employment, a

                  "Change in Control" (as defined in Section 5(b) of this

                  Agreement) has also occurred, Corporation and Bank shall pay

                  Executive a lump sum amount equal to and no greater than 2.99

                  times the Executive's Agreed Compensation as defined in

                  Section 3(f) of this Agreement (the payment of which shall be

                  subject to applicable taxes and withholdings). In addition,

                  for a period of three (3) years from the date of termination

                  of employment, or until Executive secures substantially

                  similar benefits through other employment, whichever shall

                  first occur, Executive shall receive a continuation of all

                  life, disability, medical insurance and other normal health

                  and welfare benefits in effect with respect to Executive

                  during the two (2) years prior to his termination of

                  employment, or, if Corporation and Bank cannot provide such

                  benefits because Executive is no longer an employee, a dollar

                  amount equal to the cost to Executive of obtaining such

                  benefits (or substantially similar benefits). If permitted

                  under the terms of the plan, Executive may continue to

                  participate in all qualified and non- qualified retirement

                  plans as if his employment had continued through the then

                  remaining term of the Agreement. If Executive is not eligible

                  to participate in non- qualified or qualified retirement

                  plans, Executive will receive a lump sum cash payment equal to

                  29% of the payments to be received for termination of the

                  Agreement under this provision. However, in the event the

                  payment described herein, when added to all other amounts or

                  benefits provided to or on behalf of the Executive in

                  connection with his termination of employment, would result in

                  the imposition of an excise tax under Code Section 4999, such

                  payments shall be retroactively (if

                  necessary) reduced to the extent necessary to avoid such

                  excise tax imposition. Upon written notice to Executive,

                  together with calculations of Corporation's independent

                  auditors, Executive shall remit to Corporation the amount of

                  the reduction plus such interest as may be necessary to avoid

                  the imposition of such excise tax. Notwithstanding the

                  foregoing or any other provision of this contract to the

                  contrary, if any portion of the amount herein payable to the

                  Executive is determined to be non- deductible pursuant to the

                  regulations promulgated under Section 280G of the Internal

                  Revenue Code of 1986, as amended (the "Code"), the Corporation

                  shall be required only to pay to Executive the amount

                  determined to be deductible under Section 280G.

 

         (b)      Executive shall not be required to mitigate the amount of any

                  payment provided for in this Section 6 by seeking other

                  employment or otherwise. Unless otherwise agreed to in

                  writing, the amount of payment or the benefit provided for in

                  this Section 6 shall not be reduced by any compensation earned

                  by Executive as the result of employment by another employer

                  or by reason of Executive's receipt of or right to receive any

                  retirement or other benefits after the date of termination of

                  employment or otherwise.

 

7.       RIGHTS IN EVENT OF TERMINATION OF EMPLOYMENT ABSENT CAUSE.

 

         (a)      In the event that Executive's employment is involuntarily

                  terminated by Corporation and/or Bank without Cause, and in a

                  situation not addressed by the Change in Control provisions

                  set forth in Section 6 of this Agreement, Corporation and Bank

                  shall pay Executive an amount equal to 2.0 times the

                  Executive's Agreed Compensation or the remaining balance of

                  the Agreed Compensation otherwise due to the Executive for the

                  remainder of the then existing Employment Period, whichever is

                  greater, and shall be payable in equal monthly installments

                  and shall be subject to federal, state and local tax

                  withholdings. In addition, for the remainder of the then

                  existing Employment Period or until Executive secures

                  substantially similar benefits through other employment,

                  whichever shall first occur, Executive shall receive a

                  continuation of all life, disability, medical insurance and

                  other normal health and welfare benefits in effect with

                  respect to Executive during the two (2) years prior to his

                  termination of employment, or, if Corporation and Bank cannot

                  provide such benefits because Executive is no longer an

                  employee, a dollar amount equal to the cost to Executive of

                  obtaining such benefits (or substantially similar benefits).

                  In addition, if permitted pursuant to the terms of the plan,

                  Executive may continue to participate in all qualified and

                  non-qualified retirement benefits plans as if his employment

                  had continued through the then remaining term of the

                  Agreement. If Executive is not eligible to participate in

                  non-qualified or qualified retirement plans, Executive will

                  receive a lump sum cash payment equal to 29% of the payments

                  to be received for termination of the Agreement under this

                  provision. However, in the event the payment described herein,

                  when added to all other amounts or benefits provided to or on

                  behalf of the Executive in connection with his termination of

                  employment, would result in the imposition of an excise tax

                  under

                  Code Section 4999, such payments shall be retroactively (if

                  necessary). However, in the event the payment described

                  herein, when added to all other amounts or benefits provided

                  to or on behalf of the Executive in connection with his

                  termination of employment, would result in the imposition of

                  an excise tax under Code Section 4999, such payments shall be

                  retroactively (if necessary) reduced to the extent necessary

                  to avoid such excise tax imposition. Upon written notice to

                  Executive, together with calculations of Corporation's

                  independent auditors, Executive shall remit to Corporation the

                  amount of the reduction plus such interest as may be necessary

                  to avoid the imposition of such excise tax. Notwithstanding

                  the foregoing or any other provision of this contract to the

                  contrary, if any portion of the amount herein payable to the

                  Executive is determined to be non-deductible pursuant to the

                  regulations promulgated under Section 280G of the Internal

                  Revenue Code of 1986, as amended (the "Code"), the Corporation

                  shall be required only to pay to Executive the amount

                  determined to be deductible under Section 280G.

 

         (b)      Executive shall not be required to mitigate the amount of any

                  payment provided for in this Section 7 by seeking other

                  employment or otherwise. Unless otherwise agreed to in

                  writing, the amount of payment or the benefit provided for in

                  this Section 7 shall not be reduced by any compensation earned

                  by Executive as the result of employment by another employer

                  or by reason of Executive's receipt of or right to receive any

                  retirement or other benefits after the date of termination of

                  employment or otherwise.

 

8.       COVENANT NOT TO COMPETE.

 

         (a)      Executive hereby acknowledges and recognizes the highly

                  competitive nature of the business of Corporation and Bank and

                  accordingly agrees that, during and for the applicable period

                  set forth in Section 8(c) hereof, Executive shall not, except

                  as otherwise permitted in writing by the Corporation and the

                  Bank:

 

                  (i)      be engaged, directly or indirectly, either for his

                           own account or as agent, consultant, employee,

                           partner, officer, director, proprietor, investor

                           (except as an investor owning less than 5% of the

                           stock of a publicly owned company) or otherwise of

                           any person, firm, corporation or enterprise engaged

                           in (1) the banking (including financial or bank

                           holding company) or financial services industry, or

                           (2) any other activity in which Corporation or Bank

                           or any of their subsidiaries or affiliates, other

                           than Town and Country, Inc. and Equipment Finance,

                           Inc., are engaged during the Employment Period, and

                           remain so engaged at the end of the Employment

                           Period, in any county in which, at any time during

                           the Employment Period or on the date of termination

                           of the Executive's employment, Corporation, Bank or

                           any of their subsidiaries or affiliates conducted

                           business, or in any county contiguous to such a

                           county, including countries located outside of the

                           Commonwealth of Pennsylvania (the "Non-Competition

                           Area"); or

 

                  (ii)     provide financial or other assistance to any person,

                           firm, corporation, or enterprise engaged in (1) the

                           banking (including financial or bank holding company)

                           or financial services industry, or (2) any other

                           activity in which Corporation or Bank or any of their

                           subsidiaries or affiliates, other than Town and

                           Country, Inc. and Equipment Finance, Inc., are

                           engaged during the Employment Period, in the

                           Non-Competition Area; or

 

                  (iii)    directly or indirectly contact, solicit or induce any

                           person, corporation or other entity who or which is a

                           customer or referral source of Corporation or any of

                           its subsidiaries or affiliates, on the Effective

                           Date; at any time during the Employment Period; or on

                           the effective date of termination of the Executive's

                           employment; or

 

                  (iv)     directly or indirectly solicit, induce or encourage

                           any employee of Corporation or any of its

                           subsidiaries or affiliates, who is employed on the

                           Effective Date; at any time during the Employment

                           Period; or on the effective date of termination of

                           the Executive's employment, to leave the employ of

                           Corporation or any of its subsidiaries or affiliates

                           or to seek, obtain or accept employment with any

                           person other than Corporation or any of its

                           subsidiaries or affiliates.

 

         (b)      It is expressly understood and agreed that, although Executive

                  and Corporation and Bank consider the restrictions contained

                  in Section 8(a) and (c) of this Agreement reasonable for the

                  purpose of preserving for Corporation and Bank and their

                  subsidiaries their good will and other proprietary rights, if

                  a final judicial determination is made by a court having

                  jurisdiction that the time or territory or any other

                  restriction contained in Section 8(a) and (c) of this

                  Agreement is an unreasonable or otherwise unenforceable

                  restriction against Executive, the provisions of Section 8(a)

                  and (c) of this Agreement shall not be rendered void but shall

                  be deemed amended to apply as to such maximum time and

                  territory and to such other extent as such court may

                  judicially determine or indicate to be reasonable.

 

         (c)      The provisions of this Section 8 shall be applicable

                  commencing on January 1, 2002 and ending on one of the

                  following dates, as applicable:

 

                  (i)      if Executive's employment terminates in accordance

                           with the provisions of Section 3(c) of this Agreement

                           (relating to termination for Good Reason), the end of

                           the then existing Employment Period; or

 

                  (ii)     if Executive's employment terminates in accordance

                           with the provisions of Section 3(b) of this Agreement

                           (relating to termination for Cause), the second

                           anniversary date of the effective date of termination

                           of employment; or

 

                  (iii)    if the Executive voluntarily terminates his

                           employment in accordance with the provisions of

                           Section 5 of this Agreement (relating to termination

                           from

                           following Change in Control), the second anniversary

                           date of the effective date of termination of

                           employment; or

 

                  (iv)     if the Executive's employment is involuntarily

                           terminated in accordance with the provisions of

                           Section 7 of this Agreement (relating to Termination

                           Absent Cause), the second anniversary date of the

                           effective date of termination of employment; or

 

                  (v)      if the Executive voluntarily terminates his

                           employment without Good Reason and absent Change in

                           Control, the second anniversary date of the effective

                           date of termination of employment; or

 

                  (vi)     if the Agreement expires by its terms in accordance

                           with the provisions of Section 3(a) and other than

                           for Cause, the second anniversary date of the

                           effective date of termination of employment.

 

9.       UNAUTHORIZED DISCLOSURE. During the term of his employment hereunder,

         or at any later time, the Executive shall not, without the written

         consent of the Boards of Directors of Corporation and Bank or a person

         authorized thereby, knowingly disclose to any person, other than an

         employee of Corporation or Bank or a person to whom disclosure is

         reasonably necessary or appropriate in connection with the performance

         by the Executive of his duties as an executive of Corporation and Bank,

         any material confidential information obtained by him while in the

         employ of Corporation and Bank with respect to any of Corporation and

         Bank's services, products, improvements, formulas, designs or styles,

         processes, customers, customer lists, methods of business or any

         business practices the disclosure of which could be or will be damaging

         to Corporation or Bank; provided, however, that confidential

         information shall not include any information known generally to the

         public (other than as a result of unauthorized disclosure by the

         Executive or any person with the assistance, consent or direction of

         the Executive) or any information of a type not otherwise considered

         confidential by persons engaged in the same business of a business

         similar to that conducted by Corporation and Bank or any information

         that must be disclosed as required by law.

 

10.      WORK MADE FOR HIRE. Any work performed by the Executive under this

         Agreement should be considered a "Work Made for Hire" as that phrase is

         defined by the U.S. patent laws and shall be owned by and for the

         express benefit of Corporation, Bank and their subsidiaries and

         affiliates. In the event it should be established that such work does

         not qualify as a Work Made for Hire, the Executive agrees to and does

         hereby assign to Corporation, Bank and their affiliates and

         subsidiaries, all of his rights, title, and/or interest in such work

         product, including, but not limited to, all copyrights, patents,

         trademarks, and proprietary rights.

 

11.      RETURN OF COMPANY PROPERTY AND DOCUMENTS. The Executive agrees that, at

         the time of termination of his employment, regardless of the reason for

         termination, he will deliver to Corporation, Bank and their

         subsidiaries and affiliates, any and all company property, including,

         but not limited to, keys, security codes or passes, mobile telephones,

         pagers,

 

         computers, devices, confidential information (as defined in this

         Agreement), records, data, notes, reports, proposals, lists,

         correspondence, specification, drawings, blueprints, sketches, software

         programs, equipment, other documents or property, or reproductions of

         any of the aforementioned items developed or obtained by the Executive

         during the course of his employment.

 

12.      LIABILITY INSURANCE. Corporation and Bank shall use their best efforts

         to obtain insurance coverage for the Executive under an insurance

         policy covering officers and directors of Corporation and Bank against

         lawsuits, arbitrations or other legal or regulatory proceedings;

         however, nothing herein shall be construed to require Corporation

         and/or Bank to obtain such insurance, if the Board of Directors of the

         Corporation and/or Bank determine that such coverage cannot be obtained

         at a reasonable price.

 

13.      NOTICES. Except as otherwise provided in this Agreement, any notice

         required or permitted to be given under this Agreement shall be deemed

         properly given if in writing and if mailed by registered or certified

         mail, postage prepaid with return receipt requested, to Executive's

         residence, in the case of notices to Executive, and to the principal

         executive offices of Corporation and Bank, in the case of notices to

         Corporation and Bank.

 

14.      WAIVER. No provision of this Agreement may be modified, waived or

         discharged unless such waiver, modification or discharge is agreed to

         in writing and signed by Executive and an executive officer

         specifically designated by the Boards of Directors of Corporation. No

         waiver by either party hereto at any time of any breach by the other

         party hereto of, or compliance with, any condition or provision of this

         Agreement to be performed by such other party shall be deemed a waiver

         of similar or dissimilar provisions or conditions at the same or at any

         prior or subsequent time.

 

15.      ASSIGNMENT. This Agreement shall not be assignable by any party, except

         by Corporation and Bank to any successor in interest to their

         respective businesses.

 

16.      ATTORNEY'S FEES AND COSTS. If any action at law or in equity is

         necessary to enforce or interpret the terms of this Agreement, the

         prevailing party shall be entitled to reasonable attorney's fees,

         costs, and necessary disbursements in addition to any other relief that

         may be proper.

 

17.      INDEMNIFICATION. The Corporation and/or Bank will indemnify the

         Executive, to the fullest extent permitted under Pennsylvania and

         federal law, with respect to any threatened, pending or completed legal

         or regulatory action, suit or proceeding brought against him by reason

         of the fact that he is or was a director, officer, employee or agent of

         the Corporation, or is or was serving at the request of the Corporation

         as a director, officer, employee or agent of another person or entity.

         To the fullest extent permitted by Pennsylvania and federal law, the

         Corporation will, in advance of final disposition, pay any and all

         expenses incurred by the Executive in connection with any threatened,

         pending or completed legal or regulatory action, suit or proceeding

         with respect to which he may be entitled to indemnification hereunder.

 

18.      ENTIRE AGREEMENT. This Agreement supersedes any and all agreements,

         either oral or in writing, between the parties with respect to the

         employment of the Executive by the Bank and/or Corporation, including

         the Change of Control Agreement dated August 4, 1999, and this

         Agreement contains all the covenants and agreements between the parties

         with respect to employment.

 

19.      SUCCESSORS; BINDING AGREEMENT.

 

         (a)      Corporation will require any successor (whether direct or

                  indirect, by purchase, merger, consolidation, or otherwise) to

                  all or substantially all of the businesses and/or assets of

                  Corporation and/or its subsidiaries to expressly assume and

                  agree to perform this Agreement in the same manner and to the

                  same extent that Corporation and Bank would be required to

                  perform it if no such succession had taken place. Failure by

                  Corporation to obtain such assumption and agreement prior to

                  the effectiveness of any such succession shall constitute a

                  breach of this Agreement and the provisions of Section 3 of

                  this Agreement shall apply.

 

         (b)      This Agreement shall inure to the benefit of and be

                  enforceable by Executive's personal or legal representatives,

                  executors, administrators, heirs, distributees, devisees and

                  legatees. If Executive should die after a Notice of

                  Termination is delivered by Executive, or following

                  termination of Executive's employment without Cause, and any

                  amounts would be payable to Executive under this Agreement if

                  Executive had continued to live, all such amounts shall be

                  paid in accordance with the terms of this Agreement to

                  Executive's devisee, legatee, or other designee, or, if there

                  is no such designee, to Executive's estate.

 

20.      ARBITRATION. Corporation, Bank and Executive recognize that in the

         event a dispute should arise between them concerning the interpretation

         or implementation of this Agreement, (except for any enforcement sought

         with respect to Sections 8, 9, 10 or 11 of this Agreement which may be

         litigated in court,) lengthy and expensive litigation will not afford a

         practical resolution of the issues within a reasonable period of time.

         Consequently, each party agrees that all disputes, disagreements and

         questions of interpretation concerning this Agreement are to be

         submitted for resolution, in Philadelphia, Pennsylvania, to the

         American Arbitration Association (the "Association") in accordance with

         the Association's National Rules for the Resolution of Employment

         Disputes or other applicable rules then in effect ("Rules").

         Corporation, Bank or Executive may initiate an arbitration proceeding

         at any time by giving notice to the other in accordance with the Rules.

         Corporation and Bank and Executive may, as a matter of right, mutually

         agree on the appointment of a particular arbitrator from the

         Association's pool. The arbitrator shall not be bound by the rules of

         evidence and procedure of the courts of the Commonwealth of

         Pennsylvania but shall be bound by the substantive law applicable to

         this Agreement. The decision of the arbitrator, absent fraud, duress,

         incompetence or gross and obvious error of fact, shall be final and

         binding upon the parties and shall be enforceable in courts of proper

         jurisdiction. Following written notice of a request for arbitration,

         Corporation, Bank and Executive shall be entitled to an injunction

         restraining all further proceedings in any pending or subsequently

         filed litigation concerning                                           

         this Agreement, except as otherwise provided herein or any enforcement

         sought with respect to Sections 8, 9 , 10 or 11.

 

21.      NO MITIGATION OR OFFSET. The Executive will not be required to mitigate

         the amount of any payment provided for in this Agreement by seeking

         employment or otherwise; nor will any amounts or benefits payable or

         provided hereunder be reduced in the event he does not secure

         employment, except as otherwise provided herein.

 

22.      VALIDITY. The invalidity or unenforceability of any provision of this

         Agreement shall not affect the validity or enforceability of any other

         provision of this Agreement, which shall remain in full force and

         effect.

 

23.      APPLICABLE LAW. This Agreement shall be governed by and construed in

         accordance with the domestic, internal laws of the Commonwealth of

         Pennsylvania, without regard to its conflicts of laws principles.

 

24.      HEADINGS. The section headings of this Agreement are for convenience

         only and shall not control or affect the meaning or construction or

         limit the scope or intent of any of the provisions of this Agreement.

 

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the

date first above written.

 

ATTEST:                         STERLING FINANCIAL CORPORATION

 

 

   /s/ Ronald L. Bowman         By   /s/ Glenn R. Walz

---------------------------        ---------------------------------------------

 Secretary                            Vice Chairman of the Board of Directors

 

 

                                BANK OF LANCASTER COUNTY, N.A.

 

 

  /s/ Ronald L. Bowman          By   /s/ Glenn R. Walz

--------------------------         ---------------------------------------------

 Secretary                           Vice Chairman of the Board of Directors

 

 

WITNESS:

 

/s/ Kathleen A. Prime             /s/ J. Roger Moyer, Jr

---------------------------     ------------------------------------------------

                                      J. Roger Moyer, Jr.

                                      "Executive"