exv10w13



 




Exhibit 10.13




Tomkins Capital Group Letterhead




October 25, 2006




Mr. Joel A. Balbien

Chief Executive Officer

Kreido Laboratories

1140 Avenida Acaso

Camarillo, CA 93012




Dear Mr. Balbien:



We refer to that certain term sheet dated September 1, 2006 (the “Term Sheet”) between Tompkins
Capital Group (“TCG”) and Kreido Laboratories (“Kreido”) with respect to a reverse triangular
merger and a PPO (as defined therein) and related transactions (“Transactions”). Capitalized terms
not defined in this letter shall have the meanings given to them in the Term Sheet.



TCG and Kreido desire to amend certain provisions of the Term Sheet.



Accordingly, the Term Sheet is hereby amended as follows;




The first and second paragraphs of the Provision entitled “1. Structure” in the Term Sheet are
hereby deleted in their entirety and replaced with the following:



	 	 	 
	1. Structure.

	 	Pubco, a publicly traded company currently listed on the
NASD OTC Bulletin Board and not registered under the
Securities Exchange Act of 1934, as amended, will enter into
a reverse triangular merger with Kreido and a newly formed
acquisition subsidiary of Pubco, which merger shall qualify
as a tax-free reorganization under the Internal Revenue
Code, and pursuant to which Pubco will acquire all the
outstanding shares of Kreido (the “Merger”) in exchange for
shares of Pubco common stock (“Common Stock”) with an
anticipated closing date on or before November 30, 2006 (the
“Closing Date”). Following the Closing Date, Pubco will
change its name to such other alternate name as shall be
determined by Kreido.
	 
	 	 
	 

	 	Upon the Closing Date, and as a precondition for Kreido
participation in the Merger, Pubco shall have closed on
private placement financing of units (“Units”) of Pubco
securities as discussed in Section 4 below, and the Board of
Directors of Pubco shall have adopted, subject to
shareholder approval following the Closing Date, a Three
Million Eight Hundred and Fifty Thousand (3,850,000) Share
Employee Incentive Stock Option Plan (“ESOP”).





 


 









 





The final sentence of the final paragraph of the Provision entitled “2. Merger”
in the Term Sheet is hereby deleted in its entirety and replaced with the
following:




The value of the R&W Shares
issued pursuant to the
adjustment mechanism will be
fixed at the per Unit price
of Units sold in the PPO as
defined below (which price
is currently contemplated to
be $1.35 per Unit).



The Provision entitled “3. Consideration” in the Term Sheet is hereby deleted
in its entirety and replaced with the following:



	 	 	 
	3. Consideration

	 	In consideration for the Merger, the
stockholders of Kreido shall receive Twenty
Seven Million (27,000,000) shares of Common
Stock of Pubco in exchange for all the
shares of common stock of Kreido. The shares
of Common Stock of Pubco received by the
stockholders of Kreido shall represent
approximately fifty five percent (55.0%) of
the shares of Common Stock of Pubco, if the
Minimum PPO, as such term is defined below,
is sold, and approximately fifty one and
nine tenths percent (51.9%) of the shares of
Common Stock of Pubco, if the Maximum PPO,
as such term is defined below, is sold, in
each case on a fully diluted basis after
giving effect to the Merger and the shares
of Common Stock issued in the PPO but not
the shares granted under the ESOP, or the
R&W Shares or the Investor Warrants, as
defined below. For purposes of the Merger,
Kreido’s capitalization table shall be
frozen as of October 31, 2006, and Kreido
shall be authorized to issue (“Bridge
Notes”) to satisfy its working capital needs
pending the closing of the Transactions.
Bridge Notes issued after October 31, 2006
and on or before November 30, 2006 shall,
and Bridge Notes issued after November 30,
2006 at the discretion of the lender may,
convert in their entirety into Units in the
PPO, at a conversion price identical to the
price per Unit in the PPO (which currently
is anticipated to be $1.35 per Unit), upon
the close of the PPO.
	 
	 	 
	 

	 	In consideration for the Merger, the
stockholders of Pubco will retain Eight
Million Seven Hundred and Fifty Thousand
(8,750,000) shares of Common Stock of Pubco
representing approximately seventeen and
eight tenths percent (17.8%) of the shares
of Common Stock of Pubco, if the Minimum PPO
is sold, and approximately sixteen and eight
tenths percent (16.8%) of the shares of
Common Stock of Pubco, if the Maximum PPO is
sold, in each case on a fully diluted basis
after giving effect to the Merger and the
shares of Common Stock issued in the PPO but
not the shares granted under the ESOP, or
the R&W Shares or the Investor Warrants.






 


 









 





	 	 	 
	 

	 	The investors in the PPO will own:







	 	(a)	 	Thirteen Million Three Hundred and
Thirty Three Thousand Three Hundred and
Thirty Four (13,333,334) shares of Common
Stock of Pubco representing approximately
twenty seven and two tenths percent (27.2%)
of the shares of Common Stock of Pubco, if
the Minimum PPO is sold; and

	 
	 	(b)	 	Sixteen Million Two Hundred and Ninety
Six Thousand Two Hundred and Ninety Seven
(16,296,297) shares of Common Stock of
Pubco, representing approximately thirty one
and three tenths percent (31.3%) of the
 shares of Common Stock of Pubco if the
Maximum PPO is sold,






	 	 	 
	 

	 	in each case on a fully diluted basis after
giving effect to the Merger and the shares
of Common Stock issued in the PPO, but not
the shares granted under the ESOP, or the
R&W Shares or the Investor Warrants.
	 
	 	 
	 

	 	Subject to the cancellation of the 2,000,000
R&W Shares held in escrow as provided in the
last paragraph of Section 2 above, the total
shares of Common Stock of Pubco outstanding
after giving effect to the Transactions on a
fully diluted basis will be approximately
59,600,001 shares, if the Minimum PPO is
sold, and approximately 64,044,446 shares,
if the Maximum PPO is sold, in each case
including the shares reserved for issuance
under the ESOP and the shares reserved for
issuance under the Investor Warrants.






The first paragraph of the Provision entitled “4. Private Placement Offering”
in the Term Sheet is hereby deleted in its entirety and replaced with the
following:



	 	 	 
	4. Private Placement Offering

	 	Pubco will conduct a private placement
offering pursuant to Regulation D
of the Securities Act and any and all
applicable state securities laws (the “PPO”)
of a minimum (the “Minimum PPO”) of Thirteen
Million Three Hundred and Thirty Three
Thousand Three Hundred and Thirty Four
(13,333,334) Units of its securities, and a
maximum (the “Maximum PPO”) of Sixteen
Million Two Hundred and Ninety Six Thousand
Two Hundred and Ninety Seven (16,296,297)
Units of its securities, in each case
including any securities issued upon the
conversion of Bridge Notes, at an offering
price of $1.35 per Unit. Each unit shall
consist of one (1) share of Common Stock and
one half of one common stock purchase
warrant (“Investor Warrants”). Each Investor
Warrant will entitle the holder thereof to
purchase one share of Pubco Common Stock, at
an exercise price of $1.85 per share, and
will be exercisable for a period of five (5)
years from the Closing Date.






 


 









 





	 	 	 
	 

	 	Broker-dealers who introduce investors to
the PPO will be paid a commission of seven
percent (7%) of funds raised from such
investors in the PPO.






The following language is added at the end of the Provision entitled “9.
Restriction on Sale” in the Term Sheet:



	 	 	 
	 

	 	At Closing, the principals of Kreido shall
enter into Lock-Up Agreements with Pubco for
a term of 12 months whereby they agree to
certain restrictions on the sale or
disposition of all of the Common Stock of
Pubco acquired by them in connection with
the Merger. In addition, for a period of one
year following the closing of the
Transactions, the Parent shall not register,
nor shall it take any action to facilitate
registration, under the Securities Act, the
shares of Pubco Common Stock issued pursuant
to the Merger.






The Provision entitled “13. Closing Costs” in the Term Sheet is hereby deleted
in its entirety and replaced with the following:



	 	 	 
	13. Closing Costs

	 	All fees and expenses relating to the
Transactions, including but not limited to
legal and accounting fees, will be payable
at Closing from the proceeds of the PPO. The
Parties understand that G&P shall be engaged
by Pubco to serve as its securities counsel
(“G&P Retainer”) prior to the Closing Date
and that fees and expenses of G&P incurred
by Pubco will similarly be payable at
Closing from the proceeds of the PPO. G&P
shall handle all securities matters
requested by Pubco (as defined below),
including, but not limited to, any
registration statements to be filed with the
SEC under the Securities Act of 1933 and any
compliance filing to be filed with the SEC
under the Securities Exchange Act of 1934
(e.g., 10-K, 10-Q, 8-K, 14C, S-8, S-4, etc.)
to the extent necessary to facilitate the
Closing. The terms and conditions of the G&P
Retainer will be subject to a written
agreement to be acceptable to Pubco and
Kreido prior to the retainer being
effective. G&P’s fee for such representation
shall be limited to a maximum of $150,000.
	 
	 	 
	 

	 	In addition, the fee of McGuire Woods LLP
for its representation of Kreido in
connection with the Transactions shall be
limited to a maximum of $175,000.





 


 









 





The Provision entitled “14. Exclusivity” in the Term Sheet is hereby deleted in
its entirety and replaced with the following:



	 	 	 
	14. Exclusivity

	 	From and after the Effective Date and
continuing through January 15, 2007 (the
“Exclusivity Period”), Kreido hereby
covenants and agrees that it will not enter
into any agreement or consummate any
transaction with any third party in whatever
form, other than in the ordinary course of
business (including, without limitation,
joint venture, sale, license, distribution
agreement, etc.) or enter into any other
transaction thatwould preclude the
consummation of the PPO and the Merger
Agreement consistent with the terms set
forth in this Term Sheet. During the
Exclusivity Period, Pubco will incur
additional legal and other costs and
expenses in connection with the negotiation
of the Transaction and certain due diligence
activities relating thereto. TCG shall have
the right, upon notice to the other parties
hereto, to terminate its obligations
hereunder at any time if the results of its
due diligence inquiry are unsatisfactory to
TCG, in TCG’s sole discretion.






SIGNATURE PAGE TO IMMEDIATELY FOLLOW



 


 









 





Other than the foregoing amendments, all other terms and conditions of the Term Sheet remain in
full force and effect.



AGREED TO AND ACCEPTED: This 25th day of




October, 2006




	 	 	 	 	 
	Tompkins Capital Group LLC

 	 	 
	By:  	/s/ Mark Tompkins
 	 	 
	 	Name:  	Mr. Mark Tompkins 	 	 
	 	Title:  	Manager 	 	 
	 
	Kreido Laboratories

 	 	 
	By:  	/s/ Joel A. Balbien
 	 	 
	 	Name:  	Dr. Joel A. Balbien 	 	 
	 	Title:  	Chief Executive Officer