Document:

2005 EXECUTIVE OFFICER AND DIRECTOR

STOCK ACCOUNT
 DEFERRED COMPENSATION PLAN

* * * * * *  

          1.       PURPOSE
OF THIS PLAN. The purpose of the 2005 Executive Officer and
Director Stock Account Deferred Compensation Plan (this “Plan”) is to further
the growth and development of Banner Corporation (the “Holding Company”) and
its subsidiary banks (the “Banks” and collectively with the Holding Company as “Banner”
or “Service Recipient”) by providing a select group of senior management and
Directors of Banner and their subsidiaries the opportunity to defer a portion
of their Compensation, as defined herein, and thereby encourage their
productive efforts on behalf of Banner. This Plan is also intended to provide
Participants (“Service Providers”) with an opportunity to supplement their
retirement income through deferral of Compensation as provided herein.

                    1.1          RULES
OF CONSTRUCTION - AGGREGATED PLANS. Banner
establishes, within
this Plan, a nonqualified deferred compensation plan maintained primarily for
the purpose of providing deferred compensation for a select group of management
or highly compensated employees (a “top-hat plan”) under ERISA §§ 201(2),
301(a)(3) and 401(a)(1). Furthermore, to the extent that this Plan covers any
Contractor or Contractors (as defined in Section 2.7), this Plan shall also be
exempt from Title I of ERISA with respect to such Contractor(s). Banner shall
administer this Plan in accordance with the “Plan Aggregation Rules” in a
manner so that all “like-plans” are treated as a single plan. As such, all
plans that allow deferrals of Compensation at the “election” of the Service
Provider will be Aggregated Plans, and all plans that allow for the deferral of
Compensation “other than” at the election of the Service Provider will likewise
be treated as separately Aggregated Plans. Furthermore, plans treated as “non-account
balance” plans must also be aggregated together and treated as Aggregated Plans.
For purposes of the Aggregated Plans requirement, “separation pay plans,”
split-dollar life plans, and similar in-kind reimbursement plans will be
treated separately from the foregoing Aggregated Plans requirement, and the
provisions of final Treasury Regulations under Section 1.409A-1(c)(2) shall
apply. The effect of this aggregation rule is that if a Service Provider is
covered under more than one 409A Plan of the “same type,” and there is an
operational violation under the “like-plans,” the 409A sanctions will apply to
the Service Provider under all such Aggregated Plans. However, if a Participant
in two or more like-plans participates in one plan as an Employee and one or
more other plans as a Contractor, the plans will not be Aggregated Plans as to
that Service Provider. If an Employee also serves on the Employer’s board of
directors and participates in a like-type plan or plans, but also participates
in one plan as an Employee, and in another plan as a Director, the plans
similarly will not be Aggregated Plans, provided that the plan for
Directors is substantially similar to the plan or plans that the Employer maintains
for all such individuals who serve in the capacity only as Directors. Any plan
or plans maintained for a Director will not be subject to aggregation under
this requirement with any plan or plans maintained for Contractors, as defined
in Section 2.7.  

          2.       DEFINITIONS.

                    2.1          BENEFICIARY.
The person designated by a Participant on
the Participant’s Deferred Compensation Agreement to receive any Plan benefits
payable after the Participant’s Death. See also, Section 5.4. 

                    2.2          BONUS.
Discretionary monetary bonuses earned by a
Participant which are authorized and declared by the board of directors or Compensation
Committees of Banner.

                    2.3          CHANGE
IN CONTROL. A Change in Control shall mean the
occurrence of an event in either Sections 2.3.1, 2.3.2 or 2.3.3, below, or any
combination of said event(s) as described within the meaning of Treasury
Regulation 1.409A-3(i)(5):

                                   2.3.1        CHANGE
OF OWNERSHIP OF THE HOLDING
COMPANY. A change of
ownership of the Holding Company occurs on the date that any one person or
persons acting as a Group (as that term is defined in Subsection 2.3.4)
acquires ownership of the stock of the Holding Company, that, together with
stock held by such person or Group, constitutes more than fifty percent (50%)
of the total fair market value or total voting power of the stock of the
Holding Company or of any corporation that owns at least fifty percent (50%) of
the total fair market value or total voting power of the Holding Company.
However, if any person or Group is considered to own more than fifty percent
(50%) of the total fair market value or total voting power of the stock of the
Holding Company, the acquisition of additional stock by the same person or
Group of persons is not considered to cause a Change in Control. In addition,
the term “Change in Control” shall apply if there is an increase in the
percentage of stock owned by any one person or persons, acting as a Group, as a
result of a transaction in which the Holding Company acquires its stock in
exchange for property. The rule set forth in the immediately preceding sentence
applies only when there is a transfer of stock of the Holding Company (or
issuance of stock of the Holding Company) and the stock of the Holding Company
remains outstanding after the transaction.

                    2.3.2      EFFECTIVE
CHANGE
IN CONTROL. If
the Holding Company does not incur an event under Subsection 2.3.1, above, then
it may still meet the definition of Change in Control, on the date that either:

                                                    (a)          Any
one person, or more than one person acting as a Group, acquires (or has
acquired during the twelve (12) month period ending on the date of the most
recent acquisition by such person or persons) ownership of stock of the Holding
Company possessing thirty percent (30%) or more of the total voting power of
the stock of the Holding Company; or

                                                    (b)          A
majority of the members of the Holding Company’s Board are replaced during any
twelve (12) month period by Directors whose appointment or election is not endorsed
by a majority of the members of the Holding Company’s Board prior to the date
of the appointment or election.

                    2.3.3        CHANGE IN
OWNERSHIP OF THE
HOLDING COMPANY’S ASSETS. A change in the ownership of a substantial
portion of the Holding Company’s assets occurs on the date that any person, or
more than one person acting as a Group, acquires (or has acquired during the
twelve

(12)
month period ending on the date of the most recent acquisition by such person
or persons) assets from the Holding Company that have a total gross fair market
value equal to more than forty percent (40%) of the total gross fair market
value of all of the assets of the Holding Company immediately prior to such
acquisition or acquisitions. For this purpose, “gross fair market value” means
the value of the assets of the Holding Company, or the value of the assets
being disposed of, determined without regard to any liabilities associated with
such assets.

                                                       (a)          There
will be no Change in Control under this Subparagraph 2.3.3 when there is a
transfer to an entity that is controlled by the shareholders of the Holding
Company immediately after the transfer. A transfer of assets by the Holding
Company shall not be treated as a change in ownership of such assets if the
assets are transferred to:

                                                                      (i)          A
shareholder of the Holding Company (immediately before the asset transfer) in
exchange for or with respect to its stock;

                                                                      (ii)        An
entity, fifty percent (50%) or more of the total value or voting power of which
is owned, directly or indirectly, by the Holding Company;

                                                                      (iii)       A
person, or more than one person acting as a Group, that owns, directly or
indirectly, fifty percent (50%) or more of the total value or voting power of
all the outstanding stock of the Holding Company; or

                                                                      (iv)       An
entity, at least fifty percent (50%) of the total value or voting power of
which is owned, directly or indirectly, by a person described in the
immediately preceding Subparagraph (a)(iii).

                                   2.3.4          PERSONS
ACTING AS A GROUP. Persons will not be considered to
be acting as a Group for purposes of Subsections 2.3.1, 2.3.2 and/or 2.3.3
solely because they purchase or own stock of the Holding Company at the same
time, or as a result of the same public offering. However, persons will be
considered to be acting as a Group if they are shareholders of the Holding Company
and it, or its parent, enters into a merger, consolidation, purchase or
acquisition of stock or similar business transaction with another corporation.
If a person, including an entity, owns stock in the Holding Company and in
another corporation that together are involved in a merger, consolidation,
purchase or acquisition or stock or similar transaction, then the shareholder
of the Holding Company is deemed to be acting as a Group with other
shareholders in the Holding Company prior to the transaction. For purposes of
applying the provisions of this Subsection 2.3.4, stock ownership is determined
in accordance with Code § 318(a) as modified under Treasury Regulation §
1.409A-3(i)(5)(iii).

                    Notwithstanding
the above, the definition of Change in Control shall comply with the definition
provided by the Internal Revenue Service in its regulations, as amended from
time to time with regard to Section 409A.

                    2.4          CODE.
Shall mean the Internal
Revenue Code of 1986, as amended, and corresponding provisions of
succeeding law.

                    2.5          COMPENSATION.
A Participant’s
Salary and Bonus. Compensation (either Salary or Bonus) shall not include any
amounts paid by Banner to a Participant that are not strictly monetary
consideration for personal services, such as expense reimbursement,
cost-of-living allowance, education allowance, premium on excess group life
insurance or any qualified plan sponsored by Banner; the fact that an amount
constitutes taxable income to the Participant shall not be controlling for this
purpose. Compensation shall not include any taxable income realized by, or payments
made to, a Participant as a result of the grant or exercise of an option to
acquire stock of Banner or as a result of the disposition of such stock.

                    2.6          COMPENSATION
COMMITTEES. The Compensation
Committee of the Banks and Holding Company, as designated from time to time
under the Compensation Committee Charter of Banner (the “Charter”).

                    2.7          CONTRACTOR.
The term “Contractor”
means a person or entity providing services to Banner (other than as an
Employee) as described in Treasury Regulation § 1.409A-1(f)(1) under
circumstances where the Contractor is on the cash receipts and disbursements
method of accounting for federal income tax purposes for any taxable year. A
person serving on a board of directors is a Contractor as to Compensation for
such services without regard to whether the person is an Employee for any other
purpose or purposes. A Contractor is not subject to the Code § 409A restrictions
and provisions if in the taxable year in which the legally binding right to
Compensation arises: (a) the Contractor is actively engaged in the trade or
business of performing services other than as an Employee or as a
Director; (b) the Contractor provides significant services to Banner and to at
least two (2) other unrelated service recipients, where the Contractor, Banner
and the other service recipients are all “unrelated” to each other within the
meaning of Treasury Regulations §§ 1.409A-1(f)(2)(i)(B) and (C) (as
applicable); and (c) the services are not “management services” within the
meaning of Treasury Regulation § 1.409A-1(f)(2)(iv). For purposes of the above
definition, the term “significant services” will be determined under Treasury Regulation
§ 1.409A-1(f)(2)(iii). 

                    2.8          DEFERRED
ACCOUNT. The record
maintained by Banner for each Participant of the cumulative amount, adjusted
for any distributions made pursuant to Section 5 as valued from time to time of
(a) Compensation deferred pursuant to this Plan, (b) imputed gains or losses on
those amounts accrued as provided in Section 4.7.

                    2.9          DEFERRED
COMPENSATION AGREEMENT. A written
agreement between a Participant and Banner in substantially the form set forth
in Exhibit A, whereby a Participant agrees to defer receipt of a portion of the
Participant’s Compensation and Banner agrees to make benefit payments in
accordance with the provisions of this Plan.

                    2.10        DEFERRED
COMPENSATION AND BENEFITS TRUST.
The revocable
trust (the “DCB Trust”) established by Banner with an independent trustee for
the benefit of Participants entitled to receive payments or benefits hereunder,
the assets of which will be subject to claims of Banner’s creditors in the
event of bankruptcy or insolvency.

                    2.11        DIRECTOR. A
duly elected
member of the board of directors of the Banks or Holding Company. 

                    2.12          DISABILITY.
A Participant shall be considered disabled if
the Participant is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, or is, by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than
twelve (12) months, receiving income replacement benefits for a period of not
less than three (3) months under an accident and health plan covering Employees
of Banner.

                    2.13          EXECUTIVE
OFFICER. Any Employee Officer of Banner holding a
position of senior vice president or higher.

                    2.14          MARKET
PRICE. If the Stock is traded or quoted on the
NASDAQ Stock Market or other national securities exchange on any Measurement
Date, then the market price shall be the average of the highest and lowest
selling price on such Measurement Date or, if there were no sales on such
Measurement Date, then on the next prior business day on which there was a
sale. If the Stock is not traded or quoted on the NASDAQ Stock Market or other
national securities exchange, then the market price on any Measurement Date
shall be a value determined by the Compensation Committees in good faith on
such basis as it deems appropriate. Currently, the Stock is traded on the
NASDAQ Market under ticker symbol “BANR”.

                    2.15          MEASUREMENT
DATE. The date on which a valuation of any Stock is
necessary for purposes of computing a Participant’s Deferred Account balance
under Section 4.7 or determining amounts to be distributed under Section 5.

                    2.16          PARTICIPANT.
An Executive Officer or Director who has
entered into a written Deferred Compensation Agreement with Banner in
accordance with the provisions of this Plan.

                    2.17          SALARY.
A monetary payment to a Participant in the
form of salary, commission, Director’s fees or other payments solely for personal
services rendered by a Participant to Banner during a calendar year, determined
prior to giving effect to any deferral election under this Plan or any
incentive compensation plan sponsored by Banner. “Salary” shall not include any
amounts paid by Banner to a Participant that are not strictly monetary
consideration for personal services, such as expense reimbursement,
cost-of-living allowance, education allowance, premium on excess group life
insurance or any qualified plan sponsored by Banner; the fact that an amount constitutes
taxable income to the Participant shall not be controlling for this purpose.

                    2.18          STOCK.
Shares of Stock in the Holding Company,
including fractional shares, (currently trading under ticker symbol “BANR”).

                    2.19          SEPARATION FROM
SERVICE.

                                     2.19.1     EMPLOYEES.
In the case of an Employee, the term “Separation
from Service” shall mean the Employee’s termination of employment with Banner,
whether on account of death,
retirement, Disability or otherwise. Banner will determine whether an Employee
has

terminated
his or her employment (and therefore incurred a “Separation from Service”)
based on whether the facts and circumstances as described in Treasury
Regulation § 1.409A-1(h)(1)(ii) are applicable. An Employee incurs a Separation
from Service if the parties reasonably anticipate, based upon the facts and
circumstances, that the Employee will not perform any additional services after
a certain date, or that the level of bona fide services (whether performed as
an Employee or as a Contractor) will permanently decrease to no more than twenty percent (20%) of the
average
level of bona fide services performed (whether performed as an Employee or as a
Contractor) over the immediately preceding 36-month period (or, if less, the
period that the Employee has rendered services to Banner), which period shall
be referred to as the Employee’s “average prior service.” An Employee is
presumed to have incurred a Separation from Service if the Employee’s level of
service decreased to twenty percent (20%) or less of his or her average prior
service, and an Employee is presumed not to have incurred a Separation from
Service if the Employee’s level of service continues at a rate which is fifty
percent (50%) or more of the Employee’s average prior service. No presumption
shall be applied where the Employee’s level of service is more than twenty
percent (20%) but less than fifty percent (50%) of his or her level of average
prior service, and Banner shall make any determination as to the status of such
individuals in its best judgment. 

                                     2.19.2     TREATMENT
OF LEAVE. An Employee will not incur a Separation from
Service if the Employee is on military leave, sick leave, or other bona fide
leave of absence, if such leave does not exceed a period of six (6) months, or
if longer, the period for which a statute or contract provides the Employee
with the right to re-employment with Banner. If a Participant’s leave exceeds
six (6) months, but the Participant is not entitled to re-employment under a
statute or other contract right, the Participant will incur a Separation from
service on the next day following the expiration of the six (6) month period. A
leave of absence constitutes a “bond fide leave” for purposes of this
Subsection 2.19.2 if there is a reasonable expectation that the Employee will
return to perform services for Banner. Where a leave of absence is due to any
medically determinable physical or mental impairment that can be expected to
result in death, or to last for a continuous period of at least six (6) months,
and where the Participant cannot perform his or her duties, or the duties of
any substantially similar position, in determining whether a Separation from
Service has occurred, the above six (6) month period is modified to be
twenty-nine (29) months unless Banner, or the Employee, terminates the leave prior to such time. For
purposes of determining “average prior service” under this Subsection 2.19.2,
during a paid leave of absence which is not a Separation from Service, the
Employee is treated as rendering bona fide services at a level that would have
been required to earn the amount paid during the leave. If the leave of absence
is unpaid, the period of leave is disregarded in determining “average prior
service.” 

                                     2.19.3     CONTRACTORS. The
term “Separation from Service,” in the
case of a Contractor, means the expiration of the contract or contracts under
which the Contractor performs services for Banner, provided that the expiration constitutes a good-faith
and complete termination of the contractual relationship between the Contractor
and Banner. A good-faith and complete termination does not occur if Banner
anticipates a renewal of the service contract, or Banner anticipates that the
Contractor will become an Employee of Banner. Banner will be considered to anticipate
a renewal of the contract if Banner intends to once again contract for the
services provided under the expired contract, and neither Banner nor the
Contractor has eliminated the Contractor as a possible provider of such
additional services. Banner is deemed to intend to renew any such 

contract or contracts of the Contractor, if renewal is conditioned only
upon incurring a need for services, Banner’s ability to pay for such services,
or both.

                                     2.19.4     DUAL
STATUS. If a
Participant renders services to Banner in the capacity as both an Employee and
as a Contractor, the Participant must incur a Separation from Service in both
capacities in order to constitute a Separation from Service for purposes of
this Plan. However, if a Participant renders services both as an Employee and
as a member of the Employer’s board of directors, then the Director services
are disregarded in determining whether the Participant has incurred a
Separation from Service as to this Plan, provided that the plan or plans are
not Aggregated Plans as determined under final Treasury Regulations. See Section 1.1, above. 

                    2.20          SPECIFIED
EMPLOYEE. The term “Specified Employee” means a Participant who
is a key employee as described in Code § 416(i)(1)(A), disregarding paragraph
(5) thereof, and using a definition of “compensation” as defined under Treasury
Regulations § 1.415(c)-2(a). However, a Participant is not a Specified Employee
unless any stock of the Employer is publicly traded on an established
securities market or otherwise, and the Participant is a Specified Employee on
the date of his or her Separation from Service. At present, the stock of Banner
is publicly traded on the NASDAQ Market under the ticker symbol “BANR.” If a
Participant is a key employee at any time during the twelve (12) month period
ending on the Specified Employee’s “identification date,” then the Participant
is a Specified Employee for the twelve (12) month period commencing on the Specified
Employee “effective date.” The Specified Employee identification date
is December 31. The Specified Employee effective date is April 1
of the year following the Specified Employee’s identification date. Banner, in
determining whether this Section 2.20 and any related Plan provisions shall
apply, will determine whether it has any publicly traded stock as of the date
of a Participant’s Separation from Service. In the case of certain corporate
transactions, as specified under Treasury Regulations, or in the case of a
nonresident alien Employee(s), Banner will apply the Specified Employee
provisions of the Plan in accordance with Treasury Regulations 1.409A-1(i) and
other applicable guidance.

                    2.21          TREASURY
REGULATIONS. Regulations promulgated by the Internal Revenue Service
for the U.S. Department of the Treasury, and as maybe amended from time to
time.

          3.       ADMINISTRATION
AND INTERPRETATION.
The Compensation Committees shall have
final discretion, responsibility, and authority to administer and interpret
this Plan. This includes the discretion and authority to determine all
questions of fact, eligibility, or benefits relating to this Plan. The
Compensation Committees may also adopt any rules they deem necessary to
administer this Plan. The Compensation Committees’ exercising responsibilities
relating to this Plan in accordance with this Section 3 shall be deemed to have
been delegated the discretionary authority vested in Banner with respect to
those responsibilities, unless limited in writing by the board of directors of
Banner. As further specified in the Charter, the Compensation Committees of
Banner shall operate separately with regard to the respective company, but
shall attempt to a reasonable extent to coordinate their efforts in order to
achieve a consistent policy. Any exercise of discretion by the Compensation
Committees under this Plan may be applied on a Participant-by-Participant basis
without establishing precedent or further commitment. Claims for benefits under
this Plan shall be administered in accordance with Section 9. Any
interpretation regarding the Plan (or

benefits payable under the Plan) by the Compensation Committees shall
be final and binding on the Participants.

          4.           PARTICIPANT
DEFERRAL AND DISTRIBUTION ELECTIONS.

                       4.1          ELIGIBILITY.
The Compensation Committees shall identify Executive Officers and Directors who
are eligible to participate in this Plan. Eligibility to participate in this Plan
is solely at the discretion of the Compensation Committees and shall be limited
to Executive Officers and Directors. Eligibility to participate in this Plan
for any calendar year shall not confer the right to participate during any
subsequent year, unless specifically granted by the Compensation Committees.

                       4.2          EXECUTION
OF AGREEMENT. A Participant who wishes
to participate in this Plan must execute a Deferred Compensation Agreement for
newly eligible individuals, within thirty (30) days after first becoming
eligible to participate in this Plan. Such election to defer must be in accordance
with Section 4.3 of this Plan.

                       4.3          COMPENSATION
DEFERRAL ELECTION. Each Participant
shall have the opportunity to elect the amount of Participant’s Compensation,
within limits established by the Compensation Committees, to be earned for
services performed subsequent to the dates required under Subsections 4.3.1,
4.3.2 or 4.3.3, which will be deferred in accordance with this Plan and Code §
409A.

                                      4.3.1          In
the case of the first year in which a Participant becomes eligible to participate
in the Plan, such election may be made with respect to services to be performed
subsequent to the election within thirty (30) days after the date the
Participant first becomes eligible to participate in the Plan.

                                      4.3.2          In
the case of a continuing Participant, Compensation for services performed
during a taxable year may be deferred at the Participant’s election only if the
election to defer such Compensation is made not later than the close of the
preceding taxable year or at such other time as provided in Treasury Regulations.

                                      4.3.3          Notwithstanding
Subsections 4.3.1 and 4.3.2 above, in the case of any Compensation that is
considered “performance-based compensation” under Code § 409A and Treasury
Regulations promulgated thereunder, which is based on services performed over a
period of at least twelve (12) months, such election shall be made no later
than six (6) moths before the end of the period.

                                     
4.3.4          Compensation
otherwise earned by a Participant beginning after the date in which the
deferral election is in effect shall be reduced by the amount elected to be
deferred. Elections to defer Compensation are irrevocable except as otherwise
provided in this Plan. In no event shall a Participant be allowed to defer
Compensation in an amount less than $10,000 in a single year. Any Compensation
deferred shall be credited to the Participant’s Deferred Account within a
commercially reasonable time from the day the Participant would have been
entitled to such Compensation had the
Participant not elected to defer such Compensation.

                       4.4          CHANGE OF
COMPENSATION DEFERRAL ELECTION. A Participant who wishes to change an election to defer
Compensation may
do so at any time by notifying the respective Compensation Committees in
writing prior to January 1 of the year for which the change in election is to
be effective; provided however, that any changes to defer Compensation that is considered
“performance-based compensation” under Code § 409A and Treasury Regulations promulgated
thereunder, which is based on services performed over a period of at least
twelve (12) months, shall be made no later than six (6) months before the end
of the period.

                       4.5          DISTRIBUTION
ELECTION. In the Deferred Compensation Agreement, a Participant
shall elect a distribution option for the Participant’s Deferred Account so
deferred. If a Participant has previously executed a Deferred Compensation
Agreement in accordance with this Plan and such Participant wishes to execute
an additional Deferred Compensation Agreement to defer additional Salary and
Bonus in accordance with this Plan, then the distribution option elected in the
subsequent Deferral Compensation Agreement must be identical to the
distribution option elected in the Participant’s previously executed Deferred
Compensation Agreement. Elections regarding distribution of Deferred Accounts
under this Plan are irrevocable except as otherwise provided in this Plan and
Code § 409A.

                       4.6          CHANGE
OF DISTRIBUTION ELECTION. Participants
who are current Directors or are actively employed by Banner or their
subsidiaries may request, in writing, a change in their distribution election.
The changed distribution election must be one of the distribution options in
the original Deferred Compensation Agreement or as later permitted by the
Compensation Committees. Banner must receive the request at least twelve (12)
months before the first date benefits are scheduled to be paid and such
election may not take effect until at least twelve (12) months after the date
on which the election is made; and any change in an election related to a payment
that is not related to Disability, death or an unforeseeable emergency, the
first payment with respect to which such election is made must be deferred for
a period of not less than five (5) years from the date such payment would
otherwise have been made. The request shall be approved or denied at the
Compensation Committees’ sole discretion. In the case of a change that relates
to any installment payment election, each installment shall be treated as a “separate
payment” as described in Treasury Regulation § 1.409A-2(b)(2)(iii). No change
will be permitted that would allow a payment to be made earlier than originally
elected in the Deferred Compensation Agreement or that is in violation of Code
§ 409A.

                       
4.7          DEFERRED
ACCOUNT
BALANCES, ALLOCATIONS AND ADJUSTMENTS. Banner shall maintain a record of each
Participant’s Deferred Account balance. The sole investment under this plan is
Stock. The Compensation Committees shall submit to each Participant within one hundred
twenty (120) days after the close of each calendar year and at such other times
as determined by the Compensation Committees a statement setting forth the
value of a Deferred Account maintained for each Participant. For purposes of
valuing a Participant’s Deferred Account, the value of any share of Stock shall
equal the Market Price of a share of Stock. In the event that any dividend or
other distribution (whether in the form of cash, Stock, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Stock or other securities of Banner, or other similar
corporate transaction or event affects the Stock such that an adjustment is
necessary in order to

prevent dilution or enlargement of the benefits intended to be made
available under this Plan, then the Compensation Committees, whose
determination shall be conclusive, shall appropriately adjust a Participant’s
Deferred Account balance to negate such dilution or enlargement of a
Participant’s benefits.

          5.          DISTRIBUTIONS.

                       5.1          DISTRIBUTIONS IN
GENERAL. The Plan shall
distribute the Deferred Accounts as elected by each Participant in the
applicable Deferred Compensation Agreement, except as otherwise provided in
this Section 5 or required by Code § 409A.

                       5.2          PLAN
BENEFITS UPON SEPARATION FROM
SERVICE. Distributions
from a Participant’s Deferred Account shall be made in actual shares of Stock.
Distributions under this Section 5.2 shall be made in accordance with the
election specified in the Participant’s Deferred Compensation Agreement.

                       5.3          DISABILITY.
If a Participant
Separates from Service prior to attaining age sixty-five (65) due to a
Disability, the Participant may apply to the Compensation Committees to have
Participant’s account distributed in a manner other than previously elected, provided that the payments satisfy
the Change of Distribution Election rules in Section 4.6. The Compensation
Committees may, in their sole discretion, approve or deny the request.

                       5.4          DISTRIBUTIONS
FOLLOWING PARTICIPANT DEATH;
DESIGNATION OF BENEFICIARY. A Participant
shall designate a Beneficiary by filing a written notice of designation with
the Compensation Committees in such form as the Compensation Committees may
prescribe. If a Participant dies either before benefit payments have commenced
under this Plan or after Participant’s benefits have commenced but before
Participant’s entire Deferred Account has been distributed, Participant’s
designated Beneficiary shall receive any benefit payments in accordance with
the Deferred Compensation Agreement; provided, however, a Beneficiary may
request a lump sum payment be made to such Beneficiary upon the consent of the
Compensation Committees, which consent shall be in the sole discretion of the
Compensation Committees; provided, further, that such lump sum election will
not be effective until at least twelve (12) months after the lump sum election
is made. If no designation is in
effect when any benefits payable under this Plan become due, the Beneficiary
shall be the spouse of the Participant or, if no spouse is then living, the Participant’s
estate.

                       5.5          HARDSHIP
DISTRIBUTION. If serious and
unanticipated financial hardship occurs,
a Participant may request a lump-sum distribution of all or a portion of
Participant’s Deferred Account balance. A hardship distribution will be made
only in the event of an “unforeseeable emergency,” as defined under Code § 409A
and Treasury Regulations promulgated thereunder. In order to satisfy this
standard the Participant must incur a severe financial hardship resulting from
an illness or accident of the Participant, the Participant’s spouse, or a
dependent (as defined in Code § 152(a)) of the Participant, loss of the
Participant’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. The Participant shall document, to the Compensation Committees’
satisfaction, that distribution of
Participant’s Account is necessary to satisfy the unforeseen emergency and that
the

Participant does not have access to other funds sufficient to satisfy
the need. Upon receipt of a request under this Section 5.5, the Compensation
Committees may, in their sole discretion, distribute all or a portion of the
Participant’s Account balance in a lump sum, to the extent necessary to satisfy
such emergency, plus amounts necessary to pay taxes reasonably anticipated as a
result of the distribution, after taking into account the extent to which such
hardship is or maybe relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the Participant’s assets (to the
extent the liquidation of such assets would not itself cause severe financial
hardship). If a Participant files an election to change the time and/or form of
the Participant’s distribution due to an “unforeseeable emergency,” the
election may not take effect until at least twelve (12) months after the date
on which the election is made, and must comply, in all respects, with Code §
409A and Treasury Regulations promulgated thereunder. The Participant shall
sign all documentation requested by the Compensation Committees relating to the
distribution. If a Participant makes a request and receives all or a portion of
Participant’s Deferred Account balance under this provision, the Participant
shall not be eligible to participate in any nonqualified deferred compensation
plan maintained by Banner, including this Plan, for the remainder of the year
and the following twelve (12) months after the request. In addition, any
deferred compensation agreement under any nonqualified deferred compensation
plan of Banner shall not be effective with respect to Compensation payable to
the Participant during the remainder of that year and the following twelve- (12-)
month period.

                       5.6            SMALL
ACCOUNT DISTRIBUTIONS.
On the date of Separation from Service, if a Participant’s Deferred Account
balance, determined in accordance with Section 4.7, is less than $10,000,
Banner shall promptly distribute the entire Deferred Account balance to the
Participant, and the Participant shall have no further rights or benefits under
this Plan.

                       5.7            COMMENCEMENT
OF PAYMENTS. 

                                        5.7.1   GENERAL
RULE. Unless
requested by a Participant and approved by the Compensation Committees, payment
shall commence no later than sixty (60) days after the end of the month in
which the Separation from Service occurs.

                                        5.7.2   DEFERRAL
OF COMMENCEMENT PAYMENTS. The
Compensation Committees may, in their sole discretion, allow a Participant to
defer the commencement of payment under this Plan for a period not to exceed
the greater of: (i) one (1) year, or (ii) until the Participant attains age
sixty-five (65). Notwithstanding the preceding sentence, such deferral election
must be made not less than twelve (12) months prior to Separation from Service
of the Participant and any change to a previous election must be in accordance
with Section 4.6 of the Plan and Code § 409A.

                       5.8             BENEFITS
PAYABLE TO INCOMPETENTS.
If the Compensation Committees find
that any Participant or Beneficiary to whom a benefit is payable under this
Plan is unable to care for the Participant’s or Beneficiary’s affairs because
of illness or accident, any payment due (unless prior claim therefore shall
have been made by a duly authorized guardian or other legal representative) may
be paid, upon appropriate indemnification of the Compensation Committees, to
the spouse or other legal guardian of the Participant. Any such payment shall
be a payment for the account of the Participant and shall be a complete
discharge of any liability under this Plan therefor.

                    5.9          
PAYMENT TO SPECIFIED EMPLOYEES. Notwithstanding anything to
the contrary in this Plan or in a Participant or Employer payment election, the
Plan may not make any payment to a Specified Employee based upon his or her
Separation from Service earlier than six (6) months following such Separation
from Service (or if earlier, upon the Specified Employee’s death), except as
permitted under this Section 5.9. This limitation applies regardless of the
Participant’s status as a Specified Employee or otherwise on any other date
including the next Specified Employee effective date, if the Participant had
continued his or her services through such date. The Employer, operationally
and without any direct or indirect involvement or election by the Participant,
will determine whether any payments that otherwise would be payable to the
Specified Employee during the specified six (6) month period will be: (a)
accumulated with payment delayed until the first day of the seventh (7th) month
following such six (6) month period; or (b) delayed by six (6) months as to
each installment otherwise payable during such six (6) month period. This
Section 5.9 does not apply to payments made on account of a domestic relations
order, payments made because of a conflict of interest, or the payment of
employment taxes, all as permitted under Treasury Regulation §
1.409A-3(i)(2)(i). This Section 5.9 also does not apply to any reimbursement or
in-kind benefit which constitutes “separation pay,” as defined under final
Treasury Regulations, and which does not constitute deferred compensation under
final Treasury Regulations.  

                    5.10          
CODE §162(M)/280G
AND CERTAIN
PARACHUTE PAYMENTS. The Plan may
delay payment to
any Participant if Banner reasonably anticipates that any deduction for federal
income tax purposes for a scheduled payment to the Participant will be barred
under Code § 162(m). In such event, the Plan, without regard to any Participant
election or timing, will pay such Deferred Compensation amounts either in the
Participant’s first taxable year in which Banner reasonably anticipates that
Code § 162(m) will not apply, or during the period beginning on the date that
the affected Participant Separates from Service and ending on the later of the last day of the Participant’s taxable year in which such Separation from
Service occurs, or the fifteenth (15th) day of the third (3rd)
month following the Separation from Service. If the Employer fails to delay
payment under this Section 5.10 for any scheduled payments during the taxable
year which could be so delayed, then the Employer’s delay of any payment will
be a “change of payment election” subject to the change ofpayment election
rules of the Plan and Treasury Regulations. If the employer delays payment
until a Participant’s Separation from Service, the payment is considered to be
based upon Separation from Service for purposes of the application of the
payment rules under this Plan, and payment to a Specified Employee will be made
on the date that is six (6) months after such Separation from Service.  

                    5.11          
POSTPONEMENT DUE TO
SECURITIES LAWS. The Plan may delay payment to a
Participant if Banner reasonably anticipates that the payment will violate any
federal securities law or other applicable laws. The Plan will pay such
Deferred Compensation amounts at the earliest date at which Banner reasonably
anticipates, upon advice of legal counsel, that the payment will not cause a
violation of such law or laws. For purposes of this Section 5.11, a violation
of law does not include a payment which would cause inclusion of the Deferred
Compensation amounts in the Participant’s gross income, or which would
otherwise subject the Participant to any penalty or other excise tax under the
Code or Treasury Regulations. The Plan may, however, delay payment to a
Participant if it relates to a “Change in Control” that occurs under
circumstances described in Treasury Regulation 1.409A-3(i)(5)(iv) and the
provisions of this Plan.

          6.      
MISCELLANEOUS. 

                    6.1          
UNFUNDED PLAN. This Plan is an
unfunded plan
maintained primarily to provide Deferred Compensation benefits for a select
group of Executive Officers and Directors. This Plan is not intended to create
an investment contract, but instead is intended to provide tax planning
opportunities and retirement benefits to eligible individuals who have elected
to participate in this Plan. Eligible individuals are a select group of
Directors and Executive Officers who, by virtue of their position with Banner,
are uniquely informed as to Banner’s operations and have the ability to
materially affect Banner’s profitability and operations. 

                    6.2          
UNSECURED GENERAL
CREDITOR. Participants and their
Beneficiaries, heirs, successors, and assigns shall have no legal or equitable
rights, interest, or claims in any property or assets of Banner, this Plan or
the DCB Trust. Except as provided in Section 8, the assets of Banner are not
required to be held under any trust for the benefit of Participants, their
Beneficiaries, heirs, successors, or assigns, or held in any way as collateral
security for the fulfilling of the obligations of Banner under this Plan. Any
and all Banner assets shall be, and remain, the general, unpledged and
unrestricted assets of Banner. A Participant shall have no present right, title
or interest to any Stock, including rights to vote any such Stock under this
Plan. Banner’s obligation under this Plan shall be an unfunded and unsecured
promise of Banner to pay money in the future. 

                    6.3          
NONASSIGNABILITY. Neither a Participant
nor any other person shall have any right to commute, sell, assign, transfer,
pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or
convey in advance of actual receipt the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are, expressly declared to
be unassignable and non-transferable. No part of the amounts payable shall,
prior to actual payment, be subject to seizure or sequestration for the payment
of any debts, judgments, alimony or separate maintenance owed by a Participant
or in the event of Participant’s or any other person’s bankruptcy or
insolvency. 

                    6.4          
TAXES. The Compensation Committees shall
withhold from payments made under this Plan all income, employment or other
taxes required to be withheld from distributions to a Participant under Section
5 of this Plan for the federal or any state or local government as determined
in the sole discretion of the Compensation Committees. 

                    6.5          
CONSTRUCTION. This Plan shall be
construed according to the laws of the State of Washington. 

                    6.6          NOTICE.
Any notice or filing required or permitted to be given to the Compensation
Committees under this Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to any member of the
Compensation Committees or Banner’s registered agent. Such notice shall be
deemed given as of the date of delivery or, if delivery is made by mail, as of
the date shown on the postmark on the receipt for registration or
certification. 

                    6.7          
RETENTION OF OUTSIDE
SERVICES. The Compensation Committees
may, in
their sole discretion, retain one or more independent entities to provide
services to Banner in connection with the operation and administration of this
Plan. Except as may be specifically delegated
or assigned to any such entity in writing, the Compensation Committees shall
retain all 

discretionary authority under this Plan. No
Participant or other person shall be a third party beneficiary with respect to,
or have any rights or recourse under, any contractual arrangement between
Banner and any such outside provider of services. 

                    6.8          
SEVERABILITY. If any of the provisions
of this Plan shall be held invalid, the remainder of this Plan shall not be
affected thereby. To the extent any provisions of the Plan are determined by
the Compensation Committees or a court of competent jurisdiction to fail to
comply with Section 409A of the Code with respect to any Participant or
Participants, such provisions shall have no force or effect with respect to
such Participant or Participants. 

                    6.9          
INDEMNIFICATION. Banner shall indemnify
and hold harmless the members of the Compensation Committees, and each of them,
from and against any and all loss resulting from liability to which the
Compensation Committees, or the members of the Compensation Committees, may be
subjected by reason of any act or conduct (except willful misconduct, fraud or
gross negligence) in their official capacities in the administration of this Plan
including, all expenses reasonably incurred in their defense, in case Banner
fails to provide such defense. 

                    6.10          
EXPENSES. All expenses and costs
incurred in connection with the administration and operation of this Plan shall
be borne by Banner. Banner shall pay the Participant all out-of-pocket
expenses, including attorneys’ fees, incurred by the Participant in connection
with the successful enforcement by the Participant of the Change in Control
provisions under this Plan, if such Change in Control is contested by the
Compensation Committees. 

                    6.11          
NOT A CONTRACT OF
EMPLOYMENT. The terms and conditions of
this Plan shall not be deemed to constitute a contract of employment between
Banner and the Participant, and the Participant (or Participant’s Beneficiary)
shall have no rights against Banner except as may otherwise be specifically
provided herein. Moreover, nothing in this Plan shall be deemed to give a
Participant the right to be retained in the service of Banner or to interfere
with the right of Banner to discipline or discharge a Participant at any time. 

                    6.12          
SUCCESSORS. The provisions of this Plan
shall bind and inure to the benefit of each Participant and Banner and their
successors and assigns. The term successors as used herein shall include any
Beneficiary and any corporate or other business entity which shall, whether by
merger, consolidation, purchase or otherwise acquire all or substantially all
of the Stock or assets of Banner, and successors of any such corporation or
other business entity. 

          7.      
AMENDMENT AND TERMINATION. Banner,
acting through
their Compensation Committees, may, at their sole discretion, amend or
terminate this Plan at any time, provided that the amendment or termination
shall not adversely affect the vested or accrued rights or benefits of any
Participant without the Participant’s prior consent. Any distribution of a
Participant’s Deferred Account shall not be deemed to adversely affect a
Participant by reason of causing taxes to be paid or withheld. Banner reserves
the right to terminate this Plan and distribute all of the Trust accounts under
the following circumstances.  

                    7.1          
DISSOLUTION OR BANKRUPTCY. Banner
may terminate and
liquidate the Plan within twelve (12) months following a
dissolution as a corporate entity taxable under 

Code § 331, or with the approval of a
Bankruptcy court under 11 U.S.C. § 503(b)(1)(A), provided that the Deferred
Compensation is paid to Participants and included in their gross income by the
latest of: (a) the calendar year in which the Plan termination and liquidation
occurs; (b) the first calendar year in which the amounts are no longer subject
to a substantial risk of forfeiture (as defined under final Treasury
Regulations); or (c) the first calendar year in which payment is
administratively practicable. 

                    7.2          
CHANGE IN CONTROL. Banner may
terminate and
liquidate the Plan by an irrevocable action taken within thirty (30) days
preceding, or within the twelve (12) month period following, a Change in
Control, provided that Banner distributes all Deferred Compensation amounts
(including any Aggregated Plans which Banner must also terminate and liquidate)
within twelve (12) months following the date of Banner’s irrevocable action to
terminate and liquidate the Plan and all like-plans that constitute Aggregated
Plans. If the Change in Control results from an asset purchase transaction,
then the entity with discretion to terminate and liquidate the Plan will be the
“Employer” that is primarily liable after the transaction to pay the Deferred
Compensation amounts. 

                    7.3          
OTHER CIRCUMSTANCES. Banner may
terminate the
Plan for any other reason in its discretion, provided that: (a) the termination and liquidation does not
occur proximate to a downturn in the financial health of Banner; (b) Banner
must also terminate all “Aggregated Plans” in which any Participant is also
participating; (c) the Plan makes no payments within twelve (12) months
following the date of Banner’s irrevocable action to terminate and liquidate
the Plan other than payments the Plan would otherwise have made irrespective of
the Plan termination; (d) the Plan makes all payments within twenty-four (24)
months following the date of Banner’s irrevocable action to terminate and
liquidate the Plan; and (e) Banner does not, within three (3) years following
the date of its irrevocable action to terminate and liquidate the Plan, adopt
any new plan or plans covering any Participant that would constitute an
Aggregated Plan under Treasury Regulations. 

          8.      
DEFERRED COMPENSATION AND
BENEFITS
TRUST. Upon the occurrence of any Change
in Control, Banner shall transfer to the DCB Trust an amount of cash,
marketable securities, Stock or other property acceptable to the trustee equal
in value to one hundred five percent (105%) of the amount necessary, on an
actuarial basis and calculated in accordance with the terms of the DCB Trust,
to pay Banner’s obligations with respect to all Deferred Account balances,
determined in accordance with Section 4.7 under this Plan (the “Funding
Amount”). The cash, marketable securities, Stock and other property so
transferred shall be held, managed and disbursed by the trustee subject to and
in accordance with the terms of the DCB Trust. In addition, from time to time,
Banner shall make any and all additional transfers of cash, marketable
securities or other property acceptable to the trustee as may be necessary in
order to maintain the Deferred Account established by the Compensation
Committees pursuant to this Plan. Notwithstanding Banner’s transfer of cash,
marketable securities, Stock or other property, a Participant’s sole investment
option under this Plan is Stock. 

                    Upon a
Change in Control, the assets of the DCB Trust shall be used to pay benefits
under this Plan, except to the extent Banner pays such benefits. Banner and any
successor shall continue to be liable for the ultimate payment of those
benefits. 

          9.      
CLAIMS PROCEDURE. Claims for
benefits under
this Plan shall be filed in writing, within seventy-five (75) days after the
event giving rise to a claim (180 days in the case of a claim if the claim
involves a determination involving an individual’s Disability), with Banner’s
senior human resources officer, who shall promptly forward such claim to the
Compensation Committees. The Compensation Committees shall have absolute
discretion to determine whether benefits are payable under this Plan, interpret
and apply this Plan, evaluate the facts and circumstances, and make a
determination with respect to the claim in the name and on behalf of Banner.
The claim shall include a statement of all relevant facts and copies of all
documents, materials, or other evidence that the claimant believes are relevant
to the claim. Banner shall notify the claimant in writing of the disposition of
a claim within sixty (60) days after the claim is filed, unless special
circumstances would make the rendering of a decision within the 60-day period
unfeasible, in which case the Compensation Committees must notify the claimant
of the delay, and render their decision within 120 days after its receipt of a
request for review. If the claim relates to a determination that also involves
the claimant’s “Disability,” then the 60-day period becomes a 45-day period,
and the 120- day period becomes the 90-day period after receipt of a request
for review of a claim. If a claim is denied, the specific reasons for the
denial shall be set forth in writing and pertinent provisions of this Plan
shall be cited and attached. 

          10.      
ARBITRATION, JURISDICTION AND
VENUE. Any dispute, controversy or claim
arising out of, in connection with or relating to this Plan or any breach or
alleged breach of this Agreement shall, upon exhausting the claims and claims
review procedures described in Section 9, be submitted to and settled by
arbitration in Walla Walla, Washington, pursuant to the rules then in effect of
the American Arbitration Association (or at any other place or under any other
form of arbitration mutually acceptable to the parties so involved). Any award
rendered shall be final and conclusive upon the parties and a judgment on such
award may be entered in the highest court of the forum, state or federal,
having jurisdiction. The expenses of the arbitration shall be borne equally by
the parties to the arbitration, provided that each party shall pay for and bear
the cost of their respective own experts, evidence and counsel’s fees. Any such
claim for arbitration must be initiated no later than (a) one (1) year after
the event(s) giving rise to the claim occurred, or (b) sixty (60) days after a
final written decision was provided to the claimant under Section 9, whichever
is sooner. The laws of the State of Washington shall apply, except to the
extent pre-empted by applicable federal law. 

          11.      SECTION 409A
COMPLIANCE. Notwithstanding anything in
the Plan to the contrary, (i) this Plan may be amended by Banner at any time,
retroactively if required, to the extent required to conform the Plan to Code §
409A; (ii) no provision of the Plan shall be followed to the extent that
following such provision would result in a violation of Code § 409A; and (iii)
no election made by a Participant hereunder, and no change made by a
Participant to a previous election, shall be accepted by the Compensation
Committees if the Compensation Committees determine that acceptance of such
election or change could violate any of the requirements of Code § 409A,
resulting in early taxation and penalties. 

 EXHIBIT
A

* * * * * *cpc_10k-ex1033.htm

Exhibit 10.33

    Product
Development Services Agreement - Second Amendment

     

    This
Second Amendment to that certain November 9, 2001 Product Development Services
Agreement as amended August 4, 2003 ("Product Development Services Agreement''),
is made as of June 2, 2006 ("Second Amendment"), by and between Biomed Research,
Inc., a Florida corporation ("Biomed”), and MedEnclosure, L.L.C., a Nevada
limited liability company ("Sponsor"). All capitalized terms used but not
otherwise defined in this Second Amendment shall have the respective meanings ascribed to
such terms in the Product Development Services Agreement, or as used
by the parties in their prior dealings.

     

    Whereas
the Product Development Services Agreement, as amended, addresses development of
the Product through various phases, through and including Phase
IV(b);

     

    Whereas
the parties desire and hereby mutually agree to continue development of Phases V
and VI on terms and conditions as set forth herein below;

     

    Whereas
the parties have entered into a separate hourly Services Agreement for services
beyond the scope of the Product Development Services Agreement, or as
contemplated by this "Second Amendment";

     

    Now
therefore, the parties hereby agree as follows:

     

    1)    To the
following budget, deliverables and milestone payment schedule for the further
development of Phases V & VI the MedClose VCS product:

     

    (a)           Services
provided beyond the scope of the Product Development Services Agreement, as
amended August 4, 2003, such as Phase IV revisions, shall be invoiced to the
Sponsor according to the Services Agreement of April 17, 2006, by and between
the parties.

     

    (b)           Budget
and deliverables for Phases V & VI as attached hereto as Exhibit
A.

     

    (c)    Milestones /
payment schedule;

     

    i.    Phase V
payments shall be made as follows:

     

    
      	
            	
              1.

            	
              Payment
      of one third $376,471 is due with the execution of this Second Amendment
      by both parties;

            

    

     

    
      	
            	
              2.

            	
              Payment
      of one third $376,471 is due 90 days after execution of this Second
      Amendment;

            

    

     

    
      	
            	
              3.

            	
              Payment
      of one third $376,471 is due 180 days after execution of this Second
      Amendment. This payment shall be offset by prepayment in the amount of
      $25,715.30 made by MedEnclosure to Biomed in connection with Phase V and
      other services ("Prepayments").

            

    

     

    
      	
            	
              4.

            	
               Effective upon the later to occur
      of the date that this Amendment is executed by both parties, and the
      receipt by MedEnclosure from Biomed of a written schedule of invoices
      containing specific charges for the Prepayments, MedEnclosure and Biomed,
      do hereby mutually release each other and their respective stockholders,
      and representatives from any known claims of any sort which either party
      now has or may ever have against the other, arising prior to the date
      hereof out of any matter, directly or indirectly related to (1) the
      Product Development Services Agreement, as amended, and (ii) the Services
      Agreement of April 17, 2006, among the
parties.

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Phase VI
payments shall be made as follows:

     

    
      	
            	
              1.

            	
              Payment
      of one third [$87,446] is due upon receipt of a written notice from Biomed
      that all subjects are enrolled into the MedClose clinical trial as defined
      in CL-7000, Rev, B, which shall be incorporated as Exhibit C to this
      Agreement when it is provided.

            

    

     

    
      	
            	
              2.

            	
              Payment of one third [$87,446] is
      due when the premarket approval (PMA) application is
      submitted to the U.S. Food and Drug Administration (FDA), as evidenced by
      confirmation of delivery by Federal Express or
      similar third-party courier.

            

    

     

    
      	
            	
              3.

            	
              Payment
      of one third [$87,446] is due when the PMA application is approved by the
      FDA.

            

    

     

    (d)    On a monthly
basis, by the first of the month, Biomed shall provide brief status reports
concerning the completion of tasks under Phases V and VI, as set forth in
Exhibit A. The brief status reports shall be provided in electronic form
to:

     

    Rod
Shipman

    MedEnclosure,
LLC

    Sarasota,
FL 34243

    rshipman@insights.net

     

    e)    Clinical
trial insurance shall be paid for by MedEnclosure and shall name MedEnclosure
as the insured
party.

     

    2)          The
term "Development Plan" as defined by reference to Exhibit A of the Product
Development Services Plan in section 1.2 therein, is hereby modified as
necessary to comport with the scope of development services contemplated under
this Second Amendment.

     

    3)           Section
4.2 of the Product Development Service Agreement regarding Termination is
amended by deleting:

     

    "If this
Agreement is terminated by Sponsor during any phase of the development plan, Biomed
shall refund to Sponsor within thirty (30) days of the effective date of such
termination, a pro-rata portion of the payment with respect to such phase based
on the number days remaining in such phase (determined with reference to the total
number of days accorded to such phase on Exhibit A)."

     

    and
substituting:

     

    "If this
Agreement is terminated for cause by Sponsor during any phase of the Development
Plan, Biomed shall refund to Sponsor within thirty (30) days of the effective
date of such termination, a pro-rata portion of the payment with respect to such
phase based on the number of days remaining in such phase (determined with reference to the total number of days
accorded to such phase on Exhibit A). If this Agreement is terminated
without cause by Sponsor during any phase of the Development Plan, in
addition to any other remedies available to Biomed hereunder, Sponsor shall be
obligated to pay out the balance of its obligations hereunder including payment
of all remaining installments associated with completion of the project as
defined in the Product Development Services Agreement, and as set forth at
Sections 2(b) and (a) of the Second Amendment.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    This
Agreement may be terminated for cause by a party if the other party breaches any
material representation, warranty, or obligation provided hereunder. This
Agreement may be terminated for cause by Sponsor in the event that the FDA
terminates the associated investigational device exemption (IDE) or otherwise
does not permit the Study to proceed, or Sponsor terminates the Study in order
to achieve compliance with applicable FDA laws and/or regulatory
requirements."

     

    4)    In the
event that it becomes
necessary to revise, modify or change the investigational Plan, CL-7000, Rev. B,
i.e., requiring the need for a Rev. C, or the assumptions regarding Phases V and
VI change, the parties agree that such change will constitute the conditions
necessary to execute a Third Amendment to the Product Development Services
Agreement, which both parties shall negotiate in good faith.

     

    IN
WITNESS WHEREOF, the parties hereto have executed this Second Amendment to the
Product Development Services Agreement by proper persons thereunto duly
authorized:

     

     

    
      

      
        	
                MedEnclosure,
      L.L.C

                 

                By:  Rod A.
      Shipman                                       
      

                Rod
      A. Shipman, Managing Member,

                President
      and CEO

              	
                Biomed
      Research, Inc.

                 

                By:  /s/ Michael
      Dayton                  
      

                Michael
      Dayton, President

              
	 
      	 
      
	
                Date:  June
      2, 2006

              	
                Date:  6-02-06

              

      

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      Exhibit
A

      Second
Amendment - Product Development Services Agreement

      Phase V -
Human Clinical Trial / Phase VI
- Marketing
Approval

      Phase V – Human Clinical
Trials Research

       Assumptions

      Investigational
Plan CL-7000, Rev. B

      3
clinical sites

      385-400
subjects ("run-in" + randomized)

      15 Case
Report Forms

      30 day
subject follow-up

      2 month
set-up

      8 month
subject enrollment

      3 month
data retrieval and clean-up

      12 months
for clinical phase

       

      
        INCLUDED
TASKS

        
          
            

          

        

        Clinical
trial
management               
 TOTAL CLINICAL TRIAL MANAGEMENT $ 645,870.00

        design /
print CRF's x 15

        informed
consent x 3-6

        investigator
brochure

        provide
site CRF binders

        train
sites CRF /
binders

        source
document worksheets

        identify/recruit
investigators

        negotiate
site reimbursements

        conduct
investigator meetings

        select /
obtain IRS approvals

        deliver
investigational device to sites

        manage
control of Investigational units

        train
Investigators MedClose

        train
scrub / circulating nurses Tisseel

        clinical
monitoring of sites / data 

        resolve
CRF data queries

        monitors
attend project mtgs

        weekly
subject enrollment reports

        maintain
central study files

        recruit
/ manage Medical
Monitor

        recruit /
manage Clinical Events
Committee members

        coordinate
mtgs of Medical Monitor / investigators

        coordinate
mtgs of Clinical Events Committee

        prepare /
submit required study reports to FDA

        monthly
status reports to MedEnclosure

         

          
            

          

        

        
          

          Clinical
data management TOTAL CLINICAL DATA MANAGEMENT $ 288,934.00

          design /
develop database/ entry screens

          program
allowable data rules / flagging

          test database / edit
check

          CRF
review/ query resolution

          CRF entry
validation

          QA data
audit / report

           

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

           

          
            EXHIBIT
A

            Second
Amendment - Product Development Services Agreement

            Phase V -
Human Clinical Trial / Phase VI - Marketing Approval

             

            
               

              INCLUDED
TASKS

              
                

              

              U.S.
Premarket Approval (PMA)
Application                   
TOTAL PMA APPLICATION $ 202,338.00

              PMA
summary:

              indications
for use.

              combination
product description; ingredients, components, modes of action.

              alternative
practices and procedures.

              marketing
history.

              summary
of non clinical laboratory studies.

              summary
of human clinical investigation.

              conclusions
drawn from studies.

              methods
and controls for manufacturing, par:treeing and storage.

              reference
to applicable performance standards; statement of conformance,

              
                detailed
analysis of non clinical studies; microbiological, toxicological,
biocompatibility, sterility, shelf life and animal studies w/statement
of compliance to GLP regulations.

              

              
                detailed
analysis of human clinical studies; protocol, investigators, subjects. AE's,
device failures, complaints, results of statistical analyses, contraindications,
precautions, etc.

              

              bibliography,
copies of pertinent published reports.

              proposed
packaging and labeling.

              environmental
assessment.

              anancial
disclosure and certification,

              reference
to applicable master files, i.a., Tisseel biologics application
(BLA).

              update of
pending application w/ new safety and effectiveness information, where
applicable,

              negotiate
final labeing; Instructions for use, patient information booklet, products
labels.

              prepare
summary of safety and effectiveness (SS&E) document for public release by
FDA. monthly status reports to MedEnclosure

               

               

                
                  

                

              

              
                PMA
Application Amendments

                amendments to pending PMA
application w/revised and/or additional Information, where necessary,
assumptions are
the same as those above, i.e.. human data derived from CL-7000, Rev. 13
trial.

                 

                  
                    

                  

                

                 

                TOTAL
PROJECT • PHASE VI  $262, 338.00

                Direct
pass through of actual expenses:

                 

                
                  	
                          1.

                        	
                          Any
      governmental fees, such as user fees, required for the submission of
      marketing approval applications, and any amendments or supplements
      thereto, shall be expenses passed through directly to
      MedEnclosure

                        

                

                
                  	
                          2.

                        	
                          Any
      changes to the assumptions or task list above will require a Change
      Order approved by both Biomed MedEnclosure subject to Section 4
      of the foregoing Second Amendment.

                        

                

                 

                Marketing
approval outside the United States:

                
                  
                    	
                            1.

                          	
                            By
      contracting the U.S. PMA
      application through Biomed, MedEnclosure is entitled to significant
      discounts for additional marketing approval applications in Canada and
      European
      Union countries.

                          

                  

                

                
                  
                    	
                            2.

                          	
                            Marketing
      applications in Canada and EU countries shall be negotiated independent of
      this agreement.

                          

                  

                

                 

                 

                
                  
                    
                    

                  

                  
                    
                    

                    
                      

                    

                  

                  
                    
                    

                  

                

              

            

          

        

      

    

     

    
      EXHIBIT
A

       

      Second
Amendment - Product Development Services Agreement

       

      Phase V -
Human Clinical Trial / Phase VI - Marketing Approval

       

       

      Biostatistical     
TOTAL BIOSTATISTICAL MANAGEMENT     $214,809.00

      develop
randornization scheme

      implement
randomization

      create
statistical analysis table shells

      create statistical listing
shells

      SAS programming

      statistical
reports

      data
transfer

      statistics
QC review & OA report

      statistics teleconferences
/ consults

       

      
        
          

        

      

       

      TOTAL
PROJECT - PHASE V $1,129,493.00

       

      Direct
pass-through of actual expense:

       

      
        
          	
                  1.

                	
                  AR expenses incurred for travel
      and other expenses incurred in performance of services by
      Biomed, BioStat,
      Medical Monitor, and Clinical Events Cornrnittee, as approved by
      Biomed.

                

        

      

       

      
        	
                2.

              	
                Any
      expenses approved by Biomed incurred for copying, printing and delivery of
      project documents, i.e., case report
forms.

              

      

       

      
        	
                3.

              	
                Investigational
      site per patient fees, femoral ultrasound, ABA,
  etc

              

      

       

      
        	
                4.

              	
                Institutional
      Review Board (RIB) fees

              

      

       

      
        
          	
                  5.

                	
                  Honorarium
      and fees for services performed by Medical Monitor and Clinical Events
      Committee (CEO)

                

        

      

       

      
        	
                6.

              	
                Any
      governmental fees approved by Biomed associated with submission of
      human study applications shall be passed through directly to
      MedEnclosure

              

      

       

      
        	
                7.

              	
                Billing
      to MedEnclosure will occur monthly for pass through expenses pre-paid by
      Biomed, along with receipts of actual expenses. Payment will be
      made within 30 days of the receipt of the invoice in electronic form by
      MedEnclosure, or a finance charge will be issued for all outstanding
      balances (annualized rate of 12%).

              

      

       

      
        	
                8.

              	
                Any
      changes to the assumptions or task list above
      will require a Change Order approved by both Biomed and MedEnclosure
      subject to Section 4 of the foregoing Second
      Amendment.

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