SUBORDINATION AND INTERCREDITOR AGREEMENT

      This Subordination and Intercreditor Agreement (this "Agreement") dated as
of  February  28,  2005  among  LAURUS  MASTER  FUND,  LTD.,  a  Cayman  Islands
corporation  ("Laurus"),  ROYNAT MERCHANT  CAPITAL INC., a Delaware  corporation
("Roynat"), THOMAS EQUIPMENT, INC., a Delaware corporation ("Thomas Equipment"),
THOMAS  VENTURES,  INC.,  a Delaware  corporation  ("Thomas  Ventures"),  THOMAS
EQUIPMENT 2004 INC., a corporation  organized  under the laws of Canada ("Thomas
Canada"),  PNEUTECH  INC.,  a  corporation  organized  under  the laws of Canada
("Pneutech"),  ROUSSEAU CONTROLS INC., a corporation organized under the laws of
Canada ("Rousseau"),  and HYDRAMEN FLUID POWER LIMITED, a corporation  organized
under the laws of  Ontario  ("Hydramen")  (Thomas  Equipment,  Thomas  Ventures,
Thomas Canada,  Pneutech,  Rousseau and Hydramen and their respective successors
and assigns, each a "Company" and, collectively, the "Companies").

                                   BACKGROUND

      Laurus and Roynat wish to set forth their agreement as to their respective
rights and obligations  with respect to the  indebtedness of the Companies owing
to Laurus and Roynat and the security  interests,  hypothecs and liens of Laurus
and Roynat in the assets and properties of the Companies and their understanding
relative to their respective  positions in such indebtedness and such assets and
properties.

                                   AGREEMENTS

      NOW, THEREFORE,  for good and valuable consideration,  receipt of which is
hereby acknowledged, Laurus, Roynat and each Company hereby agree as follows:

      1. Definitions.

            1.1 General  Terms.  For purposes of this  Agreement,  the following
terms shall have the following meanings:

            "Affiliate"  means,  with respect to a Person,  any other Person (i)
which directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, (ii) which owns 10%
or more of the equity interests of such Person,  (iii) 10% or more of the voting
stock (or in the case of a Person that is not a corporation,  10% or more of the
equity interests of such Person) of which is owned by such Person or (iv) who is
an executive  officer or director of such Person.  The term "control"  means (a)
the power to vote more than 50% of the securities or other equity interests of a
Person  having  ordinary  voting power (on a fully  diluted  basis),  or (b) the
possession,  directly or  indirectly,  of any other power to direct or cause the
direction of the management and policies of a Person,  whether through ownership
of voting securities, by contract or otherwise.

            "Bankruptcy Law" shall mean the Code, or any similar federal, state,
provincial  or  foreign  law for  the  relief  of  debtors  or any  arrangement,
reorganization, insolvency, moratorium, assignment for the benefit of creditors,
any other marshalling of the assets and liabilities of any Company.

<PAGE>

            "Business Day" means any day other than a Saturday,  a Sunday or any
other  day on which  commercial  banks in New  York,  New York are  required  or
permitted by law to close.

            "Code" shall mean the United  States  Bankruptcy  Code, as in effect
from time to time.

            "Collateral"  shall  mean  all  of the  property  and  interests  in
property,  tangible or intangible,  real or personal,  immovable or movable, now
owned or hereafter  acquired by any Company in or upon which any Creditor at any
time has a Lien,  including,  without  limitation,  all proceeds and products of
such property and interests in property; provided, however, the Collateral shall
not include the Life Insurance Proceeds.

            "Common Stock" means the common stock of Thomas Equipment, par value
of $0.01 per share.

            "Company" and  "Companies"  shall have the meanings set forth in the
introductory paragraph of this Agreement.

            "Creditor   Agreements"   shall  mean,   collectively,   the  Laurus
Agreements and the Roynat Agreements.

            "Creditors" shall mean, collectively, Laurus and Roynat.

            "Distribution" shall mean any payment,  whether in cash, in kind, by
offset,  securities  or any other  property,  or security  for any such  payment
(other than (i) securities,  including Common Stock,  issued by Thomas Equipment
to Roynat in connection with the Roynat Warrant or (ii) other property issued by
Thomas  Equipment to Roynat under Section  6(a)(ii) of the Roynat  Warrant as in
effect on the date hereof) for any such payment.

            "Enumerated  Collateral"  shall  mean the  Collateral  of  Pneutech,
Rousseau and Hydramen.

            "Enumerated Companies" shall mean, collectively,  Pneutech, Rousseau
and Hydramen.

            "Insolvency or Liquidation Proceeding" shall mean, collectively, (a)
any voluntary or involuntary case, proceeding or filing under any Bankruptcy Law
with respect to any Company, (b) any other voluntary or involuntary  insolvency,
reorganization  or bankruptcy case,  proceeding or filing,  or any receivership,
liquidation,  reorganization  or other similar  case,  proceeding or filing with
respect  to  any  Company  or  with  respect  to  any of  its  assets,  (c)  any
liquidation,  dissolution  or winding up of any  Company,  whether  voluntary or
involuntary  and whether or not  involving  insolvency  or  bankruptcy,  (d) any
assignment  for the benefit of creditors or any other  marshaling  of assets and
liabilities  of any  Company,  and  (e)  the  cessation  of the  operation  of a
substantial part of any Company's business.

            "Laurus  Agreements" shall mean,  collectively,  the Laurus Security
Agreement,  the Laurus  Guaranty and Security  Agreements,  the other  Ancillary
Agreements  (as  defined  in  the  Laurus  Security  Agreement)  and  all  other
promissory  notes,  agreements,  documents  and  instruments  now or at any time
hereafter  executed and/or delivered by any Company or any other Person to, with
or in favor of Laurus in connection  therewith or related thereto, as all of the
foregoing  now  exist  or may  hereafter  be  amended,  modified,  supplemented,
extended,  renewed,  restated or replaced,  in each case to the extent permitted
herein.


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<PAGE>

            "Laurus  Amendment"  shall mean the Amendment  Agreement dated as of
the date hereof among Thomas Equipment, Thomas Ventures and Laurus.

            "Laurus Default" shall mean and include a Laurus Realization Default
and/or a Laurus Non-Realization Default.

            "Laurus Default Notice" shall mean and include a Laurus  Realization
Default Notice and/or a Laurus Non-Realization Default Notice.

            "Laurus Guaranty and Security Agreements" shall mean,  collectively,
(a) each  General  Security  Agreement,  deed of  hypothecs  and  shares  pledge
agreements  made by Thomas Canada,  Pneutech,  Rousseau and Hydramen in favor of
Laurus,  (b) each  Guarantee  made by  Thomas  Canada,  Pneutech,  Rousseau  and
Hydramen  in favor of  Laurus  and (c) each  Security  Agreement  made by Thomas
Canada, Pneutech,  Rousseau and Hydramen in favor of Laurus, as each of the same
may be amended, modified and supplemented from time to time.

            "Laurus  Indebtedness"  shall mean all monetary  obligations  of any
kind owed by any Company or the  Companies  to Laurus from time to time under or
pursuant to any of the Laurus  Agreements  including,  without  limitation,  all
principal,  interest accruing thereon,  charges,  expenses,  fees and other sums
(including all interest,  charges,  expenses, fees and other sums accruing after
commencement  of any  Insolvency or  Liquidation  Proceeding)  chargeable to any
Company  or the  Companies  by Laurus,  and  reimbursement,  indemnity  or other
obligations due and payable to Laurus.

            "Laurus Non-Realization  Default" shall mean an Event of Default (or
similar term) under and as such term is defined in any Laurus  Agreement,  other
than a Laurus Realization Default.

            "Laurus  Non-Realization  Default  Notice" shall mean written notice
from Laurus to Thomas Equipment and, to the extent applicable, any other Company
of the occurrence  and  continuance  of a Laurus  Non-Realization  Default which
written  notice shall describe such Laurus  Non-Realization  Default and declare
Thomas  Equipment and, to the extent  applicable,  such other Company in default
under any of the Laurus Agreements.


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<PAGE>

            "Laurus  Realization  Default"  shall mean an Event of  Default  (or
similar term) under and as such term is defined in any Laurus Agreement  arising
from (a) the failure by any Company to make any payment,  whether for principal,
interest or fees, in respect of the Laurus Indebtedness  (whether at maturity or
at a date fixed for  prepayment or by  declaration,  acceleration  or otherwise)
and/or (b) the failure by Thomas  Equipment  to deliver or cause to be delivered
Common Stock to Laurus pursuant to and in accordance with the  requirements  set
forth in any of the Laurus Agreements.

            "Laurus  Realization  Default Notice" shall mean written notice from
Laurus to Thomas Equipment and, to the extent  applicable,  any other Company of
the occurrence and  continuance  of a Laurus  Realization  Default which written
notice  shall  describe  such Laurus  Realization  Default  and  declare  Thomas
Equipment and, to the extent applicable, such other Company in default under any
of the Laurus Agreements.

            "Laurus  Security  Agreement"  shall mean the  Security and Purchase
Agreement dated as of November 9, 2004 among Thomas  Equipment,  Thomas Ventures
and  Laurus,  amended  by the  Laurus  Amendment  and as the same may be further
amended, supplemented, modified and/or restated from time to time, to the extent
permitted herein.

            "Lien"   shall   mean  any   mortgage,   deed  of   trust,   pledge,
hypothecation,  hypothecs,  assignment, deposit arrangement,  security interest,
encumbrance  (including,  but not limited to,  easements,  rights of way and the
like),  lien (statutory or other),  security  agreement or transfer  intended as
security  including,  without  limitation,  any conditional  sale or other title
retention  agreement,  the  interest  of a lessor  under a capital  lease or any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing.

            "Life  Insurance  Proceeds"  shall  mean  the  proceeds  of any life
insurance policy on the life of Clifford Rhee specifically assigned to Roynat.

            "Maximum Laurus Principal  Amount" shall mean an amount equal to (a)
$30,800,000,  plus (b)  interest,  fees and other costs and  expenses  which may
become  part of or added to the  principal  amount of the  Laurus  Indebtedness,
minus (c) any amounts  received by Laurus from the  Companies and applied to the
outstanding  principal  amount  of the Term  Loans  (as  defined  in the  Laurus
Security  Agreement),  minus  (d) any  permanent  commitment  reductions  in any
revolving credit facility under the Laurus Security Agreement.

            "Maximum Roynat Principal  Amount" shall mean an amount equal to (a)
$6,500,000,  plus (b)  interest,  fees and other  costs and  expenses  which may
become  part of or added to the  principal  amount of the  Roynat  Indebtedness,
minus (c) any amounts  received by Roynat from the  Companies and applied to the
outstanding principal amount of the Roynat Indebtedness.

            "Permitted Payments" shall mean payments of:

            (a) interest,  fees and expenses due and payable by the Companies to
Roynat  pursuant  to the  Roynat  Agreements  as in  effect  on the date  hereof
including,  without limitation, any fees under the Registration Rights Agreement
dated as of the date hereof between Thomas Equipment and Roynat;

            (b) on or after  December  30,  2005,  any  principal  and any other
amounts which comprise all or part of the Roynat Indebtedness; and

            (c) any or all of the Roynat  Indebtedness  provided such payment is
made or derived  from the proceeds  received by Thomas  Equipment as a result of
any public offering of Common Stock.


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<PAGE>

            "Person"  shall mean an  individual,  a  partnership,  a corporation
(including a business  trust),  a company,  a joint stock company,  a trust,  an
unincorporated  association,  a joint venture, a limited liability  company,  an
unlimited liability company, a limited liability partnership or other entity, or
a government or any agency, instrumentality or political subdivision thereof.

            "Post-Petition  Financing" shall mean all extensions of credit under
any financing extended or provided to any Company under any Bankruptcy Law.

            "Roynat Agreements" shall mean, collectively,  the Roynat Debenture,
the Roynat Warrant and all promissory notes, warrants, agreements, documents and
instruments  now or at any  time  hereafter  executed  and/or  delivered  by any
Company  or any  other  Person  to,  with or in favor of  Roynat  in  connection
therewith or related thereto, as all of the foregoing now exist or may hereafter
be amended, modified, supplemented,  extended, renewed, restated or replaced, in
each case to the extent permitted herein.

            "Roynat  Debenture"  shall mean the  Debenture  dated as of the date
hereof by and  between  Roynat  and Thomas  Equipment,  as amended to the extent
permitted herein.

            "Roynat  Default" shall mean an "event of default" (or similar term)
under and as such term in any Roynat Agreement as in effect on the date hereof.

            "Roynat Default Notice" shall mean written notice from Roynat to any
Company  of the  occurrence  of a Roynat  Default  which  written  notice  shall
describe such Roynat Default and refer to this Agreement.

            "Roynat  Indebtedness"  shall mean all monetary  obligations  of any
kind owed by any Company or the  Companies  to Roynat from time to time under or
pursuant to any of the Roynat  Agreements  including,  without  limitation,  all
principal,  interest accruing thereon,  charges,  expenses,  fees and other sums
(including all interest,  charges,  expenses, fees and other sums accruing after
commencement  of any  Insolvency or  Liquidation  Proceeding)  chargeable to any
Company  or the  Companies  by Roynat,  and  reimbursement,  indemnity  or other
obligations due and payable to Roynat.

            "Roynat Warrant" shall mean the Stock Purchase Warrant issued on the
date hereof by Thomas  Equipment in favor of Roynat and any reissue or amendment
thereof to the extent permitted herein.

            "Secured  Lender  Remedies"  shall  mean the  taking  possession  of
(either  directly  or through  an agent or  mandatary),  the sale,  foreclosure,
realization  upon,  and/or a  liquidation  of any of the  Collateral  including,
without limitation,  the exercise of any of the rights or remedies of a "secured
party" under  Article 9 of the New York Uniform  Commercial  Code,  or under the
Personal Property Security Act of the applicable province or territory of Canada
or the Civil Code of Quebec,  such as, without  limitation,  the notification of
account debtors.

            1.2 Certain Matters of  Construction.  The terms "herein",  "hereof"
and  "hereunder"  and other words of similar import refer to this Agreement as a
whole and not to any particular section,  paragraph or subdivision.  Any pronoun
used shall be deemed to cover all genders.  Wherever appropriate in the context,
terms used herein in the singular  also  include the plural and vice versa.  All
references to statutes and related  regulations  shall include any amendments of
same and any successor  statutes and regulations.  Except as expressly set forth
herein,  all references to any  instruments or  agreements,  including,  without
limitation,  references to any of the Creditor  Agreements shall include any and
all  modifications or amendments  thereto and any and all extensions or renewals
thereof,  in each case,  to the  extent  permitted  herein.  All  references  to
security interests or mortgages shall mean and include hypothecs.


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<PAGE>

      2. Priorities.

            2.1 Subordination Provisions. Notwithstanding any other provision of
the Roynat  Agreements to the  contrary,  to the extent  provided  below in this
Agreement, any Distribution with respect to the Roynat Indebtedness is and shall
be expressly  junior and subordinated in right of payment to all amounts due and
owing  upon all the  Laurus  Indebtedness  outstanding  from time to time in the
manner and to the extent  provided  in this  Agreement.  Until the  indefeasible
payment in full of the Laurus  Indebtedness  and the irrevocable  termination of
the  Laurus  Agreements,  no Company  shall make and Roynat  shall not accept or
retain any Distribution in respect of the Roynat Indebtedness except, subject to
the  provisions  of this  Section 2, Roynat may accept and retain (a)  Permitted
Payments, (b) subject to the last sentence hereof, any Distribution arising from
the exercise of Secured  Lender  Remedies  and (c) subject to the last  sentence
hereof,  any proceeds of Collateral  pursuant to an  Insolvency  or  Liquidation
Proceeding.  Notwithstanding  anything contained herein to the contrary,  to the
extent any Creditor  receives  any  Distribution  arising  from such  Creditor's
exercise of its Secured Lender  Remedies or any proceeds of Collateral  pursuant
to an Insolvency or Liquidation Proceeding, in each case, as permitted by and in
accordance with the terms and conditions of this  Agreement,  the application of
such Distribution to the Laurus Indebtedness or the Roynat Indebtedness,  as the
case may be,  shall be  governed  by the  priorities  set forth in  Section  3.2
hereof.

            2.2 Payments.

            (a) From and after receipt by Roynat of a Laurus Realization Default
Notice from Laurus (which  expressly states that such Default Notice is a Laurus
Realization  Default  Notice),  no Company  shall make any  Distribution  on the
Roynat  Indebtedness  and Roynat  shall not be entitled to receive or retain any
such  Distribution in respect of the Roynat  Indebtedness  until the earliest to
occur of (i) the date on which all  Laurus  Defaults  described  in such  Laurus
Realization Default Notice shall have been cured or waived in writing by Laurus,
(ii) the date  the  Laurus  Indebtedness  is  indefeasibly  paid in full and the
Laurus Agreements are irrevocably terminated or (iii) the expiration of a period
of one-hundred  and fifty (150) days  commencing  from and including the date of
Roynat's receipt of such Laurus Realization Default Notice from Laurus.

            (b) From and after  receipt  by  Roynat of a Laurus  Non-Realization
Default Notice from Laurus (which expressly states that such Default Notice is a
Laurus  Non-Realization  Default Notice), no Company shall make any Distribution
on the Roynat Indebtedness and Roynat shall not be entitled to receive or retain
any such Distribution in respect of the Roynat  Indebtedness  until the earliest
to occur of (i) the date on which all Laurus Non-Realization  Defaults described
in such Laurus Non-Realization Default Notice shall have been cured or waived in
writing by Laurus, (ii) the date the Laurus Indebtedness is indefeasibly paid in
full  and  the  Laurus  Agreements  are  irrevocably  terminated  or  (iii)  the
expiration of a period of sixty (60) days commencing from and including the date
of Roynat's receipt of such Laurus Non-Realization Default Notice from Laurus.


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<PAGE>

            (c) No Laurus  Realization  Default Notice shall be effective  under
clause (a) above if Laurus  previously  delivered a Laurus  Realization  Default
Notice to Roynat.  No Laurus  Non-Realization  Default Notice shall be effective
under clause (b) above if Laurus previously  delivered a Laurus  Non-Realization
Default Notice to Roynat.

            (d) Any  Company  may make and  Roynat  may  accept  and  retain any
Permitted  Payments  other than during any period  described  in Section  2.2(a)
and/or Section 2.2(b) and, after the expiration of any such period,  any Company
may resume making and Roynat may accept and retain Permitted  Payments including
those Permitted  Payments that were due as of the commencement of such period or
became due during such period.

            (e)  Notwithstanding  anything contained herein to the contrary,  if
Thomas Equipment receives any proceeds from any public offering of Common Stock,
the proceeds of such public  offering shall first be applied to repay the Roynat
Indebtedness  regardless  of whether or not there has occurred and is continuing
any Laurus Realization Default or Laurus  Non-Realization  Default.  For greater
certainty, it is hereby acknowledged that nothing in this Agreement shall bar or
in any way affect the ability of Roynat to receive such  payments  following the
consummation of any public offering by Thomas Equipment.

            (f) In the  event  that  Roynat  delivers  to any  Company  a Roynat
Default Notice  declaring that there exists a Roynat Default,  any  Distribution
received by Roynat during the ten (10)  Business Days  following the delivery of
such notice to Laurus  shall be paid over to Laurus if Laurus  delivers a Laurus
Realization Default Notice or a Laurus Non-Realization  Default Notice to Roynat
during such ten (10) Business Day period.

            (g)  Notwithstanding  anything  contained  herein  to the  contrary,
Roynat shall be permitted to receive (i)  securities,  including  Common  Stock,
issued by Thomas  Equipment in connection  with the Roynat  Warrant  and/or (ii)
other property issued by Thomas  Equipment under Section  6(a)(ii) of the Roynat
Warrant (as in effect on the date hereof).

            2.3  Knowledge;  Delivery of Default  Notice.  Subject to compliance
with  Section  2.2(f)  hereof,  Roynat  shall  not at any time be  charged  with
knowledge  of any of the  events  described  in  Section  2.2  hereof or on such
account be prohibited from receiving or retaining any Permitted Payments, unless
and until Roynat  shall have  received the Laurus  Default  Notice.  Each Laurus
Default  Notice shall be deemed to be properly given by Laurus to Roynat if such
Laurus Default Notice is delivered in accordance with Section 5.6 hereof.

            2.4 Payments Held in Trust.  Should any Distribution or the proceeds
thereof,  in respect of any Roynat  Indebtedness,  be  collected  or received by
Roynat or any  Affiliate  of Roynat at a time when  Roynat is not  permitted  to
receive any such  Distribution or proceeds  thereof,  then Roynat will forthwith
deliver, or cause to be delivered, the same to Laurus in precisely the form held
by Roynat or such Affiliate (except for any necessary  endorsement) and until so
delivered,  the same shall be held in trust by Roynat, or any such Affiliate, as
the property of Laurus and shall not be commingled with other property of Roynat
or any such Affiliate.


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<PAGE>

            2.5 Subrogation. After the Laurus Indebtedness has been indefeasibly
paid in full and the Laurus Agreements have been irrevocably terminated,  to the
extent that Laurus has received any Distribution on Laurus  Indebtedness  which,
but for this Agreement,  would have been applied to Roynat Indebtedness,  Roynat
shall be  subrogated  to the then or  thereafter  rights  of  Laurus  including,
without  limitation,  the  right to  receive  any  Distribution  made on  Laurus
Indebtedness until the principal of, interest on and other amounts payable under
the  Roynat  Indebtedness  shall  be  indefeasibly  paid in full;  and,  for the
purposes of such subrogation, no Distribution to Laurus to which Roynat would be
entitled  except for the  provisions  of this  Agreement  shall,  as between any
Company,  its  creditors  (other  than  Laurus)  and  Roynat,  be deemed to be a
Distribution  by such  Company to or on account of the Laurus  Indebtedness,  it
being understood that the provisions  hereof are and are intended solely for the
purpose of defining the relative rights of Roynat on the one hand, and Laurus on
the other hand.

            2.6 Scope of  Subordination.  The  provisions of this  Agreement are
solely to define  the  relative  rights of Roynat  and  Laurus.  Nothing in this
Agreement shall impair, as between any Company and Roynat, the unconditional and
absolute  obligation of such Company to punctually pay the  principal,  interest
and any other  amounts  and  obligations  owing under the Roynat  Agreements  in
accordance  with the terms  thereof,  subject to the rights of Laurus under this
Agreement.

      3. Security and Remedies.

            3.1   Acknowledgment  of  Lien.  Each  Creditor  hereby  agrees  and
acknowledges  that  the  other  Creditor  has  been  granted  a  Lien  upon  the
Collateral.

            3.2  Priority.  Notwithstanding  the  order  or  time  of  grant  or
attachment, or the order, time or manner of perfection or rendering enforceable,
or the order or time of filing, registration,  publication or recordation of any
document or instrument, or other method of perfecting or rendering enforceable a
Lien in  favor  of each  Creditor  in any  Collateral  and  notwithstanding  any
conflicting  terms or  conditions  which may be contained in any of the Creditor
Agreements, the Liens of each Creditor shall have the following priorities:

            (a) With  respect to the  Collateral  (other  than in respect of the
Enumerated  Collateral),  the Liens of Laurus have and shall have  priority over
the Liens of Roynat upon the Collateral (other than in respect of the Enumerated
Collateral)  and the Liens of Roynat are and shall be, in all respects,  subject
and  subordinate to the Liens of Laurus therein to the full extent of the Laurus
Indebtedness outstanding from time to time; and

            (b) With respect to the Enumerated  Collateral,  the Liens of Laurus
and Roynat shall have the following priorities in the following order:

                  (i) First,  the Liens of Laurus  have and shall have  priority
over the  Liens of Roynat  to the  extent  of an amount  equal to the sum of (x)
$1,900,000,  (y) any accrued and unpaid  interest  on the  principal  amount set
forth in  subsection  (x)  immediately  above  and (z) all  costs  and  expenses
incurred  by Laurus in its  enforcement  of any  Secured  Lender  Remedies  with
respect to the Enumerated Collateral;


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<PAGE>

                  (ii) Second,  the Liens of Roynat have and shall have priority
over  the  Liens  of  Laurus  to the  full  extent  of the  Roynat  Indebtedness
outstanding from time to time; and

                  (iii) Third,  the Liens of Laurus have and shall have priority
to the remaining amounts of the outstanding Laurus Indebtedness.

            3.3 No  Alteration  of  Priority.  The Lien  priorities  provided in
Section 3.2 hereof shall not be altered or otherwise  affected by any amendment,
modification,  supplement, extension, renewal, restatement or refinancing of any
Laurus Indebtedness or Roynat Indebtedness,  nor by any action or inaction which
either Creditor may take or fail to take in respect of the Collateral.

            3.4 Perfection.

            (a) Each Creditor  shall be solely  responsible  for  perfecting and
rendering  enforceable and maintaining the perfection and  enforceability of its
Lien in and to each item  constituting the Collateral in which such Creditor has
been granted a Lien.  The foregoing  provisions  of this  Agreement are intended
solely to govern the  respective  Lien  priorities  as between the Creditors and
shall  not  impose  on  Laurus  or Roynat  any  obligations  in  respect  of the
disposition  of  proceeds  of  foreclosure  or  enforcement  of  security on any
Collateral  which would  conflict with prior  perfected and  enforceable  claims
therein in favor of any other  Person.  Each  Creditor  agrees  that it will not
contest the validity, perfection, priority or enforceability of the Liens of the
other Creditor in the Collateral.

            (b)  Each  Creditor  hereby  appoints  the  other  Creditor  as such
Creditor's  bailee,  agent and  mandatary  for the  purpose  of  perfecting  and
rendering  enforceable  its  respective  Liens  solely  in  and  on  any  of the
Collateral  in the  possession  or  "control"  (as such term is  defined  in the
Uniform  Commercial Code as in effect in each applicable  jurisdiction)  of such
other Creditor;  provided, however, that, a Creditor in the possession or having
control of any  Collateral  shall not have any duty or  liability  to protect or
preserve any rights  pertaining to any of such  Collateral and, except for gross
negligence   or  willful   misconduct   as   determined   pursuant  to  a  final
non-appealable order of a court of competent jurisdiction, the non-possessing or
non-controlling  Creditor  hereby waives and releases the Creditor in possession
or control from all claims and liabilities  arising  pursuant to such possessing
Creditor's  role as bailee,  agent and mandatary with respect to the Collateral,
so long as such possessing or controlling  Creditor shall use the same degree of
care with respect  thereto as such  possessing or controlling  Creditor uses for
similar  property  pledged  to  such  possessing  or  controlling   Creditor  as
collateral  for  indebtedness  of  others  to  such  possessing  or  controlling
Creditor.  After the  respective  indebtedness  owing to any  Creditor  has been
indefeasibly paid in full, and so long as any indebtedness  remains owing to the
other Creditor, such Creditor shall deliver the remainder of the Collateral,  if
any, in its  possession  to such other  Creditor,  and, if  permitted  under the
applicable agreements,  transfer control of the remainder of the Collateral,  if
any,  under  its  control  to such  other  Creditor,  except in each case as may
otherwise be required by applicable  law or court order.  It is  understood  and
agreed that this paragraph is intended  solely to assure  continuous  perfection
and  enforceability  of the Liens  granted under the Laurus  Agreements  and the
Roynat Agreements, as applicable,  and nothing in this paragraph shall be deemed
or construed as altering the  priorities or obligations  set forth  elsewhere in
this Agreement.


                                       9
<PAGE>

            3.5  Acceleration  and Remedies.  Until the Laurus  Indebtedness has
been  indefeasibly  paid in full and the Laurus Agreements have been irrevocably
terminated,  Roynat  shall  not  (i)  accelerate  the  maturity  of  the  Roynat
Indebtedness,  (ii) exercise any remedies  including,  without  limitation,  any
Secured Lender Remedies,  (iii) commence any action or proceeding to recover any
amounts due or to become due with  respect to the Roynat  Indebtedness,  or (iv)
join in,  solicit any other Person to join in, or act to cause the  commencement
of, any Insolvency or Liquidation Proceeding, except as follows:

            (a) Subject to Sections  3.6,  3.7 and 4 hereof and  notwithstanding
Section 3.5(b) below, following the commencement of an Insolvency or Liquidation
Proceeding by a Person other than Roynat, Roynat may (i) accelerate the maturity
of the Roynat  Indebtedness,  (ii)  commence any action or proceeding to recover
any amounts due or to become due with respect to the Roynat Indebtedness so long
as such action or proceeding  does not involve the enforcement of Secured Lender
Remedies against any Collateral and/or (iii) join in or solicit any other Person
to join in, any Insolvency or Liquidation Proceeding;

            (b)  Subject to  Sections  3.2(b),  3.5(c),  3.6,  3.7 and 4 hereof,
Roynat may (i) accelerate the maturity of the Roynat Indebtedness, (ii) exercise
Secured Lender Remedies  against the Enumerated  Collateral,  (iii) commence any
action or proceeding to recover any amounts due or to become due with respect to
the Roynat  Indebtedness  so long as such action or proceeding  does not involve
the enforcement of Secured Lender Remedies against any Collateral not consisting
of Enumerated  Collateral  and/or (iv) join in, solicit any other Person to join
in,  or  act to  cause  the  commencement  of,  any  Insolvency  or  Liquidation
Proceeding  by a Person  other than  Roynat so long as, in each  case,  a Roynat
Default has occurred and is  continuing  and a period of  one-hundred  and fifty
(150) days has elapsed  since the date Laurus has  received  the Roynat  Default
Notice from Roynat with respect to such Roynat Default; and

            (c) Subject to Sections 3.2, 3.6 and 4 hereof, on any date following
February 9, 2008, so long as a Roynat Default has occurred and is continuing and
Laurus has  received a Roynat  Default  Notice from Roynat with  respect to such
Roynat  Default,  Roynat may  exercise  any rights that it has in respect of the
Collateral including,  without limitation,  the right to exercise Secured Lender
Remedies in respect of any of the Collateral.

            3.6 Secured Lender Remedies.  Notwithstanding  any provisions herein
to the contrary  that  otherwise  permit  Roynat to exercise any Secured  Lender
Remedies,  including, without limitation,  Sections 3.5(b) and 3.5(c) hereof, in
no event shall  Roynat  exercise or  continue  to  exercise  any Secured  Lender
Remedies  at any  time  with  respect  to  the  Collateral  (including,  without
limitation,  following the expiration of the period described in Section 3.5(c))
if Laurus is diligently  pursuing its Secured  Lender  Remedies  against,  or is
diligently  attempting  to vacate any stay of  enforcement  of its Liens on, any
portion of the Collateral  (including,  without limitation,  the commencement or
continuation of any Secured Lender Remedies).


                                       10
<PAGE>

            3.7 Payments Held in Trust. In the event, at any time,  Roynat shall
receive any  Distribution  representing  proceeds of any Collateral,  other than
Enumerated   Collateral,   before  the  Laurus   Indebtedness  shall  have  been
indefeasibly  paid in full and the Laurus Agreements shall have been irrevocably
terminated,  such sums shall be held in trust by Roynat for the  benefit  and on
account of Laurus and such amounts  shall be paid to Laurus for  application  to
the then unpaid Laurus  Indebtedness under the Laurus Agreements.  In the event,
at any time,  Laurus or  Roynat  shall  receive  any  Distribution  representing
proceeds of any  Enumerated  Collateral,  such amount  shall be held in trust by
Laurus or Roynat,  as the case may be, and  distributed  in accordance  with the
provisions of Section 3.2(b) hereof, to Laurus or Roynat, as the case may be.

            3.8 Management of Collateral.  Laurus shall have the exclusive right
to manage,  perform and enforce the terms of the Laurus  Agreements with respect
to the  Collateral  and to  exercise  and  enforce  all  privileges  and  rights
thereunder  according  to its  discretion  and  the  exercise  of  its  business
judgment,  including,  without  limitation,  the  exclusive  right to enforce or
settle insurance claims,  take or retake control or possession of the Collateral
and to hold, prepare for sale,  process,  sell, lease,  dispose of, or liquidate
the Collateral,  provided, in all cases, that Laurus is acting in a commercially
reasonable manner. In connection therewith,  Roynat waives any and all rights to
affect  the method or  challenge  the  appropriateness  of any action by Laurus.
Notwithstanding  anything contained in this Section 3.8 to the contrary,  to the
extent Roynat is permitted to exercise  Secured Lender  Remedies with respect to
any Collateral under this Agreement,  Roynat may manage, perform and enforce the
terms of the Roynat  Agreements with respect to such Collateral and exercise and
enforce all privileges and rights thereunder according to its discretion and the
exercise of its business judgment, provided, in all cases, that Roynat is acting
in a commercially reasonable manner. In connection therewith,  Laurus waives any
and all rights to affect  the method or  challenge  the  appropriateness  of any
action by Roynat.

            3.9 Sale of Collateral.  Subject to Sections  3.5(b) and (c) hereof,
Laurus  shall  have  the  sole  right to  restrict  or  permit,  or  approve  or
disapprove,  the sale,  transfer or other  disposition of  Collateral,  provided
Laurus  exercises any such right in a  commercially  reasonable  manner.  Roynat
shall, immediately,  upon the request of Laurus, release, discharge or otherwise
terminate its Liens upon the Collateral,  provided that, and, as applicable,  to
the same extent that, (a) Laurus releases its Lien in such Collateral,  (b) such
Collateral  is sold or  otherwise  disposed  of either by Laurus,  its agents or
mandatary, or any Company with the prior written consent of Laurus and/or (c) in
the event any such sale or  disposition  is to a Person who is an  Affiliate  of
Laurus,  such sale or  disposition  is made upon terms  Laurus could obtain in a
comparable  arms-length  transaction.  Roynat  shall  immediately  deliver  such
release  documents  to Laurus as Laurus may require in  connection  therewith in
form and substance reasonably satisfactory to Roynat.  Notwithstanding  anything
contained in this  Section 3.9 to the contrary and subject to Sections  3.5, 3.6
and 3.7 hereof,  to the extent  Roynat is permitted to exercise  Secured  Lender
Remedies with respect to any Collateral under this Agreement,  Roynat may permit
or approve the sale, transfer or other disposition of such Collateral,  provided
Roynat  exercises  any  such  right  in a  commercially  reasonable  manner.  In
connection  therewith,  Laurus shall,  immediately,  upon the request of Roynat,
release,  discharge  or  otherwise  terminate  its Liens  upon such  Collateral,
provided that, and, as applicable,  to the same extent that, (a) Roynat releases
its Lien in such Collateral,  (b) such Collateral is sold or otherwise  disposed
of either by Roynat,  its agents or  mandatary,  or any  Company  with the prior
written  consent of Roynat and/or (c) in the event any such sale or  disposition
is to a Person who is an Affiliate of Roynat,  such sale or  disposition is made
upon terms Roynat could obtain in a comparable arms-length  transaction.  Laurus
shall immediately deliver such release documents to Roynat as Roynat may require
in connection therewith in form and substance reasonably satisfactory to Laurus.


                                       11
<PAGE>

            3.10  Insurance   Proceeds.   Proceeds  of  the  Collateral  include
insurance  proceeds,  and therefore,  notwithstanding the terms set forth in the
Laurus Agreements or the Roynat Agreements,  the priorities set forth in Section
3.2 govern the ultimate  disposition of casualty insurance proceeds.  Laurus, as
the holder of a senior security interest on the Collateral,  shall have the sole
and exclusive right to adjust settlement of insurance claims in the event of any
covered  loss,  theft or  destruction  of the  Collateral.  All proceeds of such
insurance  shall  inure to Laurus,  to the extent of Laurus'  claim,  and Roynat
shall  cooperate (if necessary) in a reasonable  manner in effecting the payment
of insurance  proceeds to Laurus. In the event Laurus, in its sole discretion or
pursuant to an agreement  with any Company,  permits such Company to utilize the
proceeds of insurance to replace Collateral, the prior written consent of Laurus
thereto shall be deemed to include the consent of Roynat.

            3.11 Section  9-611 Notice and Waiver of  Marshaling.  Each Creditor
acknowledges  that this Agreement shall  constitute  notice of their  respective
interests in the Collateral as provided by Section 9-611 of the New York Uniform
Commercial  Code or any similar  applicable  provision of the Personal  Property
Security Act of a Canadian province or territory or the Civil Code of Quebec and
each hereby waives any right to compel any marshaling of any of the Collateral.

            3.12 Defense to  Enforcement.  If Roynat,  in  contravention  of the
terms of this Agreement,  shall commence,  prosecute or participate in any suit,
action or  proceeding  against  any  Company,  then  Laurus  may  intervene  and
interpose such defense or pleas in its name. If Roynat,  in contravention of the
terms of this Agreement, shall attempt to collect any of the Roynat Indebtedness
or enforce  any of its right  under the Roynat  Agreements,  then Laurus may, by
virtue of this  Agreement,  restrain  the  enforcement  thereof.  If Roynat,  in
contravention  of the terms of this Agreement,  obtains any cash or other assets
of any Company as a result of any administrative,  legal or equitable actions or
otherwise,  Roynat agrees, subject to the terms of Section 3.2(b),  forthwith to
pay, deliver and assign to Laurus, with appropriate endorsements,  any such cash
or other  assets for  application  to the  Laurus  Indebtedness.  If Laurus,  in
contravention  of the terms of Section 3.2(b),  obtains any cash or other assets
of any Company as a result of any administrative,  legal or equitable actions or
otherwise,  Laurus agrees, subject to the terms of Section 3.2(b),  forthwith to
pay, deliver and assign to Roynat, with appropriate endorsements,  any such cash
or other assets for application to the Roynat  Indebtedness

            3.13 Life Insurance  Proceeds.  Laurus hereby  acknowledges  that it
does not have a Lien in the Life Insurance Proceeds and any distribution of Life
Insurance  Proceeds  to Roynat does not  constitute  a  Distribution  as defined
herein and, until such time as the Roynat  Indebtedness is indefeasibly  paid in
full,  Laurus  hereby  disclaims  any  Lien it may  have in the  Life  Insurance
Proceeds.


                                       12
<PAGE>

      4. Insolvency and Liquidation Proceedings.

            4.1  Continuing  Agreement.  This  Agreement  shall continue in full
force and  effect  after  the  commencement  of any  Insolvency  or  Liquidation
Proceeding by or against any Company and all  converted or  succeeding  cases or
proceedings in respect  thereof.  All references  herein to any Company shall be
deemed to apply to such  Company  as  debtor-in-possession  and to a trustee  or
similar official for such Company.

            4.2 Payments in Bankruptcy.  In the event, at any time following the
commencement of any Insolvency or Liquidation  Proceeding,  Roynat shall receive
any proceeds of any  Collateral,  other than Enumerated  Collateral,  before the
Laurus  Indebtedness  shall have been  indefeasibly  paid in full and the Laurus
Agreements  shall have been irrevocably  terminated,  such sums shall be held in
trust by Roynat for the benefit and on account of Laurus and such amounts  shall
be paid to Laurus for application to the then unpaid Laurus  Indebtedness  under
the Laurus Agreements. In the event, at any time, Laurus or Roynat shall receive
any proceeds of any Enumerated Collateral, such amount shall be held in trust by
Laurus or Roynat,  as the case may be, and  distributed  in accordance  with the
provisions of Section 3.2(b) hereof, to Laurus or Roynat, as the case may be.

            4.3 Insolvency and Liquidation Issues.

            (a) In the event an Insolvency or  Liquidation  Proceeding  shall be
commenced by or against any  Enumerated  Company and neither  Thomas  Equipment,
Thomas  Ventures  or Thomas  Canada  is  joined,  at any time,  as a debtor or a
co-debtor in such  proceeding,  Laurus hereby agrees that,  with respect to such
proceeding,  Laurus  shall  not,  until  the  payment  in  full  of  the  Roynat
Indebtedness and the irrevocable termination of the Roynat Agreements:

                  (i) seek any relief from,  or  modification  of, the automatic
stay as  provided in ss.362 of the Code or any  similar  provision  of any other
applicable  Bankruptcy  Law or seek or accept  any form of  adequate  protection
under  either or both of ss.362 and ss.363 of the Code,  except (i)  replacement
Liens and super-priority  administrative  expense claims for diminution of value
(the  "Priority  Claims"),  (A) which  Liens at all times  shall also secure the
Roynat  Indebtedness and (B) which Liens and Priority Claims shall be subject to
the priority set forth in Section 3.2 hereof,  and (ii) the accrual (but not the
current  payment) of interest and  out-of-pocket  expenses,  including  fees and
disbursements  of counsel and other  professional  advisors,  incurred by Laurus
(which Laurus  agrees will  constitute  adequate  protection of their claims and
interests);

                  (ii) oppose or object to any adequate  protection sought by or
granted to Roynat with respect to the  Enumerated  Collateral of any  Enumerated
Company in such proceeding;

                  (iii) oppose or object to the use of any Enumerated Collateral
of any Enumerated  Company in such  proceeding  constituting  cash collateral by
such  Enumerated  Company,  unless Roynat shall have opposed or objected to such
use of such cash collateral;

                  (iv) oppose or object to any Post-Petition Financing by Roynat
or any group of lenders including Roynat with respect to any Enumerated  Company
in such  proceeding  or any order  approving  same on an interim or final basis,
unless  (A)  Roynat  shall  have  opposed  or  objected  to  such  Post-Petition
Financing,  (B) such Post-Petition Financing affects the priorities set forth in
Section  3.2 hereof or (C) the rights of any  parties  in  connection  with such
Post-Petition  Financing result in a Lien in any Collateral of Thomas Equipment,
Thomas Ventures and/or Thomas Canada;


                                       13
<PAGE>

                  (v)  object  to (A)  the  amount  of the  Roynat  Indebtedness
allowed or permitted to be asserted in such proceeding  under any Bankruptcy Law
so long as the principal amount of the Roynat  Indebtedness  does not exceed the
Maximum  Roynat  Principal  Amount  or  (B)  the  extent  to  which  the  Roynat
Indebtedness  is deemed  secured  claims  in such  proceeding,  including  under
ss.506(a)  of the  Code  or  any  similar  provision  of  any  other  applicable
Bankruptcy Law;

                  (vi) oppose or object to any protection  provided to Roynat in
such  proceeding,  including  any form of adequate  protection  under  ss.362 or
ss.363 of the Code or any similar  provision of any other applicable  Bankruptcy
Law and the payment of amounts  equal to interest  and  expenses  allowed  under
ss.506(b) and (c) of the Code or any similar  provision of any other  applicable
Bankruptcy Law to Roynat; or

                  (vii) vote in favor of a chapter 11 plan of  reorganization in
such proceeding under the Code or similar plan or  reorganization or arrangement
under any other  applicable  Insolvency or Liquidation  Proceeding or Bankruptcy
Law which fails to provide for the repayment in full of the Roynat Indebtedness,
unless Roynat is voting in favor of such plan.

            Nothing  contained in this Section  4.3(a) shall  prohibit or in any
way  limit  Roynat  from,  with  respect  to the  Enumerated  Collateral  of any
Enumerated  Company in such  proceeding,  objecting  in such  proceeding  to any
action taken by Laurus,  including the seeking by Laurus of adequate  protection
with respect to the  Enumerated  Collateral  of any  Enumerated  Company in such
proceeding  or the  asserting by Laurus of any of its rights and remedies  under
the Laurus  Agreements (or otherwise) with respect to the Enumerated  Collateral
of any Enumerated Company in such proceeding in contravention of this Agreement.

            (b) In the event an Insolvency or  Liquidation  Proceeding  shall be
commenced by or against any one or more  Companies  other than an  Insolvency or
Liquidation  Proceeding  described in Section 4.3(a) above, Roynat hereby agrees
that,  with respect to such  proceeding,  Roynat shall not, until the payment in
full of the Laurus  Indebtedness  and the irrevocable  termination of the Laurus
Agreements:

                  (i) seek any relief from,  or  modification  of, the automatic
stay as  provided in ss.362 of the Code or any  similar  provision  of any other
applicable  Bankruptcy  Law or seek or accept  any form of  adequate  protection
under  either or both of ss.362 and ss.363 of the Code,  except (i)  replacement
Liens and super-priority  administrative  expense claims for diminution of value
(the  "Priority  Claims"),  (A) which  Liens at all times  shall also secure the
Laurus  Indebtedness  (except  to the  extent  such  Liens  relate  to the  Life
Insurance  Proceeds) and (B) which Liens and Priority Claims shall be subject to
the priority set forth in Section 3.2 hereof,  and (ii) the accrual (but not the
current  payment) of interest and  out-of-pocket  expenses,  including  fees and
disbursements  of counsel and other  professional  advisors,  incurred by Roynat
(which Roynat  agrees will  constitute  adequate  protection of their claims and
interests);


                                       14
<PAGE>

                  (ii) oppose or object to any adequate  protection sought by or
granted  to  Laurus  with  respect  to the  Collateral  of any  Company  in such
proceeding;

                  (iii)  oppose or object  to the use of any  Collateral  of any
Company in such proceeding  constituting cash collateral by such Company, unless
Laurus shall have opposed or objected to such use of such cash collateral;

                  (iv) oppose or object to any Post-Petition Financing by Laurus
or any group of lenders  including  Laurus  with  respect to any Company in such
proceeding or any order approving same on an interim or final basis,  unless (i)
Laurus shall have opposed or objected to such Post-Petition Financing, (ii) such
Post-Petition  Financing  affects the priorities set forth in Section 3.2 hereof
or (iii) the  rights  of any  parties  in  connection  with  such  Post-Petition
Financing result in a Lien in any Life Insurance Proceeds;

                  (v)  object  to (i)  the  amount  of the  Laurus  Indebtedness
allowed or permitted to be asserted in such proceeding  under any Bankruptcy Law
so long as the principal amount of the Laurus  Indebtedness  does not exceed the
Maximum  Laurus  Principal  Amount  or (ii)  the  extent  to  which  the  Laurus
Indebtedness  is deemed  secured  claims  in such  proceeding,  including  under
ss.506(a)  of the  Code  or  any  similar  provision  of  any  other  applicable
Bankruptcy Law;

                  (vi) oppose or object to any protection  provided to Laurus in
such  proceeding,  including  any form of adequate  protection  under  ss.362 or
ss.363 of the Code or any similar  provision of any other applicable  Bankruptcy
Law and the payment of amounts  equal to interest  and  expenses  allowed  under
ss.506(b) and (c) of the Code or any similar  provision of any other  applicable
Bankruptcy Law to Laurus; or

                  (vii) vote in favor of a chapter 11 plan of  reorganization in
such proceeding under the Code or similar plan or  reorganization or arrangement
under any other  applicable  Insolvency or Liquidation  Proceeding or Bankruptcy
Law which fails to provide for the repayment in full of the Laurus Indebtedness,
unless Laurus is voting in favor of such plan.

            Nothing  contained in this Section  4.3(b) shall  prohibit or in any
way limit Laurus from,  with  respect to the  Collateral  of any Company in such
proceeding,  objecting  in  such  proceeding  to any  action  taken  by  Roynat,
including  the  seeking by Roynat of  adequate  protection  with  respect to the
Collateral  of any Company in such  proceeding or the asserting by Roynat of any
of its rights and  remedies  under the Roynat  Agreements  (or  otherwise)  with
respect to the Collateral of any Company in such proceeding in  contravention of
this Agreement.

            4.4 Proofs of Claim;  Claims;  Voting;  Other  Matters  and Power of
Attorney.  At any  meeting of  creditors  or in the event of any  Insolvency  or
Liquidation  Proceeding  involving any Company or any Collateral,  Roynat shall,
subject  to the  limitations  set forth in this  Agreement,  retain the right to
vote,  file  a  proof  of  claim  and  otherwise  act  with  respect  to  Roynat
Indebtedness  (including,  without  limitation,  the  right to vote to accept or
reject any plan of partial or complete liquidation, reorganization, arrangement,
composition or extension). In the event Roynat fails to execute, verify, deliver
and/or  file any  proofs  of claim in  respect  of any  Roynat  Indebtedness  in
connection with any such Insolvency or Liquidation  Proceeding prior to the date
that is ten (10) days before the expiration of the time fixed by statute,  court
rule or court  order,  as  applicable,  to file any such  proof,  Roynat  hereby
irrevocably   authorizes,   empowers   and   appoints   Laurus   its  agent  and
attorney-in-fact  to execute,  verify,  deliver and file such proofs of claim in
any such Insolvency or Liquidation Proceeding;  provided, that Laurus shall have
no obligation to exercise any such authority with respect to Roynat's  claim. To
enable  Laurus to assert and enforce its rights  hereunder in any  Insolvency or
Liquidation Proceeding, Laurus or any Person whom Laurus may designate is hereby
irrevocably  appointed attorney in fact for Roynat for the purposes provided for
in this Section 4.4. Roynat will execute and deliver to Laurus such  instruments
as may be  reasonably  required by Laurus to effectuate  the aforesaid  power of
attorney.


                                       15
<PAGE>

      5. Miscellaneous.

            5.1 Transfers.  Roynat agrees that any transferee  from it of any of
the Roynat  Indebtedness  shall,  prior to acquiring such interest,  execute and
deliver a  counterpart  of this  Agreement  to Laurus.  Laurus  agrees  that any
transferee from it of any of the Laurus  Indebtedness  shall, prior to acquiring
such interest, execute and deliver a counterpart of this Agreement to Roynat.

            5.2  Survival  of Rights.  The right of any  Creditor to enforce the
provisions of this  Agreement  shall not be prejudiced or impaired by any act or
omitted act of any Company or the other Creditor, including forbearance, waiver,
consent,  compromise,  amendment,  extension,  renewal,  or taking or release or
discharge  of  security  in respect of any of such  Creditor's  indebtedness  or
noncompliance by any Company with such  provisions,  regardless of the actual or
imputed knowledge of the other Creditor.

            5.3  Amendments  to Roynat  Agreements.  Nothing  contained  in this
Agreement,  or in any other  agreement  or  instrument  binding  upon any of the
parties hereto, shall in any manner limit or restrict the ability of Roynat from
increasing  or  changing  the terms of the Roynat  Agreements,  or to  otherwise
waive,  amend or modify the terms and  conditions of the Roynat  Agreements,  in
such manner as Roynat and  Companies  shall  mutually  determine.  Laurus hereby
consents to any and all such waivers, amendments, modifications and compromises,
and any other  renewals,  extensions,  indulgences,  releases or  discharges  of
Collateral or other  accommodations  granted by Roynat to Companies from time to
time,  and agrees that none of such actions shall in any manner affect or impair
the  subordination  established  by this  Agreement  in  respect  of the  Laurus
Indebtedness.  Notwithstanding  the  foregoing,  neither  Roynat nor any Company
shall  enter into any  amendment  to or  modification  of any Roynat  Agreement,
without  the prior  written  consent  of Laurus,  the effect of which  would (a)
increase the aggregate  principal amount of the Roynat Indebtedness to an amount
greater than the Maximum Roynat Principal Amount, (b) increase the amount of any
cash installment of principal due under the Roynat  Agreements,  (c) shorten the
amortization  of any  payment  of  principal  or  interest  due under the Roynat
Agreements, (d) increase the applicable interest rate with respect to the Roynat
Indebtedness  over  the  interest  rates  currently  set  forth  in  the  Roynat
Agreements,  except in  connection  with the  imposition  of the default rate of
interest set forth in the Roynat Agreements on the date hereof; (e) increase the
dollar amounts of any fees required to be paid by any Company to Roynat from the
amounts  set  forth  in the  Roynat  Agreements  on the  date  hereof,  (f)  add
additional  financial covenants or events of defaults to any Roynat Agreement or
make the terms of any existing financial covenant or event of default materially
more  restrictive  to any Company as set forth in the Roynat  Agreements  on the
date hereof  and/or (g) add  restrictions  on the ability of any Company to make
payments to Laurus under the Laurus Agreements.


                                       16
<PAGE>

            5.4  Amendments  to Laurus  Agreements.  Nothing  contained  in this
Agreement,  or in any other  agreement  or  instrument  binding  upon any of the
parties hereto, shall in any manner limit or restrict the ability of Laurus from
increasing  or  changing  the terms of the Laurus  Agreements,  or to  otherwise
waive,  amend or modify the terms and  conditions of the Laurus  Agreements,  in
such manner as Laurus and  Companies  shall  mutually  determine.  Roynat hereby
consents to any and all such waivers, amendments, modifications and compromises,
and any other  renewals,  extensions,  indulgences,  releases or  discharges  of
Collateral or other  accommodations  granted by Laurus to Companies from time to
time,  and agrees that none of such actions shall in any manner affect or impair
the  subordination  established  by this  Agreement  in  respect  of the  Roynat
Indebtedness.  Notwithstanding  the  foregoing,  neither  Laurus nor any Company
shall  enter into any  amendment  to or  modification  of any Laurus  Agreement,
without  the prior  written  consent  of Roynat,  the effect of which  would (a)
increase the aggregate  principal amount of the Laurus Indebtedness to an amount
greater than the Maximum Laurus Principal Amount, (b) increase the amount of any
cash installment of principal due under the Laurus  Agreements,  (c) shorten the
amortization  of any  payment  of  principal  or  interest  due under the Laurus
Agreements unless a Laurus Default has occurred and is continuing,  (d) increase
the applicable  interest rate with respect to the Laurus  Indebtedness  over the
interest  rates  currently  set  forth  in  the  Laurus  Agreements,  except  in
connection  with the imposition of the default rate of interest set forth in the
Laurus  Agreements  on the date hereof,  (e) increase the dollar  amounts of any
fees  required to be paid by any Company to Laurus from the amounts set forth in
the Laurus Agreements on the date hereof,  (f) add additional events of defaults
to any  Laurus  Agreement  or make the  terms  of any  existing  Laurus  Default
materially more restrictive to any Company as set forth in the Laurus Agreements
on the date hereof and/or (g) add  restrictions on the ability of any Company to
make Permitted  Payments in addition to those  restrictions set forth herein and
in the Laurus  Agreements  on the date hereof.  For the  avoidance of any doubt,
Laurus and any Company may enter into any  amendment to or  modification  of any
Laurus  Agreement,  without  the  consent of Roynat,  the effect of which  would
decrease  the  Fixed  Conversion  Price  (as  defined  in  the  Laurus  Security
Agreement) set forth in any Laurus Agreement.

            5.5 Notice of Default and Certain Events. Each Creditor shall notify
the other of the occurrence of any of the following as applicable:

            (a) the occurrence of any Laurus Default or any Roynat Default;

            (b)  the  acceleration  of any  Laurus  Indebtedness  or any  Roynat
Indebtedness;

            (c) the granting by Laurus of any waiver of any Laurus Default under
the  Laurus  Agreements  or the  granting  by Roynat of any waiver of any Roynat
Default under the Roynat Agreements;


                                       17
<PAGE>

            (d) the  payment  in full  by  Companies  (whether  as a  result  of
refinancing or otherwise) of all Laurus Indebtedness or all Roynat Indebtedness;
and

            (e) the  irrevocable  termination  of the Laurus  Agreements  or the
Roynat Agreements.

            The  failure of any party to give such  notice  shall not affect the
subordination  terms or the relative Lien priorities set forth in this Agreement
nor shall the failure to deliver such notice give Laurus or Roynat,  as the case
may be,  any cause of action or right to  damages or other  remedy  against  one
another.

            5.6 Notices. Any notice or other communication required or permitted
pursuant to this Agreement shall be deemed given (a) when personally delivered
to any officer of the party to whom it is addressed, (b) on the earlier of
actual receipt thereof or three (3) days following posting thereof by certified
or registered mail, postage prepaid, or (c) upon actual receipt thereof when
sent by a recognized overnight delivery service, or (d) upon actual receipt
thereof when sent by telecopier to the number set forth below with electronic
confirmation of receipt, in each case addressed to each party at its address or
telecopier number set forth below or at such other address or telecopier number
as has been furnished in writing by a party to the other by like notice:

                 If to Laurus:             Laurus Master Fund, Ltd.
                                           825 Third Avenue
                                           New York, New York 10022
                                           Attention: John Tucker, Esq.
                                           Telephone: (212) 541-5800
                                           Facsimile: (212) 541-4882

                 with a copy to:           Loeb & Loeb, LLP
                                           345 Park Ave
                                           New York, New York 10154
                                           Attention: Scott Giordano, Esq.
                                           Telephone: (212) 407-4104
                                           Facsimile: (212) 407-4990

                 If to Roynat:             Roynat Merchant Capital Inc.
                                           100 Tryon Street, Suite 3720
                                           Charlotte, North Carolina 28202
                                           Attention: President
                                           Telephone: (704) 332-9641
                                           Facsimile: (704) 334-9719

                 with a copy to:           Roynat Merchant Capital Inc.
                                           201 City Centre Drive, Suite 406
                                           Mississauga, Ontario L5B 2T4
                                           Attention: John A. Neate
                                           Telephone: (905) 276-1926
                                           Facsimile: (905) 276-5726

                 If to any Company:        Thomas Equipment, Inc.
                                           1818 North Farwell Avenue
                                           Milwaukee, Wisconsin 53202
                                           Attention: David Marks
                                           Telephone: (312) 224-8812
                                           Facsimile: (312) 873-3739

                 with a copy to:           Sichenzia Ross Friedman Ference LLP
                                           1065 Avenue of the Americas
                                           New York, New York 10018
                                           Attention: Thomas A. Rose, Esq.
                                           Telephone: (212) 930-9700
                                           Facsimile: (212) 930-9725

                 and:                      Thomas Equipment 2004 Inc.
                                           29 Hawkins Road
                                           Centreville, NB E7K 3G4  Canada
                                           Attention:  Clifford M. Rhee
                                           Facsimile:  (506) 276-4308


                                       18
<PAGE>

            5.7 Binding  Effect;  Other.  This  Agreement  shall be a continuing
agreement,  shall be binding  upon and shall inure to the benefit of the parties
hereto  from time to time and their  respective  successors  and  assigns.  This
Agreement  may not be  assigned  by Laurus  except to an  assignee of the Laurus
Indebtedness. This Agreement may not be assigned by Roynat except to an assignee
of the Roynat  Indebtedness.  This Agreement  shall be irrevocable and remain in
full force and effect until the Laurus Indebtedness shall have been indefeasibly
paid in full and the Laurus  Agreements shall have been irrevocably  terminated,
but shall continue to be effective, or be reinstated,  as the case may be, if at
any time payment, or any part thereof, of any amount paid by or on behalf of any
Company with regard to the Laurus Indebtedness is rescinded or must otherwise be
restored or returned upon the insolvency, bankruptcy,  dissolution,  liquidation
or reorganization of any Company, or upon or as a result of the appointment of a
receiver, interim receiver,  monitor,  intervenor or conservator of, or trustee,
custodian,  or similar  officer,  for any Company or any substantial part of its
property,  or  otherwise,  all as though such  payments  had not been made.  Any
waiver or amendment hereunder must be evidenced by a signed writing of the party
to be bound thereby, and shall only be effective in the specific instance.  This
Agreement  shall be governed by and construed in accordance with the laws of the
State of New  York.  The  headings  in this  Agreement  are for  convenience  of
reference only, and shall not alter or otherwise affect the meaning hereof.

      6. Representations and Warranties.

            6.1 Roynat  represents  and  warrants  to Laurus  that Roynat is the
holder of Roynat  Indebtedness  and Liens  which  secure or will  secure  Roynat
Indebtedness.  Roynat  agrees that it shall not assign or transfer any of Roynat
Indebtedness  without  (i) prior  notice  being  given to  Laurus  and (ii) such
assignment  or  transfer  being  made  expressly  subject  to the  terms of this
Agreement.  Roynat further warrants to Laurus that it has full right,  power and
authority to enter into this Agreement.


                                       19
<PAGE>

            6.2 Laurus  represents  and  warrants  to Roynat  that Laurus is the
holder of the Laurus  Indebtedness  and Liens  which  secure or will  secure the
Laurus  Indebtedness.  Laurus agrees that it shall not assign or transfer any of
the Laurus  Indebtedness or Liens without (i) prior notice being given to Roynat
and (ii) such  assignment or transfer being made expressly  subject to the terms
and  provisions of this  Agreement.  Laurus  further  represents and warrants to
Roynat that it has full right, power and authority to enter into this Agreement.

            6.3 The representations  and warranties  contained in this Section 6
shall survive execution and delivery of this Agreement.

      7.  Proceedings.  ANY JUDICIAL  PROCEEDING  BROUGHT BY OR AGAINST  LAURUS,
ROYNAT OR ANY COMPANY  WITH RESPECT TO THIS  AGREEMENT OR ANY OTHER  INSTRUMENT,
DOCUMENT OR  AGREEMENT  EXECUTED OR  DELIVERED  IN  CONNECTION  HEREWITH  MAY BE
BROUGHT IN ANY COURT OF COMPETENT  JURISDICTION IN THE STATE OF NEW YORK, UNITED
STATES OF AMERICA,  AND, BY EXECUTION AND DELIVERY OF THIS  AGREEMENT EACH PARTY
HERETO ACCEPTS FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO
WAIVES  ANY  OBJECTION  TO  JURISDICTION  AND  VENUE  OF ANY  ACTION  INSTITUTED
HEREUNDER IN  ACCORDANCE  WITH THE TERMS HEREOF AND SHALL NOT ASSERT ANY DEFENSE
BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS.

      8. Waiver of Jury Trial.  EACH PARTY HERETO  HEREBY  EXPRESSLY  WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY  CLAIM,  DEMAND,  ACTION  OR CAUSE OF  ACTION  (A)
ARISING  UNDER THIS  AGREEMENT  OR ANY OTHER  INSTRUMENT,  DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION  HEREWITH,  OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR  INCIDENTAL  TO THE DEALINGS OF ANY CREDITOR OR ANY COMPANY OR ANY
OF THEM WITH  RESPECT TO THIS  AGREEMENT OR ANY OTHER  INSTRUMENT,  DOCUMENTS OR
AGREEMENT  EXECUTED  OR  DELIVERED  BY  THEM  IN  CONNECTION  HEREWITH,  OR  THE
TRANSACTIONS  RELATED  HERETO OR THERETO,  IN EACH CASE  WHETHER NOW EXISTING OR
HEREAFTER  ARISING,  AND WHETHER  SOUNDING IN CONTRACT OR TORT OR OTHERWISE  AND
EACH PARTY HERETO HEREBY AGREES AND CONSENTS THAT ANY CLAIM,  DEMAND,  ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL  WITHOUT  JURY,  AND THAT ANY OF
THEM MAY FILE AN ORIGINAL  COUNTERPART  OR A COPY OF THIS SECTION WITH ANY COURT
AS WRITTEN  EVIDENCE  OF THEIR  CONSENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.

      9.  Companies'  Acknowledgement.  Each  Company  agrees  that (a)  nothing
contained  in this  Agreement  shall be deemed to amend,  modify,  supercede  or
otherwise alter the terms of the respective  agreements between such Company and
each Creditor and (b) this  Agreement is solely for the benefit of the Creditors
and shall not give such Company,  its  successors or assigns or any other Person
any rights vis-a-vis any Creditor.


                                       20
<PAGE>

      10. Counterparts; Facsimile. This Agreement may be executed by the parties
hereto in one or more  counterparts,  each of which  shall be deemed an original
and all of  which  when  taken  together  shall  constitute  one  and  the  same
agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.

      11.  Language.  The  parties  hereto  hereby  acknowledge  that  they have
required that this Agreement be prepared in English.  Les parties  reconnaissent
avoir exige que la presente  convention  et tous les documents  connexes  soient
rediges en anglais



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
                           SIGNATURE PAGES TO FOLLOW]


                                       21
<PAGE>

            IN  WITNESS   WHEREOF,   the  undersigned  have  entered  into  this
Subordination and Intercreditor Agreement as of this 28 day of February, 2005.


                                           LAURUS MASTER FUND, LTD.


                                           By:/s/ DAVID GRIN
                                              -----------------
                                              Name:  David Grin
                                              Title: Fund Manager


                                           ROYNAT MERCHANT CAPITAL INC.


                                           By:/s/ DAVID SWAINE
                                              -------------------
                                              Name:  David Swaine
                                              Title: President


                                           THOMAS EQUIPMENT, INC.


                                           By:/s/ CLIFFORD M. RHEE
                                              -----------------------
                                              Name:  Clifford M. Rhee
                                              Title: President


                                           THOMAS VENTURES, INC.


                                           By:/s/ CLIFFORD M. RHEE
                                              -----------------------
                                              Name:  Clifford M. Rhee
                                              Title: President


                                           THOMAS EQUIPMENT 2004 INC.


                                           By: /s/ CLIFFORD M. RHEE
                                              -----------------------
                                              Name:  Clifford M. Rhee
                                              Title: President



                      [ADDITIONAL SIGNATURE PAGE TO FOLLOW]


                                       22
<PAGE>

                                           PNEUTECH INC.


                                           By: /s/ CLIFFORD M. RHEE
                                              ----------------------
                                              Name:  Clifford M. Rhee
                                              Title: President


                                           ROUSSEAU CONTROLS INC.


                                           By: /s/ CLIFFORD M. RHEE
                                              ----------------------
                                              Name: Clifford M. Rhee
                                              Title: President


                                           HYDRAMEN FLUID POWER LIMITED


                                           By: /s/ CLIFFORD M. RHEE
                                              ----------------------
                                              Name: Clifford M. Rhee
                                              Title: President

                                       23