WASHINGTON COMMERCIAL BANCORP DIRECTOR STOCK OPTION PLAN

1.      

Purpose of the Plan. The purpose of this Director Stock Option Plan ("Plan") is to provide additional incentives to Directors of WASHINGTON COMMERCIAL BANCORP, a Washington corporation ("Bancorp"), thereby helping to attract and retain the best available personnel for positions as directors of Bancorp and otherwise promoting the success of the business activities of Bancorp. Bancorp intends that Options issued under this Plan will constitute nonqualified stock options.

2.      

Definitions. As used in this Plan, the following definitions apply:

a.      

"Bancorp" has the meaning set forth in paragraph 1 of this Plan.

b.      

"Board" means the Board of Directors of Bancorp.

c.      

"Common Stock" means Bancorp's common stock, no par value.

d.      

"Committee" has the meaning set forth in subparagraph 4(a) of this Plan.

e.      

"Continuous Status as a Director" means the absence of any interruption or termination of service as a Director.

f.      

"Date of Grant" of an Option means the date on which the Committee makes the determination granting such Option, or such later date as the Committee may designate. The Date of Grant shall be specified in the Option agreement.

g.      

"Director" means any person serving as a member of the Board of Bancorp or a Subsidiary of Bancorp which is currently in existence or is hereafter organized or is acquired by Bancorp.

h.      

"Exercise Price" has the meaning set forth in subparagraph 4(b)(2) of this Plan.

i.      

"Option" means a stock option granted under this Plan, which constitutes a Nonqualified Stock Option.

j.      

"Optionee" means a Director who receives an Option.

k.      

"Plan" has the meaning set forth in paragraph 1 of this Plan.

l.      

"Subsidiary" means any bank or other corporation of which not less than fifty percent (50%) of the voting shares are held by Bancorp or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by Bancorp or a Subsidiary.

3.      

Stock Subject to Options.

a.      

Number of Shares Reserved . The maximum number of shares which may be optioned and sold under this Plan is 24,129 shares of the Common Stock of Bancorp (subject to adjustment as provided in subparagraph 6(j) of this Plan). During the term of this Plan, Bancorp will at all times reserve and keep available a sufficient number of shares of its Common Stock to satisfy the requirements of this Plan.

b.

Expired Options . If any outstanding Option expires or becomes unexercisable for any reason without having been exercised in full, the shares of Common Stock allocable to the unexercised portion of such Option will again become available for other Options.

4.      

Administration of the Plan.

a.      

The Committee . The Board will administer this Plan directly, acting as a Committee of the whole, or if the Board elects, by a separate Committee appointed by the Board for that purpose and consisting of at least three Board members. All references in the Plan to the "Committee" refers to this separate Committee, if any is established, or if none is then in existence, refers to the Board as a whole. Once appointed, any Committee will continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause), appoint new members in substitution, and fill vacancies however caused. The Committee will select one of its members as chairman, and will hold meetings at such times and places as the chairman or a majority of the Committee may determine. At all times, the Board will have the power to remove all members of the Committee and thereafter to directly administer this Plan as a Committee of the whole.

(1)      

Members of the Committee who are eligible for Options or who have been granted Options will be counted for all purposes in determining the existence of a quorum at any meeting of the Committee and will be eligible to vote on all matters before the Committee respecting the granting of Options or administration of this Plan.

(2)      

At least annually, the Committee must present a written report to the Board indicating the Directors to whom Options have been granted since the date of the last such report, and in each case the Date of Grant, the number of shares optioned, and the per-share Exercise Price.

b.      

Powers of the Committee . All actions of the Committee must be either (i) by a majority vote of the members of the full Committee at a meeting of the Committee, or (ii) by unanimous written consent of all members of the full Committee without a meeting. All decisions, determinations and interpretations of the Committee will be final and binding on all persons, including all Optionees and any other holders or persons interested in any Options, unless otherwise expressly determined by a vote of the majority of the entire Board. No member of the Committee or of the Board will be liable for any action or determination made in good faith with respect to the Plan or any Option. Subject to all provisions and limitations of the Plan, the Committee will have the authority and discretion:

(1)      

to determine the Directors to whom Options are to be granted, the Dates of Grant, and the number of shares to be represented by each Option;

(2)      

to determine the price at which shares of Common Stock are to be issued under an Option, subject to subparagraph 6(b) of this Plan ("Exercise Price");

(3)      

to determine all other terms and conditions of each Option granted under this Plan (including specification of the dates upon which Options become exercisable, and whether conditioned on performance standards, periods of service or otherwise), which terms and conditions can vary between Options;

(4)      

to modify or amend the terms of any Option previously granted, or to grant substitute Options, subject to subparagraphs 6(l) and 6(m) of this Plan;

(5)      

to authorize any person or persons to execute and deliver Option agreements or to take any other actions deemed by the Committee to be necessary or appropriate to effect the grant of Options by the Committee;

 (6)

 

to interpret this Plan and to make all other determinations and take  all other actions which the Committee deems necessary or appropriate to administer this Plan in accordance with its terms and conditions.

5.      

Eligibility. Options may be granted only to Directors. Granting of Options under this Plan will be entirely discretionary with the Committee. Adoption of this Plan will not confer on any Director any right to receive any Option or Options under this Plan unless and until said Options are granted by the Committee, in its sole discretion. Neither the adoption of this Plan nor the granting of any Options under this Plan will confer upon any Director or Optionee any right with respect to continuation of status as a Director, nor will the same interfere in any way with his or her right or with the right of the shareholders of Bancorp or any Sub