Document:

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                                                                   EXHIBIT 10.25

                               SHOPKO STORES, INC.
                                      2005
                           EXECUTIVES AND OPTOMETRISTS
                           DEFERRED COMPENSATION PLAN

                           EFFECTIVE NOVEMBER 18, 2004

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                                TABLE OF CONTENTS

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<S>                                                                                           <C>
Section   1.      Establishment and Purpose.............................................       1
          1.1     Establishment.........................................................       1
          1.2     Purpose...............................................................       1
Section   2.      Definitions...........................................................       1
          2.1     Definitions...........................................................       1
          2.2     Gender and Number.....................................................       5
Section   3.      Eligibility for Participation.........................................       6
Section   4.      Election to Defer.....................................................       6
          4.1     Deferrals.............................................................       6
          4.2     Procedures............................................................       6
          4.3     Maximum and Minimum Deferrals.........................................       7
          4.4     Election to Defer Irrevocable.........................................       7
          4.5     Retirement Benefit Plan Equivalents...................................       7
          4.6     Early Distribution Deferrals..........................................       7
Section   5.      Accounts..............................................................       8
          5.1     Establishment and Crediting of Account................................       8
          5.2     Compensation Deferrals................................................       8
          5.3     Investment Elections..................................................       8
          5.4     Crediting Rate........................................................       8
          5.5     Contractual Obligation................................................       8
          5.6     Charges Against and Balance of Accounts...............................       9
          5.7     Statement of Accounts.................................................       9
Section   6.      Payment of Benefits...................................................       9
          6.1     Retirement Benefits...................................................       9
          6.2     Benefits for Participants Upon Other Terminations of Employment.......       9
          6.3     Benefits Following a Change of Control................................      10
          6.4     Survivorship Benefits.................................................      10
          6.4.1   Death Prior to Termination of Employment..............................      10
          6.4.2   Death After Commencement of Benefits..................................      10
          6.5     Small Account Exception...............................................      10
          6.6     Recipients of Payments; Designation of Beneficiary....................      11
          6.7     Financial Emergency...................................................      11
          6.8     Pre-Retirement Benefits...............................................      12
Section   7.      Forfeiture............................................................      12
Section   8.      Non-Transferability...................................................      12
Section   9.      Administration........................................................      13
          9.1     Administration........................................................      13
          9.2     Finality of Determination.............................................      13
          9.3     Claims Procedure......................................................      13
          9.3.1   Original Claim........................................................      13
          9.3.2   Claim Review Procedure................................................      14
          9.3.3   General Rules.........................................................      14
          9.4     Expenses..............................................................      16
          9.5     Tax Withholding.......................................................      16
</TABLE>

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<TABLE>
<S>                                                                                           <C>
Section   10.     Amendment and Termination.............................................      16
Section   11.     Applicable Law........................................................      16
Section   12.     No Vested Rights......................................................      17
Section   13.     Binding Agreement.....................................................      17
Section   14.     Notice................................................................      17
Section   15.     Errors in Benefit Statement or Distribution...........................      17
Section   16.     ERISA.................................................................      18
</TABLE>

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                               SHOPKO STORES, INC.
                                      2005
                           EXECUTIVES AND OPTOMETRISTS
                           DEFERRED COMPENSATION PLAN

SECTION 1. ESTABLISHMENT AND PURPOSE

1.1 ESTABLISHMENT

ShopKo Stores, Inc., a Wisconsin corporation (hereinafter called the "Company"),
by action of its Board of Directors, hereby establishes this deferred
compensation plan for certain of its executive employees and optometrists known
as the SHOPKO STORES, INC. 2005 EXECUTIVES AND OPTOMETRISTS DEFERRED
COMPENSATION PLAN (hereinafter called the "Plan"), effective November 18, 2004.

1.2 PURPOSE

The purpose of the plan is (i) to attract high quality executives, managers and
optometrists by providing a means whereby amounts payable by the Company to
these persons may be deferred to a future period, (ii) to motivate such persons
to continue to make contributions to the growth and profits of the Company and
(iii) to provide such persons certain benefits as hereinafter described.

SECTION 2. DEFINITIONS

2.1 DEFINITIONS

Whenever used hereinafter, the following terms shall have the meaning set forth
below:

      (a)   "Account" means the account or accounts established for a
            Participant pursuant to Section 5 of the Plan.

      (b)   "Administrator" means the person or persons appointed by the
            Retirement Committee of the Company to administer the Plan pursuant
            to Section 9 of the Plan.

      (c)   "Age" means the age of the person as of his last birth date.

      (d)   "Annual Bonus" means payments made from time to time by the Company
            pursuant to the Company's (i) Executive Incentive Plan, (ii)
            Long-Term Incentive Plan (cash portion only), (iii) any plan which
            supersedes any of the above-enumerated plans, and (iv) any other
            bonus plans of the Company or any Subsidiary designated by the
            Retirement Committee as an "Annual Bonus" for purposes of this Plan.

      (e)   "Base Salary" means the salary, commissions, and other similar
            amounts payable by the Company (including amounts deferred
            hereunder), but excluding expense reimbursement, moving expense
            payments, third-party sick pay, imputed income (from excess life
            insurance premiums, automobile use payments or any other source),

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            non-qualified stock options, disqualifying dispositions of stock
            acquired pursuant to the exercise of incentive stock options, stock
            appreciation rights, severance settlements and similar items of
            remuneration.

      (f)   "Beneficiary" means the person designated by a Participant pursuant
            to Section 6.6 hereof.

      (g)   "Board" means the Board of Directors of the Company.

      (h)   "Change of Control" means any of the following events:

            (1) the acquisition by an individual, entity or group (within the
      meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
      1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership
      (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
      20% or more of either (i) the then outstanding shares of Common Stock of
      the Company (the "Outstanding Company Common Stock") or (ii) the combined
      voting power of the then outstanding voting securities of the Company
      entitled to vote generally in the election of directors (the "Outstanding
      Company Voting Securities"); provided, however, that for purposes of this
      subsection (1), the following acquisitions shall not constitute a Change
      of Control: (i) any acquisition directly from the Company, (ii) any
      acquisition by the Company, (iii) any acquisition by any employee benefit
      plan (or related trust) sponsored or maintained by the Company or any
      corporation controlled by the Company, (iv) any acquisition by any
      corporation pursuant to a transaction which complies with clauses (i) and
      (ii) of subsection (3) below, or (v) any acquisition of 20% or more but
      less than a majority of either the Outstanding Company Common Stock or the
      Outstanding Company Voting Securities by any individual, entity or group
      if at least a majority of the members of the Board of Directors of the
      Company were members of the Incumbent Board, as defined below, at the time
      of such acquisition; or

            (2) individuals who, as of the date hereof, constitute the Board
      (the "Incumbent Board") cease for any reason to constitute at least a
      majority of the Board; provided, however, that any individual becoming a
      director subsequent to the date hereof whose election, or nomination for
      election by the Company's shareholders, was approved by a vote of at least
      a majority of the directors then constituting the Incumbent Board shall be
      considered as though such individual were a member of the Incumbent Board,
      but excluding, for this purpose, any such individual whose initial
      assumption of office occurs as a result of an actual or threatened
      election contest with respect to the election or removal of directors or
      other actual or threatened solicitation of proxies or consents by or on
      behalf of a person other than the Board; or

            (3) consummation of a reorganization, merger or consolidation or
      sale or other disposition of all or substantially all of the assets of the
      Company for which approval of the shareholders of the Company is required
      (a "Business Combination"), in each case, unless, immediately following
      such Business Combination, (i) all or substantially all of the individuals
      and entities who were the beneficial owners, respectively, of the
      Outstanding Company Common Stock and Outstanding Company Voting Securities
      immediately prior to such Business Combination beneficially own, directly
      or indirectly,

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      more than 50% of, respectively, the then outstanding shares of common
      stock and the combined voting power of the then outstanding voting
      securities entitled to vote generally in the election of directors, as the
      case may be, of the corporation resulting from such Business Combination
      (including, without limitation, a corporation which as a result of such
      transaction owns the Company or all or substantially all of the Company's
      assets either directly or through one or more subsidiaries) in
      substantially the same proportions as their ownership, immediately prior
      to such Business Combination of the Outstanding Company Common Stock and
      Outstanding Company Voting Securities, as the case may be and (ii) at
      least a majority of the members of the Board of Directors of the
      corporation resulting from such Business Combination were members of the
      Incumbent Board at the time of the execution of the initial agreement, or
      of the action of the Board, providing for such Business Combination; or

            (4) approval by the shareholders of the Company of a complete
      liquidation or dissolution of the Company.

      (i)   "Chief Executive Officer" means the chief executive officer of the
            Company or the person who regularly performs the duties normally
            associated with such office on behalf of the Company.

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

      (k)   "Company" means SHOPKO STORES, INC., a Wisconsin corporation, and
            any subsidiary thereof.

      (l)   "Compensation" means Base Salary and Annual Bonus.

      (m)   "Crediting Rate" means the notional gains and losses credited on a
            Participant's Account balance based on such Participant's choice
            among investment alternatives made available by the Administrator
            pursuant to Section 5.4 of the Plan.

      (n)   "Deferred Compensation Election Form" means a written agreement
            between a Participant and the Company whereby the Participant agrees
            to defer a portion of his Compensation and the Company agrees to
            make benefit payments all in accordance with the terms and
            conditions of the Plan. The Deferred Compensation Election Form may
            take the form of an electronic communication followed by appropriate
            written confirmation as determined by the Administrator.

      (o)   "Director" means an individual who is a member of the Board and who
            is not an employee of the Company.

      (p)   "Early Retirement Date" means the first day of the month following
            the month in which the Employee reaches age 55 and has completed ten
            (10) or more years of service with the Company.

      (q)   "Effective Date" means November 18, 2004.

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      (r)   "Employee" means an employee of the Company, or any Subsidiary,
            branch or subdivision thereof, with a salary grade at or above the
            salary grade level established by the Retirement Committee from time
            to time. Employee also means an optometrist who is an employee of
            the Company or any Subsidiary, branch or subdivision thereof.

      (s)   "ERISA" means the Employment Retirement Income Security Act of 1974,
            as amended.

      (t)   "Normal Retirement Date" means the first day of the month following
            the month in which the Employee reaches age 62, has completed ten
            (10) or more years of service with the Company or if, earlier, the
            first day of the month following the month in which the Employee
            reaches age 65.

      (u)   "Participant" means those Employees who have elected to participate
            in the Plan by filing a Deferred Compensation Election Form
            hereunder.

      (v)   "Plan Year" means the calendar year.

      (w)   "Qualified Plans" means any retirement plans sponsored by the
            Company in which Participants in this Plan also participate, which
            plans, and any trusts funding such plans, meet the qualification
            requirements of Sections 401(a) and 501 (a) of the Internal Revenue
            Code.

      (x)   "Retirement" means Termination of Employment after reaching the
            Early Retirement Date or Normal Retirement Date.

      (y)   "Retirement Benefit" means the retirement benefit described in
            Section 6.1 hereof.

      (z)   "Retirement Committee" means the SHOPKO STORES, INC. Retirement
            Committee appointed by the Board for the purpose of performing
            certain administrative functions with respect to the employee
            benefit plans of the Company, including the Plan.

      (aa)  "Settlement Date" means the date by which a lump sum payment shall
            be made or the date by which installment payments shall commence
            pursuant to Section 6. The Settlement Date shall be the later of (i)
            the last day of January of the Plan Year following the year in which
            the event triggering distribution occurs or (ii) six months
            following Termination of Employment.

      (bb)  "Statutory Limitations" shall mean any statutory or regulatory
            limitations on salary reduction (other than applicable dollar limit
            under Section 402(g)(1) of the Code) or matching contributions to a
            Qualified Plan, or on compensation taken into account in calculating
            employer or employee contributions to a Qualified Plan. The impact
            of such limits on the Participant for purposes of this Plan shall be
            determined by the Administrator based upon reasonable estimates and
            shall be final and binding as of the date any credit is credited to
            a Participant's Account pursuant to Section 4.5. No subsequent
            adjustments shall be made to increase such a credit under this Plan
            as

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            a result of any adjustments ultimately required under any Qualified
            Plan due to actual employee contributions or other factors.

      (cc)  "Subsidiary" means any corporation, limited liability company or
            other business entity, the majority of the voting interests of which
            is directly or indirectly owned by the Company.

      (dd)  "Termination of Employment" means ceasing to be employed by the
            Company for any reason whatsoever, including, without limitation,
            terminations of employment which are voluntary or involuntary.

      (ee)  "Valuation Date" means the date through which notional earnings and
            losses are credited and shall be the last day of the month preceding
            the month in which the distribution or other basis for valuation
            occurs.

2.2.  GENDER AND NUMBER

Except when otherwise indicated by the context, any masculine terminology, when
used in the Plan, shall also include the feminine gender and the definition or
use of any term herein in the singular shall also include the plural.

SECTION 3. ELIGIBILITY FOR PARTICIPATION

Employees and other persons designated by the Retirement Committee shall be
eligible to participate in the Plan. Employees eligible to become Participants
shall be entitled to defer Compensation hereunder as of the first day of the
Plan Year if they are Employees or other persons designated by the Retirement
Committee as of the Effective Date, or the first day of the Plan Year following
their becoming an Employee or designated person; provided they timely submit a
Deferred Compensation Election Form to the Administrator in accordance with
Section 4.1 of the Plan. Notwithstanding the foregoing, the Retirement Committee
may establish a special enrollment period for certain Employees hired or
achieving Employee status during a Plan Year. Such special enrollment period
shall run for a maximum of thirty days following such person becoming an
Employee or achieving Employee status. A participant shall cease to be a
Participant upon Termination of Employment. The Retirement Committee, in its
sole and absolute discretion shall make such rules concerning leaves of
absences, re-employment and other matters concerning eligibility for
Participation hereunder as it deems to be in the best interests of the Company.

SECTION 4. ELECTION TO DEFER

4.1 DEFERRALS

Any Employee or designated person eligible to become a Participant may elect to
defer Compensation, otherwise payable in subsequent Plan Years, by submitting a
Deferred Compensation Election Form to the Administrator during the enrollment
period established by the Administrator prior to the beginning of the period
during which the Compensation is earned. The Retirement Committee may establish
a special enrollment period for certain Employees hired during a Plan Year or
persons achieving Employee status during the Plan year to allow

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such Employees to defer Compensation payable during the Plan Year. The special
enrollment period shall be the thirty days following the hiring of the Employee
or the person achieving Employee status, and shall relate to pay attributable to
periods beginning after the date of the deferral election.

4.2   PROCEDURES

A participant shall make the election provided for in Section 4.1 hereof by
executing a Deferred Compensation Election Form in the form provided by the
Administrator, subject to such terms and conditions as the Retirement Committee
may impose, including, but not limited to, medical examinations, health
screening, medical records reviews, etc. The Deferred Compensation Election Form
shall set forth the Participant's election to defer any whole percentage of
Compensation earned by the Participant during the Plan Year in accordance with
Section 4.3. A Participant shall only be entitled to defer Compensation in the
amounts and for the periods determined, from time to time, in the sole and
absolute discretion of the Retirement Committee. A Deferred Compensation
Election Form shall be effective if, and only if, it is timely accepted by the
Administrator on behalf of the Company. If accepted by the Administrator, the
Compensation to be deferred, as specified in the Deferred Compensation Election
Form, shall be deferred and the Participant's Compensation shall be
correspondingly reduced.

4.3   MAXIMUM AND MINIMUM DEFERRALS

The following maximum and minimum deferrals of Compensation shall apply to the
amount to be deferred by any Participant, provided, however, that the Retirement
Committee may from time to time, in its sole and absolute discretion, adjust the
maximum and minimum deferrals permitted hereunder:

            (i)   Minimum Deferral - one percent (1%) of Base Salary or one
                  percent (1%) of Annual Bonus, whichever is less;

            (ii)  Maximum Deferral- (a) forty percent (40%) of Base Salary, and
                  (b) one hundred percent (100%) of any bonus paid under any
                  Bonus Plan.

4.4   ELECTION TO DEFER IRREVOCABLE

Except as provided in this Plan or by action of the Retirement Committee as
provided herein, a Participant's election to defer any amounts of any nature
whatsoever pursuant to the Plan shall be irrevocable when made and accepted by
the Administrator and shall not be subject to amendment or modification in any
manner whatsoever thereafter.

4.5   RETIREMENT BENEFIT PLAN EQUIVALENTS

The Company, in its sole discretion, may choose to credit a Participant's
Account for any Plan Year in which the Participant makes a deferral under this
Plan to make up amounts that would have been provided to the Participant under
the Qualified Plans had the Participant made no elective deferral under this
Plan and without regard for Statutory Limitations. Such credit will be credited
to the Participant's Account on the first day of the Plan Year following the
Plan Year for which the contribution was or would have been made under the
Qualified Plans.

4.6   EARLY DISTRIBUTION DEFERRALS

At the time of submitting a Deferred Compensation Election Form, a Participant
may make an irrevocable election to create a Scheduled Withdrawal Account as to
the amounts deferred

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pursuant to that Form, including any earnings thereon, which will be paid out at
an earlier time than Retirement as provided in Section 6 hereunder; provided,
however, that the deferral period shall in no case be less than three (3) years
from the first day of the Plan Year to which the Deferred Compensation Election
Form applies; provided, further, that the payment of the Scheduled Withdrawal
Account shall be in one lump sum, and, once paid, the Participant shall be
entitled to no further benefits with respect to such Scheduled Withdrawal
Account. A Participant may have multiple Scheduled Withdrawal Accounts.

SECTION 5. ACCOUNTS

5.1   ESTABLISHMENT AND CREDITING OF ACCOUNT

The Company shall establish a separate Account on its books with respect to each
deferral election made by each Participant and shall credit to such Account(s)
certain amounts in accordance with the provisions of the Plan. Accounts shall be
deemed to be credited with notional gains or losses as provided in Section 5.4
from the date deferral is credited to the Account through the Valuation Date.

5.2   COMPENSATION DEFERRALS

The Compensation that is deferred pursuant to a Participant's Deferred
Compensation Election Form shall be credited to a Participant's Account as of
the date the Participant would have otherwise received the Compensation. The
Company shall be entitled to deduct from the Participant's Compensation which is
subject to a Deferred Compensation Election Form any amount it is required to
withhold or collect under any federal, state or local law for taxes or other
charges, including, without limitation, Social Security (FICA) and Medicare
taxes.

5.3   INVESTMENT  ELECTIONS

The Administrator shall establish a procedure by which a Participant may elect
among investment alternatives or rates made available by the Administrator and
by which the Participant may change investment elections at least quarterly. The
Administrator may allow a Participant to make a different election for each
Account, or may provide that the investment election applies to all of a
Participant's Accounts. The Participant's choice among investments shall be
solely for purposes of calculating the Crediting Rate. If the Participant fails
to elect an investment election, the Crediting Rate shall be based on the
investment alternative which is a money market fund or alternative most similar
to a money market fund. At no time shall the Company be obligated to set aside
or invest funds as directed by the Participant and, if the Company elects to
invest funds as directed by the Participant, the Participant shall have no more
right to such investments than any other unsecured general creditor.

5.4   CREDITING RATE

The Crediting Rate on amounts in a Participant's Account(s) shall be based on
the Participant's investment election(s) pursuant to Section 5.3. A
Participant's Account(s) shall reflect the investments selected by the
Participant. If an investment on which the Crediting Rate is based sustains a
loss, the Participant's Account(s) shall be reduced to reflect such loss. During
installment distributions, a Participant's Account(s) shall continue to be
credited at the Crediting Rate.

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5.5   CONTRACTUAL OBLIGATION

It is intended that the Company is under a contractual obligation to make
payments in accordance with terms and conditions of the Plan. A Participant
shall have no rights to such payments, other than as a general, unsecured
creditor of the Company. Account balances shall not be financed through a trust
fund or any other assets or properties in which a Participant has any interest
whatsoever. Payments from such Accounts shall be made out of the general funds
of the Company. All such Accounts shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to a Participant
pursuant to the Plan. Such Accounts shall not constitute or be treated as a
trust fund or an interest in any specific assets or properties of the Company of
any sort.

5.6   CHARGES AGAINST AND BALANCE OF ACCOUNTS

Each Participant's Account, as of each Valuation Date, shall consist of the
balance of such Account as of the immediately preceding Valuation Date, plus
deferrals credited to the Account since the immediately preceding Valuation
Date, plus (or minus, if the investment return is negative) the amount to be
credited to such Account by the Company based on the Crediting Rate pursuant to
Section 5.4 hereof (taking into account the timing of any contribution or
distribution), less the amount of all distributions, if any, made from such
Account since the immediately preceding Valuation Date.

5.7   STATEMENT OF ACCOUNTS

The Administrator, shall from time to time, at least quarterly, provide to each
Participant a statement in such form as the Retirement Committee deems desirable
setting forth the Participant's Accounts as of the end of the prior period.

SECTION 6. PAYMENT OF BENEFITS

6.1   RETIREMENT BENEFITS

In the event of the Participant's Retirement, the Participant shall be entitled
to receive an amount equal to the total balance(s) of the Participant's
Account(s) credited with notional earnings as provided in Section 5 through the
Valuation Date. The Participant may elect, at the same time he makes a deferral
election, to receive benefits from the Account credited with such deferrals, in
a lump sum or in annual installments over 3, 5, 10 or 15 years. In other words,
the Participant may have different benefit payout elections for each of his or
her Accounts. If the Participant fails to make a timely election, the benefits
shall be paid over fifteen (15) years. Payments shall begin on the Settlement
Date following Retirement unless the Participant has made a timely election to
have payments begin on any one of the first five (5) anniversaries of such date
but in no event later than the Settlement Date following the date the
Participant attains age seventy (70). An election to change the form of benefit
payout for any Account may be made at any time prior to Retirement by submitting
to the Administrator the form provided for such purpose but elections shall not
be effective unless made no less than thirteen (13) calendar months prior to
Retirement, and shall only be effective if they comply with Section 409A of the
Code and any regulations promulgated thereunder.

6.2   BENEFITS FOR PARTICIPANTS UPON OTHER TERMINATIONS OF EMPLOYMENT

In the event of the Participant's Termination of Employment, other than by
reason of Retirement or death, the Participant shall be entitled to receive an
amount equal to the total balance(s) of the

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Participant's Account(s) credited with notional earnings as provided in Section
5 through the Valuation Date. The Participant may elect, at the same time he
makes a deferral election, to receive benefits from the Account credited with
such deferrals, in a lump sum or annual installments over 3, 5, 10, or 15 years.
In other words, the Participant may have different benefit payout elections for
each of his or her Accounts. If the Participant fails to make a timely election,
the benefits shall be paid in a single lump sum. Payments shall begin on the
Settlement Date following Termination of Employment unless the Participant has
made a timely election to have the payments begin on the Settlement Date
following the date when Participant would be eligible for Early Retirement or
Normal Retirement. An election to change the form of benefit payout for any
Account may be made at any time prior to Termination of Employment by submitting
to the Administrator the form provided for such purpose but elections shall not
be effective unless made no less than thirteen (13) calendar months prior to
Termination of Employment, and shall only be effective if they comply with
Section 409A of the Code and any regulations promulgated thereunder.

6.3   BENEFITS FOLLOWING A CHANGE OF CONTROL

A new Participant may make an irrevocable election with respect to all future
deferral Accounts on the Participant's first Deferred Compensation Election
Form, to receive the full amount in his Account(s), credited with notional
earnings as provided in Section 5 through the Valuation Date, in the event of a
Change of Control prior to Termination of Employment. Such benefit shall be
payable in a lump sum no later than the last day of the month following the
month in which such Change of Control occurs, unless the Participant has elected
in the Deferred Compensation Election Form to have such benefit paid in five (5)
annual installments beginning on such date. In no event will accelerated
payments of Accounts be made by the Administrator under this Section 6.2 if
doing so would violate Section 409A of the Code and any regulations promulgated
thereunder.

6.4   SURVIVORSHIP BENEFITS

6.4.1 DEATH PRIOR TO TERMINATION OF EMPLOYMENT

If a Participant dies prior to receiving any benefits due hereunder, the Company
shall pay to the Participant's Beneficiary a benefit equal to the Participant's
Account(s) at death credited with notional earnings as provided in Section 5,
payable in one lump sum as soon as possible after the Retirement Committee
receives a certified copy of the Participant's death certificate. Payment of the
benefit under this Section 6.4.1 shall relieve the company of any further
obligation to pay benefits under the Plan.

6.4.2 DEATH AFTER COMMENCEMENT OF BENEFITS

If a participant dies after payments pursuant to this Section 6 have commenced
hereunder, but prior to receiving all of the scheduled annual payments, the
Company shall pay the remaining annual payments to the Participant's
Beneficiary.

6.5   SMALL ACCOUNT EXCEPTION

Notwithstanding any other provision of the Plan or a Participant's Deferred
Compensation Election Form, the Administrator, taking into account the expense
and inconvenience of administering the Plan with respect to small Accounts as
set forth herein, may, in its sole discretion, elect to distribute a
Participant's benefits in a lump sum. This Section 6.5 shall only apply to small
Accounts attributable to a Participant that have an aggregate balance of $25,000
or

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less at the time benefits payable pursuant to this Section 6 would otherwise
commence. In addition, if the installments payable under this Section 6 would,
in the aggregate, be less than $3,000 per year, the Administrator, in its sole
discretion, may shorten the period over which the installment payments are made.
In no event will accelerated payments of small Accounts be made by the
Administrator if doing so would violate Section 409A of the Code or any
regulations promulgated thereunder.

6.6   RECIPIENTS OF PAYMENTS; DESIGNATION OF BENEFICIARY

All payments to be made by the Company shall be made to the Participant, if
living. Except as otherwise provided herein, in the event of a Participant's
death prior to the receipt of all benefit payments, all subsequent payments to
be made under the Plan shall be to the Beneficiary of the Participant in
accordance with a Participant's designation of Beneficiary. Unless otherwise
specified in the Participant's Beneficiary designation, in the event a
Beneficiary dies before receiving all payments due to such Beneficiary pursuant
to this Plan, the then remaining payment shall be paid to the legal
representatives of the Beneficiary's estate. The Participant shall designate a
Beneficiary, or during his lifetime change such designation, by filing a written
notice of such designation with the Administrator in such form and subject to
such rules and regulations as the Administrator may prescribe. If the
Participant's Compensation constitutes community property, then any Beneficiary
designation made by the Participant other than a designation of such
Participant's spouse shall not be effective if any such Beneficiary or
beneficiaries are to receive more than fifty percent (50%) of the aggregate
benefits payable hereunder, unless such spouse shall approve such designation in
writing. If no designation shall be in effect at the time when any benefits
payable under this Plan shall become due, the Beneficiary shall be the legal
representatives of the Participant's estate. In the event a benefit is payable
to a minor or person declared incompetent or to a person incapable of handling
the disposition of his property, the Retirement Committee may determine to pay
such benefit to the guardian, legal representative or person having the care or
custody of such minor, incompetent or person. The Retirement Committee may
require proof of incompetence, minority or guardianship as it may deem
appropriate prior to distribution of the benefit. Such distribution shall
completely discharge the Retirement Committee and the Company from all liability
with respect to such benefit.

6.7   FINANCIAL EMERGENCY

In the event of a Participant's unforeseeable emergency, the Retirement
Committee, in its sole and absolute discretion, may alter the timing or manner
of payment of any benefits or deferred amounts to be paid pursuant to the Plan
or release the Participant from the obligation of making deferrals. For purposes
of this section, an unforeseeable emergency shall mean a severe financial
hardship to the Participant resulting from an illness or accident of the
Participant, the Participant's spouse, or a dependent (as defined in Section
152(a) of the Code) 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. Any early
payment of benefits or withdrawal of deferred amounts due to an unforeseeable
emergency shall be limited to the amount 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
may be 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). The foregoing
standard for distributions shall be modified so that it is consistent with any
regulations promulgated under Section 409A of the Code. The Retirement
Committee's decision in passing

                                       10
<PAGE>

upon severe financial hardship of the Participant and the manner in which, if at
all, the payment or deferral of any amounts pursuant to the Plan shall be
altered or modified shall be final, conclusive and not subject to appeal. The
Participant shall have no right to make up any amount distributed or transferred
as a result of a determination of financial emergency by the Retirement
Committee pursuant to this Section 6.7.

6.8   PRE-RETIREMENT BENEFITS

In the event that Participant has made the election provided for in Section 4.6
to receive amounts prior to Retirement, such pre-retirement benefits shall be
paid in accordance with such election. The calculation of the amount of such
pre-retirement benefit shall be made in accordance with the terms and conditions
of the Plan, including, without limitation, Section 5 hereof.

SECTION 7. FORFEITURE

In the event of a Participant's suicide during the first two (2) years after the
filing of any Deferred Compensation Election Form the Retirement Committee, in
its sole and absolute discretion, may terminate all or any part of a
Participant's (or Beneficiary's) right to receive any benefits whatsoever
hereunder, provided, however, that the Beneficiary of such a Participant shall
be entitled to receive at least an amount equal to that portion of the
Participant's Account which has in fact been deferred pursuant to the Plan,
without increase, growth addition or any other amount, payable in such manner as
the Retirement Committee, in its sole and absolute discretion shall determine.

In the event a Participant (i) makes any material misstatement of information in
connection with any Deferred Compensation Election Form (ii) fails to disclose
to the Company or its agents any material item of his personal or medical
history (including, but not limited to, habits of drug, chemical or tobacco
use), (iii) takes any other action (or fails to take any action), which action
(or failure to act) results in a loss to the Company under the Plan, then the
Retirement Committee, in its sole and absolute discretion, may terminate all or
any part of a Participant's (or Beneficiary's) right to receive any benefits
whatsoever hereunder.

SECTION 8. NON-TRANSFERABILITY

In no event shall the Company make any payment under the Plan to any assignee or
creditor of a Participant or a Beneficiary. Prior to the time of payment
hereunder, a Participant or Beneficiary shall have no rights by way of
anticipation or otherwise to assign or otherwise dispose of any interest under
the Plan nor shall such rights be assigned or transferred by operation of law.

SECTION 9. ADMINISTRATION

9.1   ADMINISTRATION

This Plan shall be administered by the Retirement Committee and the
Administrator. The Retirement Committee may from time to time establish rules
for the administration of the Plan that are not inconsistent with the provisions
of the Plan.

                                       11
<PAGE>

9.2   FINALITY OF DETERMINATION

Except as otherwise provided herein, any interpretation or determination by the
Retirement Committee as to any disputed questions arising under the Plan,
including questions of fact (or questions of construction and interpretation),
shall be final, binding and conclusive upon all persons, subject only to a
determination otherwise by the Board.

9.3   CLAIMS PROCEDURE

If any Participant, Beneficiary or other properly interested party is in
disagreement with any determination that has been made under the Plan, a claim
may be presented, but only in accordance with the procedures set forth herein.

9.3.1 ORIGINAL CLAIM

Any Participant, Beneficiary or other properly interested party may, if he so
desires, file with the Retirement Committee a written claim for benefits or a
determination under the Plan. Within ninety (90) days after the filing of such a
claim, the Retirement Committee shall notify the claimant in writing whether his
claim is upheld or denied in whole or in part or shall furnish the claimant a
written notice describing specific special circumstances requiring a specified
amount of additional time (but not more than one hundred eighty (180) days from
the date the claim was filed) to reach a decision on the claim. If the claim is
denied in whole or in part, the Retirement Committee shall state in writing:

            (i)   the specific reason or reasons for the denial;

            (ii)  the references to the pertinent provisions of this Plan on
                  which the denial is based;

            (iii) a description of any additional material or information
                  necessary for the claimant to perfect the claim and an
                  explanation of why such material or information is necessary;
                  and

            (iv)  an explanation of the claims review procedure set forth in
                  this section, including a statement of the claimant's right to
                  bring a civil action under ERISA Section 502(a) following a
                  denial on review.

9.3.2 CLAIM REVIEW PROCEDURE

Within sixty (60) days after receipt of notice that his claim has been denied in
whole or in part, the claimant may file with the Retirement Committee a written
request for a review and may, in conjunction therewith, submit written comments,
documents, records and other information relating to the Claim. The claimant or
his authorized representative, shall be provided, upon request and free of
charge, reasonable access to, and copies of, all documents, records and other
information relevant to the claimant's claim. For purposes of this section, a
document, record or other information shall be considered "relevant" to a
claimant's claim if such document, record or other information (i) was relied
upon by the Retirement Committee in making its decision on the claim, (ii) was
submitted, considered or generated in the course of the Retirement Committee's
making its decision on the claim, without regard to whether the Retirement
Committee relied upon such document, record or other information in making its
decision, or (iii) complies with administrative processes and safeguards which
are designed to insure and to verify that decisions on claims are made in
accordance with governing Plan documents, whose provisions are applied
consistently with respect to similarly situated claimants. The Retirement
Committee's review of the claimant's claim and of the Retirement Committee's
denial of such claim shall take into account all comments, documents, records,
and other information submitted

                                       12
<PAGE>

by the claimant or his authorized representative relating to the claim, without
regard to whether such information was submitted or considered in the initial
decision on the claim. Within sixty (60) days after the filing of such a request
for review, the Retirement Committee shall notify the claimant in writing
whether, upon review, the claim was upheld or denied in whole or in part or
shall furnish the claimant a written notice describing specific circumstances
requiring a specified amount of additional time (but not more than one hundred
twenty (120) days from the date the request for review was filed) to reach a
decision on the request for review. In the case of a decision on appeal
upholding the Retirement Committee's initial denial of the claimant's claim,
such notice shall set forth, in a manner calculated to be understood by the
claimant, the following information:

            (i)   the specific reason or reasons for the decisions on appeal;
                  (ii) references to the pertinent provisions of this Plan on
                  which the decision on appeal is based;

            (iii) a statement that the claimant is entitled to receive, upon
                  request and free of charge, reasonable access to, and copies
                  of, all documents, records and other information relevant to
                  the claimant's claim for benefits; and

            (iv)  a statement of the claimant's right to bring an action under
                  ERISA Section 502(a).

9.3.3 GENERAL RULES

            (i)   No inquiry or question shall be deemed to be a claim or a
                  request for a review of a denied claim unless made in
                  accordance with the foregoing claims procedure. The Retirement
                  Committee may require that any claim for benefits and any
                  request for a review of denied claim be filed on forms to be
                  furnished by the Administrator upon request.

            (ii)  All decisions on claims and on requests for a review of denied
                  claims shall be made by the Retirement Committee. In
                  accordance with Section 9.2 hereof, decisions of the
                  Retirement Committee shall be final, binding and conclusive
                  upon all persons.

            (iii) The Retirement Committee may, in its discretion, hold one or
                  more hearings on a claim or a request for a review of a denied
                  claim.

            (iv)  Claimants may be represented by a lawyer or other
                  representative (at their own expense), but the Retirement
                  Committee reserves the right to require the claimant to
                  furnish written authorization. A claimant's representative
                  shall be entitled to copies of all notices given to the
                  claimant.

            (v)   The decision of the Retirement Committee on a claim and on a
                  request for a review of a denied claim shall be served on the
                  claimant in writing. If a decision or notice is not received
                  by a claimant within the time specified, the claim or request
                  for a review of a denied claim shall be deemed to have been
                  denied.

                                       13
<PAGE>

            (vi)  Prior to filing a claim or a request for a review of a denied
                  claim, the claimant or his representative shall have a
                  reasonable opportunity to review a copy of this Plan and all
                  other pertinent documents in the possession of the Company and
                  the Retirement Committee.

            (vii) The Administrator and the individuals serving on the
                  Retirement Committee shall, except as prohibited by law, be
                  indemnified and held harmless by the employer from any and all
                  liabilities, costs, and expenses (including legal fees), to
                  the extent not covered by liability insurance arising out of
                  any action taken by any individual of this Committee with
                  respect to this plan, unless such liability arises from the
                  individual's own claim for his or her own benefit, the proven
                  gross negligence, bad faith, or (if the individual had
                  reasonable cause to believe his or her conduct was unlawful)
                  the criminal conduct of such individual. This indemnification
                  shall continue as to an individual who has ceased to be a
                  member of the Retirement Committee for the employer and shall
                  inure to the benefit of the heirs, executors and
                  administrators of such an individual.

9.4   EXPENSES

The cost of payment from the Plan and the expense of administering the Plan
shall be borne by the Company.

9.5   TAX WITHHOLDING

The Company shall have the right to deduct from all payments to be made under
the Plan, any federal, state or local taxes or other charges required by law to
be withheld with respect to such payments, as determined in the sole discretion
of the Retirement Committee.

SECTION 10. AMENDMENT AND TERMINATION

The Board, or the Retirement Committee, in the circumstances provided below, may
at any time amend, modify, terminate or suspend, this Plan and no Participant or
any other person shall have any right, title, interest or claim against the
Company, its directors, officers or employees for any amounts, except that (i)
the Participant shall be fully vested in his Account hereunder as of the date on
which the Plan is terminated or suspended, (ii) no amendment shall eliminate the
crediting of an investment return on an Account prior to the complete
distribution thereof or provide for a distribution method which accelerates the
timing of distributions hereunder without the consent of a Participant and (iii)
subsequent to a Change of Control, unless a majority of the holders of Account
balances agree to the contrary, the Company or the Administrator may not alter
(a) the choice of investments in the Investment Election as in effect
immediately before the Change of Control and (b) the payout options as in effect
immediately before the Change of Control. Any such amendment, modification or
termination of the Plan may occur either (i) without limitation, by resolution
of the Board or (ii) in any respect that does not materially increase the cost
of the Plan to the Company, by action of the Retirement Committee (with the
written concurrence of the Chief Executive Officer). Notwithstanding the
foregoing, if any provision of this Plan or the accompanying election forms does
not comply with the requirements of Section 409A of the Code, or any regulations
or other guidance promulgated thereunder, such that, absent correction, any
Participant would be subject to a 20% penalty under

                                       14
<PAGE>

Section 409A(a)(1)(B)(i)(II) of the Code, the Retirement Committee may amend or
modify this Plan or the election forms in a manner designed to avoid such
penalty, without the consent of any affected Participant, even if such change is
otherwise detrimental to any Participant in the Plan.

SECTION 11. APPLICABLE LAW

The Plan shall be governed and construed in accordance with the laws of the
State of Wisconsin, without regard to its conflict of laws provisions, unless
federal law supersedes Wisconsin law in which event the applicable federal law
shall apply. The invalidity of any portion of the Plan shall not invalidate the
remainder hereof and said remainder shall continue in full force. The captions
and other titles herein are designed for convenience only and are not to be
resorted to for the purposes interpreting any provision of the Plan. The waiver
by the Company of any breach of any provision of the Plan shall not operate or
be construed as a waiver of any subsequent breach by that Participant or any
other Participant.

SECTION 12. NO VESTED RIGHTS

The Plan and elections hereto shall not be deemed or construed to be a written
contract of employment between any Participant (or any person eligible to be a
Participant) and the Company, nor shall any provision of the Plan (i) restrict
the right of the Company to discharge any Participant (or any person eligible to
be a Participant) or (ii) in any way whatsoever grant to any Participant (or any
person eligible to be a Participant) the right to receive any guaranteed base
compensation, Annual Bonus, incentive bonus awards, commissions, fees or any
other payments of any nature whatsoever.

SECTION 13. BINDING AGREEMENT

The provisions of the Plan shall be binding upon the Participant, his or her
heirs, personal representatives and beneficiaries, and subject to the rights
granted to amend or terminate the Plan, the provisions of the Plan shall also be
binding upon the Company, its successors and assigns.

SECTION 14. NOTICE

Any notice or filing required or permitted to be given to the Company or a
Participant under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, in the case of the
Company, to the principal office of the Company, directed to the attention of
the Administrator, and in the case of a Participant, to the last known address
of such Participant indicated on the employment records of the Company. 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.

                                       15
<PAGE>

SECTION 15. ERRORS IN BENEFIT STATEMENT OR DISTRIBUTION

In the event an error is made in a benefit statement, such error shall be
corrected on the next benefit statement following the date such error is
discovered. In the event of an error in a distribution, the Participant's
Account(s) shall, immediately upon discovery of such error, be adjusted to
reflect such under or overpayment and, if possible, the next distribution shall
be increased or decreased to correct such prior error. If the remaining balance
of a Participant's Account(s) is insufficient to cover an erroneous overpayment,
the Company, may, at its discretion, offset any amount payable to the
Participant from the Company (including but not limited to salary, bonuses,
expense reimbursements, severance benefits or other employee compensation
benefit arrangements, as allowed by law) to recoup the amount of such
overpayment.

SECTION 16. ERISA

The Plan is intended to be an unfunded plan maintained primarily to provide
deferred compensation benefits for a select group of "management or highly
compensated employees" within the meaning of Sections 201, 301, and 401 of ERISA
and, therefore, exempt from Parts 2, 3 and 4 of Title I of ERISA.

Adopted by the Board of Directors: November 17, 2004

                                       16exv10w37

 

Exhibit 10.37

INVESTMENT AGREEMENT

     THIS AGREEMENT made effective as of the 4th day of March, 2005.

     A M O N G:

Mineola Holding Corporation, a corporation
incorporated under the laws of Delaware.

(hereinafter referred to as “Investor”)

OF THE FIRST PART

Veridien Corporation, a corporation
incorporated under the laws of Delaware.

(hereinafter referred to as “Veridien”)

OF THE SECOND PART

Mycosol, Inc., a corporation incorporated
under the laws of Delaware.

(hereinafter referred to as “Mycosol”)

OF THE THIRD PART

     NOW THIS AGREEMENT WITNESSETH THAT in consideration of the covenants, agreements, warranties
and payments herein set out and provided for, the parties hereto hereby respectively covenant and
agree, intending to be legally bound hereby, as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions. Where used in this Agreement including the schedules hereto, unless otherwise
specifically indicated, capitalized terms have the meanings given them in Schedule 1.1.

1.2 Dollar Amounts. Except where otherwise specifically indicated, all dollar amounts are in U.S.
Dollars.

1.3 Headings. The headings of all articles, sections and schedules hereof are inserted for
convenience of reference only and shall not affect the construction or interpretation of this
Agreement.

 

 

1.4 Schedules and Exhibits. The following schedules and exhibits are attached to and form part of
this Agreement:

	 	 	 
	Schedule 1.1

	 	Definitions
	 
	 	 
	Schedule 2.2

	 	Conditions to Closing
	 
	 	 
	Schedule 2.3

	 	Closing Arrangements
	 
	 	 
	Schedule 3.1

	 	Form of Debenture
	 
	 	 
	Schedule 4.2

	 	Exercise of Options and Notice Provisions
	 
	 	 
	Schedule 8.1

	 	Representations and Warranties of Veridien
	 
	 	 
	Schedule 8.1.5

	 	U.S. Resale Restrictions
	 
	 	 
	Schedule 8.2

	 	Covenants of Veridien
	 
	 	 
	Schedule 8.3

	 	Representations and Warranties of Mycosol
	 
	 	 
	Schedule 8.4

	 	Covenants of Mycosol
	 
	 	 
	Schedule 8.5

	 	Representations and Warranties of Investor
	 
	 	 
	Schedule 9.1

	 	Full Development Plan for Reagent/Diagnostic Product Line

Using Mycosol Lead Compound “M301”
	 
	 	 
	Schedule 10.1

	 	Patents and Patent Applications
	 
	 	 
	Exhibit 1

	 	Memorandum of Agreement
	 
	 	 
	Exhibit 2

	 	Final Pro Forma Capitalization Chart

ARTICLE 2

INITIAL INVESTMENT

2.1 Purchase and Sale of Initial Mycosol Common Shares. On the terms and subject to the
fulfillment of the conditions prescribed by this ARTICLE 2, Investor hereby agrees to purchase from
Veridien, and Veridien hereby agrees to sell to Investor at the Initial Closing, the Initial
Mycosol Common Shares for an aggregate purchase price (the “IMCS Purchase Price”) of $500,000.

2.2 Conditions. Prior to the Initial Closing, Veridien and Mycosol will satisfy all of the
conditions contained in paragraphs 1 through 9 and 11 in Schedule 2.2. If any of the conditions
are not fulfilled by the Initial Closing, Investor may terminate this Agreement and Investor will
be released from all obligations under this Agreement without prejudice to any rights or remedies
it may have against Veridien or Mycosol; provided that any of the conditions may be waived in whole
or in part by Investor without prejudice to its rights of termination for the non-fulfillment of
any other condition, which waiver is binding on Investor only if in writing.

2.3 First Installment and Closing. The provisions for Closing prescribed in Schedule 2.3 apply to
the Initial Closing. Investor will pay to Veridien the IMCS Purchase Price by certified cheque or
wire transfer of immediately available funds at Initial Closing against delivery: (a) by

- 2 -

 

Veridien of the documents prescribed in clauses 3(a)(i) and 3(a)(iii) through 3(a)(vii) of Schedule
2.3 and (b) by Mycosol of the documents prescribed in paragraph 5 of Schedule 2.3.

2.4 Use of Proceeds. Veridien and Mycosol agree that the proceeds of the Initial Investment will
be used as contemplated in Section 9.1.

ARTICLE 3

VERIDIEN CONVERTIBLE DEBENTURE

3.1 Purchase and Sale of Debenture. On the terms and subject to the fulfillment of the conditions
prescribed by this ARTICLE 3, Investor agrees to purchase, on its own behalf and for its own
account, and Veridien agrees to create and sell to Investor at Initial Closing the Debenture for an
aggregate purchase price of $100,000, with the terms and in the form attached as Schedule 3.1.

3.2 Conditions. Prior to the Initial Closing, in addition to the conditions prescribed in Section
2.2, Veridien shall satisfy the condition contained in paragraph 10 of Schedule 2.2. If any of the
foregoing conditions are not fulfilled by the Initial Closing, Investor may terminate this
Agreement and Investor will be released from all obligations under this Agreement without prejudice
to any rights or remedies it may have against Veridien or Mycosol; provided that any of the
conditions may be waived in whole or in part by Investor without prejudice to its rights of
termination for the non-fulfillment of any other condition, which waiver is binding on Investor
only if in writing.

3.3 Payment and Closing. The Debenture Purchase shall form part of the Initial Closing. Investor
will pay to Veridien the purchase price for the Debenture by certified cheque or wire transfer of
immediately available funds at Initial Closing against delivery by Veridien of the document
prescribed in clause 3(a)(ii) of Schedule 2.3.

ARTICLE 4

OPTION FOR ADDITIONAL INVESTMENT

4.1 Option for Additional Mycosol Common Shares. Veridien may, at its option, at any time on or
before February 1, 2006 provide the Investor with an option in writing to, on the terms and subject
to the fulfillment of the conditions prescribed by this ARTICLE 4, acquire from Veridien the
Additional Mycosol Common Shares for an aggregate purchase price of $500,000 (the “AMCS Purchase
Price”). If such an option is provided to the Investor by Veridien, it shall expire and be of no
further force and effect unless an Exercise Notice is properly given by 10 p.m. on the
5th business day following the day on which the option was received by the Investor.

4.2 Notice of Exercise of Option. If the option referred to in paragraph 4.1 is provided by
Veridien, the procedures prescribed in Schedule 4.2 shall apply to the Exercise Notice for such
option.

- 3 -

 

4.3 Conditions. Prior to the Additional Investment Closing, Veridien and Mycosol will satisfy all
of the conditions contained in paragraphs 1 through 9 and 11 through 12 of Schedule 2.2. If any of
these conditions are not fulfilled by the Additional Investment Closing, Investor may terminate the
Additional Investment and Investor will be released from all obligations under this ARTICLE 4
without prejudice to any rights or remedies it may have against Veridien or Mycosol; provided that
any of the conditions may be waived in whole or in part by Investor without prejudice to its rights
of termination for the non-fulfillment of any other condition, which waiver is binding on Investor
only if in writing.

4.4 Payment and Closing. The provisions for Closing prescribed in Schedule 2.3 apply to the
Additional Investment Closing. Investor will pay to Veridien the purchase price for the Additional
Mycosol Common Shares by certified cheque or wire transfer of immediately available funds at
Additional Investment Closing against delivery: (a) by Veridien of the documents prescribed in
subparagraph 3(b) of Schedule 2.3, and (b) by Mycosol of the documents prescribed in paragraph 5 of
Schedule 2.3.

4.5 Use of Proceeds. Veridien and Mycosol agree that the proceeds of the Additional Investment will
be used as contemplated in Section 9.2.

ARTICLE 5

PUT AND CALL OPTIONS

5.1 Call Option. Veridien has the irrevocable right, exercisable at any time from the date of the
Initial Closing to and including March 1, 2007, to notify Investor that Veridien requires Investor
to sell Mycosol Common Shares to it in accordance with any one or more of (a)(i), (a)(ii), (b)(i),
or (b)(ii) below:

	 	(a)  	if only the Initial Investment has been completed

	 	(i)  	60% of the Initial Mycosol Common Shares for an aggregate
purchase price of $750,000; or
	 
	 	(ii)  	if the option in (a)(i) has been previously or concurrently
exercised, 40% of the Initial Mycosol Common Shares for a purchase price of
$750,000;

	 	(b)  	if the Initial Investment and the Additional Investment have both been
completed, at the option of Veridien,

	 	(i)  	60% of the Initial Mycosol Common Shares and 60% of the
Additional Mycosol Common Shares for an aggregate purchase price of $1,500,000;
or
	 
	 	(ii)  	if the option in (b)(i) has been previously or concurrently
exercised, 40% of the Initial Mycosol Common Shares and 40% of the Additional
Mycosol Common Shares for an aggregate purchase price of $1,500,000; or

- 4 -

 

Each of the options granted in this Section 5.1 will expire and be of no further force and effect
unless an Exercise Notice is properly given by 5 p.m. Eastern time on March 1, 2007 in respect of
such option, that identifies which option is being exercised.

5.2 Put Option. Veridien shall give Investor two weeks’ prior written notice of the commencement
of the Put Option period as a reminder to Investor of its Put Option. Investor has the irrevocable
right, exercisable at any time from January 1, 2007 to and including the later to occur of: (a) the
date that is three (3) months after such written notice is received by Investor, and (b) April 1,
2007, (in either case, the “Put Option Expiry Date”), to notify Veridien that Investor requires
Veridien to purchase from it:

	 	(a)  	if only the Initial Investment has been completed, one half of the Initial
Mycosol Common Shares, for an aggregate purchase price of $250,000; or
	 
	 	(b)  	if the Initial Investment and the Additional Investment have both been
completed, one half of the Initial Mycosol Common Shares and one-half of the Additional
Mycosol Common Shares, for an aggregate purchase price of $500,000.

The right provided in this Section 5.2 will expire and be of no further force and effect unless an
Exercise Notice is properly given by 5 p.m. Eastern time on the Put Option Expiry Date.

5.3 Notice of Exercise of Option. The procedures for giving notice to exercise an option
prescribed in Schedule 4.2 apply to the exercise of Veridien’s Call Option and Investor’s Put
Option, as the case may be.

5.4 Conditions. Prior to the Call Option Closing or the Put Option Closing, as the case may be,
Veridien will satisfy all of the conditions detailed in paragraphs 1, 3, 4, and 6 through 12 of
Schedule 2.2. If any of the conditions are not fulfilled by Closing, Investor may terminate the
Call Option or Put Option transaction, as the case may be, and Investor will be released from all
obligations under this ARTICLE 5 without prejudice to any rights or remedies it may have against
Veridien or Mycosol; provided that any of the conditions may be waived in whole or in part by
Investor without prejudice to its rights of termination for the non-fulfillment of any other
condition, which waiver is binding on Investor only if in writing; provided further that Investor
may only terminate the Call Option or Put Option transaction, as the case may be, (a) if the breach
of the condition is material to the particular Closing, (b) Investor provides notice of the breach
to Veridien, and (c) Veridien fails to cure the breach within 10 days of receipt of notice thereof.

5.5 Payment and Closing. The provisions for Closing prescribed in Schedule 2.3 apply to the Call
Option Closing and the Put Option Closing. Payment of the purchase price in respect of the Call
Option or the Put Option, as the case may be, will be made by:

	 	(a)  	cash payment; or

- 5 -

 

	 	(b)  	issuance of that number of Veridien Common Shares, or Veridien Convertible
Securities, that is equal to the applicable purchase price valued at 80% of the Market
Price on the date of the Exercise Notice. In any event, the Veridien Common Shares
shall not be valued at a price less than:

	 	(i)  	if the Call Option, $0.051 per Veridien Common Share (subject
to paragraph (d) below); and
	 
	 	(ii)  	if the Put Option, $0.055 per Veridien Common Share.

	 	(c)  	In the case of a Put Option Closing described in section 5.2 or closing of a
Call Option described in section 5.1(a)(i) or 5.1(b)(i), Veridien shall have the right
to determine whether the consideration shall be paid in accordance with paragraph
5.5(a) or 5.5(b). In the case of closing of a Call Option described in section
5.1(a)(ii) or 5.1(b)(ii), Veridien shall, subject to paragraph, have the right to
determine whether the consideration in respect of 50% of the applicable purchase price
shall be paid in accordance with paragraph 5.5(a) or 5.5(b) and the Investor shall have
the right to determine whether the balance of the purchase price shall be paid in
accordance with paragraph 5.5(a) or 5.5(b).
	 
	 	(d)  	In the case of the closing of a Call Option, Veridien shall have the right to
deliver Veridien Common Shares only if either:

	 	(i)  	the Market Price on the date of the Exercise Notice is at least
$0.051; or
	 
	 	(ii)  	Veridien notifies the Investor in writing that it elects that
paragraph (b)(i) be read by adjusting the referenced price of $0.051 to the
Market Price on the date of the Exercise Notice;

	 	(e)  	Payment of the purchase price will be made by Veridien and accompanied by those
documents prescribed in subparagraph 3(c) of Schedule 2.3 against delivery by Investor
of the documents prescribed in paragraph 4 of Schedule 2.3.

ARTICLE 6

RIGHT OF FIRST REFUSAL

6.1 Mycosol Option. The parties acknowledge that pursuant to the Memorandum of Agreement, Veridien
has an irrevocable option to purchase certain Mycosol Common Shares currently held by the Mycosol
Principals on the terms and conditions set forth in Section 14 of the Memorandum of Agreement as
amended (the “Mycosol Option”).

6.2 Right of First Refusal. If Veridien has not exercised the Mycosol Option on or prior to the
date that is thirty Business Days prior to the expiry thereof, it shall give written notice to
Investor specifying that it has not exercised the Mycosol Option, and provided that Investor has
made both the Initial Investment and the Additional Investment, Investor shall have an irrevocable
option, exercisable at any time until the expiry of the Mycosol Option, to notify

- 6 -

 

Veridien that Investor will purchase the balance of the Mycosol Common Shares available to Veridien
under the Mycosol Option pro rata with other investors providing funding to Mycosol. Further,
Investor shall have the right, pro rata with other investors who elect to purchase the balance of
the Mycosol Common Shares available to Veridien under the Mycosol Option, to take up the pro rata
share of any other investor who does not elect to purchase its pro rata share of the Mycosol Common
Shares.

6.3 Notice of Exercise of Option. The procedures for giving notice to exercise an option
prescribed in Schedule 4.2 apply to the exercise of Investor’s option to purchase Mycosol Common
Shares pursuant to the Right of First Refusal.

6.4 Conditions. Prior to the ROFR Closing Veridien will satisfy all of the conditions applicable
to it detailed in paragraphs 1, 3, 4, 6 through 9 and 12 in Schedule 2.2. and Mycosol will satisfy
all of the conditions applicable to it detailed in paragraphs 2, 3, 5 through 9 and 12. If any of
the conditions are not fulfilled by the ROFR Closing, Investor may terminate the purchase of the
Mycosol Common Shares under the Right of First Refusal and Investor will be released from all
obligations under this ARTICLE 6 without prejudice to any rights or remedies it may have against
Veridien or Mycosol; provided that any of the conditions may be waived in whole or in part by
Investor without prejudice to its rights of termination for the non-fulfillment of any other
condition, which waiver is binding on Investor only if in writing.

6.5 Payment and Closing. The provisions for Closing prescribed in Schedule 2.3 apply to the ROFR
Closing. Investor will pay to the Mycosol Principals the purchase price for the Mycosol Common
Shares that Investor is purchasing under the Right of First Refusal by certified cheque or wire
transfer of immediately available funds at ROFR Closing against delivery by: (a) the Mycosol
Principals of share certificates duly endorsed over to or registered in the name of Investor; (b)
Veridien of the documents prescribed in subparagraph 3(d) of Schedule 2.3; and (c) Mycosol of the
documents prescribed in paragraph 5 of Schedule 2.3.

ARTICLE 7

EXCHANGE OPTION

7.1 Option to Exchange Initial Mycosol Common Shares. Investor has the irrevocable right,
exercisable at any time from the date of this Agreement up to and including December 31, 2005, to
notify Veridien that on the terms and subject to the fulfillment of the conditions prescribed by
this ARTICLE 7, Investor will require Veridien to exchange the Initial Mycosol Common Shares for
9,803,992 Veridien Common Shares (subject to appropriate antidilution adjustments for forward or
reverse splits from the date of execution of this agreement), or an equivalent value of Veridien
Convertible Securities, at Investor’s option. The right provided in this Section 7.1 will expire
and be of no further force and effect unless an Exercise Notice is properly given by 5 p.m. Eastern
time on December 31, 2005.

7.2 Option to Exchange Additional Mycosol Common Shares. If the Investor acquires the Additional
Mycosol Common Shares, the Investor shall have the irrevocable right, exercisable at any time from
the date of this Agreement, up to and the AMCS Exercise Date, to notify Veridien

- 7 -

 

that on the terms and subject to the fulfillment of the conditions prescribed by this ARTICLE 7,
Investor will require Veridien to exchange the Additional Mycosol Common Shares for such number of
Veridien Common Shares as is equal to $500,000 divided by AMCS Exchange Price (subject to
appropriate antidilution adjustments for forward or reverse splits from the date of purchase of
Additional Mycosol Common Shares), or an equivalent value of Veridien Convertible Securities, at
Investor’s option. The right provided in this Section 7.2 will expire and be of no further force
and effect unless an Exercise Notice is properly given by 5 p.m. Eastern time on such first
anniversary date.

7.3 Notice of Exercise of Option. The procedures for giving notice to exercise an option
prescribed in Schedule 4.2 apply to the exercise of Investor’s Exchange Option under either Section
7.1 or 7.2 hereof.

7.4 Conditions. Prior to the Exchange Option IMCS Closing or the Exchange Option AMCS Closing as
applicable, Veridien will satisfy all of the conditions contained in paragraphs 1, 3, 4, 7 and 9
through 12 of Schedule 2.2. If any of the conditions are not fulfilled by the time for such
closing, Investor may terminate the relevant exchange transaction and Investor will be released
from all obligations under this ARTICLE 7 in respect thereof, without prejudice to any rights or
remedies it may have against Veridien or Mycosol; provided that any of the conditions may be waived
in whole or in part by Investor without prejudice to its rights of termination for the
non-fulfillment of any other condition, which waiver is binding on Investor only if in writing.

7.5 Payment and Closing. The provisions for Closing prescribed in Schedule 2.3 apply to the
Exchange IMCS Option Closing and to the Exchange Option AMCS Closing. Investor will deliver to
Veridien the share certificate or certificates representing the Initial Mycosol Common Shares or
Additional Mycosol Common Shares, as applicable, duly endorsed over to Veridien against delivery by
Veridien of the documents prescribed in subparagraph 3(e) of Schedule 2.3.

ARTICLE 8

COVENANTS, REPRESENTATIONS AND WARRANTIES

8.1 Representations and Warranties of Veridien. Veridien represents and warrants to Investor as
detailed in Schedule 8.1 to this Agreement and acknowledges that Investor is relying on such
representations and warranties in connection with the transactions contemplated herein, including,
without limitation, the purchase by Investor of Mycosol Common Shares and the Debenture.

8.2 Covenants of Veridien. Veridien covenants to Investor as detailed in Schedule 8.2 to this
Agreement and acknowledges that Investor is relying on such covenants in connection with the
transactions contemplated herein, including, without limitation, the purchase by Investor of
Mycosol Common Shares and the Debenture.

8.3 Representations and Warranties of Mycosol. Mycosol hereby represents and warrants to Investor
as detailed in Schedule 8.3 to this Agreement and acknowledges that Investor is relying on such
representations and warranties in connection with the transactions contemplated

- 8 -

 

herein, including, without limitation, the purchase by Investor of Mycosol Common Shares from
Veridien or the Mycosol Principals.

8.4 Covenants of Mycosol. Mycosol hereby covenants to Investor as detailed in Schedule 8.4 to this
Agreement and acknowledges that Investor is relying on such covenants in connection with the
transactions contemplated herein, including, without limitation, the purchase by Investor of
Mycosol Common Shares.

8.5 Representations and Warranties of Investor. Investor hereby represents and warrants to
Veridien and Mycosol as detailed in Schedule 8.5 to this Agreement and acknowledges that Veridien
and Mycosol are each relying on such representations and warranties in connection with the
transactions contemplated herein.

8.6 Survival. The representations and warranties contained in this Agreement and in any document
or certificate given pursuant hereto shall survive Closing and notwithstanding Closing and any
investigation made by or on behalf of Investor, shall continue in full force and effect for the
benefit of Investor for six (6) months after receipt by Investor of the financial statements in
respect of the fiscal year in which the Closing occurs.

ARTICLE 9

USE OF PROCEEDS AND ACCESS TO RECORDS

9.1 Use of Proceeds of Initial Investment. Veridien will use the proceeds of the Initial
Investment to purchase Mycosol Common Shares in accordance with the Memorandum of Agreement after
the date of this Agreement. Proceeds received by Veridien but not yet invested in Mycosol in
accordance with the Memorandum of Agreement will be held in a segregated account in the name of
Veridien at SouthTrust Bank in the city of St. Petersburg, Florida. Mycosol will solely and
exclusively apply the proceeds from the sale of those Mycosol Common Shares to Veridien in pursuit
of the Development Plan set out in Schedule 9.1, as it may be amended from time to time by
Mycosol’s executive committee; provided that until all of the proceeds of the Initial Investment
have been fully expended in accordance with this Section 9.1, Mycosol may not change the objective
of such Full Development Plan, which is to pursue the development and launch of the Reagent
Diagnostic Product Line using Mycosol lead compound “M301” or one or more of its homologs or sister
compounds, without the prior express written consent of Investor.

9.2 Use of Proceeds of Additional Investment Option. If the Additional Investment is made, Veridien
will use the proceeds of this Additional Investment to purchase Mycosol Common Shares in accordance
with the Memorandum of Agreement. Mycosol will solely and exclusively apply the proceeds it
receives indirectly from the Additional Investment to for the same purposes as are set out in
section 9.1. If the Additional Investment is made, Mycosol may not change the objective of the
Full Development Plan set out in Schedule 9.1 which is to pursue the development and launch of the
Reagent Diagnostic Product Line using Mycosol lead compound “M301” or one or more of its homologs
or sister compounds, without the prior express written consent of Investor.

- 9 -

 

9.3 Supervisory Right. Mycosol covenants and agrees to permit Investor and its representatives, on
reasonable notice and at reasonable times after the Initial Closing, to make such inspections of
its properties and assets as Investor deems necessary or advisable to ensure that the proceeds of
the Initial Investment, and the Additional Investment, if any, are being used in accordance with
this ARTICLE 9. Such inspection shall not, however, affect or mitigate Mycosol’s covenants,
representations and warranties hereunder which shall continue in full force and effect as provided
in ARTICLE 8.

9.4 Reporting and Access to Records. Mycosol covenants and agrees that it shall:

	 	(a)  	within 60 days following the end of each fiscal year of Mycosol, deliver to
Investor financial statements for Mycosol in respect of the fiscal year prepared in
accordance with generally accepted accounting principles;
	 
	 	(b)  	within 90 days following the end of each fiscal year of Mycosol, deliver to
Investor accountant reviewed financial statements for Mycosol in respect of the fiscal
year prepared in accordance with generally accepted accounting principles; provided
that if audited financial statements are prepared, Mycosol shall deliver them to
Investor in accordance with this subsection;
	 
	 	(c)  	keep proper books of account and make entries therein of all matters, terms,
transactions and things as are usually written, recorded or entered in books of account
kept by corporations engaged in an enterprise of a similar nature as the Business,
which books of account shall be kept at the principal place of business of Mycosol, and
Investor and its representatives shall have free access at all times during normal
business hours to inspect, examine, copy and use the facilities of Mycosol to make
copies or take extracts from the books of account for Mycosol; and
	 
	 	(d)  	within 30 days following the end of each fiscal quarter of Mycosol, prepare and
deliver to Investor a statement of actual expenses and in that quarter compared against
the pro forma budget attached as Schedule 9.1.

ARTICLE 10

MARKETING AND MANUFACTURING RIGHTS OF VERIDIEN

10.1 Marketing and Manufacturing Rights. The parties acknowledge that if Veridien enters into an
agreement with Mycosol that entitles Veridien to purchase the marketing and manufacturing rights
for Mycosol Products that are currently under development or come under development, the agreement
will be on terms at least as beneficial to Mycosol as the following:

	 	(a)  	Technology will be owned by Mycosol and its subsidiaries;
	 
	 	(b)  	Veridien will pay Mycosol a fee equal to, using generally accepted accounting
principles for industrial products sold, the greater of:

- 10 -

 

	 	(i)  	Five percent (5%) of sales made by Veridien of Mycosol
Products; and
	 
	 	(ii)  	20% of Veridien’s net profit on Mycosol Products.

10.2 Right of First Refusal. Notwithstanding section 10.1 above, Veridien will have a right of
first refusal to license or purchase the marketing and manufacturing rights for any Mycosol
Products on market terms as of the date that the purchase offer is made. If Mycosol receives
purchase offers in respect of these rights from other parties (other than a Related Party of
Mycosol or Veridien), Veridien will have 90 days to match the best offer received by Mycosol. If
Mycosol determines that Veridien’s offer does not match or improve on the third party offers,
Veridien may refer the matter to arbitration.

10.3 Amendments. The parties agree that no amendments will be made to the terms detailed in
Section 10.1 above without the prior written consent of Investor, such consent not to be
unreasonably withheld.

ARTICLE 11

MYCOSOL EXECUTIVE COMMITTEE

11.1 Investor Option to Join Executive Committee and Mycosol Board. Provided that Investor has
completed the Initial Investment, Investor may, at its option, at any time before the first
anniversary of the Initial Closing, appoint Rolf Reininghaus to join the executive committee of
Mycosol upon completion of his current obligations with his current employer. Provided that
Investor has completed the Initial Investment, Rolf Reininghaus is invited, at his option, at any
time before the first anniversary of the Initial Closing, to join the board of directors of
Mycosol.

11.2 Executive Committee Composition. The executive committee shall be comprised of Rolf
Reininghaus (if Investor has appointed him to join), the members of Mycosol’s board of directors
(who at the time of this Agreement are Sheldon Fenton, Russell Van Zandt, Richard Klein and Jeffrey
Selph) and such other parties as may be added from time to time by a vote of the executive
committee.

11.3 Executive Committee Responsibilities. The executive committee shall provide strategic
direction to Mycosol and shall review and approve all budgets of Mycosol and any amendments
thereto. The executive committee will approve the strategic direction of Mycosol, including the
review and approval of all research and development plans and Mycosol business plans and any
amendments thereto. Mycosol shall submit a research and development plan and a business plan to
the executive committee for review and approval in respect of each fiscal year of Mycosol. A copy
of the current Mycosol business plan is attached to this Agreement as Schedule 11.3. The executive
committee will oversee the operations of Mycosol, including review and approval of any licensing
opportunities or disposal of assets out of the ordinary course of business.

11.4 Decision-Making.

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	 	(a)  	All decisions of the executive committee shall be made by consent of at least
60 percent of the members of the executive committee. Notwithstanding the foregoing,
unless otherwise agreed by all parties to this Agreement, Mycosol shall not, without
the prior express written consent of Investor or its designee, (1) approve or enter
into any transaction with a Related Party that does not confer the same direct or
indirect pro rata (to their shareholdings in Mycosol) benefit on Investor as on
Veridien, or (2) apply, or approve the application of, the proceeds of Investor’s
investments under this Agreement for any purpose other than as expressly permitted by
ARTICLE 9 of this Agreement.
	 
	 	(b)  	For greater certainty, if Mycosol with Investor’s consent enters into any
transaction that requires consent under this section 11.4 that results in a transfer of
any of its Intellectual Property to Related Party in respect of Mycosol or Veridien
(other than an entity wholly owned by Mycosol at the time of the transfer), Investor
shall be entitled to an ownership interest in such transferee entity that is equal in
proportion to Investor’s interests in Mycosol at the time of the transaction, including
any rights and options to which Investor is entitled under this Agreement. Such
entitlement shall be on terms no less favourable than the most favourable terms
received by any other shareholder (or related Person of such shareholder) receiving an
ownership interest in such transferee. At the time of the transaction, Investor shall
be issued securities and granted rights and options proportionally in respect of the
transferee entity, which rights and option shall be contingent upon and must be
exercised concurrently with Investor’s exercise of its rights and options in respect of
Mycosol securities hereunder.

11.5 Meetings. Every member of the executive committee is entitled to notice of a meeting. If a
member is unable to attend in person, either physically or by teleconference, the member may
appoint another member as proxy to attend at the meeting and act at the meeting in the manner, to
the extent and with the authority conferred by the proxy. If a member cannot attend the meeting
and elects not to appoint a proxy the member shall provide written notice to the other members that
the member has elected not to appoint a proxy and in such case the meeting may be held without such
member and decisions made at that meeting may be made by the remaining members in attendance in
person or by proxy. Notice of a regular meeting must be received not less than two weeks prior to
the date of the meeting. Notice of a special/emergency meeting must be received not less than 48
hours prior to the time of the meeting. The foregoing notice periods may be waived by unanimous
consent of executive committee members.

11.6 No Investor Obligation. Nothing in this ARTICLE 11 may be construed as an obligation of
Investor. If Investor does not exercise its option to appoint Rolf Reininghaus to join the
executive committee, or Rolf Reininghaus does not opt to join the board of directors of Mycosol,
neither Veridien nor Mycosol has any rights of redress against Investor and the other provisions of
this Agreement remain unaffected.

- 12 -

 

ARTICLE 12

12.1 Tag Along Provision. In the event that Veridien proposes to sell Mycosol Common Shares
representing 30% of its entire holding of such shares, (“Offered Shares”), Veridien shall forthwith
give written notice (the “Tag-Along Notice”) of the identity of the purchaser of such shares (the
“Third Party”) and the price and other material terms of the transaction to the Investor. The
Investor may, not later than 30 Business Days after receipt of the Tag-Along Notice, deliver to
Veridien a notice in writing invoking the provisions of this section 12.1 (a “Tag-Along Demand”).
The delivery by the Investor of a Tag-Along Demand shall be irrevocable and shall bind the Investor
to sell, at the option of the Investor, (x) all but not less than all of the Mycosol Common Shares
(the “Tagging Shares”) owned by the Investor; or (y) such lesser number of Mycosol Common Shares as
represents the same proportion of the Investor’s Mycosol Common Shares as the proportion of
Veridien’s Mycosol Common Shares that Veridien proposes to sell to the Third Party; in accordance
with the provisions of this section 12.1.

12.2 Terms and Conditions. The Tag-Along Demand will be binding upon the Third Party and the
Investor and shall contain only such terms and conditions as are identical to those upon which
Veridien proposes to sell to the Third Party the Offered Shares pursuant to section 12.1, provided
that the offer price per Mycosol Common Share, which shall be specified in the Tag-Along Offer,
shall be the same consideration as, or the cash equivalent of, the consideration per Mycosol Common
Shares at which Veridien proposes to sell to the Third Party the Offered Shares. The closing date
and other closing arrangements for the purchase and sale of the Tagging Shares shall be specified
in the Tag-Along Demand and shall be the same, mutatis mutandis, as those specified between the
Third Party and Veridien.

12.3 Agreement of Third Party Where Veridien is required to provide a Tag-Along Notice, Veridien
shall not complete the proposed sale of Mycosol Common Shares unless:

	 	(a)  	Veridien properly delivers a Tag-Along Notice to the Investor; and
	 
	 	(b)  	If the Investor properly delivers a Tag-Along Demand to Veridien, Veridien
notifies the Third Party of such Tag-Along Demand and the Third Party agrees in writing
with Veridien and the Investor to be bound by the terms of the Tag-Along Demand. as
contemplated by this Article 12.

12.4 Right of First Refusal

In the event that Investor desires to transfer any of the Mycosol Common Shares owned by it (the
“Offered Shares”) to any person (other than a corporation that is controlled by, or under common
control with, Investor) , Investor shall first deliver a notice in writing (a “Sale Notice”) to
Veridien whereby Investor offers to sell the Offered Shares to Veridien for the respective price
per Mycosol Common Share, payable in cash on closing, set out in the Sale Notice and on and subject
to the other terms and conditions (including closing arrangements) therein set out (such price,
terms and conditions being hereinafter collectively referred to as the “Sale Terms”).

- 13 -

 

Veridien shall have the right, exercisable by giving notice (an “Acceptance Notice”) to Investor
within 10 Business Days after its receipt of a Sale Notice (the “Acceptance Period”) to purchase
all, but not less than all, of the Offered Shares in accordance with the Sale Terms. In the event
that no Acceptance Notice is received from Veridien within the Acceptance Period, the offer to
Veridien shall be deemed to have been refused.

12.5 Sale Notices Irrevocable

The delivery by Investor of a Sale Notice shall be irrevocable and, upon delivery by Veridien of an
Acceptance Notice, the Investor shall be bound to sell, and Veridien shall be bound to purchase,
the relevant Offered Shares in accordance with the Sale Terms and the provisions of subsections
12.3 to 12.6 hereof.

12.6 Sales to Third Parties

If, following the completion of the procedure stipulated in section 12.4, the Offered Shares remain
unaccepted by Veridien, Investor may sell the Offered Shares to any person (a “Third Party”) at a
price not less than the price set forth in the Sale Notice and on terms not more favourable to the
Third Party than the Sale Terms (subject to negotiation of detailed representations, warranties and
conditions that are consistent with a transaction of this nature), provided that the Third Party
agrees in writing to be bound by the terms of this Agreement. If no such sale is completed by
Investor within 90 days following the expiration of the 10 Business Day period referred to in
section 12.4, Investor shall be required, before transferring any Mycosol Common Shares, again to
offer such Mycosol Common Shares in the manner provided in section 12.4 and such process shall be
repeated so often as any party to this Agreement desires to transfer any Mycosol Common Shares to a
Third Party as contemplated by subsection 12.4.

12.7 Resignation Upon a sale of more than 50% of the Mycosol Common Shares held by Investor, if
requested by Mycosol, Rolf Reininghaus will resign as a director of Mycosol if he then is a
director and as a member of the executive committee if he is then a member of such committee.

ARTICLE 13

GENERAL

13.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware and the laws of the United States applicable therein.

13.2 Submission to Jurisdiction. Each of the parties to this Agreement irrevocably submits to the
exclusive jurisdiction of the courts of the State of Delaware, subject to section 13.8 hereof.

- 14 -

 

13.3 Further Assurances. The parties hereto agree to execute and deliver such further and other
documents and perform or cause to be performed such further and other acts and things as may be
necessary or desirable in order to give full effect to this Agreement.

13.4 Time. Time shall be of the essence of this Agreement.

13.5 Assignment. No party shall assign this Agreement without the written consent of the other
parties, and any purported assignment without consent shall be void.

13.6 Enurement. This Agreement shall enure to the benefit of and be binding upon the parties and
their respective successors and permitted assigns.

13.7 Counterparts. This Agreement may be executed and delivered in any number of counterparts,
each of which when executed and delivered is an original but all of which taken together constitute
one and the same instrument.

13.8 Arbitration. Any controversy or claim arising out of or relating to this Agreement or the
breach thereof, provision for the determination of which is not made elsewhere, shall be settled by
arbitration in the state of Delaware (or at such other location as may be agreed upon by the
parties), in accordance with the rules then promulgated by The American Arbitration Association.
The parties hereto hereby submit to such jurisdiction and arbitration.

13.9 Notice Provisions. Any notice or communication hereunder shall be given in writing in the
manner contemplated by Schedule 4.2.

[signature page follows]

* * *

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     IN WITNESS WHEREOF the parties have executed this Agreement as of the date first written
above.

	 	 	 	 	 
	 	 	MINEOLA HOLDING CORPORATION
	 
	 	 	 	 
	

	 	Per:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	Title:	 	 
	 
	 	 	 	 
	 	 	I have the authority to bind the corporation
	 
	 	 	 	 
	 	 	VERIDIEN CORPORATION
	 
	 	 	 	 
	

	 	Per:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	Title:	 	 
	 
	 	 	 	 
	

	 	Per:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	Title:	 	 
	 
	 	 	 	 
	 	 	I/We have the authority to bind the corporation
	 
	 	 	 	 
	AS TO ONLY THOSE PROVISIONS RELATING TO RIGHTS OR OBLIGATIONS OF MYCOSOL INC., OR ITS WHOLLY-OWNED
SUBSIDIARY, ELION MEDICAL, INC., AND, FOR GREATER CERTAINTY, NOT AS TO ARTICLES 3, 5, 7 OR
SCHEDULES 8.1 AND 8.2 OR , EXCEPT TO THE EXTENT A SPECIFIC CONSENT OF MYCOSOL IS REQUIRED BY LAW,
ARTICLE 12.
	 
	 	 	 	 
	 	 	MYCOSOL, INC.
	 
	 	 	 	 
	

	 	Per:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	Title:	 	 
	 
	 	 	 	 
	

	 	Per:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	Title:	 	 
	 
	 	 	 	 
	 	 	I/We have the authority to bind the corporation

- 16 -

 

SCHEDULE 1.1

DEFINITIONS

In this Agreement:

“Additional Investment” means the optional purchase and sale of the Additional Mycosol Common
Shares, as contemplated in ARTICLE 4;

“Additional Investment Closing” means the completion of the Additional Investment in accordance
with ARTICLE 4;

“Additional Mycosol Common Shares” means that number of Mycosol Common Shares that represents eight
and one-third percent (8 1/3%) of the Mycosol Common Shares on the date of
this Agreement, that may be purchased by Investor pursuant to the Additional Investment, determined
on a Fully Diluted Basis and taking into account the Mycosol Common Shares or rights to acquire
Mycosol Common Shares that are to be issued to or acquired by Veridien in consideration for the
investment by Veridien in Mycosol of the proceeds of the Initial Investment and the Additional
Investment;

“Agreement” means this investment agreement and the schedules to this investment agreement, as
amended from time to time;

AMCS Exchange Price means, where an option in writing is delivered to the Investor to make the
Additional Investment pursuant to section 4.1, the Market Price computed as at the date that the
option is so delivered. In any event the price shall be not less than $0.051 per Veridien Common
Share;

“AMCS Exercise Date” means, where the Additional Mycosol Shares are acquired by the Investor, the
later of December 31, 2005 and the date that is 6 months after the date that the Additional Mycosol
Shares are so acquired.

“Business” means the business currently carried on by Mycosol, the core business of which is
establishing a proprietary, platform technology from which to develop a broad portfolio of medical,
industrial, veterinary and agricultural products for the safe and effective treatment and
prevention of microbial -induced and microbial-exacerbated problems;

“Business Day” means any day other than a Saturday or a Sunday or a statutory or civic holiday in
Delaware;

“Call Option” means the irrevocable right of Veridien to require Investor to sell to it a certain
number of Mycosol Common Shares, as contemplated in Section 5.1 of this Agreement;

“Call Option Closing” means the completion of the purchase and sale of Mycosol Common Shares
pursuant to the exercise of the Call Option;

 

 

“Closing” means any or all of the Initial Closing, the Additional Investment Closing, the Call
Option Closing, the Put Option Closing, the ROFR Closing, and the Exchange Option Closing, as the
case may be;

“Debenture” means a $100,000 principal amount convertible secured debenture with the terms and in
the form prescribed in Schedule 3.1;

“Debenture Purchase” means the purchase by Investor and the creation and sale by Veridien of the
Debenture, as contemplated in ARTICLE 3;

“Elion” means Elion Medical Inc., a wholly owned subsidiary of Mycosol;

“Event of Default” means an event of default under the Debenture or a material default under this
Agreement;

“Exchange AMCS Option” means the irrevocable right of Investor to require Veridien to exchange the
Additional Mycosol Common Shares for Veridien Common Shares, or an equivalent value of Veridien
Convertible Securities, in accordance with ARTICLE 7;

“Exchange IMCS Option” means the irrevocable right of Investor to require Veridien to exchange the
Initial Mycosol Common Shares for 9,803,992 Veridien Common Shares, or an equivalent value of
Veridien Convertible Securities, in accordance with ARTICLE 7;

“Exchange Option” means either or both of the Exchange AMCS Option or the Exchange IMCS Option as
the context requires;

“Exchange Option Closing” means the completion of the exchange of securities pursuant to the
exercise of the AMCS Exchange Option or the IMCS Exchange Option, as applicable;

“Exercise Notice” means a notice in writing given by an Option Holder to a Grantor of an Option
under this Agreement in which the Option Holder indicates its intention to exercise the Option
subject to applicable conditions;

“Financial Statements” means collectively

	 	(i)  	the accountant-prepared balance sheet of Mycosol as at December 31, 2003, the
statement of retained earnings and the statement of income for the period then ended,
together with any supporting schedules and the notes to such statements, and
	 
	 	(ii)  	the internally-prepared balance sheet of Mycosol as at September 30, 2004, the
statement of income for the period then ended, together with any supporting schedules
and the notes to such statements;

- 2 -

 

“Fully Diluted Basis” means taking into account all issued and outstanding Common Shares of Mycosol
plus all Common Shares of Mycosol that may be issued under any debt obligations, convertible stock,
warrants or options that are outstanding on the date hereof;

“Grantor” means, in the case of the Additional Investment, the Put Option, the Exchange Option and
the Right of First Refusal, Veridien, and in the case of the Call Option, Investor;

“IMCS Purchase Price” has the meaning set out in Section 2.1;

“Initial Closing” means the completion of the Initial Investment and the Debenture Purchase in
accordance with ARTICLE 2 and ARTICLE 3 of this Agreement;

“Initial Investment” means the purchase and sale of the Initial Mycosol Common Shares as
contemplated in ARTICLE 2;

“Initial Mycosol Common Shares” means that number of Mycosol Common Shares that represents eight
and one-third percent (8 1/3%) of the Mycosol Common Shares on the date of
this Agreement, to be purchased by Investor pursuant to the Initial Investment, determined on a
Fully Diluted Basis and taking into account the Mycosol Common Shares or rights to acquire Mycosol
Common Shares that are to be issued to or acquired by Veridien in consideration for the investment
by Veridien in Mycosol of the proceeds of the Initial Investment;

“Intellectual Property” means the Technology, together with all registered and unregistered service
marks, trademarks, patents, patent applications (including the Patent and Patent Applications),
trade secrets, copyrights, know-how, industrial designs, inventions, processes, formulae and other
intellectual property in respect of or related to either or both of the Business and the
Technology;

“Investor” means Mineola Holding Corporation, a corporation incorporated under the laws of Delaware
its successors and permitted assigns;

“Market Price” means, on any given day, the average closing bid/offer price on a per share basis
for Veridien Common Shares for the previous 10 trading days on which shares were traded and posted
on the OTCBB;

“Memorandum of Agreement” means that agreement made June 1, 2004 between Mycosol, Veridien and the
Mycosol Principals and Amendment No. 1 to Memorandum of Agreement made February 28, 2005, as may be
properly amended from time to time upon receipt of all necessary approvals and consents, including,
without limitation, the consent of the Mycosol executive committee in accordance with the terms of
this Agreement.

“Mycosol” means Mycosol, Inc., a corporation incorporated under the laws of Delaware, and except
where the context otherwise requires includes Elion Medical Inc., a wholly-owned subsidiary of
Mycosol, Inc., a corporation incorporated under the laws of Delaware, or Mycosol’s successors and
permitted assigns;

- 3 -

 

“Mycosol Common Shares” means common shares in the capital of Mycosol or preferred shares in the
capital of Mycosol that are convertible into common shares in the capital of Mycosol;

“Mycosol Option” has the meaning ascribed thereto in Section 6.1;

“Mycosol Principals” means Richard B. Klein, Jeffrey Selph and James Hriso;

“Mycosol Products” means all existing and potential medical, industrial, veterinary or agricultural
products developed by or for Mycosol for the purposes of being marketed or otherwise commercially
utilized;

“Option” means any or all of the Additional Investment, the Call Option, the Put Option, the Right
of First Refusal and an Exchange Option, as the case may be;

“Option Holder” means, in the case of the Additional Investment, the Put Option, the Right of First
Refusal and an Exchange Option, Investor, and in the case of the Call Option, Veridien;

“OTCBB” means the National Association of Securities Dealers, Inc.’s OTC Bulletin Board for
over-the-counter securities;

“Patent and Patent Applications” means all right, title and interest (including all rights acquired
pursuant to a licence or otherwise) in and to all patents and patent applications under any
domestic or foreign law that are now, or in the future that may be, owned or held by Mycosol, in
whole or in part, (including, without limitation, the patents and patent applications listed in
Schedule 10.1), all rights corresponding thereto to sue for past present and future infringements
and all re-issues, divisions, continuations, renewals, extensions and continuations-in-part
thereof;

“Permitted Elion Transfer” has the meaning set out in paragraph 11 of Schedule 8.4;

“Put Option” means the irrevocable right of Investor to require Veridien to purchase from it a
certain number of Mycosol Common Shares, as contemplated in Section 5.2 of this Agreement;

“Put Option Closing” means the completion of the purchase and sale of Mycosol Common Shares
pursuant to the exercise of the Put Option;

“Put Option Expiry Date” has the meaning ascribed to it in Section 5.2;

“Related Party” in respect of any corporation means any person or entity that controls, is
controlled by, or is under common control with, the corporation;

“Right of First Refusal” means the irrevocable right of Investor to purchase Mycosol Common Shares
from the Mycosol Principals as provided in ARTICLE 6;

“ROFR Closing” means the completion of the purchase by Investor and sale by the Mycosol Principals
of Mycosol Common Shares pursuant to the Right of First Refusal;

- 4 -

 

“Technology” means Mycosol’s (or following a Permitted Elion Transfer, Mycosol’s or Elion’s as
applicable) proprietary, multi-active chemistry platforms, including, without limitation, lead
compounds “M301” (as further described as compound BW32U61 in the material transfer agreement made
the 21st day of February, 2003, between Mycosol, Inc. and SmithKline Beecham Corporation
doing business as GlaxoSmithKline) and “M340” and any analogs, derivatives, homologs or sister
compounds of “M301” and “M340”, such as compounds “M341”, “M331”, “M301A”, including any
metabolites, isomers, polymorphs and salts related to any of the foregoing, either as of the
Effective Date or thereafter, and any other compounds developed, owned by or licensed to Mycosol or
Elion, either as of the Effective Date or thereafter. Technology further includes any process for
the synthesis or manufacture of any of the foregoing items;

“Veridien” means Veridien Corporation, a corporation incorporated under the laws of Delaware, or
its successors and permitted assigns;

“Veridien Common Shares” means common shares in the capital of Veridien;

“Veridien Convertible Securities” means securities issued by Veridien, which are fully convertible
into Veridien Common Shares or preferred shares in the capital of Veridien having the same
attributes as Veridien Common Shares.

- 5 -

 

SCHEDULE 2.2

CONDITIONS TO CLOSING

     The transactions contemplated in this Agreement are subject to the following terms and
conditions for the exclusive benefit of Investor to be fulfilled and performed at or prior to
Closing.

1. Veridien’s Representations and Warranties. The representations and warranties of Veridien
contained in this Agreement or in any certificate or other document delivered to Investor pursuant
to this Agreement shall be true and correct on the date of Closing.

2. Mycosol’s Representations and Warranties. The representations and warranties of Mycosol
contained in this Agreement shall be true and correct on the date of Closing.

3. Compliance. All of the terms, covenants and agreements set forth in this Agreement to be
complied with or performed by Veridien or Mycosol at or before Closing shall have been complied
with or performed by Veridien or Mycosol, as the case may be, on or before Closing.

4. Certificate of Veridien. A certificate, in form satisfactory to counsel for Investor, acting
reasonably, as to compliance with the required conditions of Closing, signed by a senior officer of
Veridien, shall be delivered to Investor at Closing; provided that the acceptance of such
certificate and the closing of any transaction contemplated herein shall not be a waiver of the
covenants, representations and warranties contained in this Agreement or in any certificate or
document given pursuant to this Agreement, which covenants, representations and warranties shall
continue in full force and effect as provided by Section 8.6.

5. Certificate of Mycosol. A certificate, in form satisfactory to counsel for Investor, acting
reasonably, as to compliance with the required conditions of Closing, signed by a senior officer of
Mycosol, shall be delivered to Investor at Closing; provided that the acceptance of such
certificate and the closing of any transaction contemplated herein shall not be a waiver of the
covenants, representations and warranties contained in this Agreement or in any certificate or
document given pursuant to this Agreement, which covenants, representations and warranties shall
continue in full force and effect as provided by Section 8.6.

6. Material Adverse Change. At Closing, there shall have been no material adverse change in the
affairs, operations, prospects, assets, conditions or business (financial or otherwise) of Veridien
or Mycosol from the date of this Agreement.

7. Approvals. All consents and approvals as are considered necessary by Investor’s and Veridien’s
counsel, acting reasonably, shall have been obtained on terms satisfactory to Investor and Veridien
respectively, acting reasonably.

8. Legal Action. No action or proceeding shall be pending or threatened by any person,
governmental authority, regulatory body or agency to enjoin, prohibit or affect any of the
transactions contemplated by this Agreement or the right of Veridien and Mycosol to conduct

 

 

their operations and to carry on their respective businesses in the normal course substantially as
their respective businesses have been carried on in the past.

9. Proceedings. Investor shall have received copies of all documentation or such other evidence as
it may reasonably request to establish the consummation of the transactions contemplated by this
Agreement and the taking of all proceedings, corporate or otherwise, in connection therewith. The
form and substance of all such documentation and other evidence shall be satisfactory in all
reasonable respects to Investor and to its counsel and all documents required to be registered
under applicable legislation shall have been registered in a manner satisfactory to Investor and to
its counsel.

10. Market for Shares. Veridien common shares shall be publicly trading over the OTCBB. Veridien
shall be current and up-to-date in all of its filings and shall have a relationship with a market
maker to trade Veridien Common Shares on the OTCBB.

11. Legal Opinion. Veridien shall deliver to Investor a favourable opinion of its legal counsel in
form satisfactory to counsel for Investor, acting reasonably, including as to any resale or other
restrictions applicable to any securities to be issued in respect of or as a result of a Closing.

12. Event of Default. No Event of Default and no condition, event or act which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default, shall have occurred and
be continuing or shall exist.

- 2 -

 

SCHEDULE 2.3

CLOSING ARRANGEMENTS

	1.  	Closing. A Closing contemplated in this Agreement shall take place at 10:00 a.m. (Eastern
Time) on the date agreed for the Closing at the principal office and place for the transaction
of business of Veridien Corporation at 2875 MCI Drive, Unit B, Pinellas Park, Florida, USA,
33782, or in such other place or manner as the parties hereto may agree.

	2.  	Closing Date. The date of Closing shall be, in the case of the Initial Closing, March 4,
2005, and in the case of any other Closing, the date specified by the Option Holder in a duly
executed and delivered Exercise Notice, or such other date as the parties may agree in
writing.

	3.  	Veridien Deliveries. Veridien shall deliver, or cause to be delivered, to Investor the
following documents duly executed by all persons other than Investor or do the following acts
or things, which delivery and performance constitute a condition in favour of Investor to the
completion of the transactions provided for in this Agreement:

	 	(a)  	at the Initial Closing:

	 	(i)  	a share certificate or certificates representing the Initial
Mycosol Common Shares duly endorsed over to or registered in the name of
Investor;
	 
	 	(ii)  	the Debenture duly executed and registered in the name of Investor;
	 
	 	(iii)  	the opinion referred to in paragraph 11 of Schedule 2.2;
	 
	 	(iv)  	the certificate referred to in paragraph 4 of Schedule 2.2;
	 
	 	(v)  	the approvals and consents referred to in paragraph 7 of
Schedule 2.2;
	 
	 	(vi)  	the documentation or evidence referred to in paragraph 9 of
Schedule 2.2; and
	 
	 	(vii)  	such other certificates and documents as are required in
accordance with the terms of this Agreement to be delivered by or on behalf of
Veridien;

	 	(b)  	at the Additional Investment Closing:

	 	(i)  	a share certificate or certificates representing the Additional
Mycosol Common Shares duly endorsed over to or registered in the name of
Investor;
	 
	 	(ii)  	the opinion referred to in paragraph 11 of Schedule 2.2;
	 
	 	(iii)  	the certificate referred to in paragraph 4 of Schedule 2.2;

 

 

	 	(iv)  	the approvals and consents referred to in paragraph 7 of Schedule 2.2;
	 
	 	(v)  	the documentation or evidence referred to in paragraph 9 of
Schedule 2.2; and
	 
	 	(vi)  	such other certificates and documents as are required in
accordance with the terms of this Agreement to be delivered by or on behalf of
Veridien;

	 	(c)  	at the Call Option Closing and the Put Option Closing:

	 	(i)  	as applicable,

	 	(A)  	a certified cheque or wire transfer of
immediately available funds, or
	 
	 	(B)  	a certificate or certificates representing the
required number of Veridien Common Shares or Veridien Convertible
Securities, as the case may be, duly executed and registered in the
name of Investor;

	 	(ii)  	the opinion referred to in paragraph 11 of Schedule 2.2;
	 
	 	(iii)  	the certificate referred to in paragraph 4 of Schedule 2.2;
	 
	 	(iv)  	the approvals and consents referred to in paragraph 7 of Schedule 2.2;
	 
	 	(v)  	the documentation or evidence referred to in paragraph 9 of
Schedule 2.2; and
	 
	 	(vi)  	such other certificates and documents as are required in
accordance with the terms of this Agreement to be delivered by or on behalf of
Veridien;

	 	(d)  	at the ROFR Closing:

	 	(i)  	the certificate referred to in paragraph 4 of Schedule 2.2;
	 
	 	(ii)  	the approvals and consents referred to in paragraph 7 of
Schedule 2.2;
	 
	 	(iii)  	the documentation or evidence referred to in paragraph 9 of
Schedule 2.2; and
	 
	 	(iv)  	such other certificates and documents as are required in
accordance with the terms of this Agreement to be delivered by or on behalf of
Veridien;

	 	(e)  	at the Exchange Option Closing:

- 2 -

 

	 	(i)  	a certificate or certificates representing 9,803,992 Veridien
Common Shares, or an equivalent value of Veridien Convertible Securities, duly
executed and registered in the name of Investor;
	 
	 	(ii)  	the opinion referred to in paragraph 11 of Schedule 2.2;
	 
	 	(iii)  	the certificate referred to in paragraph 4 of Schedule 2.2;
	 
	 	(iv)  	the approvals and consents referred to in paragraph 7 of Schedule 2.2;
	 
	 	(v)  	the documentation or evidence referred to in paragraph 9 of
Schedule 2.2; and
	 
	 	(vi)  	such other certificates and documents as are required in
accordance with the terms of this Agreement to be delivered by or on behalf of
Veridien.

	4.  	Investor Deliveries. At the Call Option Closing or the Put Option Closing, Investor will
deliver to Veridien the following documents duly executed or do the following acts or things
which delivery and performance constitute a condition in favour of Veridien to the completion
of the transactions provided for in this Agreement:

	 	(a)  	a certificate or certificates representing the appropriate number of Mycosol
Common Shares as are to be purchased and sold as contemplated in ARTICLE 5, duly
endorsed over to or registered in the name of Veridien; and
	 
	 	(b)  	such other documents as are required by this Agreement to be delivered by or on
behalf of Investor.

	5.  	Mycosol Deliveries. At the Initial Closing, the Additional Investment Closing and the ROFR
Closing, as the case may be, Mycosol will deliver to Investor the following documents duly
executed or do the following acts or things which delivery and performance constitute a
condition in favour of Investor to the completion of the transactions provided for in this
Agreement:

	 	(a)  	the certificate referred to in paragraph 5 of Schedule 2.2; and
	 
	 	(b)  	such other documents as are required by this Agreement to be delivered by or on behalf of
Mycosol.

- 3 -

 

SCHEDULE 3.1

FORM OF DEBENTURE

THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE
SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED UNTIL (I). A REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO, OR (II). THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY ACTING REASONABLY TO THE EFFECT THAT REGISTRATION UNDER SUCH
SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.

     Date: March 4, 2005 
             
                 
                 
                 
         
            Principal Amount:
$ 100,000.00

VERIDIEN CORPORATION

Debenture

          Veridien Corporation, a Delaware corporation, (the “Company”), having its principal office and
place for the transaction of business at 2875 MCI Drive Unit B, Pinellas Park, Florida 33782, for
value received, hereby promises to pay all principal and accrued interest thereon to the order of
Mineola Holding Corporation or registered assigns (the “Holder”) on March 4, 2008 (the “Maturity
Date”). The Company may prepay any portion of the principal due hereunder at any time prior to the
Maturity Date provided that (i) the Company give the Holder 30 days notice of its intent to make
repayment and (ii) each prepayment shall be applied firstly to all accrued and unpaid interest then
due under this Debenture with only the remaining balance being applied to principal reduction.

          Interest shall be calculated, both before and after the Maturity Date, at the rate of eight
percent (8%) per annum, compounded annually. Interest shall be payable in full on the Maturity Date
and may at the option of the Company be paid in cash or in the Common Stock of the Company at the
same conversion rate as defined in paragraph “B” below.

          This Debenture may, at the option of the Holder, be converted into shares of the common stock,
$.001 par value, of the Company (the “Common Stock”) as follows:

          A. The whole or any part of the principal amount due under this Debenture, together with any
accrued and unpaid interest calculated in accordance with the terms hereof, may, at any time prior
to the satisfaction thereof, be converted into Common Stock.

          B. The conversion price per share shall equal $ 0.051 per share (the “Conversion Price”). The
conversion privilege terminates when all principal plus interest due under this Debenture has been
paid in full or converted to Common Stock.

 

 

          C. To exercise the conversion privilege, the Holder shall surrender this Debenture to the
Company at its principal office, accompanied by an executed notice (which shall be irrevocable)
stating that the Holder elects to convert all or any specified part of the principal due under this
Debenture, together with any accrued and unpaid interest, into Common Stock. The date of receipt by
the Company of such notice is herein referred to as the “Date of Conversion”.

          D. As promptly as practicable, and in any event no later than the tenth day after the Date of
Conversion, the Company shall cause to be issued and delivered to the Holder, or its designee, one
or more certificates (the “Certificates”) for the whole shares of Common Stock deliverable upon the
conversion. If any fractional interest in a share of Common Stock would, except for the provisions
of this section, be deliverable upon a conversion of this Debenture, the company shall, at its
option, satisfy such fractional interest by (i) paying to the Holder an amount in cash equal (to
the nearest cent) to the value (as determined by the directors) of the fractional share on the
business day next preceding the Date of Conversion, or (ii) rounding up to the nearest whole share.
Shares of Common Stock issued upon conversion of this Debenture shall be restricted in accordance
with federal and state securities laws and each Certificate shall bear the legend reflected on the
cover hereof.

          E. Such conversion shall be deemed to have been effected immediately prior to the close of
business on the Date of Conversion and each person in whose name any Certificate shall be
deliverable shall be deemed to have become on such date the holder of record of the Common Stock,
represented thereby.

          F. Where the Holder intends only to convert a portion of this Debenture, upon surrender to the
Company of this Debenture, the Holder thereof shall be entitled to receive, without expense to such
Holder, one or more new Debentures for the unconverted portion of the principal amount, together
with a pro rata share of the interest accrued and unpaid, of this Debenture so surrendered.

          G. The Common Stock issued upon any conversion hereunder shall be entitled to receive only
those dividends whose date of declaration shall occur on or after the Date of Conversion.

          H. The Conversion Price and the number of shares purchasable hereunder shall be subject to
adjustment from time to time in accordance with the following provisions:

          (1) If the Company shall at any time subdivide, by means of a forward stock split, stock
dividend or otherwise the outstanding shares of its Common Stock, then upon subdivision the
Conversion Price in effect immediately prior thereto shall be proportionately decreased, and upon
combination or consolidation, by means of a reverse stock split or otherwise, the Conversion Price
in effect immediately prior to such combination or consolidation shall be proportionately
increased, effective from and after the record date of such subdivision or combination or
consolidation, as the case may be.

- 2 -

 

          Upon any adjustment in the Conversion Price pursuant to this subparagraph (1) above, the
Holder shall thereafter be entitled to convert this Debenture, or any portion thereof, to Common
Stock at the adjusted Conversion Price.

     (2) If at any time while this Debenture is outstanding there shall be any reorganization or
reclassification of the Common Stock of the Company (other than a subdivision, combination or
consolidation of shares provided for in subparagraph (1.) above, or any consolidation or merger of
the Company with another corporation, the Holder shall thereafter be entitled to receive, during
the term hereof and upon timely exercise of the Holder’s conversion rights hereunder, the number of
shares of Common Stock or other securities or property of the Company or of the successor
corporation resulting from such consolidation or merger, as the case may be, to which a holder of
the Common Stock of the Company, would have been entitled upon such reorganization,
reclassification, consolidation, or merger if this Debenture had been exercised immediately prior
to such reorganization, reclassification, consolidation, or merger; and in any case appropriate
adjustment (as determined by agreement of the Holder and the Board of Directors of the Company)
shall be made in the application of the provisions herein set forth with respect to the rights and
interest thereafter of the Holder to the end that the provisions set forth herein (including the
adjustment of the Conversion Price and the number of shares issuable upon the conversion of this
Debenture) shall thereafter be applicable , as near as reasonably may be, in relation to any shares
or other property thereafter deliverable upon the conversion thereof.

     (3) Upon any adjustment of the Conversion Price and any increase or decrease in the number of
shares of Common Stock purchasable upon the conversion of this Debenture, then, and in each such
case, the Company, within thirty days after the Holder’s request, shall give written notice thereof
to the Holder at the address of Holder as shown on the books of the Company, which notice shall
state the Conversion Price as adjusted, setting forth in reasonable detail the method of
calculation of each.

     (4) The issuance of certificates for shares of Common Stock upon any conversion of this
Debenture shall be made without charge to the Holder for any stock transfer tax or expense imposed
by the Company or its transfer agent in respect to the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name
of, or in such name or names as may be directed by the Holder; provided, however, that in the event
that certificates for shares of Common Stock are to be issued in a name other than the name of the
Holder, this Debenture when surrendered for exercise shall be accompanied by an instrument of
transfer in form satisfactory to the Company, duly executed by Holder in person or by an attorney
duly authorized in writing, and the Holder shall pay all stock transfer taxes payable upon issuance
of such stock certificate.

     (5) The Company agrees that it will not increase the par value of the shares of the Common
Stock issuable upon conversion of this Debenture above the then applicable Conversion Price and
that, before taking any action which would cause an adjustment reducing

- 3 -

 

the Conversion Price below the then par value, if any, of the shares of any Common Stock
issuable upon the conversion hereof, the Company will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and legally issue fully
paid and non-assessable shares of Common Stock at the Conversion Price as so adjusted.

          I. The Company covenants that it will at all times reserve and keep available, solely for the
purpose of issue upon the conversion hereof, a sufficient number of shares of Common Stock to
permit the conversion hereof in full.

          J. Except as otherwise provided herein, this Debenture and all rights hereunder are
transferable by the Holder in person or by duly authorized attorney on the books of the Company.

          K. Notwithstanding any provision herein to the contrary, the Holder may not sell, transfer, or
otherwise assign this Debenture or the shares of Common Stock issuable upon conversion hereof
without the consent of the Company, which consent may not unreasonably be withheld and which
consent shall not be withheld in any event if the Company is provided with an opinion of counsel,
satisfactory in form and substance to the Company, to the effect that such sale, transfer, or
assignment does not violate the Securities Act of 1933 or applicable state securities law.

          L. Shares of Common Stock issued upon conversion of this Debenture shall be restricted in
accordance with state and federal securities laws except as otherwise hereinafter provided.

          M. Upon the occurrence of a default under the terms of this Debenture, the Company hereby
waives demand, presentation of payment, protest, notice of protest, dishonor and any defense by
reason of any extension of time or other indulgence granted by the Holder of this Debenture, and
agrees that, upon such occurrence, the Holder shall have the right to accelerate the Maturity Date
and constitute the then unpaid principal and interest as immediately due and payable. Default is
defined as:

          (a) violation of any material term, condition or promise of this Debenture issued by the
Company to Holder this date; or,

          (b) filing by or against the Company of any bankruptcy proceeding or any filing of relief of
debtors in any court or under any statute.

          N. If the Holder incurs any costs in the collection or enforcement of this Debenture,
including costs of filing suit and reasonable attorney fees, the Company agrees to pay such costs.

- 4 -

 

          O. This Debenture shall be interpreted in accordance with the laws of the State of Delaware.
No provision of this Debenture shall be affected by the invalidity of any other provision or
provisions contained herein.

          P. Time shall be of the essence of this Debenture and every part hereof.

          Q. This Debenture shall be binding upon the Company and its successors and assigns and shall
enure to the benefit of the Holder and its successors and assigns.

          R. Subsequent to execution of this Debenture, each party hereto shall take such further action
and execute and deliver such further documentation as may be reasonably required to implement the
purposes of this Debenture.

          S. This Agreement may be executed in counterparts and the agreement outlined herein shall be
effective when executed by all parties hereto. Delivery of facsimile copies of the executed
agreement shall be sufficient evidence of its execution.

          T. If any provision of this Agreement, or the application of such provision to any person or
circumstance, shall be held invalid or unenforceable, the remainder of this Agreement, or the
application of such provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby.

          IN WITNESS WHEREOF, Veridien Corporation has by its duly authorized officers executed this
Debenture at Pinellas Park, Florida the date first above written.

	 	 	 	 
	 	

	 	Veridien Corporation
	 	 
	 	 
	By:
	 	 	 
	 	 
	 	 
	 	 
	 	 
	 	

	 	          Russell Van Zandt
	 	

	 	          Chairman

- 5 -

 

SCHEDULE 4.2

EXERCISE OF OPTIONS AND NOTICE PROVISIONS

	1.  	Exercise of Options. Options in this Agreement may be exercised by the Option Holder by
delivering to the Grantor prior to the expiry of the Option, an Exercise Notice specifying a
day for the Closing, which shall be a Business Day, and which is not less than 10 and not more
than 20 Business Days following the day on which the Exercise Notice is received by the
Grantor.

	2.  	Notice. All Exercise Notices, payments (other than payments by wire transfer as contemplated
by this Agreement) and other communications under this agreement that may be or are required
to be given by any party to the others shall (in the absence of any specific provision to the
contrary) be in writing and delivered or sent by prepaid registered mail or telecopier to the
parties at their following respective addresses:

	 	 	 
	TO:

	 	 INVESTOR
	 
	 	 
	

	 	 c/o Corporation Trust Company
	

	 	 1209 Orange Street
	

	 	 Wilmington, Delaware
	 
	 	 
	COPY TO:
	 	 
	 
	 	 
	

	 	 Rolf Reininghaus
	

	 	 313 Indian Valley Trail
	

	 	 Mississauga, Ontario L5G 2K9
	 
	 	 
	

	 	 Telecopier: 905-271-9346
	 
	 	 
	TO:

	 	 VERIDIEN
	 
	 	 
	

	 	 2875 MCI Drive, Suite B
	

	 	 Pinellas Park, Florida
	

	 	 33782
	 
	 	 
	

	 	 Attention: Russ Van Zandt, Chairman
	 
	 	 
	

	 	 Telecopier: 727-576-1611
	 
	 	 
	TO:

	 	 MYCOSOL
	 
	 	 
	

	 	 14001 Weston Parkway, Suite 112
	

	 	 Cary, North Carolina
	

	 	 27513
	 
	 	 
	

	 	 Attention: Richard Klein, Chief Executive Officer

 

 

	 	 	 
	

	 	 Telecopier: 919-535-2004

	   	and if any such payment or communication is sent by prepaid registered mail, it shall,
subject to the following sentence, be conclusively deemed to have been received on the third
Business Day following the mailing thereof and, if delivered or telecopied, it shall be
conclusively deemed to have been received at the time of delivery or transmission.
Notwithstanding the foregoing provisions with respect to mailing, in the event that it may
be reasonably anticipated that, due to any strike, lock-out or similar event involving any
interruption in postal service, any payment or communication will not be received by the
addressee by no later than the third Business Day following the mailing thereof, then the
mailing of any such Exercise Notice, payment or other communication as aforesaid shall not
be an effective means of sending the same but rather any Exercise Notice, payment or other
communication must then be sent by an alternative means of transportation which it may
reasonably be anticipated will cause the payment or communication to be received reasonably
expeditiously by the addressee. Any of the parties hereto may from time to time change
their address as written above by notice to each of the other parties in accordance with
this section.

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SCHEDULE 8.1

REPRESENTATIONS AND WARRANTIES OF VERIDIEN

     Veridien represents and warrants to Investor as follows and acknowledges that Investor is
relying on these representations and warranties in connection with transactions contemplated in
this Agreement.

1. Incorporation and Organization. Veridien is a corporation incorporated and validly subsisting
under the laws of its jurisdiction of incorporation. Veridien is up to date in all filings and is
duly qualified as a corporation to do business in all jurisdictions in which it operates. Veridien
has the corporate power and authority and is qualified to own, lease and dispose of its property,
including the Mycosol Common Shares, and to carry on its business as it is now conducted. No act
or proceeding has been taken by or against Veridien in connection with the dissolution,
liquidation, winding up, bankruptcy or reorganization of Veridien.

2. Shares Listed. The Veridien Common Shares are publicly trading over the OTCBB. Veridien is
current and up-to-date in all of its filings and has a relationship with a market maker to trade
Veridien Common Shares on the OTCBB.

3. Authorized and Issued Capital. The authorized capital of Veridien consists of 300,000,000
common shares and 25,000,000 preferred shares issuable in series, of which 210,017,310 common
shares and 6,000 series A convertible preferred shares and 174,219 series B convertible preferred
shares have been duly and validly issued as fully paid and non-assessable shares as of September
30, 2004.

4. Power and Authority. Veridien has the corporate power, authority and capacity to enter into
this Agreement and all other instruments to be executed by it under this Agreement and to
consummate the transactions contemplated in this Agreement and all other instruments. The
execution and delivery of this Agreement and such other instruments and the completion of the
transactions contemplated by this Agreement and such other instruments have been duly authorized by
all necessary corporate action on the part of Veridien and its shareholders.

5. Purchased Securities. Veridien has the absolute and unrestricted right to sell the Mycosol
Common Shares, and to issue and sell the Debenture, and to issue and sell the Veridien Common
Shares and Veridien Convertible Securities in satisfaction of the transactions contemplated by this
Agreement and has authorized and reserved for future issuance all Veridien Common Shares that are
issuable or may become issuable pursuant to the terms of this Agreement and the conversion of the
Debenture or any Veridien Convertible Securities issued under this Agreement at such applicable
times. Upon issuance, the Debenture shall be delivered to Investor and Investor shall acquire good
and marketable title thereto, free and clear of all liens. The Veridien Common Shares issuable
under the Debenture will be validly issued representing fully paid and non-assessable shares of
Veridien and will be eligible to be publicly traded over the OTCBB under the provisions of Rule 144
of the Securities Act of 1933. At any subsequent Closing, the Veridien Common Shares issued at
that Closing, or issuable under the conversion of any Veridien Convertible Securities issued at
that Closing, will be validly issued representing fully paid and non-assessable shares of Veridien
and will be eligible to be publicly traded on the

 

 

OTCBB under the provisions of Rule 144 of the Securities Act of 1933. Attached hereto as Schedule
8.1.5, is a summary of the resale restrictions applicable on the date hereof.

6. Binding Agreement. This Agreement constitutes a valid and binding obligation of Veridien
enforceable against it in accordance with its terms, subject to limitations on enforcement imposed
by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of rights of
creditors and subject to certain equitable defences and to the discretion of the court.

7. Non-Contravention. The execution and delivery of this Agreement and the other documents to be
executed and delivered by Veridien in accordance with this Agreement and the consummation of the
transactions contemplated hereby by Veridien will not result in the violation of any of the terms
or provisions of or constitute a default under the constating documents (including all amendments
thereto) or by-laws of Veridien, any resolutions of the directors or shareholders of Veridien or
under any contract, agreement, lease or indenture, written or oral, to which Veridien is a party or
by which Veridien or its property is or may be bound which might have a material adverse effect on
Veridien nor require that Veridien obtain the consent, authorization or approval of any person
(whether pursuant to any law, agreement, statute, lease or otherwise) except as otherwise disclosed
to and accepted by Investor. Subject to obtaining the consents, authorization and approvals
required, the execution and delivery of this Agreement and the other documents contemplated hereby
and the consummation by Veridien of the transactions contemplated hereby will not result in the
violation of any statute, order, decree, judgment, notice, ordinance, regulation, law or other
restrictions applicable to Veridien or by which any of the assets of Veridien may be bound.

8. No Mycosol Share Options. Veridien, at the Initial Closing and the Additional Investment
Closing, as the case may be, will be the registered and/or beneficial holder of the Initial Mycosol
Common Shares or the Additional Mycosol Common Shares, as the case may be, with good and marketable
title thereto, free and clear of all liens. No person other than Investor has any agreement,
option, right or privilege capable of becoming an agreement for the purchase from Veridien of the
Initial Mycosol Common Shares or the Additional Mycosol Common Shares.

9. No Default. Veridien is not in default under any contract material to Veridien and there has
not occurred any event that, with the lapse of time or giving of notice or both, would constitute a
default under any contract material to Veridien by Veridien or any other party to such contract.

10. Memorandum of Agreement. The Memorandum of Agreement as attached hereto as Exhibit 1 is true
and correct and has not been amended other than pursuant to Amendment No. 1 to Memorandum of
Agreement made February 28, 2005, as at the date of this Agreement.

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SCHEDULE 8.1.5

U.S. RESALE RESTRICTIONS

Mycosol Common Shares

Investor may only sell Mycosol Common Shares if it sells to a limited number of purchasers, each of
whom is a “sophisticated” investor who represents to the Investor that such purchaser is purchasing
such Mycosol Common Shares with an investment intention to hold for an indefinite period, and not
with a view to distribution thereof. The certificates the purchasers receive must bear the
restrictive legend and a “Stop Transfer” restriction in respect of the Mycosol Common Shares must
remain on the records of the stock transfer agent for Mycosol. (This restriction shall not apply
if, in the future, the Mycosol Common Shares become publicly traded, in which case sales by the
Investor thereafter shall be subject to then applicable securities requirements.)

Veridien Common Shares and Convertible Securities

Veridien is registered under section 12(g) of the Securities Exchange Act of 1934 and its shares
are approved for trading on the OTCBB.

Veridien Common Shares may not be sold for 12 months following their issue.

Between 12 months and 24 months after the date of issue, in each 90 day period, a holder of
Veridien Common Shares may only sell that number of Veridien Common Shares that represents one
percent (1%) of the total Veridien Common Shares issued and outstanding. The sales must be made
through a brokerage firm, in a normal market transaction and a Form 144 must be filed by Investor
with the SEC prior to or contemporaneously with the sale.

After 24 months has elapsed from the date of issue, Veridien Common Shares may be sold in a
non-market transaction, with no volume restrictions, as free-trading shares and no filing need be
made with the SEC.

Debenture

The hold periods described above in respect of Veridien Common Shares issued to investor upon
conversion of the Debenture begin on the date of issue of the Debenture.

Veridien Common Shares Issued under the Put or Call Option or the Exchange Option

The hold periods described above in respect of Veridien Common Shares issued to Investor upon the
exercise of the Put or Call Options or the Exchange Option will start from the date of the issue of
those shares, in other words, the date of the Put Option Closing, the Call Option Closing or the
Exchange Option Closing, as the case may be.

Veridien Convertible Securities

 

 

If Veridien Convertible Securities are issued at a Closing, the hold periods for Veridien Common
Shares issuable upon conversion of such Veridien Convertible Securities begin on the date that the
Veridien Convertible Securities are issued.

- 2 -

 

SCHEDULE 8.2

COVENANTS OF VERIDIEN

	   	Veridien covenants and agrees with Investor that:
	 
	1.  	Approvals. Veridien will use all reasonable efforts to obtain the consent,
authorization or approval of any person, (whether pursuant to any law, agreement, statute,
lease or otherwise) necessary or desirable to give effect to the transactions contemplated by
this Agreement;
	 
	2.  	Performance. Veridien will take all steps necessary to approve the transactions
contemplated by this Agreement and effect the transfer of the Mycosol Shares or the issuance
of the Debenture, the Veridien Common Shares or the Veridien Convertible Securities, as the
case may be;
	 
	3.  	Shares Listed. Veridien will take all steps necessary to ensure that the Veridien
Common Shares issued under this Agreement and upon conversion of the Debenture and the
Veridien Convertible Securities issued under this Agreement are eligible to be publicly traded
over the OTCBB upon satisfaction of the holding period imposed under Section 144 of the
Securities Act of 1933;
	 
	4.  	Compliance with Securities Laws. Veridien will take all steps necessary to ensure
that it is not in default of any applicable securities laws;
	 
	5.  	Co-operation. Veridien will co-operate with Investor to execute all documents and
instruments reasonably necessary and file and do all such things as are necessary to give
effect to the transactions contemplated in this Agreement, including without limitation, doing
all things as are necessary to effect the transfer of the Mycosol Common Shares held by the
Mycosol Principals to Investor pursuant to any exercise of the Right of First Refusal;
	 
	6.  	Conditions. Veridien will take all steps necessary to fulfil, at or prior to any
Closing, the conditions required in respect of each such Closing; and
	 
	7.  	No Changes to Veridien/Mycosol Relationship. Veridien will not negotiate or agree to
any amendment to the Memorandum of Agreement or enter into any new agreement that will impair
Investor’s rights under this Agreement or impair the value of its investment in Veridien or
Mycosol, as determined by Investor in its sole discretion, acting reasonably, without the
prior written consent of Investor.
	 
	8.  	Additional Put Obligations. Veridien shall be bound by the additional obligations
imposed on it under paragraph 9 of Schedule 8.4.

 

 

SCHEDULE 8.3

REPRESENTATIONS AND WARRANTIES OF MYCOSOL

     Mycosol represents and warrants to Investor as follows and acknowledges that Investor is
relying upon such representations and warranties in connection with the transactions contemplated
in this Agreement.

	1.  	Incorporation and Organization. Mycosol is a corporation incorporated and validly
subsisting under the laws of its jurisdiction of incorporation. Mycosol is up to date in all
filings and is duly qualified as a corporation to do business in all jurisdictions in which it
operates. Mycosol has the corporate power and authority and is qualified to own, lease and
dispose of its property, and to carry on its business as it is now conducted. No act or
proceeding has been taken by or against Mycosol in connection with the dissolution,
liquidation, winding up, bankruptcy or reorganization of Mycosol.

	2.  	Authorized and Issued Capital. The authorized capital of Mycosol consists of
10,000,000 shares consisting of (i) 7,000,000 common shares and (ii) 3,000,000 preferred
shares, of which 2,000,000 have been designated as Series A Convertible Preferred Stock, of
which 2,800,000 common shares (of which 187,500 common shares are intended to be surrendered
to Mycosol for no consideration by the founding shareholders of Mycosol) and 250,000 Series A
Convertible Preferred shares have been duly and validly issued as fully paid and
non-assessable shares.

	3.  	Purchased Securities. The Initial Mycosol Common Shares, the Additional Mycosol
Common Shares and the Mycosol Common Shares that are the subject of Investor’s Right of First
Refusal have been duly authorized as fully paid and non-assessable shares and upon issuance of
such Mycosol Common Shares to Veridien or the Mycosol Principals, as the case may be, Veridien
or the Mycosol Principals, as the case may be, acquired good and marketable title thereto,
free and clear of all liens.

	4.  	Power and Authority. Mycosol has the corporate power, authority and capacity to enter
into this Agreement and all other instruments to be executed by it as contemplated hereby and
to consummate the transactions contemplated in this Agreement and all other instruments. The
execution and delivery of this Agreement and other instruments and the completion of the
transactions contemplated by this Agreement and other instruments have been duly authorized by
all necessary corporate action on the part of Mycosol.

	5.  	Binding Agreement. This Agreement constitutes a valid and binding obligation of
Mycosol enforceable against it in accordance with its terms, subject to limitations on
enforcement imposed by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of rights of creditors and subject to certain equitable defences and to the
discretion of the court.

	6.  	Non-Contravention. The execution and delivery of this Agreement and the other
documents to be executed and delivered by Mycosol in accordance with this Agreement and the
consummation of the transactions contemplated hereby by Mycosol will not

 

 

	   	result in the violation of any of the terms or provisions of or constitute a default under
the constating documents (including all amendments thereto) or by-laws of Mycosol, any
resolutions of the directors or shareholders of Mycosol or under any contract, agreement,
lease or indenture, written or oral, to which Mycosol is a party or by which Mycosol or its
property is or may be bound which might have a material adverse effect on Mycosol nor
require that Mycosol obtain the consent, authorization or approval of any person (whether
pursuant to any law, agreement, statute, lease or otherwise) except as otherwise disclosed
to and accepted by Investor. Subject to obtaining the consents, authorization and approvals
required, the execution and delivery of this Agreement and the other documents contemplated
hereby and the consummation by Mycosol of the transactions contemplated hereby will not
result in the violation of any statute, order, decree, judgment, notice, ordinance,
regulation, law or other restrictions applicable to Mycosol or by which any of the assets of
Mycosol may be bound.
	 
	7.  	Subsidiary. Mycosol is the registered and beneficial owner of all of the issued and
outstanding shares in the capital stock of Elion and there is no agreement, option or other
right or privilege outstanding in favour of any person for the purchase from Mycosol or
acquisition from Elion of the shares of Elion or of any rights to acquire any such shares.
	 
	8.  	No Default. Mycosol is not in default under any contract material to Mycosol and
there has not occurred any event that, with the lapse of time or giving of notice or both,
would constitute a default under any contract material to Mycosol by Mycosol or any other
party to the contract.
	 
	9.  	Financial Statements. Mycosol has delivered the Financial Statements to Investor.
The Financial Statements have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with those of prior years. The Financial Statements
fairly present the assets and liabilities (whether accrued, absolute, contingent or otherwise)
and the financial condition of Mycosol as of their respective dates and the statements of
earnings and retained earnings contained in the Financial Statements fairly present the
results of operations for the periods indicated.
	 
	10.  	No Sale of Assets. Mycosol has good and marketable title to all its assets,
including the shares in the common stock of Elion, free and clear of any and all liens, except
those disclosed to and permitted by Investor. The assets are sufficient to permit the
continued operation of the Business in substantially the same manner as currently conducted.
There is no agreement (except for the Memorandum of Agreement attached hereto as Exhibit 1),
option or other right or privilege outstanding in favour of any person for the purchase from
the Mycosol of the Business or any of the assets out of the ordinary course of business.
Subject to oversight by the executive committee, Mycosol shall be free to deal with its assets
in the ordinary course of business.
	 
	11.  	No Material Adverse Change. Since June 30, 2004, there has not been any material
adverse change in the Business or the financial condition of the Business and Mycosol has not
created, incurred or assumed or agreed to create, incur or assume any long-term

- 2 -

 

	   	debt (including obligations in respect of capital leases) except in the ordinary course of
business and consistent with past practice under currently existing credit facilities.

	12.  	Ordinary Course. Mycosol carries on no business other than the Business and, since
June 30, 2004, has carried on the Business in the ordinary course.

	13.  	Capital Expenditures. Since June 30, 2004, except as disclosed to Investor in
writing, Mycosol has not made, or entered into any agreement or commitment to make, any
capital expenditure involving an expenditure or acquisition cost of greater than $50,000 as at
the date of this Agreement.

	14.  	Insurance. Mycosol maintains insurance policies as are customarily maintained by
companies operating or owning similar properties or business against loss or damage by such
perils as are customarily insured against by such companies.

	15.  	No Litigation. There is no litigation, claim, grievance, arbitration, investigation,
administrative or other proceeding, pending or threatened, against Mycosol involving a claim
in excess of $50,000 as at the date hereof and there is no valid basis to commence any of the
foregoing and Mycosol has not received any notice of violation, claim or investigation from
any person and Mycosol is not subject to any judicial, governmental, administrative or
regulatory orders (whether consensual or otherwise), injunctions, consents judgments or
decrees. There are no unsatisfied judgments or orders outstanding or judgments under appeal
against Mycosol.

	16.  	Licenses and Permits. Mycosol holds all necessary licenses, franchises, permits and
authorizations necessary to carry on the Business currently carried on by it. No portion of
the Business is carried on by any person other than Mycosol or a person contracted to do so by
Mycosol.

	17.  	Intellectual Property. Schedule 10.1 lists all of the Patents and Patent
Applications in respect of the Intellectual Property, all of which are valid and subsisting in
good standing and are recorded in the name of Mycosol, except as otherwise expressly disclosed
in Schedule 10.1. Mycosol is the first and only owner of the Intellectual Property and is
entitled to the exclusive and uninterrupted use of its Intellectual Property without payment
of any royalty or other fees, except as provided for the “Material Transfer Agreement” between
Mycosol and SmithKline Beecham Corporation effective February 21, 2003 (a copy of which the
Investor acknowledges receipt). No person has any right, title or interest in any of
Mycosol’s Intellectual Property and all such persons have waived their moral rights in any
copyright works within its Intellectual Property. Mycosol has diligently protected its legal
rights to the exclusive use of its Intellectual Property. The conduct of the Business does
not infringe, violate or otherwise conflict with any Intellectual Property rights of any
person. There is no claim or demand of any person pertaining to, or any proceedings pending or
threatened, which challenges the rights of Mycosol in respect of its Intellectual Property.
There is no governmental prohibition or restriction on the use of Mycosol’s Intellectual
Property, however it is

- 3 -

 

	   	anticipated that certain products developed from the Technology will be of the nature that
they will be regulated by certain governmental agencies.

	18.  	Regulatory Matters. All returns, declarations, elections and filings and other
reports required to be filed by or with respect to Mycosol in respect of any income, sales,
use, payroll, property, business, goods and services or other taxes imposed by any taxing
authority, whether national, state, municipal, territorial or local, have been timely filed or
a request for an extension has been timely made and granted, and are accurate and properly
completed in all material respects

	19.  	Taxes. All taxes and duties that are or may become payable by Mycosol with respect
to any prior period have been fully paid prior to the date hereof or adequately reserved in
the Financial Statements. All taxes that are or may become payable by Mycosol with respect to
its current fiscal periods through the Initial Closing will, at the Initial Closing, have been
fully paid or adequate provision for payment with respect to such taxes has been made in the
books and records of Mycosol. All assessments, reassessments, charges, penalties, interest
and fines due and payable on or before the date hereof by Mycosol have been fully paid.

	20.  	Tax Audits. Mycosol has not been audited by any governmental authority during the
past five (5) years. There are no agreements, waivers or other arrangements providing for an
extension of the limitation periods for assessment of taxes. All taxes and amounts required
to be withheld from payments to employees, officers, directors and any other persons and
remitted to any taxing or other governmental authority by Mycosol have been remitted within
the time required.

	21.  	Compliance with Applicable Laws. Mycosol is carrying on and has carried on the
Business in compliance with all material respects with all applicable laws, rules,
regulations, orders, final judgments and decrees, except for breaches that have been cured and
for which there are no undischarged liabilities, contingent or otherwise.

	22.  	Memorandum of Agreement. The Memorandum of Agreement and first Amendment thereto as
attached hereto as Exhibit 1 are true and correct and have not been further amended as at the
date of this Agreement. Except as contemplated herein and in the Final Pro Forma
Capitalization Chart attached hereto as Exhibit 2, as of the date hereof no person has any
option, warrant or other right to acquire any Mycosol Common Shares.

- 4 -

 

SCHEDULE 8.4

COVENANTS OF MYCOSOL

     Mycosol covenants and agrees with Investor that:

1. Proceeds. Mycosol will use the proceeds of the Initial Investment as prescribed in Section 9.1.
Mycosol will use the proceeds of the Additional Investment, if any, as prescribed in Section 9.2

2. Supervisory Right. Mycosol will do all things necessary to allow Investor and its
representatives access to inspect its operations as provided in Section 9.3.

3. Reporting. Mycosol will prepare and deliver or cause to be prepared and delivered the reports
prescribed in Section 9.4.

4. Intellectual Property. Mycosol will execute all documents and instruments and make all filings
and do all things as are necessary to maintain and protect its Intellectual Property, which acts
shall include, without limitation:

(a) prosecuting diligently any pending application for registration of Intellectual
Property;

(b) making application for registration of Intellectual Property, as appropriate;

(c) preserving and maintaining all rights in trademark and patent applications and
registrations; and

(d) diligently protecting Mycosol’s legal rights to the exclusive use of its Intellectual
Property.

5. Ordinary Course. Mycosol will conduct the Business in the ordinary course and diligently
operate the Business, doing all things necessary to maintain and promote the Business.

6. Co-operation. Mycosol will co-operate with Investor to execute all documents and instruments
and file and do all such things as are necessary to give effect to the transactions contemplated in
this Agreement, including without limitation, doing all things as are necessary to effect the
transfer of the Mycosol Common Shares held by the Mycosol Principals to Investor pursuant to any
exercise of the Right of First Refusal;

7. Conditions. Mycosol will take all steps necessary to fulfil, at or prior to any Closing, the
conditions in respect of each such Closing; and

8. No Changes to Veridien/Mycosol Relationship. Mycosol will not negotiate or agree to any
amendment to the Memorandum of Agreement or enter into any new agreement that will impair
Investor’s rights under this Agreement or impair the value of its investment in Veridien or
Mycosol, as determined by Investor in its sole discretion, acting reasonably, without the prior
written consent of Investor.

 

 

9. Elion. Subject to paragraph 10, where a Permitted Elion Transfer has occurred, neither Veridien
nor Mycosol shall permit Elion to enter into any transaction that would result in Elion ceasing to
be controlled by Mycosol or in Mycosol ceasing to own securities representing at least 50% of the
fully diluted equity interests in Elion.

10. Assets. If either (x) Mycosol or, (y) following a previous Permitted Elion Transfer, Elion
wishes to grant, transfer, sell, assign or otherwise dispose of any of the Intellectual Property
(collectively “Transfer”), whether to a third party or Related Party, or to encumber or permit any
of such assets to be encumbered in any manner (otherwise than pursuant to a Transfer that is a
Permitted Elion Transfer or an encumbrance to an institutional lender to secure borrowings by
Mycosol or Elion as applicable), or if Mycosol wishes to permit Elion to enter into a transaction
that would be prohibited by paragraph 9 above, Mycosol or Elion as applicable shall first provide
written notice to the Investor requesting the Investor’s consent to such Transfer, encumbrance or
transaction (the “Consent Request Notice”). The Consent Request Notice shall contain sufficient
information with respect to the proposed Transfer, encumbrance or transaction (the “Proposed
Transaction”) to permit Investor to make a reasonably informed decision as to whether or not the
Proposed Transaction is in the best interests of Mycosol and the Investor. On receipt of a Consent
Request Notice including the information referred to above, the Investor shall have 14 days within
which to advise Mycosol in writing whether the Investor consents to the Proposed Transaction, such
consent not to be unreasonably withheld. If the Investor does not so consent to the Proposed
Transaction and Mycosol or Elion, as applicable, wishes to proceed with the Proposed Transaction,
it may do so, provided that the terms of the transaction so implemented are the same as the terms
that were described to Investor in the Consent Request Notice in respect of the Proposed
Transaction and provided that Veridien has consented to the Proposed Transaction.

In the event that Mycosol or Elion, as applicable, decides to proceed with any Proposed Transaction
that requires the delivery of a Consent Request Notice pursuant to this paragraph 10 and to which
the Investor does not consent after receiving a Consent Request Notice, Mycosol or Elion, as
applicable, may do so on the following terms:

	(a)  	   Mycosol shall provide prior written notice to the Investor of the intention to proceed with
the Proposed Transaction (the “Decision Notice”). The Decision Notice shall be provided
forthwith at the earliest of the following times that are applicable in respect of the
transaction:

	 	(i)  	   the time that the executive committee of Mycosol decides to proceed with the
Proposed Transaction;
	 
	 	(ii)  	   the time that the board of directors of Mycosol decides to proceed with the
Proposed Transaction; or
	 
	 	(iii)  	   the time that the Proposed Transaction occurs (whether or not (i) or (ii) has
occurred).

- 2 -

 

	(b)  	   In the event that Mycosol becomes obligated to send a Decision Notice to Investor, Investor
shall have the right to put its Mycosol Common Shares acquired pursuant to this Agreement and
its Debenture to Veridien, for:

	 	(i)  	   in the case of the Mycosol Common Shares, a price equal to the initial cost
thereof to the Investor, plus 10% per annum, without compounding, to the date of
closing ; and
	 
	 	(ii)  	   in the case of the Debenture an amount equal to the outstanding principal and
any accrued and unpaid interest as at the date of closing.

	   	If Investor wishes to exercise such option, Investor shall deliver an Exercise Notice in
writing to Mycosol and Veridien within either (x) 30 Business Days of delivery of the
Decision Notice in a timely fashion under paragraph (a); or (y) if no Decision Notice has
been delivered in a timely fashion, within 30 days of the time that the Investor otherwise
learns of the occurrence of any of the events referred to in any of paragraphs (a)(i) to
(iv). The provisions of section 5.5 of the Agreement shall apply mutatis mutandis to the
closing of a purchase and sale under this paragraph 10(b), except that (x) payment shall be
in cash (i.e. paragraph 5.5(b) of the Agreement shall not apply); and (y) the closing shall
occur within 30 days after delivery by the Investor of the Exercise Notice under this
paragraph 10(b). If Investor exercises the put under this paragraph 10(b), the provisions
of this paragraph shall, unless otherwise agreed to by Investor, override any other call
right that Veridien has under the Agreement, unless such call right was exercised prior to
the earliest of the times set out in paragraphs (a) (i) to (iv) of this paragraph 10.

For greater certainty, (x) in the event that a Permitted Elion Transfer has occurred, this
paragraph 10 shall also apply in respect of any Intellectual Property of Elion such that any
proposed disposition or encumbrance by Elion after the Permitted Elion Transfer shall give rise to
the same obligations as a proposed disposition or encumbrance by Mycosol; (y) nothing in this
paragraph 10 shall be construed as requiring Mycosol to obtain Investor’s consent to enter into any
agreement with respect to the licensing, development, distribution or marketing of the Mycosol
Products, Technology or Intellectual Property in the ordinary course of the Business; and (z) in
the event that a put option arises under paragraph (b) in respect of a proposed or actual Transfer
or encumbrance of Technology but the Investor decides not to exercise such option, the provisions
of this paragraph 10, including where applicable the extension of a further put option under
paragraph (b), shall apply thereafter with respect to any other proposed or actual Transfer or
encumbrance of Intellectual Property.

11. For the purposes of paragraphs 10 and 11, a Permitted Elion Transfer is a Transfer to Elion
where all of the following conditions are met:

	 	(i)  	immediately after the Transfer, Mycosol shall control Elion and
shall own securities representing at least 50% of the fully diluted equity
interests in Elion; and

- 3 -

 

	 	(ii)  	Elion shall prior to the Transfer agree in writing with the
Investor that any subsequent disposition of Intellectual Property by Elion
shall be subject to the same restrictions as are contained in paragraph 10 of
this Schedule 8.4.

12. Mycosol covenants and agrees with Veridien that it will not take any action that would require
the delivery of a Decision Notice to the Investor pursuant to paragraph 10 above without the
written consent of Veridien. Veridien acknowledges that its obligation to the Investor under
paragraph 10 are not dependent upon Mycosol so doing.

13. If a put arises under paragraph 10 to Veridien, Mycosol will at Veridien’s direction assume
the obligations under the put and acquire the Mycosol Common Shares acquired pursuant to this
Agreement and the Investor’s Debenture in place of Veridien; however the assumption by Mycosol of
such obligations shall not relieve Veridien of its obligations in that regard should Mycosol fail
to duly perform such obligations.

- 4 -

 

SCHEDULE 8.5

REPRESENTATIONS AND WARRANTIES OF INVESTOR

     Investor represents and warrants to Veridien and Mycosol as follows and acknowledges that
Veridien and Mycosol are relying upon such representations and warranties in connection with the
transactions contemplated in this Agreement.

1. Investor is an “accredited investor” as that term is defined in Regulation D promulgated by the
U.S. Securities and Exchange Commission.

2. Investor is capable of evaluating the risks and merits of the transactions contemplated in this
Agreement.

3. Investor has been afforded the opportunity to ask questions of, and obtain information from, the
respective managements of Veridien and Mycosol and has requested such information to the extent
that it has deemed necessary to make an informed investment decision and has received answers and
documentation satisfactory to it. Notwithstanding the preceding sentence, the parties acknowledge
that Investor and its representatives have not performed, at the time of this Agreement, any
independent review of the scientific know-how and intellectual property of Mycosol and Investor is
relying on the written claims and information provided to it by Mycosol in respect of such
scientific know-how and intellectual property and upon the representations and warranties of
Veridien and Mycosol hereunder.

4. Investor is aware of the terms of the Memorandum of Agreement between Veridien and Mycosol and
is aware that it is purchasing a portion of Veridien’s investment.

5. Investor is aware that it is purchasing the portion of Veridien’s investment in Mycosol in a
private transaction, that the Mycosol Common Shares are restricted as to further transfer or
disposition, and that it has no present intent to sub-divide, hypothecate, pledge, distribute or
otherwise dispose of such portion.

6. Investor is aware of the availability of Veridien’s periodic filings with the U.S. Securities
and Exchange Commission on the SEC website (www.sec.gov) and has performed such review of those as
it has deemed necessary to make an informed investment decision.

7. Investor is aware that no securities commission or agency has reviewed the transactions
contemplated in this Agreement or evaluated or approved the fairness of the terms thereof.

8. Investor represents that its investment is not the result of a public advertisement or public
solicitation, but the result of individual contact by persons who have a prior relationship.

9. Investor acknowledges that Mycosol and/or Elion may with the approval of their respective board
of directors and the executive committee of Mycosol, elect to raise further capital for use in
connection with the Technology or other projects.

 

 

SCHEDULE 9.1

FULL DEVELOPMENT PLAN FOR REAGENT/DIAGNOSTIC PRODUCT

LINE USING MYCOSOL LEAD COMPOUND “M301” OR ONE

OR MORE OF ITS HOMOLOGS OR SISTER COMPOUNDS

 

 

SCHEDULE 10.1

PATENTS AND PATENT APPLICATIONS

Published Patent Applications:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Publication /	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Application	 	 	Publication	 	 	 	 	 	 	 
	 	Jurisdiction	 	 	Number	 	 	Date	 	 	Title	 	 	Status	 
	 	United States

	 	 	 20040224984
	 	 	November 11, 2004
	 	 	Methods of treating
inflammations and
infections with
pyridium salts

	 	 	Published	 
	 	United States

	 	 	 20040235898
	 	 	November 25, 2004
	 	 	Compounds and
methods for
controlling fungi,
bacteria and
insects

	 	 	Published	 
	 	Patent Cooperation

Treaty – World

Omnibus patent

application

	 	 	 WO 2004/078136
	 	 	September 16, 2004
	 	 	Pyridinium salts,
compounds and
methods of use

	 	 	Published	 
	 

Patent Applications Filed:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Jurisdiction	 	 	File Number	 	 	Filing Date	 	 	Title	 	 	Status	 
	 	United States

	 	 	 60/524,784
	 	 	December 17, 2004
	 	 	Methods for
controlling fungi
and bacteria

	 	 	Filed	 
	 	United States

	 	 	 60/636,952
	 	 	December 22, 2003
	 	 	Thiazolium
compounds and uses

	 	 	Filed	 
	 	United States

	 	 	 60/635,461
	 	 	December 10, 2004
	 	 	Wide dispenser with wipe guide

	 	 	Filed	 
	 	United States

	 	 	 60/637,183
	 	 	December 17, 2004
	 	 	Stilbazium and
thiazolium assays

	 	 	Filed	 
	 

 

 

EXHIBIT 1

MEMORANDUM OF AGREEMENT

AND

AMENDMENT #1 THERETO

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