Filed by Bowne Pure Compliance



 




Exhibit 10.12




Tomkins Capital Group Letterhead




September 1, 2006




Mr. Joel A. Balbien

Chief Executive Officer

Kreido Laboratories, [Inc.]

1140 Avenida Acaso

Camarillo, CA 93012




Dear Mr. Balbien:




We are pleased to submit this binding Term Sheet whereby Tompkins Capital Group, or its affiliates
(“TCG”), will assist Kreido Laboratories, [Inc.] (“Kreido”), and a US publicly traded company
(“Pubco”), in connection with a reverse triangular merger and a PPO (as defined herein) and related
transactions (“Transactions”). We agree that this Term Sheet supersedes and replaces any and all
prior oral and/or written agreements.



	 	 	 
	Item	 	Description
	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 October 31, 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 Seven
Hundred and Fifty Thousand (3,750,000)
Share Employee Incentive Stock Option Plan
(“ESOP”).
	 
	 	 
	 

	 	The above-described transactions will
hereinafter be referred to as the
“Transaction” or “Transactions.” All
references in this Term Sheet to “$s” or
“dollars” are to United States dollars,
unless the context specifically provides
otherwise.






 


 









 





	 	 	 
	Item	 	Description
	2. Merger

	 	The definitive merger agreement among
Pubco, Kreido and the acquisition
subsidiary (the “Merger Agreement”) will
contain customary representations and
warranties for a transaction of this type.
In particular, Pubco will represent,
warrant and covenant to Kreido that on the
date of the Merger Agreement and on the
Closing Date, that Pubco (and the
acquisition subsidiary as applicable):







	 	(a)	 	is a US corporation in good standing
whose shares are presently eligible for
quotation on the NASD OTC Bulletin Board
and not subject to any notice of suspension
or delisting;

	 
	 	(b)	 	has complied with all applicable
federal and state securities laws and
regulations, including being current in all
of its reporting obligations under federal
securities laws and regulations;

	 
	 	(c)	 	no order suspending the effectiveness
of Pubco’ Registration Statement on Form
SB-2 has been issued by the Securities and
Exchange Commission (the “SEC”) and, to
Pubco’ knowledge, no proceedings for that
purpose have been initiated or threatened
by the SEC;

	 
	 	(d)	 	is not, and has not, and the past and
present officers, directors and affiliates
of Pubco are not and have not, been the
subject of, nor does any officer or
director of Pubco have any reason to
believe that Pubco or any of its officers,
directors or affiliates will be the subject
of, any civil or criminal proceeding or
investigation by any federal or state
agency alleging a violation of securities
laws;

	 
	 	(e)	 	is not, and has not been the subject of
any voluntary or involuntary bankruptcy
proceeding, nor is it or has it been a
party to any material litigation.
Litigation shall be deemed “material” if
the amount at issue exceeds the lesser of
$10,000 per matter or $25,000 in the
aggregate;

	 
	 	(f)	 	has not, and the past and present
officers, directors and affiliates of Pubco
have not, been the subject of, nor does any
officer or director of Pubco have any
reason to believe that Pubco or any of its
officers, directors or affiliates will be
the subject of, any civil, criminal or
administrative investigation or proceeding
brought by any federal or state agency;





 


 









 






	 	 	 
	Item	 	Description






	 	(g)	 	will discontinue all of its business
operations without any material adverse
effect upon Pubco, and Pubco has no
material liabilities, contingent or
otherwise in any way related to any such
business operations; and

	 
	 	(h)	 	does not, on the Closing Date, have any
liabilities, contingent or otherwise,
including but not limited to notes payable
and accounts payable, except as otherwise
discussed herein, and is not a party to any
executory agreements.






	 	 	 
	 

	 	The Merger Agreement will contain customary
indemnification provisions to secure
breaches of representations and warranties
reasonably satisfactory to the parties.
Such provisions shall provide, among other
things, that the stockholders of Kreido as
of the date of the execution of this Term
Sheet (the “Effective Date”) shall
initially receive in the Merger ninety five
percent (95%) of the shares to which such
stockholder is entitled, with the remaining
five percent (5%) of such shares being held
in escrow for two (2) years to satisfy post
Closing claims for indemnification by
Pubco. The Merger Agreement will also
contain a provision providing for a
post-Closing share adjustment as a means
for which claims for indemnity may be made
by Kreido. Pursuant to the provision up to
2,000,000 shares (the “R&W Shares”) of
Common Stock may be issued to stock holders
of Kreido, pro rata, during the two (2)
year period following the Closing Date for
breaches of representations and warranties.
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 $1.30
per Unit).
	 
	 	 
	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 four and five tenths
percent (54.5%) of the shares of Common
Stock of Pubco, if the Minimum PPO, as such
term is defined below, is sold, and
approximately fifty two and eight tenths
percent (52.8%>) 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.





 


 









 





	 	 	 
	Item	 	Description
	 

	 	In consideration for the Merger, the
stockholders of Pubco will retain Eight
Million (8,750,000) shares of Common Stock
of Pubco representing approximately
seventeen and six tenths percent (17.6%) of
the shares of Common Stock of Pubco, if the
Minimum PPO is sold, and approximately
seventeen and one tenth percent (17.1%>)
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 Eight Hundred and
Forty Six Thousand One Hundred and Fifty
Three (13,846,153) shares of Common Stock
of Pubco representing approximately twenty
seven and nine tenths percent (27.9%o) of
the shares of Common Stock of Pubco, if the
Minimum PPO is sold; and

	 
	 	(b)	 	Fifteen Million Three Hundred and
Eighty Four Thousand Six Hundred and
Fifteen (15,384,615) shares of Common Stock
of Pubco, representing approximately thirty
and one tenth percent (30.1%) 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 60,269,229 shares, if
the Minimum PPO is sold, and approximately
62,576,923 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.
	 
	 	 
	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 Eight Hundred and Forty
Six Thousand One Hundred and Fifty Three
(13,846,153) Units of its securities, and a
maximum (the “Maximum PPO”) of Fifteen
Million Three Hundred and Eighty Four
Thousand Six Hundred and Fifteen
(15,384,615) Units of its securities, at an
offering price of $1.30 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
$1.80 per share, and will be exercisable
for a period of five (5) years from the
Closing Date.





 


 









 





	 	 	 
	Item	 	Description
	 

	 	The parties acknowledge that TCG will
assist Kreido on a “best efforts” basis in
finding qualified subscribers for the PPO.
The parties agree that TCG has no
commitment to sell the Units, and shall
have no liability hereunder if all or any
of the Units are not sold.
	 
	 	 
	5. Financial Statements of
Kreido

	 	On or prior to the Closing Date, Kreido
shall provide any such audited or unaudited
financial statements as may be required
under applicable U.S. Securities Exchange
Commission (“SEC”) regulations for
inclusion of such statements in Pubco’s SEC
and other regulatory filings.
	 
	 	 
	6. Signing Date

	 	It is contemplated that the definitive
agreement (the “Merger Agreement”) will be
signed on or before the last day of the
Exclusivity Period (hereinafter defined).
The Merger Agreement shall contain such
terms and provisions as shall be mutually
agreed upon between Kreido and Pubco
consistent with the provisions in this Term
Sheet.
	 
	 	 
	7. Board of Directors

	 	Immediately following the Closing Date, the
Board of Directors shall consist of five
(5) members. On the Closing Date, all of
the current officers and directors of Pubco
shall resign and, simultaneously therewith,
appoint a new Board of Directors and such
executive officers as shall be determined
solely by Kreido. On the Closing Date,
Pubco shall have the right to appoint one
(1) member of the five (5) new members of
the Board of Directors, provided such
appointee is reasonably acceptable to the
Kreido appointed directors.
	 
	 	 
	8. Registration

	 	Promptly, but no later than one hundred
twenty (120) calendar days from the Closing
Date of the Merger, Pubco shall file a
registration statement (on Form SB-2, or
similar form) with the SEC covering the
shares of Pubco Common Stock issued in
connection with the PPO (including the
shares of Common Stock underlying the
Investor Warrants) (the “Registration
Statement”). Pubco shall use its best
efforts to ensure that such Registration
Statement is declared effective within one
hundred twenty (120) calendar days of
filing with the SEC. There shall be
monetary penalties if Pubco is late in
filing the Registration Statement or if the
Registration Statement is not declared
effective within one hundred twenty (120)
days of filing with the SEC. Such penalties
shall be equal to one and one-quarter
percent (1.25%) of the gross proceeds of
the PPO for each full month that (i) Pubco
is late in filing the Registration
Statement or (ii) the Registration
Statement is late in being declared
effective; provided, however, that in no
event shall the aggregate of any such
penalties exceed fifteen percent (15%) of
the gross proceeds of the PPO. Pubco shall
keep the Registration Statement “Evergreen”
for two (2) years from the date it is
declared effective by the SEC or until Rule
144(k) of the Securities Act of 1933, as
amended, is available to the PPO investors
with respect to all of their shares,
whichever is earlier. Pubco shall retain,
and pay at its sole expense, Gottbetter &
Partners, LLP (“G&P”) to file the
Registration Statement.






 


 









 





	 	 	 
	Item	 	Description
	9. Restriction on Sale

	 	All securities issued pursuant to the
Merger will be “restricted” stock and be
subject to all applicable resale
restrictions specified by federal and state
securities laws.
	 
	 	 
	10. Conditions to Closing

	 	The Merger shall include certain closing
conditions including the following: (i)
consummation of all required definitive
instruments and agreements, including, but
not limited to, the Merger Agreement; (ii)
obtaining all necessary board, shareholder
and third party consents; (iii)
satisfactory completion by Pubco and Kreido
of all necessary technical and legal due
diligence, and (iv) the completion of the
offer and sale of the PPO.
In connection with the Transactions Pubco
will change its name to such name as is
acceptable to Kreido.
Notwithstanding the foregoing, the parties
shall continue to be bound by the
provisions of Section 17 in the event of
any termination of this Term Sheet.
	 
	 	 
	11. Pre-Closing Covenants

	 	Pubco and Kreido shall each cooperate with
each other and use their reasonable best
efforts to execute and deliver the Merger
Agreement and all other documents necessary
or desirable to effect the Transactions as
soon as possible and to thereafter satisfy
each of the conditions to closing specified
thereunder. Kreido will retain McGuire
Woods, LLP as its corporate and securities
counsel for the purpose of effectuating the
Transactions. The terms and conditions of
the retention of McGuire Woods, LLP will be
subject to a written agreement to be
acceptable to Kreido prior to the retainer
being effective.
	 
	 	 
	12. Employment Agreement

	 	Mr. Joel A. Balbien shall have an
employment agreement mutually satisfactory
to Kreido and Pubco and to Mr. Balbien.
	 
	 	 
	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.






 


 









 





	 	 	 
	Item	 	Description
	14. Exclusivity

	 	From and after the Effective Date and
during a period of one hundred twenty (120)
days thereafter (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 that would
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.
	 
	 	 
	15. Governing Law

	 	This Agreement shall be governed and
construed in accordance with the laws of
the State of New York, without giving
effect to principles of conflicts or choice
of laws thereof.
	 
	 	 
	16. Use of Proceeds

	 	Pubco shall receive the gross proceeds from
the PPO, less the legal and accounting fees
of Pubco, as set forth herein. The gross
proceeds will be utilized for (i) a
mutually agreeable $500,000 investor
relations program, (ii) general working
capital purposes and (iii) development of
three (3) bio-diesel production facilities
using Kreido technology.
	 
	 	 
	17. Termination and Effects
of Termination

	 	The obligations of the parties to each
other under this Term Sheet shall terminate
upon the first to occur of (x) the
expiration of the Exclusivity Period, (y)
termination by TCG pursuant to Section 14
of this Term Sheet or (z) the execution and
delivery of a Merger Agreement among
Kreido, Pubco and the acquisition
subsidiary, provided that the provisions
and obligations of the parties created by
Sections 17 and 18 shall survive the
termination of this Term Sheet in any
event.
	 
	 	 
	18. Confidentiality

	 	Each of the parties to this Term Sheet
agrees to maintain the confidentiality of
the terms of this Term Sheet and the
Transaction, and not to use any information
it may learn about the other party for any
purpose other than to consummate the
Transaction. Further, no disclosure of any
information concerning this Term Sheet, the
Transaction or any confidential information
of the delivering party bearing a label
“confidential” or any similar marking shall
be disclosed to any other person unless and
until such person shall have first executed
and delivered a written confidentiality
agreement by which such person agrees to
hold in confidence all such confidential
information (unless by operation of law or
pre-existing agreement, such person is
already bound by such confidentiality
obligations).






 


 









 





	 	 	 
	Item	 	Description
	 

	 	Any notices desired, required or permitted
to be given hereunder shall be delivered
personally or mailed, certified or
registered mail, return receipt requested,
or delivered by overnight courier service,
to the following addresses, or such other
addresses as shall be given by notice
delivered hereunder, and shall be deemed to
have been given upon delivery, if delivered
personally, four (4) days after mailing, if
mailed, or one (1) business day after
timely delivery to the overnight courier
service, if delivered by overnight courier
service: (i) if to TCG, to 488 Madison
Ave., 12th FL, New York, NY 10022,
Attention: Mr. Mark Tompkins, with a copy
to Gottbetter & Partners, LLP, 488 Madison
Ave., 12th FL, New York, NY 10022,
Attention: Adam S. Gottbetter, Esq., and
(ii) if to Kreido, to Mr. Joel A. Balbien,
1140 Avenida Acaso, Camarillo, CA 93012,
with a copy to McGuire Woods LLP, 1345
Avenue of the Americas, New York, New York
10105, Attention: Louis W. Zehil, Esq., and
with a copy to DLA Piper US LLP, 203 North
LaSalle Street, Suite 1900, Chicago,
Illinois 60601, Attention: John H.
Heuberger, Esq.






SIGNATURE PAGE TO IMMEDIATELY FOLLOW



 


 









 





This Term Sheet sets forth the principal terms of the Transaction and constitutes a binding
contract on the part of the parties hereto. All of these binding obligations of the parties with
respect to the Transaction shall be further memorialized by the execution and delivery of the
definitive Merger Agreement and the related PPO documentation.



We look forward to working with you to complete the Transaction successfully and
expeditiously. If the foregoing correctly sets forth your understanding, please evidence your
agreement to this Term Sheet by executing a copy of this Term Sheet in the space set forth below.



AGREED TO AND ACCEPTED:




This 1st day of September, 2006.




	 	 	 	 	 
	KREIDO LABORATORIES, INC.

 	 	 
	By:  	/s/ Joel A. Balbien
 	 	 
	 	Name:  	Mr. Joel A. Balbien 	 	 
	 	Title:  	CEO 	 	 
	 
	TOMPKINS CAPITAL GROUP

 	 	 
	By:  	/s/ Mark Tompkins
 	 	 
	 	Name:  	Mr. Mark Tompkins 	 	 
	 	Title:  	Principal