Document:

EXHIBIT
      10.1

     

    ESCROW
      AGREEMENT

     

    This
      Escrow Agreement is entered into as of January 12, 2007, by and among Kreido
      Biofuels, Inc. (f/k/a Gemwood Productions, Inc.), a Nevada corporation (the
      “Parent”), Joel A. Balbien (the “Indemnification Representative”) and Gottbetter
& Partners, LLP (the “Escrow Agent”).

     

    WHEREAS,
      the Parent has entered into an Agreement and Plan of Merger and Reorganization
      (the “Merger Agreement”) with Kreido Laboratories, a California corporation (the
“Company”), (i) pursuant to which a wholly-owned subsidiary of the Parent will
      merge with and into the Company, with the Company surviving the merger and
      (ii)
      as a result of which the Company will become a wholly-owned subsidiary of the
      Parent;

     

    WHEREAS,
      the Merger Agreement provides that an escrow account will be established to
      secure the indemnification obligations of the stockholders of the Company as
      of
      the Closing Date, as such terms are defined in the Merger Agreement
      (collectively, the “Indemnifying Stockholders”) to the Parent; and

     

    WHEREAS,
      the parties hereto desire to establish the terms and conditions pursuant to
      which such escrow account will be established and maintained.

     

    NOW,
      THEREFORE, the parties hereto hereby agree as follows:

     

    1. Consent
      of Company Stockholders.
      The
      Indemnifying Stockholders have, either by virtue of their entry into the Merger
      Agreement or through the execution of an instrument to such effect, consented
      to: (a) the establishment of this escrow to secure the Indemnifying
      Stockholders’ indemnification obligations under Article 6 of the Merger
      Agreement in the manner set forth herein, (b) the appointment of the
      Indemnification Representative as their representatives for purposes of this
      Agreement and as attorneys-in-fact and agents for and on behalf of each
      Indemnifying Stockholder, and the taking by the Indemnification Representative
      of any and all actions and the making of any decisions required or permitted
      to
      be taken or made by them under this Agreement and (c) all of the other
      terms, conditions and limitations in this Agreement.

     

    2. Escrow
      and Indemnification.

     

    (a) Escrow
      of Shares.
      Simultaneously with the execution of this Agreement, the Parent shall deposit
      with the Escrow Agent a certificate for 1,350,000 shares of common stock of
      the
      Parent, as determined pursuant to Section 1.5(b) of the Merger Agreement,
      issued in the name of the Escrow Agent or its nominee. The Escrow Agent hereby
      acknowledges receipt of such stock certificate. The shares deposited with the
      Escrow Agent pursuant to the first sentence of this Section 2(a) are
      referred to herein as the “Escrow Shares.” The Escrow Shares shall be held as a
      trust fund and shall not be subject to any lien, attachment, trustee process
      or
      any other judicial process of any creditor of any party hereto. The Escrow
      Agent
      agrees to hold the Escrow Shares in an escrow account (the “Escrow Account”),
      subject to the terms and conditions of this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Indemnification.
      The
      Indemnifying Stockholders have agreed in Section 6.1 of the Merger Agreement
      to
      indemnify and hold harmless the Parent from and against specified Damages (as
      defined in Section 6.1 of the Merger Agreement). The Escrow Shares shall be
      security for such indemnity obligation of the Indemnifying Stockholders, subject
      to the limitations, and in the manner provided, in this Agreement.

     

    (c) Dividends,
      Etc.
      Any
      securities distributed in respect of or in exchange for any of the Escrow
      Shares, whether by way of stock dividends, stock splits or otherwise, shall
      be
      issued in the name of the Escrow Agent or its nominee, and shall be delivered
      to
      the Escrow Agent, who shall hold such securities in the Escrow Account. Such
      securities shall be considered Escrow Shares for purposes hereof. Any cash
      dividends or property (other than securities) distributed in respect of the
      Escrow Shares shall promptly be distributed by the Escrow Agent to the
      Indemnifying Stockholders in accordance with Section 3(c).

     

    (d) Voting
      of Shares.
      The
      Indemnification Representative shall have the right, in its sole discretion,
      on
      behalf of the Indemnifying Stockholders, to direct the Escrow Agent in writing
      as to the exercise of any voting rights pertaining to the Escrow Shares, and
      the
      Escrow Agent shall comply with any such written instructions. In the absence
      of
      such instructions, the Escrow Agent shall not vote any of the Escrow Shares.
      The
      Indemnification Representative shall have no obligation to solicit consents
      or
      proxies from the Indemnifying Stockholders for purposes of any such
      vote.

     

    (e) Transferability.
      The
      respective interests of the Indemnifying Stockholders in the Escrow Shares
      shall
      not be assignable or transferable, other than by operation of law. Notice of
      any
      such assignment or transfer by operation of law shall be given to the Escrow
      Agent and the Parent, and no such assignment or transfer shall be valid until
      such notice is given.

     

    3. Distribution
      of Escrow Shares.

     

    (a) The
      Escrow Agent shall distribute the Escrow Shares only in accordance with (i)
      a
      written instrument delivered to the Escrow Agent that is executed by both the
      Parent and the Indemnification Representative and that instructs the Escrow
      Agent as to the distribution of some or all of the Escrow Shares, (ii) an
      order of a court of competent jurisdiction, a copy of which is delivered to
      the
      Escrow Agent by either the Parent or the Indemnification Representative, that
      instructs the Escrow Agent as to the distribution of some or all of the Escrow
      Shares, or (iii) the provisions of Section 3(b) hereof.

     

    (b) Within
      five business days after January 12, 2008 (the “Termination Date”), the Escrow
      Agent shall distribute to the Indemnifying Stockholders all of the Escrow Shares
      then held in escrow, registered in the name of the Indemnifying Stockholders.
      Notwithstanding the foregoing, if the Parent has previously delivered to the
      Escrow Agent a copy of a Claim Notice and the Escrow Agent has not received
      written notice of the resolution of the claim covered thereby, or if the Parent
      has previously delivered to the Escrow Agent a copy of an Expected Claim Notice
      and the Escrow Agent has not received written notice of the resolution of the
      anticipated claim covered thereby, the Escrow Agent shall retain in escrow
      after
      the Termination Date such number of Escrow Shares as have a Value (as defined
      in
      Section 4 below) equal to the Claimed Amount covered by such Claim Notice
      or equal to the estimated amount of Damages set forth in such Expected Claim
      Notice, as the case may be. Any Escrow Shares so retained in escrow shall be
      distributed only in accordance with the terms of clauses (i) or (ii) of
      Section 3(a) hereof. For purposes of this Agreement, a Claim Notice means a
      written notification under the Merger Agreement given by the Parent to the
      Indemnifying Stockholders which contains (i) a description and the amount (the
      “Claimed Amount”) of any Damages incurred or reasonably expected to be incurred
      by the Parent, (ii) a statement that the Parent is entitled to indemnification
      under Article 6 of the Merger Agreement for such Damages and a reasonable
      explanation of the basis therefor, and (iii) a demand for payment (in the manner
      provided in Article 9 of the Merger Agreement below) in the amount of such
      Damages. For purposes of this Agreement, an Expected Claims Notice means a
      notice delivered pursuant to the Merger Agreement by the Parent to an
      Indemnifying Stockholder, before expiration of a representation or warranty,
      to
      the effect that, as a result a legal proceeding instituted by or written claim
      made by a third party, the Parent reasonably expects to incur Damages as a
      result of a breach of such representation or warranty.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (c) Any
      distribution of all or a portion of the Escrow Shares (or cash or other property
      pursuant to Section 2(c)) to the Indemnifying Stockholders shall be made by
      delivery of stock certificates issued in the name of the Indemnifying
      Stockholders covering such percentage of the Escrow Shares being distributed
      as
      is calculated in accordance with the percentages set forth opposite such
      holders’ respective names on Attachment A
      attached
      hereto; provided,
      however,
      that
      the Escrow Agent shall withhold the distribution of the portion of the Escrow
      Shares otherwise distributable to an Indemnifying Stockholder who has not,
      according to a written notice provided by the Parent to the Escrow Agent, prior
      to such distribution, surrendered pursuant to the terms of the Merger Agreement
      his, her or its documents formerly representing equity interests of the Company.
      Any such withheld shares shall be delivered to the Parent promptly after the
      Termination Date, and shall be delivered by the Parent to the Indemnifying
      Stockholders to whom such shares would have otherwise been distributed upon
      surrender of documents evidencing their Company equity interests. Distributions
      to the Indemnifying Stockholders shall be made by mailing stock certificates
      to
      such holders at their respective addresses shown on Attachment A
      (or such
      other address as may be provided in writing to the Escrow Agent by any such
      holder). No fractional Escrow Shares shall be distributed to Indemnifying
      Stockholders pursuant to this Agreement. Instead, the number of shares that
      each
      Indemnifying Stockholder shall receive shall be rounded up or down to the
      nearest whole number (provided that the Indemnification Representative shall
      have the authority to effect such rounding in such a manner that the total
      number of whole Escrow Shares to be distributed equals the number of Escrow
      Shares then held in the Escrow Account).

     

    4. Valuation
      of Escrow Shares.
      For
      purposes of this Agreement, the “Value” of any Escrow Shares shall be $1.35 per
      share, multiplied by the number of such Escrow Shares.

     

    5. Fees
      and Expenses of Escrow Agent.
      The
      Parent, on the one hand, and the Indemnifying Stockholders, on the other hand,
      shall each pay one-half of the fees of the Escrow Agent for the services to
      be
      rendered by the Escrow Agent hereunder.

     

    6. Limitation
      of Escrow Agent’s Liability.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (a) The
      Escrow Agent shall incur no liability with respect to any action taken or
      suffered by it in reliance upon any notice, direction, instruction, consent,
      statement or other documents believed by it to be genuine and duly authorized,
      nor for other action or inaction except its own willful misconduct or gross
      negligence. The Escrow Agent shall not be responsible for the validity or
      sufficiency of this Agreement. In all questions arising under the Escrow
      Agreement, the Escrow Agent may rely on the advice of counsel, and the Escrow
      Agent shall not be liable to anyone for anything done, omitted or suffered
      in
      good faith by the Escrow Agent based on such advice. The Escrow Agent shall
      not
      be required to take any action hereunder involving any expense unless the
      payment of such expense is made or provided for in a manner reasonably
      satisfactory to it. In no event shall the Escrow Agent be liable for indirect,
      punitive, special or consequential damages.

     

    (b) The
      Parent and the Indemnifying Stockholders agree to indemnify the Escrow Agent
      for, and hold it harmless against, any loss, liability or expense incurred
      without gross negligence or willful misconduct on the part of the Escrow Agent,
      arising out of or in connection with its carrying out of its duties hereunder.
      The Parent, on the one hand, and the Indemnifying Stockholders, on the other
      hand, shall each be liable for one-half of such amounts.

     

    7. Liability
      and Authority of Indemnification Representative; Successors and
      Assignees.

     

    (a) The
      Indemnification Representative shall not incur any liability to the Indemnifying
      Stockholders with respect to any action taken or suffered by him in reliance
      upon any note, direction, instruction, consent, statement or other documents
      believed by him to be genuinely and duly authorized, nor for other action or
      inaction except his own willful misconduct or gross negligence. The
      Indemnification Representative may, in all questions arising under the Escrow
      Agreement, rely on the advice of counsel and the Indemnification Representative
      shall not be liable to the Indemnifying Stockholders for anything done, omitted
      or suffered in good faith by the Indemnification Representative based on such
      advice.

     

    (b) In
      the
      event of the death or permanent disability of the Indemnification
      Representative, or his or her resignation as an Indemnification Representative,
      a successor Indemnification Representative shall be appointed by the other
      Indemnification Representative or, absent its appointment, a successor
      Indemnification Representative shall be elected by a majority vote of the
      Indemnifying Stockholders, with each such Indemnifying Stockholder (or his,
      her
      or its successors or assigns) to be given a vote equal to the number of votes
      represented by the shares of stock of the Company held by such Indemnifying
      Stockholder immediately prior to the effective time of the share purchase under
      the Merger Agreement. Each successor Indemnification Representative shall have
      all of the power, authority, rights and privileges conferred by this Agreement
      upon the original Indemnification Representative, and the term “Indemnification
      Representative” as used herein shall be deemed to include successor
      Indemnification Representative.

     

    (c) The
      Indemnification Representative shall have full power and authority to represent
      the Indemnifying Stockholders, and their successors, with respect to all matters
      arising under this Agreement and all actions taken by the Indemnification
      Representative hereunder shall be binding upon the Indemnifying Stockholders,
      and their successors, as if expressly confirmed and ratified in writing by
      each
      of them. Without limiting the generality of the foregoing, the Indemnification
      Representative shall have full power and authority to interpret all of the
      terms
      and provisions of this Agreement, to compromise any claims asserted hereunder
      and to authorize any release of the Escrow Shares to be made with respect
      thereto, on behalf of the Indemnifying Stockholders and their successors.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (d) The
      Escrow Agent may rely on the Indemnification Representative as the exclusive
      agent of the Indemnifying Stockholders under this Agreement and shall incur
      no
      liability to any party with respect to any action taken or suffered by it in
      reliance thereon.

     

    8. Amounts
      Payable by Indemnifying Stockholders.
      The
      amounts payable by the Indemnifying Stockholders under this Agreement (i.e.,
      the
      fees of the Escrow Agent payable pursuant to Section 5 and the
      indemnification obligations pursuant to Section 6(b)) shall be payable
      solely as follows. The Escrow Agent shall notify the Indemnification
      Representative of any such amount payable by the Indemnifying Stockholders
      as
      soon as it becomes aware that any such amount is payable, with a copy of such
      notice to the Parent. On the sixth business day after the delivery of such
      notice, the Escrow Agent shall sell such number of Escrow Shares (up to the
      number of Escrow Shares then available in the Escrow Account), subject to
      compliance with all applicable securities laws, as is necessary to raise such
      amount, and shall be entitled to apply the proceeds of such sale in satisfaction
      of such indemnification obligations of the Indemnifying Stockholders; provided
      that if the Parent delivers to the Escrow Agent (with a copy to the
      Indemnification Representative), within five business days after delivery of
      such notice by the Indemnification Representative, a written notice contesting
      the legitimacy or reasonableness of such amount, then the Escrow Agent shall
      not
      sell Escrow Shares to raise the disputed portion of such claimed amount except
      in accordance with the terms of clauses (i) or (ii) of
      Section 3(a).

     

    9. Termination.
      This
      Agreement shall terminate upon the distribution by the Escrow Agent of all
      of
      the Escrow Shares in accordance with this Agreement; provided that the
      provisions of Sections 6 and 7 shall survive such termination.

     

    10. Notices.
      All
      notices, instructions and other communications given hereunder or in connection
      herewith shall be in writing. Any such notice, instruction or communication
      shall be sent either (i) by registered or certified mail, return receipt
      requested, postage prepaid, or (ii) via a reputable nationwide overnight
      courier service, in each case to the address set forth below. Any such notice,
      instruction or communication shall be deemed to have been delivered two business
      days after it is sent by registered or certified mail, return receipt requested,
      postage prepaid, or one business day after it is sent via a reputable nationwide
      overnight courier service.

     

    If
      to the
      Parent:

    

    Kreido
      Biofuels, Inc.

    1140
      Avenida Acaso

    Camarrillo,
      CA 93012

    Attn:
      Joel A. Balbien, Chief Executive Officer

    Facsimile:
      (805) 384-0989

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    If
      to the
      Indemnification Representative:

    

    Mr.
      Joel
      A. Balbien

    Kreido
      Biofuels, Inc.

    1140
      Avenida Acaso

    Camarrillo,
      CA 93012

    Attn:
      Joel A. Balbien, Chief Executive Officer

    Facsimile:
      (805) 384-0989

    

    If
      to the
      Escrow Agent:

    

    Gottbetter
      & Partners, LLP

    488
      Madison Avenue, 12th
      Floor

    New
      York,
      NY 10022

    Attn:
      Adam S. Gottbetter, Esq.

    Facsimile: (212)
      400-6901

    

    Any
      party
      may give any notice, instruction or communication in connection with this
      Agreement using any other means (including personal delivery, telecopy or
      ordinary mail), but no such notice, instruction or communication shall be deemed
      to have been delivered unless and until it is actually received by the party
      to
      whom it was sent. Any party may change the address to which notices,
      instructions or communications are to be delivered by giving the other parties
      to this Agreement notice thereof in the manner set forth in this
      Section 10.

     

    11. Successor
      Escrow Agent.
      In the
      event the Escrow Agent becomes unavailable or unwilling to continue in its
      capacity herewith, the Escrow Agent may resign and be discharged from its duties
      or obligations hereunder by delivering a resignation to the parties to this
      Escrow Agreement, not less than 60 days prior to the date when such
      resignation shall take effect. The Parent may appoint a successor Escrow Agent
      without the consent of the Indemnification Representative so long as such
      successor is a bank with assets of at least $500 million, and may appoint any
      other successor Escrow Agent with the consent of the Indemnification
      Representative, which shall not be unreasonably withheld. If, within such notice
      period, the Parent provides to the Escrow Agent written instructions with
      respect to the appointment of a successor Escrow Agent and directions for the
      transfer of any Escrow Shares then held by the Escrow Agent to such successor,
      the Escrow Agent shall act in accordance with such instructions and promptly
      transfer such Escrow Shares to such designated successor. If no successor Escrow
      Agent is named as provided in this Section 11 prior to the date on which the
      resignation of the Escrow Agent is to properly take effect, the Escrow Agent
      may
      apply to a court of competent jurisdiction for appointment of a successor Escrow
      Agent.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    12. General.

     

    (a) Governing
      Law; Assigns.
      This
      Agreement shall be governed by and construed in accordance with the internal
      laws of the State of New York without regard to conflict-of-law principles
      and
      shall be binding upon, and inure to the benefit of, the parties hereto and
      their
      respective successors and assigns.

     

    (b) Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument.

     

    (c) Entire
      Agreement.
      Except
      for those provisions of the Merger Agreement referenced herein, this Agreement
      constitutes the entire understanding and agreement of the parties with respect
      to the subject matter of this Agreement and supersedes all prior agreements
      or
      understandings, written or oral, between the parties with respect to the subject
      matter hereof.

     

    (d) Waivers.
      No
      waiver by any party hereto of any condition or of any breach of any provision
      of
      this Escrow Agreement shall be effective unless in writing. No waiver by any
      party of any such condition or breach, in any one instance, shall be deemed
      to
      be a further or continuing waiver of any such condition or breach or a waiver
      of
      any other condition or breach of any other provision contained
      herein.

     

    (e) Amendment.
      This
      Agreement may be amended only with the written consent of the Parent, the Escrow
      Agent and the Indemnification Representative.

     

    (f) Consent
      to Jurisdiction and Service.
      The
      parties hereby absolutely and irrevocably consent and submit to the jurisdiction
      of the courts in the State of New York and of any Federal court located in
      said
      State in connection with any actions or proceedings brought against any party
      hereto by the Escrow Agent arising out of or relating to this Escrow Agreement.
      In any such action or proceeding, the parties hereby absolutely and irrevocably
      waive personal service of any summons, complaint, declaration or other process
      and hereby absolutely and irrevocably agree that the service thereof may be
      made
      by certified or registered first-class mail directed to such party, at their
      respective addresses in accordance with Section 10 hereof.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
      and
      year first above written.

     

    
      	 	 	 
	 	KREIDO
              BIOFUELS,
              INC.
	 
 	 
 	 
 
	 	By:  	/s/
              Stephen B. Jackson 
	 	
              
Name: Stephen
              B. Jackson
	 	Title: Chief
              Executive Officer

    

     

    
      	 	        
              	 
	
            	/s/
              Joel A.
              Balbien
	 	
              
Joel
              A. Balbien, Individually and as Indemnification
              Representative

    

    

    
      	 	 	 
	 	GOTTBETTER
&
              PARTNERS, LLP
	 
 	 
 	 
 
	 	By:  	/s/
              Adam
              S. Gottbetter
	 	
              
Name: Adam
              S. Gottbetter, Esq.
	 	Title: Partner

    
      
        
        

      

      
        8EXHIBIT
      10.2

     

    SUBSCRIPTION
      AGREEMENT

     

    THIS
      SUBSCRIPTION AGREEMENT (the “Agreement”)
      is made
      as of this 12th day of January, 2007, by and among Kreido Biofuels, Inc. (f/k/a
      Gemwood Productions, Inc.), a Nevada corporation (the “Company”),
      Kreido
      Laboratories, a California corporation (“Kreido”)
      and
      the investor identified on the signature page to this Agreement (the
      “Investor”).

     

    RECITALS:

     

    WHEREAS,
      the Company and Kreido contemplate that they will enter into an Agreement and
      Plan of Merger and Reorganization, pursuant to which a wholly-owned subsidiary
      of the Company, will merge with and into Kreido, with Kreido being the surviving
      entity and a wholly-owned subsidiary of the Company (the “Merger”),
      upon
      the effective date of the Merger (the “Merger Effective
      Date”);

     

    WHEREAS,
      as a condition to the consummation of the Merger, and to provide the capital
      required by Kreido for working capital purposes, the Company is offering, in
      compliance with Rule 506 of Regulation D of the Securities Act of 1933, as
      amended (the “Securities
      Act”),
      and
      available prospectus exemptions in Canada to accredited investors in a private
      placement transaction (the “Offering”),
      18,518,519 units of its securities (the “Units”)
      at a
      purchase price of $1.35 per Unit, each Unit consisting of one share of the
      Company’s common stock, par value $0.001 per share (“Common
      Stock”)
      and a
      warrant (the “Investor
      Warrants”)
      to
      purchase one share of Common Stock for five (5) years at the exercise price
      of
      $1.85 per share of Common Stock a form of Investor Warrant is attached hereto
      as
Exhibit
      A;

    

    WHEREAS,
      the Investor desires to subscribe for, purchase and acquire from the Company
      and
      the Company desires to sell and issue to the Investor the number of Units,
      set
      forth on the signature page of this Agreement (the “Investor’s
      Units”)
      upon
      the terms and conditions and subject to the provisions hereinafter set
      forth;

     

    WHEREAS,
      in connection with the purchase of the Investor’s Units, the Company and the
      Investor will execute a Registration Rights Agreement dated as of the same
      date
      as this Agreement pursuant to which the Company will provide certain
      registration rights to the Investor (the “Registration
      Rights Agreement”);
      and

     

    WHEREAS,
      the Company, Kreido and McGuireWoods LLP (the “Escrow
      Agent”)
      have
      entered into an Escrow Agreement (the “Escrow
      Agreement”)
      to
      provide for the safekeeping of funds received and documents executed in
      connection with the Offering.

     

    NOW,
      THEREFORE, for and in consideration of the mutual premises contained herein
      and
      for other good and valuable consideration, the receipt and sufficiency of which
      are hereby acknowledged, the parties hereto agree as follows:

     

    1.  Purchase
      and Sale of the Units.
      Subject
      to the terms and conditions of this Agreement and the satisfaction of the
      Closing Conditions, the Investor subscribes for and agrees to purchase and
      acquire from the Company and the Company agrees to sell and issue to the
      Investor the Investor’s Units at the purchase price of $1.35 per Unit (the
“Purchase
      Price”);
      provided,
      that
      the Company reserves the right, in its sole discretion and for any reason,
      to
      reject any Investor’s subscription in whole or in part, or to allot less than
      the number of Units subscribed for.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.  The
      Closing.
      The
      Offering will terminate upon the receipt of acceptable subscriptions totaling
      $25,000,000; provided,
      that
      the initial closing of the Offering shall be concurrent with the close of the
      Merger (the “Closing
      Date”)
      at the
      offices of the Escrow Agent. On the Closing Date, the Escrow Agent shall deliver
      the funds and Transaction Documents (as defined herein) held in escrow as of
      the
      Closing Date pursuant to the terms of the Escrow Agreement. As soon as
      practicable after the Closing Date, the Company shall issue and deliver, or
      shall cause the issuance and delivery of, a stock certificate, registered in
      the
      name of the Investor and representing the shares of Common Stock underlying
      the
      Investor’s Units and a warrant certificate registered in the name of the
      Investor representing the Investor’s right to purchase the number of shares of
      Common Stock underlying the Investor’s Warrants purchased in the
      Offering.

     

    3.  Closing
      Conditions.
      

     

    a.     
      Conditions
      to Obligations of Investors.
      The
      respective obligations of the Investors hereunder in connection with the Closing
      are subject to the satisfaction or waiver of the following conditions: (i)
      the
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Company contained herein; and (ii)
      all
      obligations, covenants and agreements of the Company required to be performed
      at
      or prior to the Closing Date shall have been performed.

    

    b.    
       Conditions to Obligations of the Company. The obligations of the
      Company hereunder in connection with the Closing are subject to the satisfaction
      or waiver of the following conditions: (i) the accuracy in all material
      respects when made and on the Closing Date of the representations and warranties
      of the Investors contained herein; (ii) all obligations, covenants and
      agreements of the Investors required to be performed at or prior to the Closing
      Date shall have been performed; and (iii) the delivery by the Investors of
      the
      items set forth in Section 4 of this Agreement.

     

    4.  Subscription
      Procedure.
      To
      complete a subscription for the Units, the Investor must fully comply with
      the
      subscription procedure provided in this Section on or before 5:00 p.m. Eastern
      time on the Closing Date.

     

    a.  Transaction
      Documents.
      Before
      5:00 p.m. Eastern time on the Closing Date, the Investor shall review, complete
      and execute this Agreement, the Investor Questionnaire attached hereto as
Appendix
      A
      and the
      Registration Rights Agreement (collectively, the “Transaction
      Documents”)
      and
      deliver the Transaction Documents to the Escrow Agent at the address provided
      below. Executed agreements and questionnaires may be delivered to the Escrow
      Agent by facsimile using the facsimile number provided below if the Investor
      immediately thereafter confirms receipt of such transmission with the Escrow
      Agent and delivers the original copies of the agreements and questionnaire
      to
      the Escrow Agent as soon as practicable thereafter.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Escrow
      Agent - Mailing Address and Facsimile Number:

    

    McGuireWoods
      LLP

    50
      North
      Laura Street, Suite 3300

    Jacksonville,
      FL 32202-3661

    Facsimile
      Number: (904) 798-3271

    Attention:
      Jonathan Sacks

    Telephone
      Number: (904) 798-2627

    

    b.  Purchase
      Price.
      Simultaneously with the delivery of the Transaction Documents to the Escrow
      Agent as provided herein, and in any event on or prior to 5:00 p.m. Eastern
      time
      on the Closing Date, the Investor shall deliver to the Escrow Agent the full
      Purchase Price for the Investor’s Units by wire transfer of immediately
      available funds pursuant to wire transfer instructions provided
      below:

     

    Escrow
      Agent - Wire Transfer Instructions:

    

    BANK
      OF
      AMERICA - Jacksonville, FL

    ABA:
      026009593 (Domestic Wires)

    Swift
      Code: BOFAUS3N (International Wires)

    Credit:
      McGuireWoods LLP IOLTA Account

    Account
      Number: 2101206537

    Reference:
      Louis Zehil - Kreido Laboratories Escrow - 2049303-0001

    

    McGuireWoods
      Accounting Contact: Julia Aaron (804) 775-1224

    Bank
      Contact: Patrick Comia (888) 841-8159, Opt. 2, Ext. 2160

    

    c.  Purchaser
      Representative.
      If the
      Investor has retained the services of a purchaser representative to assist
      in
      evaluating the merits and risks associated with investing in the Units, the
      Investor must deliver along with the Transaction Documents, a purchaser
      representative certificate in a form acceptable to the Company. 

     

    d.  Company
      Discretion.
      The
      Company may accept any subscription in whole or in part or reject any
      subscription in its sole discretion for any reason and may terminate this
      Offering at any time before accepting subscriptions. If the Investor’s
      subscription is rejected or if the conditions to closing this Offering,
      including the receipt and acceptance of subscriptions representing $25,000,000,
      are not satisfied or if this Offering is otherwise terminated or withdrawn,
      funds delivered by the Investor to the Escrow Agent will be returned to the
      Investor without interest or deduction.

     

    5.  Representations
      and Warranties of the Company and Kreido.
      In
      order to induce the Investor to enter into this Agreement, the Company and,
      as
      applicable, Kreido represent and warrant to the Investor the
      following:

     

    a.  Subsidiaries.
      The
      Company has no direct or indirect subsidiaries (each a “Subsidiary”
      and
      collectively the “Subsidiaries”)
      other
      than Kreido Acquisition Corp., and Gemwood Leasco, Inc. and those set forth
      in
      the Exchange Act Documents (as defined in Section 5(g)), or as are necessary
      or
      desirable to consummate the Merger and the transactions contemplated in the
      Merger Agreement. Except as disclosed in the Exchange Act Documents, the Company
      owns, directly or indirectly, all of the capital stock of each Subsidiary free
      and clear of any and all liens, and all the issued and outstanding shares of
      capital stock of each Subsidiary are validly issued and are fully paid,
      non-assessable and free of preemptive and similar rights. Kreido has no direct
      or indirect subsidiaries and all references to the term Subsidiary and
      Subsidiaries used herein specifically refers to Kreido Acquisition Corp., and
      Gemwood Leasco, Inc. and those set forth in the Exchange Act Documents, or
      as
      are necessary or desirable to consummate the Merger and the transactions
      contemplated in the Merger Agreement.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    b.  Organization
      and Qualification.
      The
      Company and Kreido, and as applicable any Subsidiary, are each an entity duly
      incorporated or otherwise organized, validly existing and in good standing
      under
      the laws of the jurisdiction of its incorporation or organization (as
      applicable), with the requisite power and authority to own and use its
      properties and assets and to carry on its business as currently conducted.
      Neither the Company and Kreido, nor any Subsidiary, is in violation or default
      of any of the provisions of its respective certificate or articles of
      incorporation, bylaws or other organizational or charter documents. Each of
      the
      Company and Kreido and the Subsidiaries is duly qualified to conduct business
      and is in good standing as a foreign corporation or other entity in each
      jurisdiction in which the nature of the business conducted or property owned
      by
      it makes such qualification necessary, except where the failure to be so
      qualified or in good standing, as the case may be, could not have or reasonably
      be expected to result in (i) a material adverse effect on the legality, validity
      or enforceability of any Transaction Document or Investor Warrant, (ii) a
      material adverse effect on the results of operations, assets, business,
      prospects or condition (financial or otherwise) of the Company, Kreido and
      the
      Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
      Company’s or Kreido’s ability to perform in any material respect on a timely
      basis its obligations under any Transaction Document or Investor Warrant (any
      of
      (i), (ii) or (iii), a “Material
      Adverse Effect”)
      and no
      proceeding has been instituted in any such jurisdiction revoking, limiting
      or
      curtailing or seeking to revoke, limit or curtail such power and authority
      or
      qualification.

     

    c.  Authorization;
      Enforcement.
      The
      Company and Kreido each has the requisite corporate power and authority to
      enter
      into and to consummate the transactions contemplated by each of the Transaction
      Documents and the Investor Warrants and otherwise to carry out its obligations
      hereunder and thereunder. The execution and delivery of each of the Transaction
      Documents and Investor Warrants by the Company and Kreido and the consummation
      of the transactions contemplated hereby and thereby have been duly authorized
      by
      all necessary action on the part of the Company and Kreido and no further action
      is required by the Company and Kreido, and their respective boards of directors
      or its stockholders in connection therewith. Each Transaction Document and
      Investor Warrant has been (or upon delivery will have been) duly executed by
      the
      Company or Kreido, as applicable, and, when delivered in accordance with the
      terms hereof and thereof, will constitute the valid and binding obligation
      of
      the Company or Kreido enforceable against the Company or Kreido in accordance
      with its terms except (i) as limited by general equitable principles and
      applicable bankruptcy, insolvency, reorganization, moratorium and other laws
      of
      general application affecting enforcement of creditors’ rights generally, (ii)
      as limited by laws relating to the availability of specific performance,
      injunctive relief or other equitable remedies and (iii) insofar as
      indemnification and contribution provisions may be limited by applicable
      law.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    d.  No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company,
      the issuance and sale of the Units and the consummation by the Company or
      Kreido, as applicable, of the other transactions contemplated hereby and thereby
      do not and will not (i) conflict with or violate any provision of the Company’s
      and Kreido’s or any Subsidiary’s certificate or articles of incorporation,
      bylaws or other organizational or charter documents, or (ii) conflict with,
      or
      constitute a default (or an event that with notice or lapse of time or both
      would become a default) under, result in the creation of any lien upon any
      of
      the properties or assets of the Company or Kreido or any Subsidiary, or give
      to
      others any rights of termination, amendment, acceleration or cancellation (with
      or without notice, lapse of time or both) of, any agreement, credit facility,
      debt or other instrument (evidencing a Company or Kreido or Subsidiary debt
      or
      otherwise) or other understanding to which the Company or Kreido or any
      Subsidiary is a party or by which any property or asset of the Company or any
      Subsidiary is bound or affected, or (iii) conflict with or result in a violation
      of any law, rule, regulation, order, judgment, injunction, decree or other
      restriction of any court or governmental authority to which the Company or
      Kreido or a Subsidiary is subject (including federal and state securities laws
      and regulations), or by which any property or asset of the Company or Kreido
      or
      a Subsidiary is bound or affected; except in the case of each of clauses (ii)
      and (iii), such as could not have or reasonably be expected to result in a
      Material Adverse Effect.

     

    e.  Approvals.
      The
      execution, delivery, and performance by the Company of this Agreement and the
      offer and sale of the Units require no consent of, action by or in respect
      of,
      or filing with, any person, governmental body, agency, or official other than
      those consents that have been obtained prior to the Closing and those filings
      required to be made pursuant to the Securities Act and any State Acts which
      the
      Company undertakes to file within the applicable time period or provincial
      filings required in connection with sales in Canada.

     

    f.  Capitalization.
      Upon
      issuance in accordance with the terms of this Agreement against payment of
      the
      Purchase Price therefor, the shares of Common Stock underlying the Investor’s
      Units will be duly and validly issued, fully paid, and nonassessable and free
      and clear of all liens imposed by or through the Company, and, assuming the
      accuracy of the representations and warranties of the Investor and all other
      purchasers of Units in the Offering, will be issued in accordance with a valid
      exemption from the registration or qualification provisions of the Securities
      Act, and any applicable state securities laws (the “State
      Acts”),
      or
      will be issued in accordance with a valid prospectus exemption in Canada. The
      Company has not issued any capital stock since its most
      recently filed periodic report under the
      Securities Exchange Act of 1934, as amended (the “Exchange
      Act”),
      and
      the
      rules and regulations thereunder, no
      person
      has any right of first refusal, preemptive right, right of participation, or
      any
      similar right to participate in the transactions contemplated by the Transaction
      Documents. All of the outstanding shares of capital stock of the Company are
      validly issued, fully paid and nonassessable, have been issued in compliance
      with all federal and state securities laws, and none of such outstanding shares
      was issued in violation of any preemptive rights or similar rights to subscribe
      for or purchase securities. No further approval or authorization of any
      stockholder, the Board of Directors of the Company or others is required for
      the
      issuance and sale of the Units. There are no stockholders agreements, voting
      agreements or other similar agreements with respect to the Company’s capital
      stock to which the Company is a party or, to the knowledge of the Company,
      between or among any of the Company’s stockholders.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    g.  Exchange
      Act Filing.
      During
      the 12 calendar months immediately preceding the date of this Agreement, all
      reports and statements, including all amendments, required to be filed by the
      Company with the Securities and Exchange Commission (the “Commission”)
      under
      the Exchange Act, have been timely filed. Such filings, together with all
      amendments and all documents incorporated by reference therein, are referred
      to
      as “Exchange
      Act Documents.”
      Each
      Exchange Act Document conformed in all material respects to the requirements
      of
      the Exchange Act and the rules and regulations thereunder, and no Exchange
      Act
      Document, at the time each such document was filed, included any untrue
      statement of a material fact or omitted to state any material fact required
      to
      be stated therein or necessary to make the statements therein, in light of
      the
      circumstances under which they were made, not misleading.

     

    h.  Company
      Financial Statements. The
      audited financial statements, together with the related notes of the Company
      at
      September 30, 2005, included in the Company’s SB-2 for the fiscal year ended
      September 30, 2005 as filed with the Commission (the “Company
      Financial Statements”),
      fairly present in all material respects, on the basis stated therein and on
      the
      date thereof, the financial position of the Company at the respective dates
      therein specified and its results of operations and cash flows for the periods
      then ended. Such statements and related notes have been prepared in accordance
      with generally accepted accounting principles in the United States applied
      on a
      consistent basis except as expressly noted therein.

     

    i.  Material
      Changes; Undisclosed Events, Liabilities or Developments.
      Since
      the date of the latest audited financial statements included within the Exchange
      Act Documents, except as specifically disclosed in a subsequent Exchange Act
      Document filed prior to the date hereof, (i) there has been no event, occurrence
      or development that has had or that could reasonably be expected to result
      in a
      Material Adverse Effect, (ii) the Company has not incurred any liabilities
      (contingent or otherwise) other than (A) trade payables and accrued expenses
      incurred in the ordinary course of business consistent with past practice and
      (B) liabilities not required to be reflected in the Company’s financial
      statements pursuant to GAAP or disclosed in filings made with the Commission,
      (iii) the Company has not altered its method of accounting, (iv) the Company
      has
      not declared or made any dividend or distribution of cash or other property
      to
      its stockholders or purchased, redeemed or made any agreements to purchase
      or
      redeem any shares of its capital stock and (v) the Company has not issued any
      equity securities to any officer, director or Affiliate. The Company does not
      have pending before the Commission any request for confidential treatment of
      information. Except for the issuance of the Securities contemplated by this
      Agreement, no event, liability or development has occurred or exists with
      respect to the Company or its Subsidiaries or their respective business,
      properties, operations or financial condition, that would be required to be
      disclosed by the Company under applicable securities laws at the time this
      representation is made.

     

    j.  No
      Disputes or Litigation Against the Company or Kreido.
      There
      is no action, suit, inquiry, notice of violation, proceeding or investigation
      pending or, to the knowledge of the Company and Kreido, threatened against
      or
      affecting the Company and Kreido, any Subsidiary or any of their respective
      properties before or by any court, arbitrator, governmental or administrative
      agency or regulatory authority (federal, state, county, local or foreign)
      (collectively, an “Action”)
      which
      (i) adversely affects or challenges the legality, validity or enforceability
      of
      any of the Transaction Documents or the Units or (ii) could, if there were
      an
      unfavorable decision, have or reasonably be expected to result in a Material
      Adverse Effect. Neither the Company and Kreido, nor any Subsidiary, nor any
      director or officer thereof, is or has been the subject of any Action involving
      a claim of violation of or liability under federal or state securities laws
      or a
      claim of breach of fiduciary duty. There has not been, and to the knowledge
      of
      the Company and Kreido, there is not pending or contemplated, any investigation
      by the Commission involving the Company and Kreido or any current or former
      director or officer of the Company and Kreido. The Commission has not issued
      any
      stop order or other order suspending the effectiveness of any registration
      statement filed by the Company or any Subsidiary under the Exchange Act or
      the
      Securities Act.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    k.  Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company and Kreido,
      is
      imminent with respect to any of the employees of the Company which could
      reasonably be expected to result in a Material Adverse Effect. None of the
      Company’s and Kreido’s or any Subsidiary’s employees is a member of a union that
      relates to such employee’s relationship with the Company, and neither the
      Company and Kreido or any Subsidiary is a party to a collective bargaining
      agreement, and the Company (and its Subsidiaries) and Kreido believe that their
      relationships with their employees are good. No executive officer, to the
      knowledge of the Company or Kreido, is, or is now expected to be, in violation
      of any material term of any employment contract, confidentiality, disclosure
      or
      proprietary information agreement or non-competition agreement, or any other
      contract or agreement or any restrictive covenant, and the continued employment
      of each such executive officer does not subject the Company (or any of its
      Subsidiaries) and Kreido to any liability with respect to any of the foregoing
      matters. The Company (and its Subsidiaries) and Kreido are in compliance with
      all U.S. federal, state, local and foreign laws and regulations relating to
      employment and employment practices, terms and conditions of employment and
      wages and hours, except where the failure to be in compliance could not,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    l.  Compliance.
      Neither
      the Company nor Kreido, nor any Subsidiary, (i) is in default under or in
      violation of (and no event has occurred that has not been waived that, with
      notice or lapse of time or both, would result in a default by the Company nor
      Kreido, or any Subsidiary under), nor has the Company nor Kreido, or any
      Subsidiary received notice of a claim that it is in default under or that it
      is
      in violation of, any indenture, loan or credit agreement, or any other agreement
      or instrument to which it is a party or by which it or any of its properties
      is
      bound (whether or not such default or violation has been waived), (ii) is in
      violation of any order of any Court, arbitrator, or governmental body, or (iii)
      is or has been in violation of any statute, rule or regulation of any
      governmental authority, including without limitation all foreign, federal,
      state
      and local laws relating to taxes, environmental protection, occupational health
      and safety, product quality and safety and employment and labor matters, except
      in each case as could not, individually or in the aggregate, have or reasonably
      be expected to result in a Material Adverse Effect. The Company is in compliance
      with the applicable requirements of the Sarbanes-Oxley Act of 2002, as amended,
      and the rules and regulations thereunder, except where such noncompliance could
      not have or reasonably be expected to result in a Material Adverse
      Effect.

     

    m.  Regulatory
      Permits.
      The
      Company (and its Subsidiaries) and Kreido possess all certificates,
      authorizations and permits issued by the appropriate federal, state, local
      or
      foreign regulatory authorities necessary to conduct their respective businesses,
      except where the failure to possess such permits could not have or reasonably
      be
      expected to result in a Material Adverse Effect (“Material
      Permits”),
      and
      neither the Company and Kreido, nor any Subsidiary, has received any notice
      of
      proceedings relating to the revocation or modification of any Material
      Permit.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    n.  Title
      to Assets.
      The
      Company and Kreido, and, as applicable, the Subsidiaries have good and
      marketable title in fee simple to all real property owned by them that is
      material to the business of the Company and Kreido and good and marketable
      title
      in all personal property owned by them that is material to the business of
      the
      Company and Kreido, in each case free and clear of all liens, except for liens
      as do not materially affect the value of such property and do not materially
      interfere with the use made and proposed to be made of such property by the
      Company and Kreido and liens for the payment of federal, state or other taxes,
      the payment of which is neither delinquent nor subject to penalties. Any real
      property and facilities held under lease by the Company and Kreido are held
      by
      them under valid, subsisting and enforceable leases with which the Company
      and
      Kreido are in compliance.

     

    o.  Patents
      and Trademarks.
      The
      Company and Kreido, or any of their respective Subsidiaries have, or have rights
      to use, all patents, patent applications, trademarks, trademark applications,
      service marks, trade names, copyrights, licenses, and other similar rights
      that
      are necessary or material for use in connection with their respective businesses
      and which the failure to so have could, individually or in the aggregate, have
      or reasonably be expected to result in a Material Adverse Effect (collectively,
      the “Intellectual
      Property Rights”).
      Neither the Company nor Kreido, or any of their respective Subsidiaries, has
      received a written notice that the Intellectual Property Rights used by the
      Company or Kreido, or any of their respective Subsidiaries, violates or
      infringes upon the rights of any person. Except as set forth in the Exchange
      Act
      Documents, to the knowledge of the Company, all such Intellectual Property
      Rights are enforceable and there is no existing infringement by another person
      of any of the Intellectual Property Rights, except where such infringement
      could
      not have or reasonably be expected to result in a Material Adverse
      Effect.

     

    p.  Insurance.
      The
      Company and Kreido and, as applicable, the Subsidiaries, are insured by insurers
      of recognized financial responsibility against such losses and risks and in
      such
      amounts as are prudent and customary in the businesses in which the Company
      and
      Kreido and the Subsidiaries are engaged, including, but not limited to,
      directors’ and officers’ liability coverage. Neither the Company and Kreido, nor
      any Subsidiary, has any reason to believe that it will not be able to renew
      its
      existing insurance coverage as and when such coverage expires or to obtain
      similar coverage from similar insurers as may be necessary to continue its
      business without a significant increase in cost.

     

    q.  Transactions
      With Affiliates and Employees.
      Except
      as set forth in the Exchange Act Documents, the Confidential Private Placement
      Memorandum dated November 16, 2006, as revised on December 15, 2006 (the
“Memorandum”)
      and
      those transactions contemplated by the Transaction Documents, none of the
      officers or directors of the Company or Kreido and, to the knowledge of the
      Company or Kreido, none of the employees of the Company or Kreido is presently
      a
      party to any transaction with the Company or any Subsidiary of Kreido (other
      than for services as employees, officers, and directors), including any
      contract, agreement, or other arrangement providing for the furnishing of
      services to or by, providing for rental of real or personal property to or
      from,
      or otherwise requiring payments to or from any officer, director, or such
      employee or, to the knowledge of the Company or Kreido, any entity in which
      any
      officer, director, or any such employee has a substantial interest or is an
      officer, director, trustee, or partner.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    r.  Internal
      Accounting Controls.
      The
      Company and the Subsidiaries maintain a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are executed
      in
      accordance with management’s general or specific authorizations, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset accountability, (iii) access to assets is permitted only in
      accordance with management’s general or specific authorization, and (iv) the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals and appropriate action is taken with respect to any
      differences. The Company has established disclosure controls and procedures
      (as
      defined in Exchange Act rules 13a-15(e) and 15d-15(e)) for the Company and
      designed such disclosure controls and procedures to ensure that material
      information relating to the Company and its Subsidiaries is made known to the
      Company’s certifying officers by others within those entities, particularly
      during the period in which the Company’s Form 10-KSB or 10-QSB, as the case may
      be, are being prepared. The Company’s certifying officers have evaluated the
      effectiveness of the Company’s controls and procedures as of the end of the
      reporting period covered by the Company’s Form 10-KSB and each of the Company’s
      Forms 10-QSB filed with the Commission (each such date, the “Evaluation
      Date”)
      and
      presented in each such report their conclusions about the effectiveness of
      the
      Company’s disclosure controls and procedures based on their evaluations as of
      the applicable Evaluation Date. Since the Evaluation Date of the Company’s most
      recently filed Form 10-KSB or Form 10-QSB, there have been no significant
      changes in the Company’s disclosure controls and procedures, the Company’s
      internal control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) or 15d-15(f) or, to the Company’s knowledge, in other factors that
      could significantly affect the Company’s internal controls over financial
      reporting.

     

    s.  Solvency.
      Based
      on the financial condition of the Company as of the Closing Date (and assuming
      that the Closing shall have occurred), (i) the Company’s fair saleable value of
      its assets exceeds the amount that will be required to be paid on or in respect
      of the Company’s existing debts and other liabilities (including known
      contingent liabilities) as they mature; (ii) the Company’s assets do not
      constitute unreasonably small capital to carry on its business for the current
      fiscal year as now conducted and as proposed to be conducted including its
      capital needs taking into account the particular capital requirements of the
      business conducted by the Company, and projected capital requirements and
      capital availability thereof; and (iii) the current cash flow of the Company,
      together with the proceeds the Company would receive, were it to liquidate
      all
      of its assets, after taking into account all anticipated uses of the cash,
      would
      be sufficient to pay all amounts on or in respect of its debt when such amounts
      are required to be paid. The Company does not intend to incur debts beyond
      its
      ability to pay such debts as they mature (taking into account the timing and
      amounts of cash to be payable on or in respect of its debt).

     

    t.  Certain
      Fees.
      Other
      than the cash commission payable on the closing, no brokerage or finder’s fees
      or commissions are or will be payable by the Company to any broker, financial
      advisor or consultant, finder, placement agent, investment banker, bank, or
      other person with respect to the transactions contemplated by this Agreement.
      The Investor shall have no obligation with respect to any claims (other than
      such fees or commissions owed by an Investor pursuant to written agreements
      executed by the Investor which fees or commissions shall be the sole
      responsibility of such Investor) made by or on behalf of other persons for
      fees
      of a type contemplated in this Section that may be due in connection with the
      transactions contemplated by this Agreement. 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    u.  Certain
      Registration Matters.
      Assuming the accuracy of the Investor’s representations and warranties set forth
      in this Agreement and the Transaction Documents and the representations and
      warranties made by all other purchasers of Units in the Offering, no
      registration under the Securities Act is required for the offer and sale of
      the
      Investor’s Units by the Company to the Investor hereunder.

     

    v.  Listing
      and Maintenance Requirements.
      The
      Company is, and has no reason to believe that it will not in the foreseeable
      future continue to be, in compliance with the listing and maintenance
      requirements for continued listing of the Common Stock on the NASD Over the
      Counter Bulletin Board.

     

    w.  Investment
      Company.
      Neither
      the Company nor Kreido are an “investment company” or an “affiliate” of an
“investment company” within the meaning of the Investment Company Act of 1940,
      as amended.

     

    x.  No
      Additional Agreements.
      The
      Company and Kreido do not have any agreement or understanding with any other
      purchasers of the Units in the Offering with respect to the transactions
      contemplated by this Agreement on terms that differ substantially from those
      set
      forth in this Agreement.

     

    y.  Disclosure.
      The
      Investor confirms that in making its decision to enter into this Agreement,
      the
      Investor has relied on the information contained in the Confidential Private
      Placement Memorandum dated November 16, 2006, as revised on December 15, 2006
      and on the representations and warranties set forth in Section 5 of this
      Agreement, and not on any other materials that have been furnished by or on
      behalf of the Company and Kreido. The information contained in the Memorandum
      and the representations and warranties of the Company and Kreido in this
      Agreement are true and correct in all material respects and do not contain
      any
      untrue statement of a material fact or omit to state any material fact necessary
      in order to make the statements made therein, in light of the circumstances
      under which they were made, not misleading. The Company and Kreido confirm
      that
      neither they nor any person acting on their behalf has provided the Investor,
      or
      its agents or counsel, with any information that the Company or Kreido believes
      would constitute material, non-public information following the announcement
      of
      the Closing and the transactions contemplated thereby. The Company understands
      and confirms that the Investor will rely on the foregoing representations and
      covenants in effecting transactions in securities of the Company.

     

    z.  Registration
      Rights.
      Other
      than each of the Investors, no person has any right to cause the Company to
      effect the registration under the Securities Act of any securities of the
      Company.

     

    aa.  No
      Integrated Offering.
      Assuming
      the accuracy of the Investors’ representations and warranties set forth in
      Section 6, neither the Company, nor any of its affiliates, nor any person acting
      on its or their behalf has, directly or indirectly, made any offers or sales
      of
      any security or solicited any offers to buy any security, under circumstances
      that would cause the Offering of the Units to be integrated with prior offerings
      by the Company for purposes of the Securities Act or any applicable shareholder
      approval provisions of any trading market on which any of the securities of
      the
      Company are listed or designated.

     

    
      
        
        

      

      
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    bb.  No
      General Solicitation.
      Neither
      the Company nor any person acting on behalf of the Company has offered or sold
      any of the Units by any form of general solicitation or general advertising.
      The
      Company has offered the Units for sale only to the Purchasers and certain other
      “accredited investors” within the meaning of Rule 501 under the Securities
      Act.

     

    cc.  Acknowledgment
      Regarding Investors’ Purchase of Securities.
      The
      Company acknowledges and agrees that each of the Investors is acting solely
      in
      the capacity of an arm’s length purchaser with respect to the Transaction
      Documents and the transactions contemplated thereby. The Company further
      acknowledges that no Investor is acting as a financial advisor or fiduciary
      of
      the Company (or in any similar capacity) with respect to the Transaction
      Documents and the transactions contemplated thereby and any advice given by
      any
      Investor or any of their respective representatives or agents in connection
      with
      the Transaction Documents and the transactions contemplated thereby is merely
      incidental to the Investors’ purchase of the Units. The Company further
      represents to each Investor that the Company’s decision to enter into this
      Agreement and the other Transaction Documents has been based solely on the
      independent evaluation of the transactions contemplated hereby by the Company
      and Kreido and their representatives.

     

    dd.  Acknowledgement
      Regarding Investors’ Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
      it is understood and acknowledged by the Company (i) that none of the Investors
      have been asked to agree, nor has any Investor agreed, to desist from purchasing
      or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Units for
      any specified term; (ii) that past or future open market or other transactions
      by any Investor, including short sales, and specifically including, without
      limitation, short sales or “derivative” transactions, before or after the
      closing of this or future private placement transactions, may negatively impact
      the market price of the Company’s publicly-traded securities; (iii) that any
      Investor, and counter-parties in “derivative” transactions to which any such
      Investor is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) that each Investor shall not be deemed
      to
      have any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction. The
      Company further understands and acknowledges that (a) one or more Investors
      may
      engage in hedging activities at various times during the period that the Units
      are outstanding, including, without limitation, during the periods that the
      value of the shares underlying the Warrants deliverable with respect to Units
      are being determined and (b) such hedging activities (if any) could reduce
      the
      value of the existing stockholders' equity interests in the Company at and
      after
      the time that the hedging activities are being conducted.  The Company
      acknowledges that such aforementioned hedging activities do not constitute
      a
      breach of any of the Transaction Documents and Investor Warrants.

     

    6.  Representations
      and Warranties of the Investor.
      In
      order to induce the Company to enter into this Agreement, the Investor
      represents and warrants to the Company and Kreido the following:

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    a.  Authority.
      If a
      corporation, partnership, limited partnership, limited liability company, or
      other form of entity, the Investor is duly organized or formed, as the case
      may
      be, validly existing, and in good standing under the laws of its jurisdiction
      of
      organization or formation, as the case may be. The Investor has all requisite
      individual or entity right, power, and authority to execute, deliver, and
      perform this Agreement.

     

    b.  Enforceability.
      The
      execution, delivery, and performance of this Agreement by the Investor have
      been
      duly authorized by all requisite partnership, corporate or other entity action,
      as the case may be. This Agreement has been duly executed and delivered by
      the
      Investor, and, upon its execution by the Company, shall constitute the legal,
      valid, and binding obligation of the Investor, enforceable in accordance with
      its terms, except to the extent that its enforceability is limited by
      bankruptcy, insolvency, reorganization, moratorium, or other laws relating
      to or
      affecting the enforcement of creditors’ rights generally and by general
      principles of equity.

     

    c.  No
      Violations.
      The
      execution, delivery, and performance of this Agreement by the Investor do not
      and will not, with or without the passage of time or the giving of notice,
      result in the breach of, or constitute a default, cause the acceleration of
      performance, or require any consent under, or result in the creation of any
      lien, charge or encumbrance upon any property or assets of the Investor pursuant
      to, any material instrument or agreement to which the Investor is a party or
      by
      which the Investor or its properties may be bound or affected, and, do not
      or
      will not violate or conflict with any provision of the articles of incorporation
      or bylaws, partnership agreement, operating agreement, trust agreement, or
      similar organizational or governing document of the Investor, as applicable.
      

     

    d.  Knowledge
      of Investment and its Risks.
      The
      Investor has knowledge and experience in financial and business matters as
      to be
      capable of evaluating the merits and risks of Investor’s investment in the
      Units. The Investor understands that an investment in the Company represents
      a
      high degree of risk and there is no assurance that the Company’s business or
      operations will be successful. The Investor has considered carefully the risks
      attendant to an investment in the Company, and that, as a consequence of such
      risks, the Investor could lose Investor’s entire investment in the
      Company.

     

    e.  Investment
      Intent.
      The
      Investor hereby represents and warrants that (i) the Investor’s Units are being
      acquired for investment for the Investor’s own account, and not as a nominee or
      agent and not with a view to the resale or distribution of all or any part
      of
      the Investor’s Units, and the Investor has no present intention of selling,
      granting any participation in, or otherwise distributing any of the Investor’s
      Units within the meaning of the Securities Act, (ii) the Investor’s Units are
      being acquired in the ordinary course of the Investor’s business, and (iii) the
      Investor does not have any contracts, understandings, agreements, or
      arrangements, directly or indirectly, with any person and/or entity to
      distribute, sell, transfer, or grant participations to such person and/or entity
      with respect to, any of the Investor’s Units. The Investor is not purchasing the
      Investor’s Units as a result of any advertisement, article, notice or other
      communication regarding the Investor’s Units published in any newspaper,
      magazine or similar media or broadcast over television or radio or presented
      at
      any seminar or any other general solicitation or general
      advertisement.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    f.  Investor
      Status.
      The
      Investor is an “accredited investor” as that term is defined by Rule 501 of
      Regulation D promulgated under the Securities Act and the information provided
      by the Investor in the Investor Questionnaire, attached hereto as Appendix
      A,
      is
      truthful, accurate, and complete. The Investor is not registered as a
      broker-dealer under Section 15 of the Exchange Act or an affiliate of such
      broker-dealer, except as otherwise provided in the Investor
      Questionnaire.

     

    g.  Disclosure.
      The
      Investor has reviewed the information provided to the Investor by the Company
      in
      connection with the Investor’s decision to purchase the Investor’s Units,
      including but not limited to, the Company’s publicly available filings with the
      Commission and the information contained therein. The Company has provided
      the
      Investor with all the information that the Investor has requested in connection
      with the decision to purchase the Investor’s Units. The Investor further
      represents that the Investor has had an opportunity to ask questions and receive
      answers from the Company regarding the business, properties, prospects, and
      financial condition of the Company. All such questions have been answered to
      the
      full satisfaction of the Investor. Neither such inquiries nor any other
      investigation conducted by or on behalf of the Investor or its representatives
      or counsel shall modify, amend, or affect the Investor’s right to rely on the
      truth, accuracy, and completeness of the disclosure materials and the Company’s
      representations and warranties contained herein.

     

    h.  No
      Registration.
      The
      Investor understands that Investor may be required to bear the economic risk
      of
      Investor’s investment in the Company for an indefinite period of time. The
      Investor further understands that (i) neither the offering nor the sale of
      the Investor’s Units has been registered under the Securities Act or any
      applicable State Acts in reliance upon exemptions from the registration
      requirements of such laws, (ii) the Investor’s Units must be held by the
      Investor indefinitely unless the sale or transfer thereof is subsequently
      registered under the Securities Act and any applicable State Acts, or an
      exemption from such registration requirements is available, (iii) except as
      set
      forth in the Registration Rights Agreement, dated as of the date hereof, between
      the Company and the Investor, the Company is under no obligation to register
      any
      of the shares of Common Stock underlying the Investor’s Units on the Investor’s
      behalf or to assist the Investor in complying with any exemption from
      registration, and (iv) the Company will rely upon the representations and
      warranties made by the Investor in this Agreement and the Transaction Documents
      in order to establish such exemptions from the registration requirements of
      the
      Securities Act and any applicable State Acts. 

     

    i.  Transfer
      Restrictions.
      The
      Investor will not transfer any of the Investor’s Units or the shares of Common
      Stock underlying the Investor’s Units or the Investor Warrants unless such
      transfer is registered or exempt from registration under the Securities Act
      and
      such State Acts, and, if requested by the Company in the case of an exempt
      transaction, the Investor has furnished an opinion of counsel reasonably
      satisfactory to the Company that such transfer is so exempt. The Investor
      understands and agrees that (i) the certificates evidencing the shares of Common
      Stock underlying the Investor’s Units and the Investor’s Warrants will bear
      appropriate legends indicating such transfer restrictions placed upon the Units
      and shares of Common Stock and Investor Warrants, (ii) the Company shall have
      no
      obligation to honor transfers of any of the Investor’s Units, Investor Warrants
      or shares of Common Stock underlying the Investor’s Units or Investor Warrants
      in violation of such transfer restrictions, and (iii) the Company shall be
      entitled to instruct any transfer agent or agents for the securities of the
      Company to refuse to honor such transfers.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    j.  No
      Solicitation.
      The
      Investor (i) did not receive or review any advertisement, article, notice or
      other communication published in a newspaper or magazine or similar media or
      broadcast over television or radio, whether closed circuit, or generally
      available, with respect to the Units or (ii) was not solicited by any person,
      other than by representatives of the Company, with respect to a purchase of
      the
      Units.

     

    k.  Principal
      Address.
      The
      Investor’s principal residence, if an individual, or principal executive office,
      if an entity, is set forth on the signature page of this Subscription
      Agreement.

     

    l.  Reliance
      by the Company.
      The
      Investor acknowledges and consents to the Company’s reliance on the Investor’s
      representations and warranties made above for purposes of complying with all
      applicable securities laws and any applicable exemptions from registration
      requirements thereunder and otherwise.

     

    7.  Transfer
      Restrictions.

     

    a.  The
      Common Stock and Common Stock issuable upon exercise of the Investor Warrants
      (the “Warrant
      Shares”)
      (the
      Common Stock, Investor Warrants and Warrant Shares are collectively referred
      to
      as the “Securities”)
      may
      only be disposed of in compliance with state and federal securities laws. In
      connection with any transfer of Securities other than pursuant to an effective
      registration statement or Rule 144, the Company may require the transferor
      thereof to provide to the Company an opinion of counsel selected by the
      transferor and reasonably acceptable to the Company, the form and substance
      of
      which opinion shall be reasonably satisfactory to the Company, to the effect
      that such transfer does not require registration of such transferred Securities
      under the Securities Act. As a condition of transfer, any such transferee shall
      agree in writing to be bound by the terms of this Agreement and shall have
      the
      rights of an Investor under this Agreement and the Registration Rights
      Agreement.

     

    b.  The
      Investors agree to the imprinting, so long as is required by this Section 7,
      of
      a legend on any of the Securities in the following form:

     

    THIS
      SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR
      THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY.

     

    
      
        
        

      

      
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    c.  Certificates
      evidencing the Common Stock and Warrant Shares shall not contain any legend
      (including the legend set forth in Section 7(b)), (i) while a registration
      statement (including the Registration Statement) covering the resale of such
      security is effective under the Securities Act, or (ii) following any sale
      of
      such Common Stock or Warrant Shares pursuant to Rule 144, or (iii) if such
      Common Stock or Warrant Shares are eligible for sale under Rule 144(k), or
      (iv)
      if such legend is not required under applicable requirements of the Securities
      Act (including judicial interpretations and pronouncements issued by the staff
      of the Commission). The Company shall cause its counsel to issue a legal opinion
      to the Company’s transfer agent promptly after the effective date of the
      Registration Statement (the “Effective
      Date”)
      if
      required by the Company’s transfer agent to effect the removal of the legend
      hereunder. If all or any portion of an Investor Warrant is exercised at a time
      when there is an effective registration statement to cover the resale of the
      Warrant Shares, such shares shall be issued free of all legends. The Company
      agrees that following the Effective Date or at such time as such legend is
      no
      longer required under this Section 7(c), it will, five Trading Days following
      the delivery by an Investor to the Company or the Company’s transfer agent of a
      certificate representing Common Stock or Warrant Shares, as the case may be,
      issued with a restrictive legend (such fifth Trading Day, the “Legend
      Removal Date”),
      deliver or cause to be delivered to such Investor a certificate representing
      such shares that is free from all restrictive and other legends. The Company
      may
      not make any notation on its records or give instructions to any transfer agent
      of the Company that enlarge the restrictions on transfer set forth in this
      Section 7. Certificates for Securities and subject to legend removal hereunder
      shall be transmitted by the transfer agent of the Company to the Investors
      by
      crediting the account of the Investor’s prime broker with the Depository Trust
      Company System.

     

    d.  In
      addition to such Investor’s other available remedies, the Company shall pay to
      an Investor, in cash, as partial liquidated damages and not as a penalty, for
      each $1,000 of Common Stock or Warrant Shares (based on the VWAP of the Common
      Stock on the date such Securities are submitted to the Company’s transfer agent)
      delivered for removal of the restrictive legend and subject to Section 7(c),
      $10
      per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after
      such damages have begun to accrue) for each Trading Day after the Legend Removal
      Date until such certificate is delivered without a legend. Nothing herein shall
      limit such Investor’s right to pursue actual damages for the Company’s failure
      to deliver certificates representing any Securities as required by the
      Transaction Documents, and such Purchaser shall have the right to pursue all
      remedies available to it at law or in equity including, without limitation,
      a
      decree of specific performance and/or injunctive relief. For purposes of this
      Section 7(d) “VWAP”
means,
      for any date, the price determined by the first of the following clauses that
      applies: (i) if the Common Stock is then listed or quoted on a Trading Market,
      the daily volume weighted average price of the Common Stock for such date (or
      the nearest preceding date) on the Trading Market on which the Common Stock
      is
      then listed or quoted for trading as reported by Bloomberg L.P. (based on a
      Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
      time); (ii)  if the OTC Bulletin Board is not a Trading Market, the volume
      weighted average price of the Common Stock for such date (or the nearest
      preceding date) on the OTC Bulletin Board; (iii) if the Common Stock is not
      then
      quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
      are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a
      similar organization or agency succeeding to its functions of reporting prices),
      the most recent bid price per share of the Common Stock so reported; or
      (iv) in all other cases, the fair market value of a share of Common Stock
      as determined by an independent appraiser selected in good faith by the Investor
      and reasonably acceptable to the Company, the fees and expenses of which shall
      be paid by the Company. 

     

    
      
        
        

      

      
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    e.  Each
      Investor, severally and not jointly with the other Investors, agrees that the
      removal of the restrictive legend from certificates representing Securities
      as
      set forth in this Section 7 is predicated upon the Company’s reliance that the
      Investor will sell any Securities pursuant to either the registration
      requirements of the Securities Act, including any applicable prospectus delivery
      requirements, or an exemption therefrom, and that if Securities are sold
      pursuant to a Registration Statement, they will be sold in compliance with
      the
      plan of distribution set forth therein.

     

    8.  Independent
      Nature of Investor’s Obligations and Rights.
      The
      obligations of the Investor under this Agreement and the Transaction Documents
      are several and not joint with the obligations of any other purchaser of Units
      in the Offering, and the Investor shall not be responsible in any way for the
      performance of the obligations of any other purchaser of Units in the Offering
      under any Transaction Document. The decision of the Investor to purchase the
      Investor’s Units pursuant to the Transaction Documents has been made by the
      Investor independently of any other purchaser of Units in the Offering. Nothing
      contained herein or in any Transaction Document or Investor Warrant, and no
      action taken by any purchaser of Units pursuant thereto, shall be deemed to
      constitute such purchasers as a partnership, an association, a joint venture,
      or
      any other kind of entity, or create a presumption that the purchasers of Units
      are in any way acting in concert or as a group with respect to such obligations
      or the transactions contemplated by the Transaction Documents. The Investor
      acknowledges that no other purchaser of Units has acted as agent for the
      Investor in connection with making its investment hereunder and that no other
      purchaser of Units will be acting as agent of the Investor in connection with
      monitoring its investment in the Units or enforcing its rights under the
      Transaction Documents and Investor Warrants. The Investor shall be entitled
      to
      independently protect and enforce its rights, including without limitation
      the
      rights arising out of this Agreement or out of the other Transaction Documents
      or Investor Warrants, and it shall not be necessary for any other purchaser
      of
      Units to be joined as an additional party in any proceeding for such
      purpose.

     

    9.  Prospectus
      Delivery Requirement.
      The
      Investor hereby covenants with the Company not to make any sale of the
      Investor’s Units without complying with the provisions hereof and of the
      Registration Rights Agreement, and without effectively causing the prospectus
      delivery requirement under the Securities Act to be satisfied (unless the
      Investor is selling in a transaction not subject to the prospectus delivery
      requirement). 

     

    10.  Shareholder
      Approval.
      The
      Company represents and warrants to the Investor that a vote of the stockholders
      of the Company will not be required to approve the issuance of the Investor’s
      Units.

     

    11.  Indemnification
      of Investor.
      In
      addition to the indemnity provided in the Registration Rights Agreement, the
      Company will indemnify and hold the Investor and its directors, officers,
      shareholders, members, managers, partners, employees and agents (each, an
“Investor
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs, and reasonable attorneys’ fees and costs of
      investigation (collectively, “Losses”)
      that
      any such Investor Party may suffer or incur as a result of or relating to any
      misrepresentation, breach, or inaccuracy of any representation, warranty,
      covenant, or agreement made by the Company in any Transaction Document. In
      addition to the indemnity contained herein, the Company will reimburse each
      Investor Party for its reasonable legal and other expenses (including the cost
      of any investigation, preparation, and travel in connection therewith) incurred
      in connection therewith, as such expenses are incurred.

     

    
      
        
        

      

      
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    12.  Contribution.
      If the
      indemnification under Section 11 is unavailable to an indemnified party or
      insufficient to hold an indemnified party harmless for any Losses, then each
      indemnifying party shall contribute to the amount paid or payable by such
      indemnified party, in such proportion as is appropriate to reflect the relative
      fault of the indemnifying party and indemnified party in connection with the
      actions, statements or omissions that resulted in such Losses as well as any
      other relevant equitable considerations. The relative fault of such indemnifying
      party and indemnified party shall be determined by reference to, among other
      things, whether any action in question, including any untrue or alleged untrue
      statement of a material fact or omission or alleged omission of a material
      fact,
      has been taken or made by, or relates to information supplied by, such
      indemnifying party or indemnified party, and the parties’ relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      action, statement or omission. The amount paid or payable by a party as a result
      of any Losses shall be deemed to include, subject to the limitations set forth
      in this Agreement, any reasonable attorneys’ or other fees or expenses incurred
      by such party in connection with any Action to the extent such party would
      have
      been indemnified for such fees or expenses if the indemnification provided
      for
      in this Section was available to such party in accordance with its
      terms.

     

    13.  Integration.
      The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Purchasers or that would be integrated with the offer
      or sale of the Securities for purposes of the rules and regulations of any
      Trading Market such that it would require shareholder approval prior to the
      closing of such other transaction unless shareholder approval is obtained before
      the closing of such subsequent transaction.

     

    14.  Participation
      in Future Financing.

     

    a.    
       From
      the
      date hereof until the date that is the second anniversary of the Effective
      Date,
      upon any issuance by the Company or any of its Subsidiaries of Common Stock
      or
      Common Stock Equivalents for cash consideration (a “Subsequent
      Financing”),
      each
      Investor shall have the right to participate in an amount up to the amount
      of
      the Subsequent Financing (the “Participation
      Maximum”)
      on the
      same terms, conditions and price provided for in the Subsequent
      Financing. 

     

    b.    
       At
      least
      15 Trading Days prior to the closing of the Subsequent Financing, the Company
      shall deliver to each Investor a written notice of its intention to effect
      a
      Subsequent Financing (“Pre-Notice”),
      which
      Pre-Notice shall ask such Investor if it wants to review the details of such
      financing (such additional notice, a “Subsequent
      Financing Notice”). 
      Upon the request of an Investor, and only upon a request by such Investor,
      for a
      Subsequent Financing Notice, the Company shall as soon as practicable, but
      no
      later than 2 Trading Days after such request, deliver a Subsequent Financing
      Notice to such Investor.  The Subsequent Financing Notice shall describe in
      reasonable detail the proposed terms of such Subsequent Financing, the amount
      of
      proceeds intended to be raised thereunder, the person or persons through or
      with
      whom such Subsequent Financing is proposed to be effected, and attached to
      which
      shall be a term sheet or similar document relating
      thereto.   

     

    
      
        
        

      

      
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    c.    
       Any
      Investor desiring to participate in such Subsequent Financing must provide
      written notice to the Company by not later than 5:30 p.m. Eastern time on the
      fifth Trading Day after all of the Investors have received the Pre-Notice that
      the Investor is willing to participate in the Subsequent Financing, the amount
      of the Investor’s participation, and that the Investor has such funds ready,
      willing, and available for investment on the terms set forth in the Subsequent
      Financing Notice. If the Company receives no notice from an Investor as of
      such
      fifth Trading Day, such Investor shall be deemed to have notified the Company
      that it does not elect to participate.  

     

    d.    
       If
      by
      5:30 p.m. Eastern time on the fifth Trading Day after all of the Investors
      have
      received the Pre-Notice, notifications by the Investors of their willingness
      to
      participate in the Subsequent Financing (or to cause their designees to
      participate) is, in the aggregate, less than the total amount of the Subsequent
      Financing, then the Company may effect the remaining portion of such Subsequent
      Financing on the terms and with the persons set forth in the Subsequent
      Financing Notice.  

     

    e.    
       If
      by
      5:30 p.m. Eastern time on the fifth Trading Day after all of the Investors
      have
      received the Pre-Notice, the Company receives responses to a Subsequent
      Financing Notice from Investors seeking to purchase more than the aggregate
      amount of the Participation Maximum, each such Investor shall have the right
      to
      purchase the greater of (a) their Pro Rata Portion (as defined below) of the
      Participation Maximum and (b) the difference between the Participation Maximum
      and the aggregate amount of participation by all other Investors. 
“Pro
      Rata Portion”
is
      the
      ratio of (x) the amount of Units subscribed for in this Agreement and purchased
      on the Closing Date by an Investor participating under this Section 14 and
      (y)
      the sum of the aggregate amount of Units subscribed for and purchase under
      this
      Agreement on the Closing Date by all Purchasers participating under this Section
      14.

     

    f.     
       The
      Company must provide the Investors with a second Subsequent Financing Notice,
      and the Investors will again have the right of participation set forth above
      in
      this Section 14, if the Subsequent Financing subject to the initial Subsequent
      Financing Notice is not consummated for any reason on the terms set forth in
      such Subsequent Financing Notice within 60 Trading Days after the date of the
      initial Subsequent Financing Notice.

     

    g.    
      Notwithstanding
      the foregoing, this Section 14 shall not apply in respect of (i)
      an
      Exempt
      Issuance
      or (ii)
      an underwritten public offering of Common Stock.
      “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers
      or
      directors of the Company pursuant to any stock or option plan duly adopted
      by a
      majority of the non-employee members of the Board of Directors of the Company
      or
      a majority of the members of a committee of non-employee directors established
      for such purpose, (b) securities upon the exercise or exchange of or conversion
      of any Securities issued hereunder and/or other securities exercisable or
      exchangeable for or convertible into shares of Common Stock issued and
      outstanding on the date of this Agreement, provided that such securities have
      not been amended since the date of this Agreement to increase the number of
      such
      securities or to decrease the exercise, exchange or conversion price of such
      securities, and (c) securities issued pursuant to acquisitions or strategic
      transactions approved by a majority of the disinterested directors of the
      Company, provided that any such issuance shall only be to a Person which is,
      itself or through its subsidiaries, an operating company in a business
      synergistic with the business of the Company and in which the Company receives
      benefits in addition to the investment of funds, but shall not include a
      transaction in which the Company is issuing securities primarily for the purpose
      of raising capital or to an entity whose primary business is investing in
      securities.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    15.  Non-Public
      Information.
      Subsequent to the Closing, the Company covenants and agrees that neither it
      nor
      any other person acting on its behalf will provide Investor or its agents or
      counsel with any information that the Company believes constitutes material
      non-public information, unless prior thereto the Investor shall have executed
      a
      written agreement regarding the confidentiality and use of such information.
      

     

    16.  Further
      Assurances.
      The
      parties hereto will, upon reasonable request, execute and deliver all such
      further assignments, endorsements, and other documents as may be necessary
      in
      order to perfect the purchase by the Investor of the Investor’s Units. In
      addition, the Company agrees that it will do all such acts necessary to ensure
      that Canadian residents holding shares will be able to trade such securities
      without resale restrictions under Canadian securities legislation within four
      months from the Merger Effective Date, including, if necessary, all acts in
      order for the Company to become a reporting issuer in a Canadian province or
      territory, which may include the filing and receipting of a prospectus by
      Canadian securities regulatory authorities.

     

    17.  Entire
      Agreement; No Oral Modification.
      This
      Agreement and the other Transaction Documents and Investor Warrants contain
      the
      entire agreement among the parties hereto with respect to the subject matter
      hereof and supersede all prior agreements and understandings with respect
      thereto and this Agreement may not be amended or modified except in a writing
      signed by both of the parties hereto.

     

    18.  Amendments
      and Waivers.
      The
      provisions of this Agreement may be amended on or before the Closing Date,
      and
      particular provisions of this Agreement may be waived, with and only with an
      agreement or consent in writing signed by the Company and the majority of
      Investors, unless such provision is specific to an Investor. The Investors
      acknowledge that by the operation of this Section 18, the majority of Investors
      may have the right and power to diminish or eliminate all rights of the
      Purchasers under this Agreement. 

     

    19.  Binding
      Effect; Benefits.
      This
      Agreement shall inure to the benefit of and be binding upon the parties hereto
      and their respective heirs, successors and assigns; however, nothing in this
      Agreement, expressed or implied, is intended to confer on any other person
      other
      than the parties hereto, or their respective heirs, successors, or assigns,
      any
      rights, remedies, obligations, or liabilities under or by reason of this
      Agreement.

     

    20.  Counterparts.
      This
      Agreement may be executed in any number of counterparts, for each of which
      shall
      be deemed to be an original and all of which together shall be deemed to be
      one
      and the same instrument. In the event that any signature is delivered by
      facsimile transmission, such signature shall create a valid and binding
      obligation of the party executing (or on whose behalf such signature is
      executed) with the same force and effect as if such facsimile signature page
      were an original thereof.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    21.  Governing
      Law.
      This
      Agreement shall be governed by, and construed and enforced in accordance with,
      the laws of the United States of America and the State of New York, both
      substantive and remedial, without regard to New York conflicts of law
      principles. Any
      judicial proceeding brought against either of the parties to this agreement
      or
      any dispute arising out of this Agreement or any matter related hereto shall
      be
      brought in the courts of the State of New York, New York County, or in the
      United States District Court for the Southern District of New York and, by
      its
      execution and delivery of this agreement, each party to this Agreement accepts
      the jurisdiction of such courts. 

     

    22.  Prevailing
      Parties.
      In any
      action or proceeding brought to enforce any provision of this Agreement, or
      where any provision hereof is validly asserted as a defense, the prevailing
      party shall be entitled to receive and the nonprevailing party shall pay upon
      demand reasonable attorneys’ fees in addition to any other remedy.

     

    23.  Notices.
      All
      communication hereunder shall be in writing and shall be mailed, delivered,
      telegraphed or sent by facsimile or electronic mail, and such delivery shall
      be
      confirmed to the addresses as provided below: 

     

    if
      to the
      Investor:

    

    to
      the
      address set forth on the signature page of this Agreement

     

    if
      to the
      Company before the Closing Date:

    

    Kreido
      Biofuels, Inc.

    88
      West
      44th Avenue

    Vancouver,
      British Columbia, V5Y 2V1 Canada

    Attn:
      Stephen B. Jackson, President

    

    with
      copy
      to: 

    

    Gottbetter
      & Partners, LLP

    488
      Madison Avenue, 12th
      Floor

    New
      York,
      New York 10022

    Attention:
      Kenneth S. Goodwin, Esq.

    Facsimile:
      (212) 400-6901

    

    if
      to
      Kreido or to the Company after the Closing Date, to: 

    

    Kreido
      Laboratories

    1140
      Avenida Acaso

    Camarillo,
      California 93012

    Attention:
      Dr. Joel Balbien, Chief Executive Officer

    Facsimile:
      (805) 384-0989

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    with
      a
      copy to:

    

    McGuireWoods
      LLP

    1345
      Avenue of the Americas, 7th Floor

    New
      York,
      New York 10105

    Attention:
      Louis W. Zehil

    Facsimile:
      (212) 548-2175

    

    24.  Headings.
      The
      section headings herein are included for convenience only and are not to be
      deemed a part of this Agreement.

     

    [SIGNATURE
      PAGES FOLLOW]

    
      
        
        

      

      
        21

        
          

        

      

       

    

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

    
      	 	 	 
	 	
              KREIDO
                BIOFUELS, INC.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:
              Stephen B. Jackson 
	 	Its:  President

    

     

    [SIGNATURE
      PAGES OF KREIDO AND INVESTOR FOLLOW]

    
      
        
        

      

      
        22

        
          

        

      

       

    

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

    
      	 	 	 
	 	
              KREIDO
                LABORATORIES

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:
              Dr. Joel Balbien
	 	Its:  Chief
              Executive Officer

    

     

    [SIGNATURE
      PAGE OF INVESTOR FOLLOWS]

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

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

    

    
      	
              INVESTOR
                (individual)

            	
              INVESTOR
                (entity)

            
	 	 
	
              ______________________________________

            	
              ____________________________________

            
	
              Signature

            	
              Name
                of Entity

            
	 	 
	
              ______________________________________

            	
              ____________________________________

            
	
              Print
                Name

            	
              Signature

            
	 	 
	
              Address
                of Principal Residence:

            	 
	
              _____________________________________

            	
              Print
                Name: __________________________

            
	
              _____________________________________

            	 
	
              _____________________________________

            	
              Title:
                ________________________________

            
	 	 
	
              Social
                Security Number:

            	
              Address
                of Executive Offices:

            
	
              _____________________________________

            	 
	 	
              _____________________________________

            
	
              Telephone
                Number:

            	
              _____________________________________

            
	
              _____________________________________

            	
              _____________________________________

            
	 	 
	
              Facsimile
                Number:

            	
              IRS
                Tax Identification Number:

            
	
              _____________________________________

            	
              __________________________________

            
	 	 
	 	
              Telephone
                Number:

            
	 	
              __________________________________

            
	 	 
	 	
              Facsimile
                Number:

            
	 	
              ____________________________________

            

    

     

    
      	
              _________________

            	
              X

            	
              $1.35

            	
              =

            	
              $___________________

            
	
              Number
                of Units 

            	 	
              Price
                per Unit

            	 	
              Purchase
                Price

            

    

    

     

    
      
        
        

      

      
        24

        
          

        

      

       

    

    EXHIBIT
      A

    

    Form
      of Warrant

    

    

    (See
      Attached)

    
      
        
        

      

      
        25

        
          

        

      

       

    

    

    APPENDIX
      A

    

    Investor
      Questionnaire

     

    

    (See
      Attached)

    

    
      
        
        

      

      
        26

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