Option Cancellation

Exhibit 10(hh)

November 5, 2004

Deborah A. Meekins, President & C.E.O.                 

Northern Empire Bancshares

810 Fourth Street

Santa Rosa, CA 95404

Re: Option Cancellation

Dear Debbie:

I am writing in furtherance of our Board's determination that it is in

the best interests of Northern Empire Bancshares for non-employee

directors to cancel options held by them at the beginning of this year.

To implement this determination, I agree with the Corporation that:

(1) We are canceling all of my outstanding options under the 1997 Stock

Option Plan, as amended.   As a result, options representing   *   shares

are cancelled.

(2) My exercise price per share for each of the   *   option shares I

ex