Document:

SECURITY
      AND PURCHASE AGREEMENT

     

    This
      Security and Purchase Agreement is made as of January 17, 2007 (this
“Agreement”) by and among FEDERAL
      PARTNERS, L.P.,
      a
      Delaware limited partnership (“Federal Partners”), THOMAS EQUIPMENT, INC., a
      Delaware corporation (“Company”), THOMAS VENTURES, INC., a Delaware corporation
      (“Thomas Ventures”) and such other subsidiaries of Company named herein or which
      hereafter become a party hereto (Thomas Ventures and such other subsidiaries,
      each an “Eligible Subsidiary” and collectively, the “Eligible Subsidiaries”).

     

    BACKGROUND

     

    Company
      and Eligible Subsidiaries have requested that Federal Partners make a term
      loan
      available to Company and each Eligible Subsidiary; and

     

    Federal
      Partners has agreed to make such term loan on the terms and conditions set
      forth
      in this Agreement.

     

    AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the mutual covenants and undertakings and the
      terms and conditions contained herein, the parties hereto agree as
      follows:

     

    1.  (a)General
      Definitions.
      Capitalized terms used in this Agreement shall have the meanings assigned to
      them in Annex A.

     

    (b)  Accounting
      Terms.
      Any
      accounting terms used in this Agreement which are not specifically defined
      shall
      have the meanings customarily given them in accordance with GAAP and all
      financial computations shall be computed, unless specifically provided herein,
      in accordance with GAAP consistently applied.

     

    (c)  Other
      Terms.
      All
      other terms used in this Agreement and defined in the UCC, shall have the
      meaning given therein unless otherwise defined herein.

     

    (d)  Rules
      of Construction.
      All
      Schedules, Addenda, Annexes and Exhibits hereto or expressly identified to
      this
      Agreement are incorporated herein by reference and taken together with this
      Agreement constitute but a single agreement. The words “herein”, hereof” and
“hereunder” or other words of similar import refer to this Agreement as a whole,
      including the Exhibits, Addenda, Annexes and Schedules thereto, as the same
      may
      be from time to time amended, modified, restated or supplemented, and not to
      any
      particular section, subsection or clause contained in this Agreement. Wherever
      from the context it appears appropriate, each term stated in either the singular
      or plural shall include the singular and the plural, and pronouns stated in
      the
      masculine, feminine or neuter gender shall include the masculine, the feminine
      and the neuter. The term “or” is not exclusive. The term “including” (or any
      form thereof) shall not be limiting or exclusive. All references to statutes
      and
      related regulations shall include any amendments of same and any successor
      statutes and regulations. All references in this Agreement or in the Schedules,
      Addenda, Annexes and Exhibits to this Agreement to sections, schedules,
      disclosure schedules, exhibits, and attachments shall refer to the corresponding
      sections, schedules, disclosure schedules, exhibits, and attachments of or
      to
      this Agreement. All references to any instruments or agreements, including
      references to any of this Agreement or the Ancillary Agreements shall include
      any and all modifications or amendments thereto and any and all extensions
      or
      renewals thereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.  Term
      Loan.
      Subject
      to the terms and conditions set forth herein and in the Ancillary Agreements,
      Federal Partners shall make a term loan (the “Term
      Loan”)
      to
      Company and the Eligible Subsidiaries in an aggregate amount equal to
      $1,500,000. The Term Loan shall be advanced on January ___, 2007 and shall
      be
      payable in full on the Term Loan Maturity Date, together with all accrued and
      unpaid interest thereon and all other amounts due and owing with respect
      thereto, subject to acceleration upon the occurrence of an Event of Default
      or
      termination of this Agreement. The Term Loan shall be evidenced by the
      Note.

     

    3.  Repayment
      of the Loans.
      Company
      and the Eligible Subsidiaries (a) may prepay the Obligations from time to time
      in accordance with the terms and provisions of the Note (and Section 16 hereof
      if such prepayment is due to a termination of this Agreement); and (b) shall
      repay on the expiration of the Term (i) the then aggregate outstanding principal
      balance of the Loan together with accrued and unpaid interest, fees and charges
      and (ii) all other amounts owed Federal Partners under this Agreement and the
      Ancillary Agreements. Any payments of principal, interest, fees or any other
      amounts payable hereunder or under any Ancillary Agreement shall be made prior
      to 12:00 noon (New York time) on the due date thereof in immediately available
      funds.

     

    4.  Interest
      and Payments.

     

    (a)  Interest.

     

    (i)  Except
      as
      modified by Section 5(a)(iii) below, Company and each Eligible Subsidiary shall
      pay interest at the Contract Rate on the unpaid principal balance of the Loan
      until such time as such Loan is collected in full in good funds in dollars
      of
      the United States of America.

     

    (ii)  Interest
      and payments shall be computed and made as set forth in the Note.

     

    (iii)  Effective
      upon the occurrence of any Event of Default and for so long as any Event of
      Default shall be continuing, the Contract Rate shall automatically be increased
      as set forth in the Note, (such increased rate, the “Default Rate”), and all
      outstanding Obligations, including unpaid interest, shall continue to accrue
      interest from the date of such Event of Default at the Default Rate applicable
      to such Obligations. 

     

    (iv)  In
      no
      event shall the aggregate interest payable hereunder exceed the maximum rate
      permitted under any applicable law or regulation, as in effect from time to
      time
      (the “Maximum Legal Rate”) and if any provision of this Agreement or any
      Ancillary Agreement is in contravention of any such law or regulation, interest
      payable under this Agreement and each Ancillary Agreement shall be computed
      on
      the basis of the Maximum Legal Rate (so that such interest will not exceed
      the
      Maximum Legal Rate). 

     

    
      
        
        

      

      
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    (v)  Company
      and each Eligible Subsidiary shall pay principal, interest and all other amounts
      payable hereunder, or under any Ancillary Agreement, without any deduction
      whatsoever, including any deduction for any set-off or counterclaim or deduction
      or withholding for any taxes, levies, imposts, deductions, charges or
      withholdings of whatever kind or nature. If Company or any Eligible Subsidiary
      shall be required by law to deduct or withhold any taxes from or in respect
      of
      any sum payable hereunder to Federal Partners, then:

     

    (1)  the
      sum
      payable to Federal Partners shall be increased as necessary so that after making
      all required deductions and withholdings Federal Partners receives an amount
      equal to the sum it would have received had no such deductions or withholdings
      been made;

     

    (2)  Company
      or such Subsidiary shall make such deductions and withholdings;

     

    (3)  Company
      and/or such Subsidiary shall pay the full amount deducted or withheld to the
      relevant taxing authority or other authority in accordance with applicable
      law;
      and

     

    (4)  without
      duplication of amounts paid under clause (1), Company and/or such Subsidiary
      shall also pay to Federal Partners for the account of Federal Partners, at
      the
      time interest is paid, all additional amounts which Federal Partners specifies
      as necessary to preserve the after-tax yield Federal Partners would have
      received if such taxes had not been imposed.

     

    (b)  Payments;
      Certain Closing Conditions.

     

    (i)  Financial
      Information Default.
      Without
      affecting Federal Partners’ other rights and remedies, in the event Company or
      any Eligible Subsidiary fails to deliver the financial information required
      by
      Section 11 on or before the date required by this Agreement, Company and the
      Eligible Subsidiaries shall pay Federal Partners an aggregate fee in the amount
      of $500.00 per week (or portion thereof) for each such failure until such
      failure is cured to Federal Partners’ satisfaction or waived in writing by
      Federal Partners. Such fee shall be charged to Company’s and the Eligible
      Subsidiaries account upon the occurrence of each such failure. 

     

    (ii)  Expenses;
      Closing Fee.
      The
      Company and the Eligible Subsidiaries shall (i) reimburse Federal Partners
      for
      its reasonable expenses (including legal fees and expenses) incurred in
      connection with the preparation and negotiation of this Agreement and the
      Ancillary Agreements (as hereinafter defined), and expenses incurred in
      connection with Federal Partners’ due diligence review of the Company and its
      Subsidiaries and all related matters and (ii) pay to Federal Partners a closing
      fee of $52,500. Amounts required to be paid under this Section 5(b)(ii) will
      be
      paid on the Closing Date by wire transfer of immediately available funds to
      an
      account designated by Federal Partners.

     

    5.  Security
      Interest.

     

    (a)  To
      secure
      the prompt payment to Federal Partners of the Obligations, Company hereby
      assigns, pledges and grants to Federal Partners a continuing security interest
      in and Lien upon the Collateral. All of Company’s Books and Records relating to
      the Collateral shall, until delivered to or removed by Federal Partners, be
      kept
      by Company in trust for Federal Partners until all Obligations have been paid
      in
      full. 

     

    
      
        
        

      

      
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    (b)  Company
      hereby (i) authorizes Federal Partners to file any financing statements,
      continuation statements or amendments thereto that indicate the Collateral
      and
      contain any other information required by Part 5 of Article 9 of the UCC for
      the
      sufficiency or filing office acceptance of any financing statement, continuation
      statement or amendment and (ii) ratifies its authorization for Federal Partners
      to have filed any initial financial statements, or amendments thereto if filed
      prior to the date hereof. Company acknowledges that it is not authorized to
      file
      any financing statement or amendment or termination statement with respect
      to
      any financing statement without the prior written consent of Federal Partners
      and agrees that it will not do so without the prior written consent of Federal
      Partners, subject to Company’s rights under Section 9-509(d)(2) of the
      UCC.

     

    (c) This
      Agreement and the Federal Partners Lien upon the Collateral shall be subject
      to
      the terms of the Laurus Subordination Agreement. 

     

    6.  Representations,
      Warranties and Covenants Concerning the Collateral.
      Each of
      Company and each Eligible Subsidiary represents, warrants and covenants as
      follows:

     

    (a)  all
      of
      the Collateral (i) is owned by Company and/or an Eligible Subsidiary, as the
      case may be, free and clear of all Liens except those Permitted Liens and (ii)
      other than the Laurus Security Documents, is not subject to any agreement
      prohibiting the granting of a Lien or requiring notice of or consent to the
      granting of a Lien.

     

    (b)  neither
      the Company nor any Eligible Subsidiary shall encumber, mortgage, pledge, assign
      or grant any Lien in any Collateral or any of Company’s or any Eligible
      Subsidiary other assets to anyone other than Federal Partners and except for
      Permitted Liens.

     

    (c)  the
      Liens
      granted pursuant to this Agreement, upon completion of the filings and other
      actions listed on Schedule
      6(c)
      (which,
      in the case of all filings and other documents referred to in said Schedule,
      have been delivered to Federal Partners in duly executed form) constitute valid
      perfected security interests in all of the Collateral in favor of Federal
      Partners as security for the prompt and complete payment and performance of
      the
      Obligations, enforceable in accordance with the terms hereof against any and
      all
      creditors of and any purchasers from Company and the Eligible Subsidiaries
      and,
      subject to Permitted Liens, such security interest is prior to all other Liens
      in existence on the date hereof.

     

    (d)  no
      effective security agreement, mortgage, deed of trust, financing statement,
      equivalent security or Lien instrument or continuation statement covering all
      or
      any part of the Collateral is or will be on file or of record in any public
      office, except those relating to Permitted Liens.

     

    (e)  neither
      Company nor any Eligible Subsidiary shall dispose of any of the Collateral
      whether by sale or otherwise.

     

    (f)  each
      of
      Company and each Eligible Subsidiary shall defend the right, title and interest
      of Federal Partners in and to the Collateral against the claims and demands
      of
      all Persons whomsoever, and take such actions, including (i) all actions
      necessary to grant Federal Partners “control” of the Collateral with any
      agreements establishing control to be in form and substance satisfactory to
      Federal Partners, (ii) the prompt (but in no event later than five (5) Business
      Days following Federal Partners’ request therefor) delivery to Federal Partners
      of all original certificated Stock representing the Collateral (in each case,
      accompanied by stock powers, allonges or other instruments of transfer executed
      in blank), (iii) notification of Federal Partners’ interest in Collateral at
      Federal Partners’ request and (iv) the institution of litigation against third
      parties as shall be prudent in order to protect and preserve Company’s, each
      Eligible Subsidiary’s and/or Federal Partners’ respective and several interests
      in the Collateral. 

     

    
      
        
        

      

      
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    (g)  each
      of
      Company and each Eligible Subsidiary shall place notations upon its Books and
      Records relating to the Collateral and any financial statement of Company and
      each Eligible Subsidiary, as the case may be, to disclose Federal Partners’ Lien
      in the Collateral.

     

    (h)  subject
      to the Laurus Subordination Agreement, each of Company and each Eligible
      Subsidiary shall perform in a reasonable time all other steps requested by
      Federal Partners to create and maintain in Federal Partners’ favor a valid
      perfected first Lien in the Collateral subject only to Permitted
      Liens.

     

    (i)  each
      of
      Company and each Eligible Subsidiary shall maintain and keep all of its Books
      and Records concerning the Collateral at such person’s executive offices listed
      in Schedule
      9(aa).

     

    7.  Inspections
      and Appraisals.
      At all
      times during normal business hours, Federal Partners, and/or any agent of
      Federal Partners shall have the right to (a) have access to, visit, inspect,
      review, evaluate and make physical verification and appraisals of each of
      Company’s and each Eligible Subsidiary’s properties and the Collateral, (b)
      inspect, audit and copy (or take originals if necessary) and make extracts
      from
      Company’s and each Eligible Subsidiary’s Books and Records, including management
      letters prepared by independent accountants, and (c) discuss with Company’s and
      each Eligible Subsidiary’s principal officers, and independent accountants,
      Company’s and each Eligible Subsidiary’s business, assets, liabilities,
      financial condition, results of operations and business prospects. Each of
      Company and each Eligible Subsidiary will deliver to Federal Partners any
      instrument necessary for Federal Partners to obtain records from any service
      bureau maintaining records for Company and such Eligible Subsidiary. If any
      internally prepared financial information, including that required under this
      Section is unsatisfactory in any manner to Federal Partners, Federal Partners
      may request that the Accountants review the same.

     

    8.  Financial
      Reporting.
      Company
      will deliver, or cause to be delivered, to Federal Partners each of the
      following, which shall be in form and detail acceptable to Federal
      Partners:

     

    (a)  As
      soon
      as available, and in any event within one hundred five (105) days after the
      end
      of each fiscal year of Company, Company’s audited financial statements with a
      report of independent certified public accountants of recognized standing
      selected by Company and acceptable to Federal Partners (the “Accountants”),
      which annual financial statements shall include Company’s balance sheet as at
      the end of such fiscal year and the related statements of Company’s income,
      retained earnings and cash flows for the fiscal year then ended, prepared,
      if
      Federal Partners so requests, on a consolidating and consolidated basis to
      include all Subsidiaries and Affiliates, all in reasonable detail and prepared
      in accordance with GAAP, together with (i) if and when available, copies of
      any
      management letters prepared by such accountants; and (ii) a certificate of
      Company’s President, Chief Executive Officer or Chief Financial Officer stating
      that such financial statements have been prepared in accordance with GAAP and
      whether or not such officer has knowledge of the occurrence of any Default
      or
      Event of Default hereunder and, if so, stating in reasonable detail the facts
      with respect thereto;

     

    
      
        
        

      

      
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    (b)  As
      soon
      as available and in any event within fifty (50) days after the end of each
      quarter, an unaudited/internal balance sheet and statements of income, retained
      earnings and cash flows of Company as at the end of and for such quarter and
      for
      the year to date period then ended, prepared, if Federal Partners so requests,
      on a consolidating and consolidated basis to include all Subsidiaries and
      Affiliates, in reasonable detail and stating in comparative form the figures
      for
      the corresponding date and periods in the previous year, all prepared in
      accordance with GAAP, subject to year-end adjustments and accompanied by a
      certificate of Company’s President, Chief Executive Officer or Chief Financial
      Officer, stating (i) that such financial statements have been prepared in
      accordance with GAAP, subject to year-end audit adjustments, and (ii) whether
      or
      not such officer has knowledge of the occurrence of any Default or Event of
      Default hereunder not theretofore reported and remedied and, if so, stating
      in
      reasonable detail the facts with respect thereto;
      and

     

    (c)  Promptly
      after (i) the filing thereof, copies of Company’s most recent registration
      statements and annual, quarterly, monthly or other regular reports which Company
      files with the Securities and Exchange Commission (the “SEC”), and (ii) the
      issuance thereof, copies of such financial statements, reports and proxy
      statements as Company shall send to its stockholders.

     

    9.  Additional
      Representations and Warranties.
      Company
      and each Eligible Subsidiary hereby represent and warrant to Federal Partners
      as
      follows (which representations and warranties are supplemented by, and subject
      to, Company’s filings under the Securities Exchange Act of 1934 (collectively,
      the “Exchange Act Filings”), copies of which have been provided to Federal
      Partners:

     

    (a)  Organization,
      Good Standing and Qualification.
      Each of
      Company and each of its Subsidiaries is a corporation duly organized, validly
      existing and in good standing under the laws of its jurisdiction of
      organization. Each of Company and each of its Subsidiaries has the corporate
      power and authority to own and operate its properties and assets, to execute
      and
      deliver this Agreement and the Ancillary Agreements, to issue and sell the
      Warrants and the shares of Common Stock issuable upon conversion of the Warrants
      (the “Warrant Shares”), and to carry out the provisions of this Agreement and
      the Ancillary Agreements and to carry on its business as presently conducted.
      Each of Company and each of its Subsidiaries is duly qualified and is authorized
      to do business and is in good standing as a foreign corporation in all
      jurisdictions, except for those jurisdictions in which the failure to do so
      has
      not had, or could not reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect.

     

    (b)  Subsidiaries.
      Each
      direct and indirect Subsidiary of Company, the direct owner of such Subsidiary
      and its percentage ownership thereof, is set forth on Schedule
      9(b). 

     

    (c)  Capitalization;
      Voting Rights.

     

    (i)  The
      authorized capital stock of the Company, as of the date hereof consists of
      205,000,000 shares, of which 200,000,000 are shares of Common Stock, par value
      $0.01 per share, 20,000,000] shares of which are issued and outstanding, and
      5,000,000 are shares of preferred stock, par value $0.01 per share, of which
      [21,590] are issued and outstanding. The authorized capital stock of each
      Subsidiary of the Company is set forth on Schedule
      9(c).

     

    
      
        
        

      

      
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    (ii)  Except
      as
      disclosed on Schedule
      9(c),
      other
      than: (i) the shares reserved for issuance under Company’s stock option plans;
      and (ii) shares issued or which may be issued pursuant to this Agreement and
      the
      Ancillary Agreements, there are no outstanding options, warrants, rights
      (including conversion or preemptive rights and rights of first refusal), proxy
      or stockholder agreements, or arrangements or agreements of any kind for the
      purchase or acquisition from Company of any of its securities. Except as
      disclosed on Schedule
      9(c),
      neither
      the offer, issuance or sale of any of the Note or any Warrants, or the issuance
      of any of the Warrant Shares, nor the consummation of any transaction
      contemplated hereby will result in a change in the price or number of any
      securities of Company outstanding, under anti-dilution or other similar
      provisions contained in or affecting any such securities.

     

    (iii)  All
      issued and outstanding shares of Company’s Common Stock: (i) have been duly
      authorized and validly issued and are fully paid and nonassessable; and (ii)
      were issued in compliance with all applicable state and federal laws concerning
      the issuance of securities.

     

    (iv)  The
      rights, preferences, privileges and restrictions of the shares of the Common
      Stock are as stated in Company’s Certificate of Incorporation (the “Charter”).
      The Warrant Shares have been duly and validly reserved for issuance. When issued
      in compliance with the provisions of this Agreement and Company’s Charter, the
      Securities will be validly issued, fully paid and nonassessable, and will be
      free of any liens or encumbrances; provided, however, that the Securities may
      be
      subject to restrictions on transfer under state and/or federal securities laws
      as set forth herein or as otherwise required by such laws at the time a transfer
      is proposed.

     

    (d)  Authorization;
      Binding Obligations.
      All
      corporate action on the part of each of Company and each of its Subsidiaries,
      their respective officers and directors necessary for the authorization of
      this
      Agreement and the Ancillary Agreements, the performance of all obligations
      of
      Company and each of its Subsidiaries hereunder and under the Ancillary
      Agreements on the Closing Date and, the authorization, sale, issuance and
      delivery of the Note and the Warrant has been taken or will be taken prior
      to
      the Closing Date. This Agreement and the Ancillary Agreements, when executed
      and
      delivered and to the extent it is a party thereto, will be valid and binding
      obligations of each of Company and each of its Subsidiaries enforceable in
      accordance with their terms, except:

     

    (i)  as
      limited by applicable bankruptcy, insolvency, reorganization, moratorium or
      other laws of general application affecting enforcement of creditors’ rights;
      and

     

    (ii)  general
      principles of equity that restrict the availability of equitable or legal
      remedies.

     

    
      
        
        

      

      
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    The
      sale
      of the Note and the issuance of the Warrants and the subsequent exercise of
      the
      Warrants for Warrant Shares are not and will not be subject to any preemptive
      rights or rights of first refusal that have not been properly waived or complied
      with. 

     

    (e)  Liabilities.
      Neither
      Company nor any of its Subsidiaries has any contingent liabilities, except
      current liabilities incurred in the ordinary course of business and liabilities
      disclosed in any Exchange Act Filings.

     

    (f)  Agreements;
      Action.
      Except
      as set forth on Schedule
      9(f)
      or as
      disclosed in any Exchange Act Filings:

     

    (i)  There
      are
      no agreements, understandings, instruments, contracts, proposed transactions,
      judgments, orders, writs or decrees to which Company or any of its Subsidiaries
      is a party or to its knowledge by which it is bound which may involve: (i)
      obligations (contingent or otherwise) of, or payments to, Company or any of
      its
      Subsidiaries in excess of $50,000 (other than obligations of, or payments to,
      Company or any of its Subsidiaries arising from purchase or sale agreements
      entered into in the ordinary course of business); or (ii) the transfer or
      license of any patent, copyright, trade secret or other proprietary right to
      or
      from Company or any of its Subsidiaries (other than licenses arising from the
      purchase of “off the shelf” or other standard products); or (iii) provisions
      restricting the development, manufacture or distribution of Company’s or any of
      its Subsidiaries’ products or services; or (iv) indemnification by Company or
      any of its Subsidiaries with respect to infringements of proprietary
      rights.

     

    (ii)  Since
      March 31, 2006, neither Company nor any of its Subsidiaries has: (i) declared
      or
      paid any dividends, or authorized or made any distribution upon or with respect
      to any class or series of its capital stock; (ii) incurred any indebtedness
      for
      money borrowed or any other liabilities (other than ordinary course obligations)
      individually in excess of $50,000 or, in the case of indebtedness and/or
      liabilities individually less than $50,000, in excess of $100,000 in the
      aggregate; (iii) made any loans or advances to any person not in excess,
      individually or in the aggregate, of $100,000, other than ordinary advances
      for
      travel expenses; or (iv) sold, exchanged or otherwise disposed of any of its
      assets or rights, other than the sale of its inventory in the ordinary course
      of
      business.

     

    (iii)  For
      the
      purposes of subsections (i) and (ii) of this Section 9(f) above, all
      indebtedness, liabilities, agreements, understandings, instruments, contracts
      and proposed transactions involving the same person or entity (including persons
      or entities Company has reason to believe are affiliated therewith or with
      any
      Subsidiary thereof) shall be aggregated for the purpose of meeting the
      individual minimum dollar amounts of such subsections.

     

    (g)  Obligations
      to Related Parties.
      Except
      as set forth on Schedule
      9(g),
      there
      are no obligations of Company or any of its Subsidiaries to officers, directors,
      stockholders or employees of Company or any of its Subsidiaries other
      than:

     

    (i)  for
      payment of salary for services rendered and for bonus payments;

     

    (ii)  reimbursement
      for reasonable expenses incurred on behalf of Company or any of its
      Subsidiaries;

     

    
      
        
        

      

      
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    (iii)  for
      other
      standard employee benefits made generally available to all employees (including
      stock option agreements outstanding under any stock option plan approved by
      the
      Board of Directors of Company); and

     

    (iv)  obligations
      listed in Company’s financial statements or disclosed in any of its Exchange Act
      Filings.

     

    Except
      as
      described above or set forth on Schedule
      9(g),
      none of
      the officers, directors or, to the best of Company’s and each Eligible
      Subsidiary’s knowledge, key employees or stockholders of Company, any of its
      Subsidiaries or any members of their immediate families, are indebted to Company
      or any of their Subsidiaries, individually or in the aggregate, in excess of
      $50,000 or have any direct or indirect ownership interest in any firm or
      corporation with which Company or any of its Subsidiaries is affiliated or
      with
      which Company or any of its Subsidiaries has a business relationship, or any
      firm or corporation which competes with Company or any of its Subsidiaries,
      other than passive investments in publicly traded companies (representing less
      than one percent (1%) of such company) which may compete with Company or any
      of
      its Subsidiaries. Except as described above, no officer, director or
      stockholder, or any member of their immediate families, is, directly or
      indirectly, interested in any material contract with Company or any of its
      Subsidiaries and no agreements, understandings or proposed transactions are
      contemplated between Company or any of its Subsidiaries and any such person.
      Except as set forth on Schedule
      9(g),
      neither
      Company nor any of its Subsidiaries is a guarantor or indemnitor of any
      indebtedness of any other person, firm or corporation.

     

    (h)  Changes.
      Since
December
      31, 2005,
      except
      as disclosed in any Exchange Act Filing or in any Schedule to this Agreement
      or
      to any of the Ancillary Agreements, there has not been:

     

    (i)  any
      change in the business, assets, liabilities, condition (financial or otherwise),
      properties, operations or prospects of Company or any of its Subsidiaries,
      which, individually or in the aggregate, has had, or could reasonably be
      expected to have, a Material Adverse Effect;

     

    (ii)  any
      resignation or termination of any officer, key employee or group of employees
      of
      Company or any of its Subsidiaries; 

     

    (iii)  any
      material change, except in the ordinary course of business, in the contingent
      obligations of Company or any of its Subsidiaries by way of guaranty,
      endorsement, indemnity, warranty or otherwise;

     

    (iv)  any
      damage, destruction or loss, whether or not covered by insurance, which has
      had,
      or could reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect;

     

    (v)  any
      waiver by Company or any of its Subsidiaries of a valuable right or of a
      material debt owed to it;

     

    (vi)  any
      direct or indirect material loans made by Company or any of its Subsidiaries
      to
      any stockholder, employee, officer or director of Company or any of its
      Subsidiaries, other than advances made in the ordinary course of
      business;

     

    
      
        
        

      

      
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    (vii)  any
      material change in any compensation arrangement or agreement with any employee,
      officer, director or stockholder; 

     

    (viii)  any
      declaration or payment of any dividend or other distribution of the assets
      of
      Company or any of its Subsidiaries;

     

    (ix)  any
      labor
      organization activity related to Company or any of its
      Subsidiaries;

     

    (x)  any
      debt,
      obligation or liability incurred, assumed or guaranteed by Company or any of
      its
      Subsidiaries, except those for immaterial amounts and for current liabilities
      incurred in the ordinary course of business;

     

    (xi)  any
      sale,
      assignment or transfer of any patents, trademarks, copyrights, trade secrets
      or
      other intangible assets;

     

    (xii)  any
      change in any material agreement to which Company or any of its Subsidiaries
      is
      a party or by which it is bound which, either individually or in the aggregate,
      has had, or could reasonably be expected to have, a Material Adverse
      Effect;

     

    (xiii)  any
      other
      event or condition of any character that, either individually or in the
      aggregate, has had, or could reasonably be expected to have, a Material Adverse
      Effect; or

     

    (xiv)  any
      arrangement or commitment by Company or any of its Subsidiaries to do any of
      the
      acts described in subsection (i) through (xiii) of this Section
      12(h).

     

    (i)  Title
      to Properties and Assets; Liens, Etc.
      Except
      as set forth on Schedule
      9(i),
      each of
      Company and each of its Subsidiaries has good and marketable title to its
      properties and assets, and good title to its leasehold estates, in each case
      subject to no mortgage, pledge, lien, lease, encumbrance or charge, other
      than:

     

    (i)  those
      resulting from taxes which have not yet become delinquent;

     

    (ii)  minor
      liens and encumbrances which do not materially detract from the value of the
      property subject thereto or materially impair the operations of Company or
      any
      of its Subsidiaries; and

     

    (iii)  those
      that have otherwise arisen in the ordinary course of business.

     

    All
      facilities, machinery, equipment, fixtures, vehicles and other properties owned,
      leased or used by Company or any of its Subsidiaries are in good operating
      condition and repair and are reasonably fit and usable for the purposes for
      which they are being used. Except as set forth on Schedule
      9(i),
      each of
      Company and each of its Subsidiaries is in compliance with all material terms
      of
      each lease to which it is a party or is otherwise bound.

     

    (j)  Intellectual
      Property.

     

    (i)  Each
      of
      Company and each of its Subsidiaries owns or possesses sufficient legal rights
      to all Intellectual Property necessary for its business as now conducted and
      to
      Company’s knowledge as presently proposed to be conducted, without any known
      infringement of the rights of others. There are no outstanding options, licenses
      or agreements of any kind relating to such Intellectual Property of Company
      or
      any of its Subsidiaries, nor is Company or any of its Subsidiaries bound by
      or a
      party to any options, licenses or agreements of any kind with respect to the
      Intellectual Property of any other person or entity other than such licenses
      or
      agreements arising from the purchase of “off the shelf” or standard
      products.

     

    
      
        
        

      

      
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    (ii)  Neither
      Company nor any of its Subsidiaries has received any communications alleging
      that Company or any of its Subsidiaries has violated any of the patents,
      trademarks, service marks, trade names, copyrights or trade secrets or other
      proprietary rights of any other person or entity, nor is Company aware of any
      basis therefor.

     

    (iii)  Neither
      Company nor any Eligible Subsidiary believes it is or will be necessary to
      utilize any inventions, trade secrets or proprietary information of any of
      its
      employees made prior to their employment by Company or any Eligible Subsidiary
      or any of their respective Subsidiaries, except for inventions, trade secrets
      or
      proprietary information that have been rightfully assigned to Company or any
      such Subsidiary.

     

    (k)  Compliance
      with Other Instruments.
      Neither
      Company nor any of its Subsidiaries is in violation or default of (x) any term
      of its Charter or Bylaws, or (y) of any provision of any indebtedness, mortgage,
      indenture, contract, agreement or instrument to which it is party or by which
      it
      is bound or of any judgment, decree, order or writ, which violation or default,
      in the case of this clause (y), has had, or could reasonably be expected to
      have, either individually or in the aggregate, a Material Adverse Effect. The
      execution, delivery and performance of and compliance with this Agreement and
      the Ancillary Agreements to which it is a party, and the issuance of the Note
      by
      Company and the Eligible Subsidiaries and the other Securities by Company each
      pursuant hereto and thereto, will not, with or without the passage of time
      or
      giving of notice, result in any such material violation, or be in conflict
      with
      or constitute a default under any such term or provision, or result in the
      creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
      properties or assets of Company or any of its Subsidiaries or the suspension,
      revocation, impairment, forfeiture or nonrenewal of any permit, license,
      authorization or approval applicable to Company or any of its Subsidiaries,
      its
      business or operations or any of its assets or properties. 

     

    (l)  Litigation.
      Except
      as set forth on Schedule
      9(l),
      there
      is no action, suit, proceeding or investigation pending or, to Company’s
      knowledge, currently threatened against Company or any of its Subsidiaries
      that
      prevents Company or any of its Subsidiaries from entering into this Agreement
      or
      the Ancillary Agreements, or from consummating the transactions contemplated
      hereby or thereby, or which has had, or could reasonably be expected to have,
      either individually or in the aggregate, a Material Adverse Effect, or could
      result in any change in the current equity ownership of Company or any of its
      Subsidiaries, nor is Company aware that there is any basis to assert any of
      the
      foregoing. Neither Company nor any of its Subsidiaries is a party or subject
      to
      the provisions of any order, writ, injunction, judgment or decree of any court
      or government agency or instrumentality. There is no action, suit, proceeding
      or
      investigation by Company or any of its Subsidiaries currently pending or which
      Company or any of its Subsidiaries intends to initiate.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (m)  Tax
      Returns and Payments.
      Each of
      Company and each of its Subsidiaries has timely filed all tax returns (federal,
      state and local) required to be filed by it. All taxes shown to be due and
      payable on such returns, any assessments imposed, and all other taxes due and
      payable by each of Company and each of its Subsidiaries on or before the Closing
      Date, have been paid or will be paid prior to the time they become delinquent.
      Except as set forth on Schedule
      9(m),
      neither
      Company nor any of its Subsidiaries has been advised:

     

    (i)  that
      any
      of its returns, federal, state or other, have been or are being audited as
      of
      the date hereof; or

     

    (ii)  of
      any
      deficiency in assessment or proposed judgment to its federal, state or other
      taxes.

     

    Neither
      Company nor any Eligible Subsidiary has any knowledge of any liability of any
      tax to be imposed upon its properties or assets as of the date of this Agreement
      that is not adequately provided for. 

     

    (n)  Employees.
      Except
      as set forth on Schedule
      9(n),
      neither
      Company nor any of its Subsidiaries has any collective bargaining agreements
      with any of its employees. There is no labor union organizing activity pending
      or, to Company’s or any Eligible Subsidiary’s knowledge, threatened with respect
      to Company or any such Subsidiary. Except as disclosed in the Exchange Act
      Filings or on Schedule
      9(n),
      neither
      Company nor any of its Subsidiaries is a party to or bound by any currently
      effective employment contract, deferred compensation arrangement, bonus plan,
      incentive plan, profit sharing plan, retirement agreement or other employee
      compensation plan or agreement. To Company’s and each Eligible Subsidiary’s
      knowledge, no employee of Company or any of its Subsidiaries, nor any consultant
      with whom Company or any of its Subsidiaries has contracted, is in violation
      of
      any term of any employment contract, proprietary information agreement or any
      other agreement relating to the right of any such individual to be employed
      by,
      or to contract with, Company or any of its Subsidiaries because of the nature
      of
      the business to be conducted by Company or any of its Subsidiaries; and to
      Company’s and each Eligible Subsidiary’s knowledge the continued employment by
      Company and its Subsidiaries of their respective present employees, and the
      performance of Company’s and its Subsidiaries contracts with its independent
      contractors, will not result in any such violation. Neither Company nor any
      Eligible Subsidiary is aware that any of its or any of its Subsidiaries’
employees is obligated under any contract (including licenses, covenants or
      commitments of any nature) or other agreement, or subject to any judgment,
      decree or order of any court or administrative agency, that would interfere
      with
      their duties to Company or any of its Subsidiaries. Neither Company nor any
      of
      its Subsidiaries has received any notice alleging that any such violation has
      occurred. Except for employees who have a current effective employment agreement
      with Company or any of its Subsidiaries, no employee of Company or any of its
      Subsidiaries has been granted the right to continued employment by Company
      or
      any of its Subsidiaries or to any material compensation following termination
      of
      employment with Company or any of its Subsidiaries. Except as set forth on
      Schedule
      9(n),
      neither
      Company nor any of its Subsidiaries is aware that any officer, key employee
      or
      group of employees intends to terminate his, her or their employment with
      Company or any of its Subsidiaries, nor does Company or any of its Subsidiaries
      have a present intention to terminate the employment of any officer, key
      employee or group of employees.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (o)  Registration
      Rights and Voting Rights.
      Except
      as set forth on Schedule
      9(o)
      and
      except as disclosed in Exchange Act Filings, neither Company nor any of its
      Subsidiaries is presently under any obligation, and has granted any rights,
      to
      register any of Company’s or any such Subsidiary’s presently outstanding
      securities or any of its securities that may hereafter be issued. Except as
      set
      forth on Schedule
      9(o)
      and
      except as disclosed in Exchange Act Filings, to Company’s and each Eligible
      Subsidiary’s knowledge, no stockholder of Company or any of its Subsidiaries has
      entered into any agreement with respect to the voting of equity securities
      of
      Company or any of its Subsidiaries.

     

    (p)  Compliance
      with Laws; Permits.
      Neither
      Company nor any of its Subsidiaries is in violation of any applicable statute,
      rule, regulation, order or restriction of any domestic or foreign government
      or
      any instrumentality or agency thereof in respect of the conduct of its business
      or the ownership of its properties which has had, or could reasonably be
      expected to have, either individually or in the aggregate, a Material Adverse
      Effect. No governmental orders, permissions, consents, approvals or
      authorizations are required to be obtained and no registrations or declarations
      are required to be filed in connection with the execution and delivery of this
      Agreement or any Ancillary Agreement and the issuance of any of the Securities,
      except such as has been duly and validly obtained or filed, or with respect
      to
      any filings that must be made after the Closing Date, as will be filed in a
      timely manner. Each of Company and each of its Subsidiaries has all material
      franchises, permits, licenses and any similar authority necessary for the
      conduct of its business as now being conducted by it, the lack of which could,
      either individually or in the aggregate, reasonably be expected to have a
      Material Adverse Effect.

     

    (q)  Environmental
      and Safety Laws.
      Neither
      Company is nor any of its Subsidiaries is in violation of any applicable
      statute, law or regulation relating to the environment or occupational health
      and safety, and to its knowledge, no material expenditures are or will be
      required in order to comply with any such existing statute, law or regulation.
      Except as set forth on Schedule
      9(q),
      no
      Hazardous Materials (as defined below) are used or have been used, stored,
      or
      disposed of by Company or any of its Subsidiaries or, to Company’s knowledge, by
      any other person or entity on any property owned, leased or used by Company
      or
      any of its Subsidiaries. For the purposes of the preceding sentence, “Hazardous
      Materials” shall mean:

     

    (i)  materials
      which are listed or otherwise defined as “hazardous” or “toxic” under any
      applicable local, state, federal and/or foreign laws and regulations that govern
      the existence and/or remedy of contamination on property, the protection of
      the
      environment from contamination, the control of hazardous wastes, or other
      activities involving hazardous substances, including building materials;
      and

     

    (ii)  any
      petroleum products or nuclear materials.

     

    (r)  Valid
      Offering.
      Assuming the accuracy of the representations and warranties of Federal Partners
      contained in this Agreement, the offer, sale and issuance of the Securities
      will
      be exempt from the registration requirements of the Securities Act of 1933,
      as
      amended (the “Securities Act”), and will have been registered or qualified (or
      are exempt from registration and qualification) under the registration, permit
      or qualification requirements of all applicable state securities
      laws. 

     

    
      
        
        

      

      
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    (s)  Full
      Disclosure.
      Each of
      Company and each of its Subsidiaries has provided Federal Partners with all
      information requested by Federal Partners in connection with its decision to
      purchase the Note and the Warrants, including all information Company believes
      is reasonably necessary to make such investment decision. Neither this
      Agreement, the Ancillary Agreements nor the exhibits and schedules hereto and
      thereto nor any other document delivered by Company or any of its Subsidiaries
      to Federal Partners or its attorneys or agents in connection herewith or
      therewith or with the transactions contemplated hereby or thereby, contain
      any
      untrue statement of a material fact nor omit to state a material fact necessary
      in order to make the statements contained herein or therein, in light of the
      circumstances in which they are made, not misleading. Any financial projections
      and other estimates provided to Federal Partners by Company and its Subsidiaries
      were based on Company’s and its Subsidiaries’ experience in the industry and on
      assumptions of fact and opinion as to future events which Company and/or such
      Subsidiary, at the date of the issuance of such projections or estimates,
      believed to be reasonable. 

     

    (t)  Insurance.
      Each of
      Company and each of its Subsidiaries has general commercial, product liability,
      fire and casualty insurance policies with coverages which Company believes
      are
      customary for companies similarly situated to Company and its Subsidiaries
      in
      the same or similar business.

     

    (u)  SEC
      Reports and Financial Statements.
      Except
      as set forth on Schedule
      9(u),
      Company
      and each of its Subsidiaries has filed all proxy statements, reports and other
      documents required to be filed by it under the Exchange Act, subject to the
      exceptions for the three years preceding the date hereof expressly set forth
      in
      the Reorganization Agreement. Company has furnished Federal Partners with copies
      of: (i) its Annual Report on Form 10-KSB for its fiscal year ended June 30,
      2005; and (ii) its Quarterly Reports on Form 10-QSB for its fiscal quarters
      ended March 31, 2006 and December 31, 2005, and the Form 8-K filings which
      it
      has made during its fiscal year 2006 to date (collectively, the “SEC Reports”).
      Except as set forth on Schedule 4.21, each SEC Report was, at the time of its
      filing, in substantial compliance with the requirements of its respective form
      and none of the SEC Reports, nor the financial statements (and the notes
      thereto) included in the SEC Reports, as of their respective filing dates,
      contained any untrue statement of a material fact or omitted to state a 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. Such
      financial statements have been prepared in accordance with generally accepted
      accounting principles (“GAAP”) applied on a consistent basis during the periods
      involved (except (i) as may be otherwise indicated in such financial statements
      or the notes thereto or (ii) in the case of unaudited interim statements, to
      the
      extent they may not include footnotes or may be condensed) and fairly present
      in
      all material respects the financial condition, the results of operations and
      the
      cash flows of Company and its Subsidiaries, on a consolidated basis, as of,
      and
      for, the periods presented in each such SEC Report.

     

    (v)  Listing.
      The
      Company’s Common Stock is traded on the Pink Sheets and satisfies all
      requirements for the continuation of such trading. The Company has not received
      any notice that its Common Stock will be ineligible to trade on the Pink Sheets
      or that its Common Stock does not meet all requirements for such
      trading. 

     

    (w)  No
      Integrated Offering.
      Neither
      Company, nor any of its Subsidiaries 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 Securities pursuant to this
      Agreement or any Ancillary Agreement to be integrated with prior offerings
      by
      Company for purposes of the Securities Act which would prevent Company from
      selling the Securities pursuant to Rule 506 under the Securities Act, or any
      applicable exchange-related stockholder approval provisions, nor will Company
      or
      any of its affiliates or Subsidiaries take any action or steps that would cause
      the offering of the Securities to be integrated with other
      offerings.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (x)  Stop
      Transfer.
      The
      Securities are restricted securities as of the date of this Agreement. Company
      will not issue any stop transfer order or other order impeding the sale and
      delivery of any of the Securities at such time as the Securities are registered
      for public sale or an exemption from registration is available, except as
      required by state and federal securities laws.

     

    (y)  Dilution.
      Company
      specifically acknowledges that its obligation to issue the shares of Common
      Stock upon exercise of the Warrants is binding upon Company and enforceable
      regardless of the dilution such issuance may have on the ownership interests
      of
      other shareholders of Company. 

     

    (z)  Patriot
      Act.
      Each of
      Company and each Eligible Subsidiary certifies that, to the best of Company’s
      and such Eligible Subsidiary’s knowledge, neither Company nor any of its
      Subsidiaries has been designated, and is not owned or controlled, by a
“suspected terrorist” as defined in Executive Order 13224. Each of Company and
      each Eligible Subsidiary hereby acknowledges that Federal Partners seeks to
      comply with all applicable laws concerning money laundering and related
      activities. In furtherance of those efforts, each of Company and each Eligible
      Subsidiary hereby represent, warrant and agree that: (i) none of the cash or
      property that it or any of its Subsidiaries will pay or will contribute to
      Federal Partners has been or shall be derived from, or related to, any activity
      that is deemed criminal under United States law; and (ii) no contribution or
      payment by it or any of its Subsidiaries to Federal Partners, to the extent
      that
      they are within Company’s or any such Subsidiary’s control shall cause Federal
      Partners to be in violation of the United States Bank Secrecy Act, the United
      States International Money Laundering Control Act of 1986 or the United States
      International Money Laundering Abatement and Anti-Terrorist Financing Act of
      2001. Each of Company and each Eligible Subsidiary shall promptly notify Federal
      Partners if any of these representations ceases to be true and accurate
      regarding Company or any of its Subsidiaries. Each of Company and each Eligible
      Subsidiary agrees to provide Federal Partners with any additional information
      regarding Company and each Subsidiary thereof that Federal Partners deems
      necessary or convenient to ensure compliance with all applicable laws concerning
      money laundering and similar activities. Each of Company and each Eligible
      Subsidiary understands and agrees that if at any time it is discovered that
      any
      of the foregoing representations are incorrect, or if otherwise required by
      applicable law or regulation related to money laundering similar activities,
      Federal Partners may undertake appropriate actions to ensure compliance with
      applicable law or regulation, including but not limited to segregation and/or
      redemption of Federal Partners’ investment in Company and each Eligible
      Subsidiary. Each of Company and each Eligible Subsidiary further understands
      that Federal Partners may release confidential information about Company and
      its
      Subsidiaries and, if applicable, any underlying beneficial owners, to proper
      authorities if Federal Partners, in its sole discretion, determines that it
      is
      in the best interests of Federal Partners in light of relevant rules and
      regulations under the laws set forth in subsection (ii) above.

     

    
      
        
        

      

      
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    (aa)  Schedule
      9(aa)
      sets
      forth Company’s and each Eligible Subsidiary’s name as it appears in official
      filing in the state of its incorporation, the type of entity of Company and
      each
      Eligible Subsidiary, the organizational identification number issued by
      Company’s and each Eligible Subsidiary’s state of incorporation or a statement
      that no such number has been issued, Company’s and each Eligible Subsidiary’s
      state of incorporation, and the location of Company’s and each Eligible
      Subsidiary’s chief executive office, corporate offices, warehouses, other
      locations of Collateral and locations where records with respect to Collateral
      are kept (including in each case the county of such locations) and, except
      as
      set forth in such Schedule
      9(aa),
      such
      locations have not changed during the preceding twelve months. As of the Closing
      Date, during the prior five years, except as set forth in Schedule
      9(aa),
      neither
      Company nor any Eligible Subsidiary has been known as or conducted business
      in
      any other name (including trade names). Each of Company and each Eligible
      Subsidiary has only one state of incorporation.

     

    10.  Covenants.
      Each of
      Company and each Eligible Subsidiary, as applicable, covenants and agrees with
      Federal Partners as follows:

     

    (a)  Stop-Orders.
      It will
      advise Federal Partners, promptly after it receives notice of issuance by the
      SEC, any state securities commission or any other regulatory authority of any
      stop order or of any order preventing or suspending any offering of any
      securities of Company, or of the suspension of the qualification of the Common
      Stock of Company for offering or sale in any jurisdiction, or the initiation
      of
      any proceeding for any such purpose.

     

    (b)  Listing.
      It will
      promptly secure the listing of the shares of Common Stock issuable upon exercise
      of the Warrants on the Pink Sheets (the “Principal Market”) upon which shares of
      Common Stock are listed (subject to official notice of issuance) and shall
      maintain such listing so long as any other shares of Common Stock shall be
      so
      listed. Company will maintain the listing of its Common Stock on the Principal
      Market, and will comply in all material respects with Company’s reporting,
      filing and other obligations under the bylaws or rules of the National
      Association of Securities Dealers (“NASD”) and such exchanges, as
      applicable. 

     

    (c)  Market
      Regulations.
      Company
      will notify the SEC, NASD and applicable state authorities, in accordance with
      their requirements, of the transactions contemplated by this Agreement, and
      shall take all other necessary action and proceedings as may be required and
      permitted by applicable law, rule and regulation, for the legal and valid
      issuance of the Securities to Federal Partners and promptly provide copies
      thereof to Federal Partners.

     

    (d)  Reporting
      Requirements.
      Company
      will timely file with the SEC all reports required to be filed pursuant to
      the
      Exchange Act and refrain from terminating its status as an issuer required
      by
      the Exchange Act to file reports thereunder even if the Exchange Act or the
      rules or regulations thereunder would permit such termination. 

     

    (e)  Use
      of
      Funds.
      Company
      and each Eligible Subsidiary shall use the proceeds of the Term Loan solely
      to
      pay for Thomas Asia’s working capital purposes.

     

    (f)  Access
      to Facilities.
      It
      will, and will cause each of its Subsidiaries to, permit any representatives
      designated by Federal Partners (or any successor of Federal Partners), upon
      reasonable notice and during normal business hours, at such person’s expense and
      accompanied by a representative of Company or any such Subsidiary, as the case
      may be, to:

     

    (i)  visit
      and
      inspect any of the properties of Company or any such Subsidiary;

     

    
      
        
        

      

      
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    (ii)  examine
      the corporate and financial records of Company or any of its Subsidiaries
      (unless such examination is not permitted by federal, state or local law or
      by
      contract) and make copies thereof or extracts therefrom; and

     

    (iii)  discuss
      the affairs, finances and accounts of Company or any of its Subsidiaries with
      the directors, officers and independent accountants of Company or any of its
      Subsidiaries.

     

    Notwithstanding
      the foregoing, neither the Company nor any of its Subsidiaries will provide
      any
      material, non-public information to Federal Partners unless Federal Partners
      signs a confidentiality agreement and otherwise complies with Regulation FD,
      under the federal securities laws.

     

    (g)  Taxes.
      It
      will, and will cause each of its Subsidiaries to, promptly pay and discharge,
      or
      cause to be paid and discharged, when due and payable, all lawful taxes,
      assessments and governmental charges or levies imposed upon its and its
      Subsidiaries’ income, profits, property or business, as the case may be;
      provided, however, that any such tax, assessment, charge or levy need not be
      paid if the validity thereof shall currently be contested in good faith by
      appropriate proceedings and if it and/or such Subsidiary shall have set aside
      on
      its and/or such Subsidiary’s books adequate reserves with respect thereto, and
      provided, further, that it will, and will cause each of its Subsidiaries to,
      pay
      all such taxes, assessments, charges or levies forthwith upon the commencement
      of proceedings to foreclose any lien which may have attached as security
      therefor.

     

    (h)  Insurance.
      It will
      bear the full risk of loss from any loss of any nature whatsoever with respect
      to the Collateral. It will keep its assets which are of an insurable character
      insured by financially sound and reputable insurers against loss or damage
      by
      fire, explosion and other risks customarily insured against by companies in
      similar business similarly situated; and it will maintain, with financially
      sound and reputable insurers, insurance against other hazards and risks and
      liability to persons and property to the extent and in the manner which it
      reasonably believes is customary for companies in similar business similarly
      situated and to the extent available on commercially reasonable terms. It will
      (jointly and severally) bear the full risk of loss from any loss of any nature
      whatsoever with respect to the assets pledged to Federal Partners as security
      for its obligations hereunder and under the Ancillary Agreements. At it’s own
      cost and expense in amounts and with carriers reasonably acceptable to Federal
      Partners, it shall (i) keep all its insurable properties and properties in
      which
      it has an interest insured against the hazards of fire, flood, sprinkler
      leakage, those hazards covered by extended coverage insurance and such other
      hazards, and for such amounts, as is customary in the case of companies engaged
      in similar businesses similar including business interruption insurance; (ii)
      maintain a bond in such amounts as is customary in the case of companies engaged
      in similar businesses insuring against larceny, embezzlement or other criminal
      misappropriation of insured’s officers and employees who may either singly or
      jointly with others at any time have access to the assets or funds of Company
      or
      any of its Subsidiaries either directly or through governmental authority to
      draw upon such funds or to direct generally the disposition of such assets;
      (iii) maintain public and product liability insurance against claims for
      personal injury, death or property damage suffered by others; (iv) maintain
      all
      such worker’s compensation or similar insurance as may be required under the
      laws of any state or jurisdiction in which Company or any of its Subsidiaries
      is
      engaged in business; and (v) furnish Federal Partners with copies of all
      policies and evidence of the maintenance of such policies at least thirty (30)
      days before any expiration date. 

     

    
      
        
        

      

      
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    (i)  Intellectual
      Property.
      It
      will, and will cause each of its Subsidiaries to, maintain in full force and
      effect its corporate existence, rights and franchises and all licenses and
      other
      rights to use Intellectual Property owned or possessed by it and reasonably
      deemed to be necessary to the conduct of its business.

     

    (j)  Properties.
      It
      will, and will cause each of its Subsidiaries to, keep its properties in good
      repair, working order and condition, reasonable wear and tear excepted, and
      from
      time to time make all needful and proper repairs, renewals, replacements,
      additions and improvements thereto; and it will, and will cause each of its
      Subsidiaries to, at all times comply with each provision of all leases to which
      it is a party or under which it occupies property if the breach of such
      provision could reasonably be expected to have a Material Adverse
      Effect.

     

    (k)  Confidentiality.
      It will
      not, and will not permit any of its Subsidiaries to, disclose, and will not
      include in any public announcement, the name of Federal Partners, unless
      expressly agreed to by Federal Partners or unless and until such disclosure
      is
      required by law or applicable regulation, and then only to the extent of such
      requirement. Company and its Subsidiaries may disclose Federal Partners’
identity and the terms of this Agreement to its current and prospective debt
      and
      equity financing sources.

     

    (l)  Required
      Approvals.
      It
      shall not, and shall not permit any of its Subsidiaries to, without the prior
      written consent of Federal Partners, (i) create, incur, assume or suffer to
      exist any indebtedness (exclusive of trade debt) whether secured or unsecured
      other than Company’s and each Eligible Subsidiary’s indebtedness to Federal
      Partners and as set forth on Schedule
      9(l)(i)
      attached
      hereto and made a part hereof; (ii) cancel any debt owing to it in excess of
      $100,000 in the aggregate during any 12 month period; (iii) assume, guarantee,
      endorse or otherwise become directly or contingently liable in connection with
      any obligations of any other Person, except the endorsement of negotiable
      instruments by Company or an Eligible Subsidiary for deposit or collection
      or
      similar transactions in the ordinary course of business; (iv) directly or
      indirectly declare, pay or make any dividend or distribution on any class of
      its
      Stock or apply any of its funds, property or assets to the purchase, redemption
      or other retirement of any Stock of Company or any Eligible Subsidiary
      outstanding on the date hereof, or issue any preferred stock; (v) purchase
      or
      hold beneficially any Stock or other securities or evidences of indebtedness
      of,
      or make any investment or acquire any interest whatsoever in, any other Person,
      including any partnership or joint venture other than the Subsidiaries in
      existence on the date hereof and listed in Schedule
      9(b)
      and any
      new Subsidiary formed in accordance with subsection (vii) below; (vi) make
      or
      permit to exist any loans or advances to any other Person, including any
      partnership or joint venture, except (x) travel advances, (y) loans to Company’s
      and each Eligible Subsidiaries officers and employees not exceeding at any
      one
      time an aggregate of $10,000, and (z) any Eligible Subsidiary and Thomas Canada;
      (vii) create or permit to exist any Subsidiary, other than any Subsidiary in
      existence on the date hereof and listed in Schedule
      9(b)
      unless
      such new Subsidiary is a wholly-owned Subsidiary and is designated by Federal
      Partners as either a co-borrower or guarantor hereunder and such Subsidiary
      shall have entered into all such documentation required by Federal Partners;
      (viii) directly or indirectly, prepay any indebtedness (other than to Federal
      Partners, to Laurus and in the ordinary course of business), or repurchase,
      redeem, retire or otherwise acquire any indebtedness (other than to Federal
      Partners, to Laurus and in the ordinary course of business) except to make
      scheduled payments of principal and interest thereof; (ix) enter into any
      merger, consolidation or other reorganization with or into any other Person
      or
      acquire all or a portion of the assets or Stock of any Person or permit any
      other Person to consolidate with or merge with it, unless (1) Company or an
      Eligible Subsidiary, as applicable, is the surviving entity of such merger
      or
      consolidation, (2) no Event of Default shall exist immediately prior to and
      after giving effect to such merger or consolidation, (3) Company and each
      Eligible Subsidiary, as applicable, shall have provided Federal Partners copies
      of all documentation relating to such merger or consolidation and (4) Company
      shall have provided Federal Partners with at least thirty (30) days’ prior
      written notice of such merger or consolidation; (x) materially change the nature
      of the business in which it is presently engaged; (xi) become subject to
      (including, without limitation, by way of amendment to or modification of)
      any
      agreement or instrument which by its terms would (under any circumstances)
      restrict the Company’s or any Eligible Subsidiary’s right to perform the
      provisions of this Agreement or any of the agreements contemplated thereby;
      (xii) change its fiscal year or make any changes in accounting treatment and
      reporting practices without prior written notice to Federal Partners except
      as
      required by GAAP or in the tax reporting treatment or except as required by
      law;
      (xiii) enter into any transaction with any employee, director or Affiliate,
      except in the ordinary course on arms-length terms; (xiv) bill Accounts under
      any name except the present name of Company or any Eligible Subsidiary; or
      (xv)
      except for the sale of inventory in the ordinary course of business, sell,
      lease, transfer or otherwise dispose of any of its properties or assets, or
      any
      of the properties or assets of its Subsidiaries (collectively, the “Permitted
      Asset Sales”); provided, the aggregate fair market value of all Permitted Asset
      Sales during any fiscal year shall not exceed $100,000.

     

    
      
        
        

      

      
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    (m)  Reissuance
      of Securities.
      Company
      agrees to reissue certificates representing the Securities without the legends
      set forth in Section 37 below at such time as:

     

    (i)  the
      holder thereof is permitted to dispose of such Securities pursuant to Rule
      144(k) under the Securities Act; or

     

    (ii)  upon
      resale subject to an effective registration statement after such Securities
      are
      registered under the Securities Act.

     

    Company
      agrees to cooperate with Federal Partners in connection with all resales
      pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary
      to
      allow such resales provided Company and its counsel receive reasonably requested
      representations from Federal Partners and broker, if any.

     

    (n)  Opinion.
      On the
      Closing Date, Company and each Eligible Subsidiary will deliver to Federal
      Partners an opinion acceptable to Federal Partners from Company’s and each
      Eligible Subsidiary’s legal counsel. Company and each Eligible Subsidiary will
      provide, at Company’s and each Eligible Subsidiary’s expense, such other legal
      opinions in the future as are reasonably necessary for the exercise of the
      Warrants.

     

    (o)  Legal
      Name, etc.
      Neither
      Company nor any of its Eligible Subsidiaries will, without providing Federal
      Partners with 30 days prior written notice, change (i) its name as it appears
      in
      the official filings in the state of its incorporation or formation, (ii) the
      type of legal entity it is, (iii) its organization identification number, if
      any, issued by its state of incorporation, (iv) its state of incorporation
      or
      (v) amend its certificate of incorporation, by-laws or other organizational
      document. 

     

    
      
        
        

      

      
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    (p)  Compliance
      with Laws.
      The
      operation of each of the Company’s and each of its Subsidiaries’ business is and
      will continue to be in compliance in all material respects with all applicable
      federal, state and local laws, rules and ordinances, including to all laws,
      rules, regulations and orders relating to taxes, payment and withholding of
      payroll taxes, employer and employee contributions and similar items,
      securities, employee retirement and welfare benefits, employee health safety
      and
      environmental matters.

     

    (q)  Notices.
      Each of
      the Company and each of its Subsidiaries will promptly inform Federal Partners
      in writing of: (i) the commencement of all proceedings and investigations by
      or
      before and/or the receipt of any notices from, any governmental or
      nongovernmental body and all actions and proceedings in any court or before
      any
      arbitrator against or in any way concerning any event which could reasonable
      be
      expected to have singly or in the aggregate, a Material Adverse Effect; (ii)
      any
      change which has had, or could reasonably be expected to have, a Material
      Adverse Effect; (iii) any Event of Default or Default; and (iv) any default
      or
      any event which with the passage of time or giving of notice or both would
      constitute a default under any agreement for the payment of money to which
      Company or any of its Subsidiaries is a party or by which Company or any of
      its
      Subsidiaries or any of Company’s or any such Subsidiary’s properties may be
      bound the breach of which would have a Material Adverse Effect.

     

    (r)  Margin
      Stock.
      The
      Company will not permit any of the proceeds of the Loans made hereunder to
      be
      used directly or indirectly to “purchase” or “carry” “margin stock” or to repay
      indebtedness incurred to “purchase” or “carry” “margin stock” within the
      respective meanings of each of the quoted terms under Regulation U of the Board
      of Governors of the Federal Reserve System as now and from time to time
      hereafter in effect. 

     

    (s)  Offering
      Restrictions.
      Except
      as previously disclosed in the SEC Reports or in the Exchange Act Filings,
      or
      stock or stock options granted to employees or directors of the Company (these
      exceptions hereinafter referred to as the “Excepted Issuances”), the Company
      will not issue any securities with a continuously variable/floating conversion
      feature which are or could be (by conversion or registration) free-trading
      securities (i.e. common stock subject to a registration statement) prior to
      the
      full repayment of the Note (together with all accrued and unpaid interest and
      fees related thereto (the “Exclusion Period”).

     

    (t)  Authorization
      and Reservation of Shares.
      Company
      will at all times after April 6, 2007 have authorized and reserved a sufficient
      number of shares of Common Stock to provide for the exercise of the
      Warrants.

     

    (u) Offerings.
      Company
      shall not commence any offering of any of its Common Stock or other equity
      securities intended, in whole or in part, to raise capital for the benefit
      of
      Company and/or any of its Subsidiaries, without the prior written consent of
      Federal Partners, unless the aggregate amount of proceeds that Company receives
      from such offering and the proceeds of such offering or a portion thereof,
      as
      applicable, are used by Company to indefeasibly pay the Obligations in full
      or
      in part, at Federal Partners’ option. Each of Company and each Eligible
      Subsidiary hereby acknowledges that Company’s breach of this Section 10(u) shall
      constitute an automatic Event of Default and no cure or grace period shall
      be
      applicable thereto notwithstanding any other provision of this Agreement to
      the
      contrary.

     

    
      
        
        

      

      
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    (v) Further
      Assurances.
      At any
      time and from time to time, upon the written request of Federal Partners and
      at
      the sole expense of Company, each of Company and each Eligible Subsidiary shall
      promptly and duly execute and deliver any and all such further instruments
      and
      documents and take such further action as Federal Partners may request (a)
      to
      obtain the full benefits of this Agreement and the Ancillary Agreements, (b)
      to
      protect, preserve and maintain Federal Partners’ rights in the Collateral and
      under this Agreement or any Ancillary Agreement, or (c) to enable Federal
      Partners to exercise all or any of the rights and powers herein granted or
      any
      Ancillary Agreement.

     

    11.  Representations
      and Warranties of Federal Partners.

     

    Federal
      Partners hereby represents and warrants to Company as follows:

     

    (a)  Requisite
      Power and Authority.
      Federal
      Partners has all necessary power and authority under all applicable provisions
      of law to execute and deliver this Agreement and the Ancillary Agreements and
      to
      carry out their provisions. All corporate action on Federal Partners’ part
      required for the lawful execution and delivery of this Agreement and the
      Ancillary Agreements have been or will be effectively taken prior to the Closing
      Date. Upon their execution and delivery, this Agreement and the Ancillary
      Agreements will be valid and binding obligations of Federal Partners,
      enforceable in accordance with their terms, except (a) as limited by applicable
      bankruptcy, insolvency, reorganization, moratorium or other laws of general
      application affecting enforcement of creditors’ rights, and (b) as limited by
      general principles of equity that restrict the availability of equitable and
      legal remedies.

     

    (b)  Investment
      Representations.
      Federal
      Partners understands that the Securities are being offered and sold pursuant
      to
      an exemption from registration contained in the Securities Act based in part
      upon Federal Partners’ representations contained in this Agreement, including,
      without limitation, that Federal Partners is an “accredited investor” within the
      meaning of Regulation D under the Securities Act. Federal Partners has received
      or has had full access to all the information it considers necessary or
      appropriate to make an informed investment decision with respect to the Note
      to
      be purchased by it under this Agreement.

     

    (c)  Federal
      Partners Bears Economic Risk.
      Federal
      Partners has substantial experience in evaluating and investing in private
      placement transactions of securities in companies similar to Company so that
      it
      is capable of evaluating the merits and risks of its investment in Company
      and
      has the capacity to protect its own interests. Federal Partners must bear the
      economic risk of this investment until the Securities are sold pursuant to
      (i)
      an effective registration statement under the Securities Act, or (ii) an
      exemption from registration is available.

     

    (d)  Acquisition
      for Own Account.
      Federal
      Partners is acquiring the Securities for its own account for investment only,
      and not as a nominee or agent and not with a view towards or for resale in
      connection with their distribution.

     

    
      
        
        

      

      
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    (e)  Federal
      Partners Can Protect Its Interest.
      Federal
      Partners represents that by reason of its, or of its management’s, business and
      financial experience, Federal Partners has the capacity to evaluate the merits
      and risks of its investment in the Note, and the Securities and to protect
      its
      own interests in connection with the transactions contemplated in this
      Agreement, and the Ancillary Agreements. Further, Federal Partners is aware
      of
      no publication of any advertisement in connection with the transactions
      contemplated in the Agreement or the Ancillary Agreements.

     

    (f)  Accredited
      Investor.
      Federal
      Partners represents that it is an accredited investor within the meaning of
      Regulation D under the Securities Act.

     

    (g)  Shorting.
      Neither
      Federal Partners nor any of its Affiliates or investment partners has, will,
      or
      will cause any person or entity, directly or indirectly to, engage in “short
      sales” of Company’s common stock directly related to Company’s Common Stock as
      long as any Minimum Borrowing Note shall be outstanding.

     

    (h)  Patriot
      Act.
      Federal
      Partners certifies that, to the best of Federal Partners’ knowledge, Federal
      Partners has not been designated, and is not owned or controlled, by a
“suspected terrorist” as defined in Executive Order 13224. Federal Partners
      seeks to comply with all applicable laws concerning money laundering and related
      activities. In furtherance of those efforts, Federal Partners hereby represents,
      warrants and agrees that: (i) none of the cash or property that Federal Partners
      will use to purchase the Note has been or shall be derived from, or related
      to,
      any activity that is deemed criminal under United States law; and (ii) no
      disbursement by Federal Partners to the Company, to the extent within Federal
      Partners’ control, shall cause Federal Partners to be in violation of the United
      States Bank Secrecy Act, the United States International Money Laundering
      Control Act of 1986 or the United States International Money Laundering
      Abatement and Anti-Terrorist Financing Act of 2001. Federal Partners shall
      promptly notify the Company if any of these representations ceases to be true
      and accurate regarding Federal Partners. Federal Partners agrees to provide
      the
      Company any additional information regarding Federal Partners that the Company
      deems necessary or convenient to ensure compliance with all applicable laws
      concerning money laundering and similar activities. Federal Partners understands
      and agrees that if at any time it is discovered that any of the foregoing
      representations are incorrect, or if otherwise required by applicable law or
      regulation related to money laundering similar activities, Federal Partners
      may
      undertake appropriate actions to ensure compliance with applicable law or
      regulation, including but not limited to segregation and/or redemption of
      Federal Partners’ investment in the Company. Federal Partners further
      understands that the Company may release information about Federal Partners
      and,
      if applicable, any underlying beneficial owners, to proper authorities if the
      Company, in its sole discretion, determines that it is in the best interests
      of
      the Company in light of relevant rules and regulations under the laws set forth
      in subsection (ii) above.

     

    12.  [Intentionally
      omitted]

     

    13.  Term
      of Agreement.
      Federal
      Partners’ agreement to make the Loan under and in accordance with the terms of
      this Agreement or any Ancillary Agreement shall continue in full force and
      effect until the expiration of the Initial Term. At Federal Partners’ election
      following the occurrence of an Event of Default, Federal Partners may terminate
      this Agreement. The termination of the Agreement shall not affect any of Federal
      Partners’ rights hereunder or any Ancillary Agreement and the provisions hereof
      and thereof shall continue to be fully operative until all transactions entered
      into, rights or interests created and the Obligations have been irrevocably
      disposed of, concluded or liquidated. Notwithstanding the foregoing, Federal
      Partners shall release its security interests at any time after ten (10)
      Business Days’ notice upon irrevocable payment to it of all Obligations if
      Company and each Eligible Subsidiary shall have provided Federal Partners with
      an executed release of any and all claims which Company or any Eligible
      Subsidiary may have or thereafter have under this Agreement and all Ancillary
      Agreements.

     

    
      
        
        

      

      
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    14.  Termination
      of Lien.
      The
      Liens and rights granted to Federal Partners hereunder and any Ancillary
      Agreements and the financing statements filed in connection herewith or
      therewith shall continue in full force and effect, notwithstanding the
      termination of this Agreement until (a) all of the Obligations of Company or
      any
      Eligible Subsidiary have been paid or performed in full after the termination
      of
      this Agreement. Federal Partners shall not be required to send termination
      statements to Company or any Eligible Subsidiary, or to file them with any
      filing office, unless and until this Agreement and the Ancillary Agreements
      shall have been terminated in accordance with their terms and all Obligations
      paid in full in immediately available funds.

     

    15.  Events
      of Default.
      The
      occurrence of any of the following shall constitute an “Event of
      Default”:

     

    (a)  failure
      to make payment of any of the Obligations when required hereunder; 

     

    (b)  failure
      by the Company or any of its Subsidiaries to pay any taxes when due (to the
      extent such unpaid taxes for any fiscal year exceed $10,000 in the aggregate)
      unless such taxes are being contested in good faith by appropriate proceedings
      and with respect to which adequate reserves have been provided on Company’s
      and/or such Subsidiary’s books;

     

    (c)  failure
      to perform under, and/or committing any breach of, in any material respect,
      this
      Agreement or any Ancillary Agreement or any other agreement between Company
      and/or any Subsidiary thereof, on the one hand, and Federal Partners, on the
      other hand, which failure or breach shall continue for a period of thirty (30)
      days after the occurrence thereof;

     

    (d)  the
      occurrence of any event of default (or similar term) under any indebtedness
      in
      excess of $250,000 which Company or any of its Subsidiaries is a party with
      third parties;

     

    (e)  any
      representation, warranty or statement made by Company or any of its Subsidiaries
      hereunder, in any Ancillary Agreement, any certificate, statement or document
      delivered pursuant to the terms hereof, or in connection with the transactions
      contemplated by this Agreement should at any time be false or misleading in
      any
      material respect; 

     

    (f)  an
      attachment or levy is made upon Company’s or any Eligible Subsidiary’s assets
      having an aggregate value in excess of $100,000 or a judgment is rendered
      against Company or any Eligible Subsidiary or Company’s or any Eligible
      Subsidiary’s property involving a liability of more than $250,000 which shall
      not have been vacated, discharged, stayed or bonded within forty (40) days
      from
      the entry thereof;

     

    
      
        
        

      

      
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    (g)  any
      change in Company’s or any of its Subsidiaries’ condition or affairs (financial
      or otherwise) which in Federal Partners’ reasonable, good faith opinion, could
      reasonably be expected to have a Material Adverse Effect; 

     

    (h)  any
      Lien
      created hereunder or under any Ancillary Agreement for any reason ceases to
      be
      or is not a valid and perfected Lien having a first priority interest, subject
      to the Permitted Liens;

     

    (i)  other
      than as currently existing, if Company or any of its Subsidiaries shall (i)
      apply for, consent to or suffer to exist the appointment of, or the taking
      of
      possession by, a receiver, custodian, trustee or liquidator of itself or of
      all
      or a substantial part of its property, (ii) make a general assignment for the
      benefit of creditors, (iii) commence a voluntary case under the federal
      bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt
      or insolvent, (v) file a petition seeking to take advantage of any other law
      providing for the relief of debtors, (vi) acquiesce to, or fail to have
      dismissed, within forty-five (45) days, any petition filed against it in any
      involuntary case under such bankruptcy laws, or (vii) take any action for the
      purpose of effecting any of the foregoing;

     

    (j)  other
      than as currently existing, Company or any of its Subsidiaries shall admit
      in
      writing its inability, or be generally unable to pay its debts as they become
      due or cease operations of its present business;

     

    (k)  Company
      or any Eligible Subsidiary directly or indirectly sells, assigns, transfers,
      conveys, or suffers or permits to occur any sale, assignment, transfer or
      conveyance of any assets of Company or any Eligible Subsidiary or any interest
      therein, except as permitted herein;

     

    (l)  the
      occurrence of a change in the controlling ownership or a Senior Management
      Change of Company or any Eligible Subsidiary;

     

    (m)  the
      indictment or threatened indictment of Company or any of its Subsidiaries or
      any
      executive officer of Company or any of its Subsidiaries under any criminal
      statute, or commencement or threatened commencement of criminal or civil
      proceeding against Company or any of its Subsidiaries or any executive officer
      of Company or any of its Subsidiaries pursuant to which statute or proceeding
      penalties or remedies sought or available include forfeiture of any of the
      property of Company or any of its Subsidiaries; or

     

    (n)  if
      an
      Event of Default (or similar term) shall occur under and as defined in the
      Note
      or in any Ancillary Agreement;

     

    (o)  the
      Company or any of its Subsidiaries shall breach any term or provision of any
      Ancillary Agreement to which it is a party which is not cured within any
      applicable cure or grace period;

     

    (p)  if
      the
      Company or any of its Subsidiaries attempts to terminate, challenges the
      validity of, or its liability under any Ancillary Agreement; 

     

    (q)  should
      the Company, any of its Subsidiaries default in its obligations under any
      Ancillary Agreement to which it is a party or if any proceeding shall be brought
      to challenge the validity, binding effect of any Ancillary Agreement to which
      it
      is a party or should the Company, any of its Subsidiaries breach any
      representation, warranty or covenant contained in any Ancillary Agreement to
      which it is a party or should any Ancillary Agreement cease to be a valid,
      binding and enforceable obligation of the Company, any of its Subsidiaries
      (to
      the extent such Persons are a party thereto); or

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    (r)  if
      Company or any of its Subsidiaries shall take or participate in any action
      which
      would be prohibited under the provisions of any Subordination Agreement or
      make
      any payment on the indebtedness covered by any Subordination Agreement in
      violation of the provisions of any Subordination Agreement.

     

    16.  Remedies.
      Following the occurrence of an Event of Default, Federal Partners shall have
      the
      right to demand repayment in full of all Obligations, whether or not otherwise
      due. Until all Obligations have been fully satisfied, Federal Partners shall
      retain its Lien in the Collateral. Subject to the Laurus Subordination
      Agreement, Federal Partners shall have, in addition to all other rights provided
      herein and in each Ancillary Agreement, the rights and remedies of a secured
      party under the UCC, and under other applicable law, all other legal and
      equitable rights to which Federal Partners may be entitled, including the right
      to take immediate possession of the Collateral at Company’s and each Eligible
      Subsidiaries’ joint and several expense, and to make it available to Federal
      Partners at a place designated by Federal Partners which is reasonably
      convenient to both parties and to enter any of the premises of Company or any
      Eligible Subsidiary or wherever the Collateral shall be located, with or without
      force or process of law, and to keep and store the same on said premises until
      sold (and if said premises be the property of Company or any Eligible
      Subsidiary, Company agrees not to charge Federal Partners for storage thereof),
      and the right to apply for the appointment of a receiver for Company’s and each
      Eligible Subsidiary’s property. Further, subject to the Laurus Subordination
      Agreement, Federal Partners may, at any time or times after the occurrence
      of an
      Event of Default, sell and deliver the Collateral held by or for Federal
      Partners at public or private sale for cash, upon credit or otherwise, at such
      prices and upon such terms as Federal Partners, in Federal Partners’ sole
      discretion, deems advisable or Federal Partners may otherwise recover upon
      the
      Collateral in any commercially reasonable manner as Federal Partners, in its
      sole discretion, deems advisable. The requirement of reasonable notice shall
      be
      met if such notice is mailed postage prepaid to Company Agent at Company Agent’s
      address as shown in Federal Partners’ records, at least ten (10) days before the
      time of the event of which notice is being given. Federal Partners may be the
      purchaser at any sale, if it is public. The proceeds of sale shall be applied
      first to all costs and expenses of sale, including attorneys’ fees, and second
      to the payment (in whatever order Federal Partners elects) of all Obligations.
      After the indefeasible payment and satisfaction in full in cash of all of the
      Obligations, and after the payment by Federal Partners of any other amount
      required by any provision of law, including Section 608(a)(1) of the Code (but
      only after Federal Partners has received what Federal Partners considers
      reasonable proof of a subordinate party’s security interest), the surplus, if
      any, shall be paid to Company, such Eligible Subsidiary or its representatives
      or to whosoever may be lawfully entitled to receive the same, or as a court
      of
      competent jurisdiction may direct. Each of Company and each Eligible Subsidiary
      shall remain jointly and severally liable to Federal Partners for any
      deficiency. Company, Eligible Subsidiaries and Federal Partners acknowledge
      that
      the actual damages that would be incurred by Federal Partners after the
      occurrence of an Event of Default would be difficult to quantify and that
      Company, Eligible Subsidiaries and Federal Partners have agreed that the fees
      and obligations set forth in this Section and in this Agreement would constitute
      fair and appropriate liquidated damages in the event of any such
      termination.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    17.  Waivers.
      To the
      full extent permitted by applicable law, each of Company and each Eligible
      Subsidiary hereby waives (a) presentment, demand and protest, and notice of
      presentment, dishonor, intent to accelerate, acceleration, protest, default,
      nonpayment, maturity, release, compromise, settlement, extension or renewal
      of
      any or all of this Agreement and the Ancillary Agreements or any other notes,
      commercial paper, Accounts, contracts, Documents, Instruments, Chattel Paper
      and
      guaranties at any time held by Federal Partners on which Company or any such
      Eligible Subsidiary may in any way be liable, and hereby ratifies and confirms
      whatever Federal Partners may do in this regard; (b) all rights to notice and
      a
      hearing prior to Federal Partners’ taking possession or control of, or to
      Federal Partners’ replevy, attachment or levy upon, any Collateral or any bond
      or security that might be required by any court prior to allowing Federal
      Partners to exercise any of its remedies; and (c) the benefit of all valuation,
      appraisal and exemption laws. Each of Company and each Eligible Subsidiary
      acknowledges that it has been advised by counsel of its choices and decisions
      with respect to this Agreement, the Ancillary Agreements and the transactions
      evidenced hereby and thereby. 

     

    18.  Expenses.
      Company
      and each Eligible Subsidiary shall jointly and severally pay all of Federal
      Partners’ reasonable out-of-pocket costs and expenses, including reasonable fees
      and disbursements of in-house or outside counsel and appraisers, in connection
      with the preparation, execution and delivery of this Agreement and the Ancillary
      Agreements, and in connection with the prosecution or defense of any action,
      contest, dispute, suit or proceeding concerning any matter in any way arising
      out of, related to or connected with this Agreement or any Ancillary Agreement.
      Company and each Eligible Subsidiary shall also jointly and severally pay all
      of
      Federal Partners’ reasonable fees, charges, out-of-pocket costs and expenses,
      including fees and disbursements of counsel and appraisers, in connection with
      (a) the preparation, execution and delivery of any waiver, any amendment thereto
      or consent proposed or executed in connection with the transactions contemplated
      by this Agreement or the Ancillary Agreements, (b) Federal Partners’ obtaining
      performance of the Obligations under this Agreement and any Ancillary
      Agreements, including, but not limited to, the enforcement or defense of Federal
      Partners’ security interests, assignments of rights and Liens hereunder as valid
      perfected security interests, (c) any attempt to inspect, verify, protect,
      collect, sell, liquidate or otherwise dispose of any Collateral, (d) any
      appraisals or re-appraisals of any property (real or personal) pledged to
      Federal Partners by Company or any of its Subsidiaries as Collateral for, or
      any
      other Person as security for, the Obligations hereunder and (e) any
      consultations in connection with any of the foregoing. Company and each Eligible
      Subsidiary shall also jointly and severally pay Federal Partners’ customary bank
      charges for all bank services (including wire transfers) performed or caused
      to
      be performed by Federal Partners for Company or any of its Subsidiaries at
      Company’s or such Subsidiary’s request or in connection with Company’s and/or
      any Eligible Subsidiary’s loan account with Federal Partners. All such costs and
      expenses together with all filing, recording and search fees, taxes and interest
      payable by Company and each Eligible Subsidiary to Federal Partners shall be
      payable on demand and shall be secured by the Collateral. If any tax by any
      Governmental Authority is or may be imposed on or as a result of any transaction
      between Company and/or any Subsidiary thereof, on the one hand, and Federal
      Partners on the other hand, which Federal Partners is or may be required to
      withhold or pay, Company and each Eligible Subsidiary agree to jointly and
      severally indemnify and hold Federal Partners harmless in respect of such taxes,
      and Company and each Eligible Subsidiary will repay to Federal Partners the
      amount of any such taxes which shall be charged to Company’s and each Eligible
      Subsidiary’s account; and until Company and each Eligible Subsidiary shall
      furnish Federal Partners with indemnity therefor (or supply Federal Partners
      with evidence satisfactory to it that due provision for the payment thereof
      has
      been made), Federal Partners may hold without interest any balance standing
      to
      Company’s and each Eligible Subsidiary’s credit and Federal Partners shall
      retain its Liens in any and the Collateral.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    19.  Assignment
      By Federal Partners.
      Federal
      Partners may assign any or all of the Obligations together with any or all
      of
      the security therefor to any Person which is not a competitor of Company and
      any
      such transferee shall succeed to all of Federal Partners’ rights with respect
      thereto. Upon such transfer, Federal Partners shall be released from all
      responsibility for the Collateral to the extent same is assigned to any
      transferee. Federal Partners may from time to time sell or otherwise grant
      participations in any of the Obligations and the holder of any such
      participation shall, subject to the terms of any agreement between Federal
      Partners and such holder, be entitled to the same benefits as Federal Partners
      with respect to any security for the Obligations in which such holder is a
      participant. Company and each Eligible Subsidiary agree that each such holder
      may exercise any and all rights of banker’s lien, set-off and counterclaim with
      respect to its participation in the Obligations as fully as though Company
      and/or such Eligible Subsidiary were directly indebted to such holder in the
      amount of such participation.

     

    20.  No
      Waiver; Cumulative Remedies.
      Failure
      by Federal Partners to exercise any right, remedy or option under this
      Agreement, any Ancillary Agreement or any supplement hereto or thereto or any
      other agreement between Company, any Eligible Subsidiary and Federal Partners
      or
      delay by Federal Partners in exercising the same, will not operate as a waiver;
      no waiver by Federal Partners will be effective unless it is in writing and
      then
      only to the extent specifically stated. Federal Partners’ rights and remedies
      under this Agreement and the Ancillary Agreements will be cumulative and not
      exclusive of any other right or remedy which Federal Partners may
      have.

     

    21.  Application
      of Payments.
      Company
      and each Eligible Subsidiary irrevocably waive the right to direct the
      application of any and all payments at any time or times hereafter received
      by
      Federal Partners from or on Company’s and/or any Eligible Subsidiary’s behalf
      and Company and each Eligible Subsidiary hereby irrevocably agree that Federal
      Partners shall have the continuing exclusive right to apply and reapply any
      and
      all payments received at any time or times hereafter against the Obligations
      hereunder in such manner as Federal Partners may deem advisable notwithstanding
      any entry by Federal Partners upon any of Federal Partners’ books and
      records.

     

    22.  Indemnity.
      Company
      and each Eligible Subsidiary agree to jointly and severally indemnify and hold
      Federal Partners, and its respective affiliates, employees, attorneys and agents
      (each, an “Indemnified Person”), harmless from and against any and all suits,
      actions, proceedings, claims, damages, losses, liabilities and expenses of
      any
      kind or nature whatsoever (including attorneys’ fees and disbursements and other
      costs of investigation or defense, including those incurred upon any appeal)
      which may be instituted or asserted against or incurred by any such Indemnified
      Person as the result of credit having been extended, suspended or terminated
      under this Agreement or any of the Ancillary Agreements or with respect to
      the
      execution, delivery, enforcement, performance and administration of, or in
      any
      other way arising out of or relating to, this Agreement, the Ancillary
      Agreements or any other documents or transactions contemplated by or referred
      to
      herein or therein and any actions or failures to act with respect to any of
      the
      foregoing, except to the extent that any such indemnified liability is finally
      determined by a court of competent jurisdiction to have resulted solely from
      such Indemnified Person’s gross negligence or willful misconduct. NO INDEMNIFIED
      PERSON SHALL BE RESPONSIBLE OR LIABLE TO COMPANY, ANY ELIGIBLE SUBSIDIARY OR
      TO
      ANY OTHER PARTY OR TO ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR
      ANY
      OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
      PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT
      OF
      CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR
      ANY
      ANCILLARY AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
      HEREUNDER OR THEREUNDER.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    23.  [Intentionally
      omitted]

     

    24.  Revival.
      Company
      and each Eligible Subsidiary further agree that to the extent Company or any
      Eligible Subsidiary makes a payment or payments to Federal Partners, which
      payment or payments or any part thereof are subsequently invalidated, declared
      to be fraudulent or preferential, set aside and/or required to be repaid to
      a
      trustee, receiver or any other party under any bankruptcy act, state or federal
      law, common law or equitable cause, then, to the extent of such payment or
      repayment, the obligation or part thereof intended to be satisfied shall be
      revived and continued in full force and effect as if said payment had not been
      made.

     

    25.  Borrowing
      Agency Provisions.

     

    (a)  Each
      of
      Company and each Eligible Subsidiary hereby irrevocably designates Company
      Agent
      to be its attorney and agent and in such capacity to borrow, sign and endorse
      notes, and execute and deliver all instruments, documents, writings and further
      assurances now or hereafter required hereunder, on behalf of such Company or
      Eligible Subsidiary, and hereby authorizes Federal Partners to pay over or
      credit all loan proceeds hereunder in accordance with the request of Company
      Agent.

     

    (b)  The
      handling of this credit facility as a co-borrowing facility with a borrowing
      agent in the manner set forth in this Agreement is solely as an accommodation
      to
      Company and each Eligible Subsidiary and at their request. Federal Partners
      shall not incur any liability to Company or any Eligible Subsidiary as a result
      thereof. To induce Agent and Lenders to do so and in consideration thereof,
      each
      of Company and each Eligible Subsidiary hereby indemnifies Federal Partners
      and
      holds Federal Partners harmless from and against any and all liabilities,
      expenses, losses, damages and claims of damage or injury asserted against
      Federal Partners by any Person arising from or incurred by reason of the
      handling of the financing arrangements of Company and each Eligible Subsidiary
      as provided herein, reliance by Federal Partners on any request or instruction
      from Company Agent or any other action taken by Federal Partners with respect
      to
      this Section 29.

     

    (c)  All
      Obligations shall be joint and several, and each of Company and each Eligible
      Subsidiary shall make payment upon the maturity of the Obligations by
      acceleration or otherwise, and such obligation and liability on the part of
      Company and each Eligible Subsidiary shall in no way be affected by any
      extensions, renewals and forbearance granted by Federal Partners to Company
      or
      any Eligible Subsidiary, failure of Federal Partners to give Company or any
      Eligible Subsidiary notice of borrowing or any other notice, any failure of
      Federal Partners to pursue to preserve its rights against Company or any
      Eligible Subsidiary, the release by Federal Partners of any Collateral now
      or
      thereafter acquired from Company or any Eligible Subsidiary, and such agreement
      by Company or any Eligible Subsidiary to pay upon any notice issued pursuant
      thereto is unconditional and unaffected by prior recourse by Federal Partners
      to
      Company or any Eligible Subsidiary or any Collateral for Company’s or any
      Eligible Subsidiary’s Obligations or the lack thereof.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (d)  Each
      of
      Company and each Eligible Subsidiary expressly waives any and all rights of
      subrogation, reimbursement, indemnity, exoneration, contribution or any other
      claim which Company and such Eligible Subsidiary may now or hereafter have
      against the other or other person or entity directly or contingently liable
      for
      the Obligations, or against or with respect to any other’s property (including,
      without limitation, any property which is Collateral for the Obligations),
      arising from the existence or performance of this Agreement, until all
      Obligations have been paid in full and this Agreement has been irrevocably
      terminated.

     

    (e)  Each
      of
      Company and each Eligible Subsidiary represents and warrants to Federal Partners
      that (i) Company and each Eligible Subsidiary have one or more common
      shareholders, directors and officers, (ii) the businesses and corporate
      activities of the Company and each Eligible Subsidiary are closely related
      to,
      and substantially benefit, the business and corporate activities of Company
      and
      each Eligible Subsidiary, (iii) the financial and other operations of Company
      and each Eligible Subsidiary are performed on a combined basis as if Company
      and
      each Eligible Subsidiary constituted a consolidated corporate group, (iv)
      Company and each Eligible Subsidiary will receive a substantial economic benefit
      from entering into this Agreement and will receive a substantial economic
      benefit from the application of each Loan hereunder, in each case, whether
      or
      not such amount is used directly by Company or any such Eligible Subsidiary
      and
      (v) all requests for Loans hereunder by the Company Agent are for the exclusive
      and indivisible benefit of Company and each Eligible Subsidiary as though,
      for
      purposes of this Agreement, Company and each Eligible Subsidiary constituted
      a
      single entity.

     

    26.  Notices.
      Any
      notice or request hereunder may be given to Company, Company Agent, any Eligible
      Subsidiary or Federal Partners at the respective addresses set forth below
      or as
      may hereafter be specified in a notice designated as a change of address under
      this Section. Any notice or request hereunder shall be given by registered
      or
      certified mail, return receipt requested, hand delivery, overnight mail or
      telecopy (confirmed by mail). Notices and requests shall be, in the case of
      those by hand delivery, deemed to have been given when delivered to any officer
      of the party to whom it is addressed, in the case of those by mail or overnight
      mail, deemed to have been given three (3) business days after the date when
      deposited in the mail or with the overnight mail carrier, and, in the case
      of a
      telecopy, when confirmed.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    Notices
      shall be provided as follows:

    

      
        	
                If
                  to Federal Partners:

              	 	
                Federal
                  Partners, L.P.

              
	 	 	
                c/o
                  The Clark Estates, Inc.

              
	 	 	
                1
                  Rockefeller Plaza, 34th Floor

              
	 	 	
                New
                  York, New York 10020

              
	 	 	
                Attention:
                  Stephen M. Duff

              
	 	 	
                Telephone:
                  (212) 977-3441

              
	 	 	
                Telecopier:
                  (212)
                  977-3425

              
	 	 	 
	
                With
                      a copy to: 

              	 	
                Patterson
                  Belknap Webb & Tyler, LLP

              
	 	 	
                1133
                  Avenue of the Americas

              
	 	 	
                New
                  York, New York 10036-6710

              
	 	 	
                Attention:
                  Jeffrey
                  E. LaGueux, Esq.

              
	 	 	
                Telephone:
                  (212) 336-2684

              
	 	 	
                Telecopier:
                  (212) 336-2222

              

      

    

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    
      	
              If
                to Company, 

            	 	 
	
              Company
                Agent or any 

            	 	 
	
              Eligible
                Subsidiary:

            	 	
              Thomas
                Equipment, Inc.

            
	 	 	
              1818
                North Farwell Avenue

            
	 	 	
              Milwaukee,
                Wisconsin 53202

            
	 	 	
              Attention:
                Michael S. Luther

            
	 	 	
              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

            
	 	 	
              Telecopier:
                (212) 930-9725

            

    

    or
      such
      other address as may be designated in writing hereafter in accordance with
      this
      Section 30 by such Person.

     

    27.  Governing
      Law, Jurisdiction and Waiver of Jury Trial.
      (a)
      THIS AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED
      AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
      TO
      CONTRACTS MADE AND PERFORMED IN SUCH STATE.

     

    (b)  COMPANY
      AND EACH ELIGIBLE SUBSIDIARY HEREBY CONSENTS AND AGREES THAT THE STATE OR
      FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE
      EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
      COMPANY AND/OR EACH ELIGIBLE SUBSIDIARY, ON THE ONE HAND, AND FEDERAL PARTNERS,
      ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE ANCILLARY
      AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
      ANY
      OF THE ANCILLARY AGREEMENTS; PROVIDED,
      THAT
      FEDERAL PARTNERS, EACH ELIGIBLE SUBSIDIARY AND COMPANY ACKNOWLEDGE THAT ANY
      APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
      THE
      COUNTY OF NEW YORK, STATE OF NEW YORK; AND
      FURTHER PROVIDED,
      THAT
      NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE FEDERAL
      PARTNERS FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
      JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY
      OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
      ORDER IN FAVOR OF FEDERAL PARTNERS. EACH OF COMPANY AND EACH ELIGIBLE SUBSIDIARY
      EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION
      OR
      SUIT COMMENCED IN ANY SUCH COURT, AND COMPANY AND EACH ELIGIBLE SUBSIDIARY
      HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
      JURISDICTION, IMPROPER VENUE OR FORUM
      NON CONVENIENS.
      EACH OF
      COMPANY AND EACH ELIGIBLE SUBSIDIARY HEREBY WAIVES PERSONAL SERVICE OF THE
      SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
      AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE
      BY
      REGISTERED OR CERTIFIED MAIL ADDRESSED TO COMPANY AGENT AT THE ADDRESS SET
      FORTH
      IN SECTION 29 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
      EARLIER OF COMPANY’S OR SUCH ELIGIBLE SUBSIDIARY’S, AS THE CASE MAY BE, ACTUAL
      RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
      POSTAGE PREPAID.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    (c)  THE
      PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
      APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
      OF
      THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS
      TO
      TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
      WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN FEDERAL PARTNERS, ANY
      ELIGIBLE SUBSIDIARY AND/OR COMPANY ARISING OUT OF, CONNECTED WITH, RELATED
      OR
      INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
      THIS
      AGREEMENT, ANY ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED
      THERETO.

     

    28.  Limitation
      of Liability.
      Each of
      Company and each Eligible Subsidiary acknowledges and understands that in order
      to assure repayment of the Obligations hereunder Federal Partners may be
      required to exercise any and all of Federal Partners’ rights and remedies
      hereunder and agrees that, except as limited by applicable law, neither Federal
      Partners nor any of Federal Partners’ agents shall be liable for acts taken or
      omissions made in connection herewith or therewith except for actual bad
      faith.

     

    29.  Entire
      Understanding.
      This
      Agreement and the Ancillary Agreements contain the entire understanding among
      Company, each Eligible Subsidiary and Federal Partners as to the subject matter
      hereof and thereof and any promises, representations, warranties or guarantees
      not herein contained shall have no force and effect unless in writing, signed
      by
      Company’s, each Eligible Subsidiary’s and Federal Partners’ respective officers.
      Neither this Agreement, the Ancillary Agreements, nor any portion or provisions
      thereof may be changed, modified, amended, waived, supplemented, discharged,
      cancelled or terminated orally or by any course of dealing, or in any manner
      other than by an agreement in writing, signed by the party to be
      charged.

     

    30.  Severability.
      Wherever possible each provision of this Agreement or the Ancillary Agreements
      shall be interpreted in such manner as to be effective and valid under
      applicable law, but if any provision of this Agreement or the Ancillary
      Agreements shall be prohibited by or invalid under applicable law such provision
      shall be ineffective to the extent of such prohibition or invalidity, without
      invalidating the remainder of such provision or the remaining provisions
      thereof.

     

    31.  Captions.
      All
      captions are and shall be without substantive meaning or content of any kind
      whatsoever.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    32.  Counterparts;
      Telecopier Signatures.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      constitute an original and all of which taken together shall constitute one
      and
      the same agreement. Any signature delivered by a party via telecopier
      transmission shall be deemed to be any original signature hereto.

     

    33.  Construction.
      The
      parties acknowledge that each party and its counsel have reviewed this Agreement
      and that the normal rule of construction to the effect that any ambiguities
      are
      to be resolved against the drafting party shall not be employed in the
      interpretation of this Agreement or any amendments, schedules or exhibits
      thereto.

     

    34.  Publicity.
      Each of
      Company and each Eligible Subsidiary hereby authorizes Federal Partners to
      make
      appropriate announcements of the financial arrangement entered into by and
      among
      Company, each Eligible Subsidiary and Federal Partners, including, without
      limitation, announcements which are commonly known as tombstones, in such
      publications and to such selected parties as Federal Partners shall in its
      sole
      and absolute discretion deem appropriate, or as required by applicable
      law.

     

    35.  Joinder.
      It is
      understood and agreed that any person or entity that desires to become an
      Eligible Subsidiary hereunder, or is required to execute a counterpart of this
      Agreement after the date hereof pursuant to the requirements of this Agreement
      or any Ancillary Agreement, shall become an Eligible Subsidiary hereunder by
      (x)
      executing a Joinder Agreement in form and substance satisfactory to Federal
      Partners, (y) delivering supplements to such exhibits and annexes to this
      Agreement and the Ancillary Agreements as Federal Partners shall reasonably
      request and (z) taking all actions as specified in this Agreement as would
      have
      been taken by such Assignor had it been an original party to this Agreement,
      in
      each case with all documents required above to be delivered to Federal Partners
      and with all documents and actions required above to be taken to the reasonable
      satisfaction of Federal Partners.

     

    36.  Legends.
      The
      Securities shall bear legends as follows;

     

    (a)  The
      Note
      shall bear substantially the following legend: 

     

    “THIS
      NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE,
      STATE SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION
      OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
      THE
      ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES
      UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
      REASONABLY SATISFACTORY TO THOMAS EQUIPMENT, INC. THAT SUCH REGISTRATION IS
      NOT
      REQUIRED.”

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    (b)  Any
      shares of Common Stock issued pursuant to conversion of the Note or exercise
      of
      the Warrants, shall bear a legend which shall be in substantially the following
      form until such shares are covered by an effective registration statement filed
      with the SEC:

     

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.
      THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
      THE
      ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
      APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THOMAS
      EQUIPMENT, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

     

    (c)  The
      Warrants shall bear substantially the following legend:

     

    “THIS
      WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
      STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
      OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
      IN
      THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
      UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
      LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THOMAS EQUIPMENT,
      INC.
      THAT SUCH REGISTRATION IS NOT REQUIRED.”

     

    [Balance
      of page intentionally left blank; signature page follows.]

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

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

     

    
      	 	 	 
	 	
              THOMAS
                EQUIPMENT, INC. 

              (f/k/a
                Maxim Mortgage Corporation)

            
	 
 	 
 	 
 
	
            	By:  	/s/
              MICHAEL LUTHER
	 	
              
Name:
              Michael Luther
	 	Title:
              CRO

    

    
       

      
        	 	 	 
	 	
                
                  THOMAS
                    VENTURES, INC.

                

              
	 
 	 
 	 
 
	
              	By:  	/s/
                MICHAEL LUTHER
	 	
                
Name:
                Michael Luther
	 	Title:
                CRO

      

      
        
           

          
            	 	 	 
	 	
                    
                      FEDERAL
                        PARTNERS, L.P. 

                      
                        By
                          NINTH FLOOR CORPORATION,

                        Its
                          General Partner

                      

                    

                  
	 
 	 
 	 
 
	
                  	By:  	/s/
                    STEPHEN DUFF
	 	 	
                    

                  

          

           

          
            
              
              

            

            
              35

              
                

              

            

            
              
              

            

          

        

      

    

     

    Annex
      A - Definitions

     

    “Account
      Debtor”
means
      any Person who is or may be obligated with respect to, or on account of, an
      Account.

     

    “Accountants”
has
      the
      meaning given to such term in Section 8(a).

     

    “Affiliate”
of
      any
      Person means (a) any Person (other than a Subsidiary) which, directly or
      indirectly, is in control of, is controlled by, or is under common control
      with
      such Person, (b) any Person who is a director or officer (i) of such Person,
      (ii) of any Subsidiary of such Person or (iii) of any Person described in clause
      (a) above. For the purposes of this definition, control of a Person shall mean
      the power (direct or indirect) to direct or cause the direction of the
      management and policies of such Person whether by contract or
      otherwise.

     

    “Ancillary
      Agreements”
means,
      the Note, the Warrant, the Registration Rights Agreements, each Security
      Document and all other agreements, instruments, documents, mortgages, pledges,
      powers of attorney, consents, assignments, contracts, notices, security
      agreements, trust agreements and guarantees whether heretofore, concurrently,
      or
      hereafter executed by or on behalf of Company, any Eligible Subsidiary or any
      other Person or delivered to Federal Partners, relating to this Agreement or
      to
      the transactions contemplated by this Agreement or otherwise relating to the
      relationship between the Company, any Eligible Subsidiary and Federal
      Partners.

     

    “Books
      and Records”
means
      all books, records, board minutes, contracts, licenses, insurance policies,
      environmental audits, business plans, files, computer files, computer discs
      and
      other data and software storage and media devices, accounting books and records,
      financial statements (actual and pro forma), filings with Governmental
      Authorities and any and all records and instruments relating to the Collateral
      or otherwise necessary or helpful in the collection thereof or the realization
      thereupon.

     

    “Business
      Day”
means
      a
      day on which Federal Partners is open for business and that is not a Saturday,
      a
      Sunday or other day on which banks are required or permitted to be closed in
      the
      State of New York.

     

    “Charter”
shall
      have the meaning given such term in Section 9(c)(iv).

     

    “Closing
      Date”
means
      January __, 2007.

     

    “Collateral”
has
      the
      meaning as set forth in that certain Stock Pledge Agreement, dated as of the
      date hereof, by and between Federal Partners and the Company.

     

    “Common
      Stock”
the
      shares of stock representing the Company’s common equity interests.

     

    “Company
      Agent”
means
      Thomas Equipment, Inc.

     

    “Contract
      Rate”
shall
      have the meaning set forth in the Note. 

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    “Default”
means
      any act or event which, with the giving of notice or passage of time or both,
      would constitute an Event of Default.

     

    “Default
      Rate”
has
      the
      meaning given to such term in Section 4(a)(iii).

     

    “Eligible
      Subsidiary”
shall
      mean Thomas Ventures, Inc. and each other Subsidiary of the Company consented
      to
      in writing by Federal Partners to be included as and “Eligible Subsidiary” for
      the purposes of this Agreement.

     

    “Event
      of Default”
means
      the occurrence of any of the events set forth in Section 15. 

     

    “Excepted
      Issuances”
shall
      have the meaning given such term in Section 10(s).

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    “Exchange
      Act Filings”
shall
      have the meaning given to such term in Section 9.

     

    “Exclusion
      Period”
shall
      have the meaning given such term in Section 10(s).

     

    “GAAP”
means
      generally accepted accounting principles, practices and procedures in effect
      from time to time in the United States of America.

     

    “Governmental
      Authority”
means
      any nation or government, any state or other political subdivision thereof,
      and
      any agency, department or other entity exercising executive, legislative,
      judicial, regulatory or administrative functions of or pertaining to government.
      

     

    “Hazardous
      Materials”
shall
      have the meaning given such term in Section 9(q).

     

    “Indemnified
      Person”
shall
      have the meaning given to such term in Section 22.

     

    “Intellectual
      Property”
means
      any and all patents, trademarks, service marks, trade names, copyrights, trade
      secrets, Licenses, information and other proprietary rights and
      processes.

     

    “Laurus”
means
      Laurus Master Fund, Ltd.

     

    “Laurus
      Security Documents”
means
      collectively (a) that certain Security and Purchase Agreement, dated as of
      November 9, 2004 (the “Laurus
      Security Agreement”),
      by
      and among Laurus, Company and the Eligible Subsidiaries and (b) the Ancillary
      Agreements (as defined in the Laurus Security Agreements). 

     

    “Laurus
      Subordination Agreement”
means
      that certain Subordination Agreement, dated as of the date hereof, by and among
      Laurus, Federal Partners, Company and the Eligible Subsidiaries. 

     

    “License”
means
      any rights under any written agreement now or hereafter acquired by any Person
      to use any trademark, trademark registration, copyright, copyright registration
      or invention for which a patent is in existence or other license of rights
      or
      interests now held or hereafter acquired by any Person.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    “Lien”
means
      any mortgage, security deed, deed of trust, pledge, hypothecation, assignment,
      security interest, lien (whether statutory or otherwise), charge, claim or
      encumbrance, or preference, priority or other security agreement or preferential
      arrangement held or asserted in respect of any asset of any kind or nature
      whatsoever including any conditional sale or other title retention agreement,
      any lease having substantially the same economic effect as any of the foregoing,
      and the filing of, or agreement to give, any financing statement under the
      UCC
      or comparable law of any jurisdiction.

     

    “Loan”
means
      the Term Loan and all other extensions of credit hereunder and under any
      Ancillary Agreement.

     

    “Material
      Adverse Effect”
means
      a
      material adverse effect on (a) a material adverse effect on the business,
      assets, liabilities, condition (financial or otherwise), properties, operations
      or prospects of Company or any of its Subsidiaries (taken individually or as
      a
      whole), (b) Company’s or any of its Subsidiary’s ability to pay or perform the
      Obligations in accordance with the terms hereof or any Ancillary Agreement,
      (c)
      the value of the Collateral, the Liens on the Collateral or the priority of
      any
      such Lien or (d) the practical realization of the benefits of Federal Partners’
rights and remedies under this Agreement and the Ancillary
      Agreements.

     

    “Maximum
      Legal Rate”
shall
      have the meaning given to such term in Section 4(a)(iv).

     

    “NASD”
shall
      have the meaning given to such term in Section 10(b).

     

    “Note”
means
      and the Term Note made by Company and each Eligible Subsidiary in favor of
      Federal Partners in connection with the transactions contemplated hereby, as
      the
      same may be amended, modified, supplemented and restated from time to time,
      as
      applicable.

     

    “Obligations”
means
      the Loan and all other advances, debts, liabilities, obligations, covenants
      and
      duties owing by Company and each of its Subsidiaries to Federal Partners (or
      any
      corporation that directly or indirectly controls or is controlled by or is
      under
      common control with Federal Partners) of every kind and description (whether
      or
      not evidenced by any note or other instrument and whether or not for the payment
      of money or the performance or non-performance of any act), direct or indirect,
      absolute or contingent, due or to become due, contractual or tortious,
      liquidated or unliquidated, whether existing by operation of law or otherwise
      now existing or hereafter arising including any debt, liability or obligation
      owing from Company and/or each of its Subsidiaries to others which Federal
      Partners may have obtained by assignment or otherwise and further including
      all
      interest (including interest accruing at the then applicable rate provided
      in
      this Agreement after the maturity of the Loan and interest accruing at the
      then
      applicable rate provided in this Agreement after the filing of any petition
      in
      bankruptcy, or the commencement of any insolvency, reorganization or like
      proceeding, whether or not a claim for post-filing or post-petition interest
      is
      allowed in such proceeding), charges or any other payments Company and/or each
      of its Subsidiaries is required to make by law or otherwise arising under or
      as
      a result of this Agreement and the Ancillary Agreements, together with all
      reasonable expenses and reasonable attorneys’ fees chargeable to Company’s or
      any of its Subsidiary’s account or incurred by Federal Partners in connection
      with Company’s or any of its Subsidiary’s account whether provided for herein or
      in any Ancillary Agreement.

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    “Payment
      Intangibles”
means
      all “payment intangibles” as such term is defined in the UCC, now owned or
      hereafter acquired by any Person, including, a General Intangible under which
      the Account Debtor’s principal obligation is a monetary obligation.

     

    “Permitted
      Liens”
means
      (a) Liens of carriers, warehousemen, artisans, bailees, mechanics and
      materialmen incurred in the ordinary course of business securing sums not
      overdue; (b) Liens incurred in the ordinary course of business in connection
      with workmen’s compensation, unemployment insurance or other forms of
      governmental insurance or benefits, relating to employees, securing sums (i)
      not
      overdue or (ii) being diligently contested in good faith provided that adequate
      reserves with respect thereto are maintained on the books of the Company or
      any
      Subsidiary thereof in conformity with GAAP; (c) Liens in favor of Federal
      Partners; (d) Liens for taxes (i) not yet due or (ii) being diligently contested
      in good faith by appropriate proceedings, provided that adequate reserves with
      respect thereto are maintained on the books of the Company or any Subsidiary
      thereof in conformity with GAAP provided, that, the Lien shall have no effect
      on
      the priority of Liens in favor of Federal Partners or the value of the assets
      in
      which Federal Partners has a Lien; (e) Purchase Money Liens securing Purchase
      Money Indebtedness to the extent permitted in this Agreement, (f) Liens in
      favor
      of Laurus and (g) Liens specified on Schedule
      2
      hereto.

     

    “Person”
means
      any individual, sole proprietorship, partnership, limited liability partnership,
      joint venture, trust, unincorporated organization, association, corporation,
      limited liability company, institution, public benefit corporation, entity
      or
      government (whether federal, state, county, city, municipal or otherwise,
      including any instrumentality, division, agency, body or department thereof),
      and shall include such Person’s successors and assigns.

     

    “Purchase
      Money Indebtedness”
means
      (a) any indebtedness incurred for the payment of all or any part of the purchase
      price of any fixed asset, including indebtedness under capitalized leases,
      (b)
      any indebtedness incurred for the sole purpose of financing or refinancing
      all
      or any part of the purchase price of any fixed asset, and (c) any renewals,
      extensions or refinancings thereof (but not any increases in the principal
      amounts thereof outstanding at that time).

     

    “Purchase
      Money Lien”
means
      any Lien upon any fixed assets that secures the Purchase Money Indebtedness
      related thereto but only if such Lien shall at all times be confined solely
      to
      the asset the purchase price of which was financed or refinanced through the
      incurrence of the Purchase Money Indebtedness secured by such Lien and only
      if
      such Lien secures only such Purchase Money Indebtedness.

     

    “Registration
      Rights Agreements”
means
      those registration rights agreements from time to time entered into between
      Company and Federal Partners, as amended, modified and supplemented from time
      to
      time.

     

    “Samsung”
means
      Samsung Industries Co., Inc., a company organized under the laws of the Republic
      of Korea.

     

    “SEC”
shall
      mean the Securities and Exchange Commission.

     

    “SEC
      Reports”
shall
      have the meaning provided such term in Section 9(u).

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    “Securities”
means
      the Warrants being issued by Company to Federal Partners pursuant to this
      Agreement and the Ancillary Agreements and the shares of the common stock of
      Company which may be issued pursuant to exercise of such Warrants.

     

    “Securities
      Act”
shall
      have the meaning given such term in Section 9(r).

     

    “Security
      Documents”
means
      all security agreements, mortgages, cash collateral deposit letters, pledges
      and
      other agreements which are executed by the Company or any of its Subsidiaries
      in
      favor of Federal Partners.

     

    “Senior
      Management Change”
means
      the failure of at least one of the following individuals to be involved in
      the
      day to day senior management of Company and its subsidiaries: Michael S. Luther
      and Luigi LoBasso.

     

    “Stock”
means
      all certificated and uncertificated shares, options, warrants, membership
      interests, general or limited partnership interests, participation or other
      equivalents (regardless of how designated) of or in a corporation, partnership,
      limited liability company or equivalent entity whether voting or nonvoting,
      including common stock, preferred stock, or any other “equity security” (as such
      term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
      by the SEC under the Securities Exchange Act of 1934).

     

    “Subordination
      Agreement”
means,
      collectively, (a) the Laurus Subordination Agreement and (b) any and all other
      subordination agreements entered into from time to time in favor of Federal
      Partners with respect to the Obligations, as each of the same may be amended,
      modified and supplemented from time to time.

     

    “Subsidiary”
of
      any
      Person means (i) a corporation or other entity whose shares of stock or other
      ownership interests having ordinary voting power (other than stock or other
      ownership interests having such power only by reason of the happening of a
      contingency) to elect a majority of the directors of such corporation, or other
      persons or entities performing similar functions for such person or entity,
      are
      owned, directly or indirectly, by such person or entity or (ii) a corporation
      or
      other entity in which such person or entity owns, directly or indirectly, more
      than 50% of the equity interests at such time.

     

    “Term”
means
      the Closing Date through the Term Loan Maturity Date, in each case, subject
      to
      acceleration at the option of Federal Partners upon the occurrence of an Event
      of Default hereunder or other termination hereunder.

     

    “Term
      Loan Maturity Date”
means
      January ___, 2009.

     

    “Term
      Note”
means
      the Secured Term Note made by Company and each Eligible Subsidiary in favor
      of
      Federal Partners in the aggregate principal amount of One Million Five Hundred
      Thousand Dollars ($1,500,000), as the same may be amended, modified,
      supplemented and restated from time to time.

     

    “Thomas
      Asia”
means
      Thomas Equipment Asia Co. Ltd., a company organized under the laws of the
      Republic of Korea.

     

    “Total
      Investment Amount”
means
      $1,500,000.

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

     

    “UCC”
means
      the Uniform Commercial Code as the same may, from time be in effect in the
      State
      of New York; provided, that in the event that, by reason of mandatory provisions
      of law, any or all of the attachment, perfection or priority of, or remedies
      with respect to, Federal Partners’ Lien on any Collateral is governed by the
      Uniform Commercial Code or such other applicable law as in effect in a
      jurisdiction other than the State of New York, the term “UCC” shall mean the
      Uniform Commercial Code or such other applicable law as in effect in such other
      jurisdiction for purposes of the provisions of this Agreement or any Ancillary
      Agreement relating to such attachment, perfection, priority or remedies and
      for
      purposes of definitions related to such provisions; provided further, that
      to
      the extent that UCC is used to define any term herein or in any Ancillary
      Agreement and such term is defined differently in different Articles or
      Divisions of the UCC, the definition of such term contained in Article or
      Division 9 shall govern.

     

    “Warrant
      Shares”
shall
      have the meaning given such term in Section 9(a).

     

    “Warrants”
means,
      collectively, (a) that certain Common Stock Purchase Warrant No. F-8 dated
      as of
      the Closing Date made by Company in favor of Federal Partners, and (b) each
      other warrant made by Company in favor Federal Partners, as each of the same
      may
      be amended, restated, modified and/or supplemented from time to time.

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    FEDERAL
      PARTNERS, L.P..

     

    THOMAS
      EQUIPMENT, INC.

     

    and

     

    THOMAS
      VENTURES, INC.

     

    Dated:
      January __, 2007

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    LIST
      OF
      SCHEDULES

     

    Schedule
      2 Liens

    Schedule
      4.21 SEC
      Reports

    Schedule
      6(c) Actions
      Regarding Collateral

    Schedule
      9(b) Subsidiaries

    Schedule
      9(c) Capitalization

    Schedule
      9(f) Agreements

    Schedule
      9(g) Obligations
      to Related Parties

    Schedule
      9(i) Title
      to
      Properties and Assets, Liens, Etc.

    Schedule
      9(l) Litigation

    Schedule
      9(m) Taxes

    Schedule
      9(n) Employee
      Bargaining Agreements

    Schedule
      9(o) Registration
      Rights and Voting Rights

    Schedule
      9(q) Environmental

    Schedule
      9(u) SEC
      Reports and Financial Statements

    Schedule
      9(aa) 
      Names

    Schedule
      9(l)(i) Indebtedness

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Table
      of Contents

     

    
      	 	 	 	
              Page

            
	 	 	 	 
	
              1.  

            	
              (a)  

            	
              General
                Definitions. 

            	
              1

            
	 	 	 	
               

            
	
               

            	
              (b)  

            	
              Accounting
                Terms. 

            	
              1

            
	 	 	 	
               

            
	
               

            	
              (c)  

            	
              Other
                Terms. 

            	
              1

            
	 	 	 	
               

            
	
               

            	
              (d)  

            	
              Rules
                of Construction. 

            	
              1

            
	 	 	 	
               

            
	
              2.  

            	
               

            	
              Term
                Loan. 

            	
              2

            
	 	 	 	
               

            
	
              3.  

            	
               

            	
              Repayment
                of the Loans. 

            	
              2

            
	 	 	 	
               

            
	
              4.  

            	
               

            	
              Interest
                and Payments 

            	
              2

            
	 	 	 	
               

            
	
               

            	
               

            	
              Interest.
                

            	
              2

            
	 	 	 	
               

            
	
               

            	
              (b)

            	
              Payments;
                Certain Closing Conditions. 

            	
              3

            
	 	 	 	
               

            
	
              5.  

            	
               

            	
              Security
                Interest. 

            	
              3

            
	 	 	 	
               

            
	
              6.  

            	
               

            	
              Representations,
                Warranties and Covenants Concerning the Collateral. 

            	
              4

            
	 	 	 	
               

            
	
              7.  

            	
               

            	
              Inspections
                and Appraisals. 

            	
              5

            
	 	 	 	
               

            
	
              8.  

            	
               

            	
              Financial
                Reporting. 

            	
              5

            
	 	 	 	
               

            
	
              9.  

            	
               

            	
              Additional
                Representations and Warranties. 

            	
              6

            
	 	 	 	
               

            
	
               

            	
              (a)  

            	
              Organization,
                Good Standing and Qualification. 

            	
              6

            
	 	 	 	
               

            
	
               

            	
              (b)  

            	
              Subsidiaries.
                

            	
              6

            
	 	 	 	
               

            
	
               

            	
              (c)  

            	
              Capitalization:
                Voting Rights. 

            	
              6

            
	 	 	 	
               

            
	
               

            	
              (d)  

            	
              Authorization:
                Binding Obligations. 

            	
              7

            
	 	 	 	
               

            
	
               

            	
              (e)  

            	
              Liabilities.
                

            	
              8

            
	 	 	 	
               

            
	
               

            	
              (f)  

            	
              Agreements:
                Action. 

            	
              8

            
	 	 	 	
               

            
	
               

            	
              (g)  

            	
              Obligations
                to Related Parties. 

            	
              8

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      Table
        of Contents

       

    

    
      	 	 	 	
              Page

            
	 	 	 	 
	
               

            	
              (h)  

            	
              Changes.
                

            	
              9

            
	 	 	 	
               

            
	
               

            	
              (i)  

            	
              Title
                to Properties and Assets; Liens, Etc. 

            	
              10

            
	 	 	 	
               

            
	
               

            	
              (j)  

            	
              Intellectual
                Property. 

            	
              10

            
	 	 	 	
               

            
	
               

            	
              (k)  

            	
              Compliance
                with Other Instruments. 

            	
              11

            
	 	 	 	
               

            
	
               

            	
              (l)  

            	
              Litigation.
                

            	
              11

            
	 	 	 	
               

            
	
               

            	
              (m)  

            	
              Tax
                Returns and Payments. 

            	
              12

            
	 	 	 	
               

            
	
               

            	
              (n)  

            	
              Employees.
                

            	
              12

            
	 	 	 	
               

            
	
               

            	
              (o)  

            	
              Registration
                Rights and Voting Rights. 

            	
              13

            
	 	 	 	
               

            
	
               

            	
              (p)  

            	
              Compliance
                with Laws; Permits. 

            	
              13

            
	 	 	 	
               

            
	
               

            	
              (q)  

            	
              Environmental
                and Safety Laws. 

            	
              13

            
	 	 	 	
               

            
	
               

            	
              (r)  

            	
              Valid
                Offering. 

            	
              13

            
	 	 	 	
               

            
	
               

            	
              (s)  

            	
              Full
                Disclosure. 

            	
              14

            
	 	 	 	
               

            
	
               

            	
              (t)  

            	
              Insurance.
                

            	
              14

            
	 	 	 	
               

            
	
               

            	
              (u)  

            	
              SEC
                Reports and Financial Statements. 

            	
              14

            
	 	 	 	
               

            
	
               

            	
              (v)  

            	
              Listing.
                

            	
              14

            
	 	 	 	
               

            
	
               

            	
              (w)  

            	
              No
                Integrated Offering. 

            	
              14

            
	 	 	 	
               

            
	
               

            	
              (x)  

            	
              Stop
                Transfer. 

            	
              15

            
	 	 	 	
               

            
	
               

            	
              (y)  

            	
              Dilution.
                

            	
              15

            
	 	 	 	
               

            
	
               

            	
              (z)  

            	
              Patriot
                Act. 

            	
              15

            
	 	 	 	
               

            
	
               

            	
              (aa)  

            	
              Schedule
                9 (aa). 

            	
              16

            

    

     

    
      
        
        

      

      
        TOC
          2

        
          

        

      

      
        
        

      

    

     

    
      Table
        of Contents

       

    

    
      	 	 	 	
              Page

            
	 	 	 	 
	
              10.  

            	
               

            	
              Covenants.
                

            	
              16

            
	 	 	 	
               

            
	
               

            	
              (a)  

            	
              Stop-Orders.
                

            	
              16

            
	 	 	 	
               

            
	
               

            	
              (b)  

            	
              Listening.
                

            	
              16

            
	 	 	 	
               

            
	
               

            	
              (c)  

            	
              Market
                Regulations. 

            	
              16

            
	 	 	 	
               

            
	
               

            	
              (d)  

            	
              Reporting
                Requirements. 

            	
              16

            
	 	 	 	
               

            
	
               

            	
              (e)  

            	
              Use
                of Funds. 

            	
              16

            
	 	 	 	
               

            
	
               

            	
              (f)  

            	
              Access
                to Facilities. 

            	
              16

            
	 	 	 	
               

            
	
               

            	
              (g)  

            	
              Taxes.
                

            	
              17

            
	 	 	 	
               

            
	
               

            	
              (h)  

            	
              Insurance.
                

            	
              17

            
	 	 	 	
               

            
	
               

            	
              (i)  

            	
              Intellectual
                Property. 

            	
              18

            
	 	 	 	
               

            
	
               

            	
              (j)  

            	
              Properties.
                

            	
              18

            
	 	 	 	
               

            
	
               

            	
              (k)  

            	
              Confidentiality.
                

            	
              18

            
	 	 	 	
               

            
	
               

            	
              (l)  

            	
              Required
                Approvals. 

            	
              18

            
	 	 	 	
               

            
	
               

            	
              (m)  

            	
              Reissuance
                of Securities. 

            	
              19

            
	 	 	 	
               

            
	
               

            	
              (n)  

            	
              Opinion.
                

            	
              19

            
	 	 	 	
               

            
	
               

            	
              (o)  

            	
              Legal
                Name, etc. 

            	
              19

            
	 	 	 	
               

            
	
               

            	
              (p)  

            	
              Compliance
                with Laws. 

            	
              20

            
	 	 	 	
               

            
	
               

            	
              (q)  

            	
              Notices.
                

            	
              20

            
	 	 	 	
               

            
	
               

            	
              (r)  

            	
              Margin
                Stock. 

            	
              20

            
	 	 	 	
               

            
	
               

            	
              (s)  

            	
              Offering
                Restrictions. 

            	
              20

            
	 	 	 	
               

            
	
               

            	
              (t)  

            	
              Authorization
                and Reservation of Shares. 

            	
              20

            
	 	 	 	
               

            
	
               

            	
              (u)  

            	
              Offerings.
                

            	
              20

            

    

     

    
      
        
        

      

      
        TOC
          3

        
          

        

      

      
        
        

      

    

     

    
      Table
        of Contents

    

     

    
      	 	 	 	
              Page

            
	 	 	 	 
	
               

            	
              (v)  

            	
              Further
                Assurance. 

            	
              21

            
	 	 	 	
               

            
	
              11.  

            	
               

            	
              Representations
                and Warranties of Federal Partners. 

            	
              21

            
	 	 	 	
               

            
	
               

            	
              (a)  

            	
              Requisite
                Power and Authority. 

            	
              21

            
	 	 	 	
               

            
	
               

            	
              (b)  

            	
              Investment
                Representations. 

            	
              21

            
	 	 	 	
               

            
	
               

            	
              (c)  

            	
              Federal
                Partners Bears Economic Risk. 

            	
              21

            
	 	 	 	
               

            
	
               

            	
              (d)  

            	
              Acquisition
                for Own Account. 

            	
              21

            
	 	 	 	
               

            
	
               

            	
              (e)  

            	
              Federal
                Partners Can Protect Its Interest. 

            	
              22

            
	 	 	 	
               

            
	
               

            	
              (f)  

            	
              Accredited
                Investor. 

            	
              22

            
	 	 	 	
               

            
	
               

            	
              (g)  

            	
              Shorting.
                

            	
              22

            
	 	 	 	
               

            
	
               

            	
              (h)  

            	
              Patriot
                Act. 

            	
              22

            
	 	 	 	
               

            
	
              12.  

            	
               

            	
              [Intentionally
                Omitted]. 

            	
              22

            
	 	 	 	
               

            
	
              13.  

            	
               

            	
              Term
                of Agreement. 

            	
              22

            
	 	 	 	
               

            
	
              14.  

            	
               

            	
              Termination
                of Lien. 

            	
              23

            
	 	 	 	
               

            
	
              15.  

            	
               

            	
              Events
                of Default. 

            	
              23

            
	 	 	 	
               

            
	
              16.  

            	
               

            	
              Remedies.
                

            	
              25

            
	 	 	 	
               

            
	
              17.  

            	
               

            	
              Waivers.
                

            	
              26

            
	 	 	 	
               

            
	
              18.  

            	
               

            	
              Expenses.
                

            	
              26

            
	 	 	 	
               

            
	
              19.  

            	
               

            	
              Assignment
                By Federal Partners. 

            	
              27

            
	 	 	 	
               

            
	
              20.  

            	
               

            	
              No
                Waiver; Cumulative Remedies. 

            	
              27

            
	 	 	 	
               

            
	
              21.  

            	
               

            	
              Application
                of Payments. 

            	
              27

            
	 	 	 	
               

            
	
              22.  

            	
               

            	
              Indemnity.
                

            	
              27

            

    

     

    
      
        
        

      

      
        TOC
          4

        
          

        

      

      
        
        

      

    

     

    
      Table
        of Contents

    

     

    
      	 	 	 	
              Page

            
	 	 	 	 
	
              23.  

            	
               

            	
              [Intentionally
                Omitted]. 

            	
              28

            
	 	 	 	
               

            
	
              24.  

            	
               

            	
              Revival.
                

            	
              28

            
	 	 	 	
               

            
	
              25.  

            	
               

            	
              Borrowing
                Agency Provisions. 

            	
              28

            
	 	 	 	
               

            
	
              26.  

            	
               

            	
              Notices.
                

            	
              29

            
	 	 	 	
               

            
	
              27.  

            	
               

            	
              Governing
                Law, Jurisdiction and Waiver of Jury Trial. 

            	
              31

            
	 	 	 	
               

            
	
              28.  

            	
               

            	
              Limited
                of Liability. 

            	
              32

            
	 	 	 	
               

            
	
              29.  

            	
               

            	
              Entire
                Understanding. 

            	
              32

            
	 	 	 	
               

            
	
              30.  

            	
               

            	
              Severability.
                

            	
              32

            
	 	 	 	
               

            
	
              31.  

            	
               

            	
              Captions.
                

            	
              32

            
	 	 	 	
               

            
	
              32.  

            	
               

            	
              Counterparts;
                Telecopier Signatures. 

            	
              33

            
	 	 	 	
               

            
	
              33.  

            	
               

            	
              Construction.
                

            	
              33

            
	 	 	 	
               

            
	
              34.  

            	
               

            	
              Publicity.
                

            	
              33

            
	 	 	 	
               

            
	
              35.  

            	
               

            	
              Joinder.
                

            	
              33

            
	 	 	 	
               

            
	
              36.  

            	
               

            	
              Legends.
                

            	
              33

            

    

     

    
      
        
        

      

      
        TOC
          5SECURED
      TERM NOTE

     

    FOR
      VALUE
      RECEIVED, each of THOMAS EQUIPMENT, INC., a Delaware corporation (“Thomas
      Equipment”),
      and
      THOMAS VENTURES, INC., a Delaware corporation (“Thomas
      Ventures”)
      and
      together with Thomas Equipment, each a “Borrower”
and
      collectively the “Borrowers”)
      jointly and severally promises to pay to Federal
      Partners, L.P., a Delaware limited partnership (the
      “Holder”)
      or its
      registered assigns or successors in interest, on order, the sum of One Million
      Five Hundred Thousand Dollars ($1,500,000), together with any accrued and unpaid
      interest hereon, on January 19, 2009 (the “Maturity
      Date”)
      if not
      sooner paid.

     

    Capitalized
      terms used herein without definition shall have the meanings ascribed to such
      terms in that certain Security and Purchase Agreement, dated as of the date
      hereof, among Borrowers and the Holder (as the same may be amended, modified,
      restated and supplemented from time to time, the “Security
      Agreement”).

     

    The
      following terms shall apply to this Note:

     

    ARTICLE
      I 

    INTEREST
      & REDEMPTION

     

    1.1.
      Interest
      Rate.
      Subject
      to Sections 2.9 and 4.7 hereof, interest payable on the outstanding principal
      amount of this Note (the “Principal
      Amount”)
      shall
      accrue at a rate per annum equal to the sum of (i) the “prime rate” published in
The
      Wall Street Journal
      from
      time to time (the “Prime
      Rate”),
      plus
      two percent (2%) (the “Contract
      Rate”).
      The
      Contract Rate shall be increased or decreased as the case may be for each
      increase or decrease in the Prime Rate in an amount equal to such increase
      or
      decrease in the Prime Rate; each change to be effective as of the day of the
      change in the Prime Rate. The Contract Rate shall not at any time be less than
      nine percent (9%). Interest shall be (i) calculated on the basis of a 360 day
      year, and (ii) payable monthly, in arrears, commencing on February 1, 2007
      and
      on the first Business Day of each consecutive calendar month thereafter through
      and including the Maturity Date, whether by acceleration or otherwise (each
      date
      upon which interest shall be so payable, an “Interest
      Payment Date”).

     

    1.2. Optional
      Redemption.
      The
      Borrowers may prepay this Note (“Optional
      Redemption”)
      by
      paying to the Holder a sum of money a sum of money equal to one hundred and
      five
      percent (105%) of the principal amount of this Note together with accrued but
      unpaid interest and any and all other sums due, accrued or payable to the Holder
      arising under this Note, the Security Agreement and/or any other Ancillary
      Agreement (the “Redemption
      Amount”),
      in
      each case, outstanding on the Redemption Payment Date (as defined below). Thomas
      Equipment shall deliver to the Holder a written notice of redemption (the
“Notice
      of Redemption”)
      specifying the date for such Optional Redemption (the “Redemption
      Payment Date”),
      which
      date shall be seven (7) Business Days after the date of the Notice of
      Redemption. On the Redemption Payment Date, the Redemption Amount must be paid
      in good funds to the Holder. In the event the Borrowers fail to pay the
      Redemption Amount on the Redemption Payment Date as set forth herein, then
      such
      Notice of Redemption will be null and void.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      II

    EVENTS
      OF DEFAULT

     

    The
      occurrence of any of the following events set forth in Sections 4.1 through
      4.10, inclusive, shall be an “Event
      of Default”:

     

    2.1. Failure
      to Pay Principal, Interest or other Fees.
      Any
      Borrower fails to pay when due any installment of principal, interest or other
      fees hereon or on any other promissory note issued pursuant to the Security
      Agreement, or any Borrower fails to pay when due any amount due under any other
      promissory note issued by such Borrower, when due in accordance with the terms
      of such note, and in any such case, such failure shall continue for a period
      of
      three (3) days following the date upon which any such payment was
      due.

     

    2.2. Breach
      of Covenant.
      Any
      Borrower breaches any covenant or other term or condition of this Note in any
      material respect and such breach, if subject to cure, continues for a period
      of
      fifteen (15) days after the occurrence thereof.

     

    2.3. Breach
      of Representations and Warranties.
      Any
      representation or warranty of any Borrower or any of its Subsidiaries made
      herein, or the Security Agreement, or in any Ancillary Agreement shall be false
      or misleading in any material respect.

     

    2.4. Receiver
      or Trustee.
      Any
      Borrower or any of its Subsidiaries shall make an assignment for the benefit
      of
      creditors, or apply for or consent to the appointment of a receiver or trustee
      for it or for a substantial part of its property or business; or such a receiver
      or trustee shall otherwise be appointed.

     

    2.5. Judgments.
      Any
      money judgment, writ or similar final process shall be entered or filed against
      any Borrower or any of its Subsidiaries or any of their respective property
      or
      other assets for more than $250,000 in the aggregate for Borrower and all such
      Subsidiaries, and shall remain unvacated, unbonded or unstayed for a period
      of
      thirty (30) days.

     

    2.6. Bankruptcy.
      Bankruptcy, insolvency, reorganization or liquidation proceedings or other
      proceedings or relief under any bankruptcy law or any law for the relief of
      debtors shall be instituted by or against any Borrower or any of its
      Subsidiaries.

     

    2.7. Default
      Under Other Agreements.
      The
      occurrence of an Event of Default under and as defined in the Security Agreement
      or any Ancillary Agreement or any event of default (or similar term) under
      any
      other agreement evidencing indebtedness of at least $250,000.

     

    2.8. Change
      in Control.
      The
      occurrence of a change in the controlling ownership of any
      Borrower.

     

    DEFAULT
      RELATED PROVISIONS

     

    2.9. Default
      Interest Rate.
      Following the occurrence and during the continuance of an Event of Default,
      the
      Contract Rate shall automatically be increased by one and one-half percent
      (1.50%) per month, and all outstanding Obligations, including unpaid interest,
      shall continue to accrue interest from the date of such Event of Default at
      such
      interest rate applicable to such Obligations until such Event of Default is
      cured or waived.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    2.10. Cumulative
      Remedies.
      The
      remedies under this Note shall be cumulative.

     

    ARTICLE
      III 

    DEFAULT
      PAYMENTS

     

    3.1. Default
      Payment.
      If an
      Event of Default occurs and is continuing beyond any applicable grace period,
      the Holder, at its option, may elect, in addition to all rights and remedies
      of
      Holder under the Security Agreement and the Ancillary Agreements and all
      obligations of each Borrower under the Security Agreement and the Ancillary
      Agreements, to require the Borrowers to make a Default Payment (“Default
      Payment”).
      The
      Default Payment shall be 115% of the outstanding principal amount of the Note,
      plus accrued but unpaid interest, all other fees then remaining unpaid, and
      all
      other amounts payable hereunder. The Default Payment shall be applied first
      to
      any fees due and payable to Holder pursuant to the Notes or the Ancillary
      Agreements, then to accrued and unpaid interest due on the Notes and then to
      outstanding principal balance of the Notes.

     

    3.2. Default
      Payment Date.
      The
      Default Payment shall be due and payable immediately on the date that the Holder
      has exercised its rights pursuant to Section 3.1.

     

    ARTICLE
      IV 

    MISCELLANEOUS

     

    4.1. Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of the Holder hereof in the exercise of any power,
      right or privilege hereunder shall operate as a waiver thereof, nor shall any
      single or partial exercise of any such power, right or privilege preclude other
      or further exercise thereof or of any other right, power or privilege. All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.

     

    4.2. Notices.
      Any
      notice herein required or permitted to be given shall be in writing and provided
      in accordance with the terms of the Security Agreement.

     

    4.3. Amendment
      Provision.
      The
      term “Note”
and
      all
      reference thereto, as used throughout this instrument, shall mean this
      instrument as originally executed, or if later amended or supplemented, then
      as
      so amended or supplemented, and any successor instrument as it may be amended
      or
      supplemented.

     

    4.4. Assignability.
      This
      Note shall be binding upon each Borrower and its successors and assigns, and
      shall inure to the benefit of the Holder and its successors and assigns, and
      may
      be assigned by the Holder in accordance with the requirements of the Security
      Agreement.

     

    4.5. Cost
      of Collection.
      If
      default is made in the payment of this Note, each Borrower shall jointly and
      severally pay the Holder hereof reasonable costs of collection, including
      reasonable attorneys’ fees.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    4.6. Governing
      Law.
      This
      Note shall be governed by and construed in accordance with the laws of the
      State
      of New York, without regard to principles of conflicts of laws. Any action
      brought by either party against the other concerning the transactions
      contemplated by this Agreement shall be brought only in the state courts of
      New
      York or in the federal courts located in the state of New York. Each party
      hereto and the individual signing this Note on behalf of each Borrower agree
      to
      submit to the jurisdiction of such courts. The prevailing party shall be
      entitled to recover from the other party its reasonable attorney’s fees and
      costs. In the event that any provision of this Note is invalid or unenforceable
      under any applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law. Any such provision which
      may prove invalid or unenforceable under any law shall not affect the validity
      or unenforceability of any other provision of this Note. Nothing contained
      herein shall be deemed or operate to preclude the Holder from bringing suit
      or
      taking other legal action against any Borrower in any other jurisdiction to
      collect on such Borrower’s obligations to Holder, to realize on any collateral
      or any other security for such obligations, or to enforce a judgment or other
      court order in favor of Holder.

     

    4.7. Maximum
      Payments.
      Nothing
      contained herein shall be deemed to establish or require the payment of a rate
      of interest or other charges in excess of the maximum permitted by applicable
      law. In the event that the rate of interest required to be paid or other charges
      hereunder exceed the maximum permitted by such law, any payments in excess
      of
      such maximum shall be credited against amounts owed by Borrowers to the Holder
      and thus refunded to the Borrowers

     

    4.8. Security
      Interest.
      The
      Holder has been granted a security interest in certain assets of Thomas
      Equipment as more fully described in the Security Agreement. 

     

    4.9.
      Construction.
      Each
      party acknowledges that its legal counsel participated in the preparation of
      this Note and, therefore, stipulates that the rule of construction that
      ambiguities are to be resolved against the drafting party shall not be applied
      in the interpretation of this Note to favor any party against the
      other.

     

    4.10.
      Registered
      Obligation.
      This
      Note is intended to be a registered obligation within the meaning of Treasury
      Regulation Section 1.871-14(c)(1)(i) and the Borrowers (or its agent) shall
      register the Note (and thereafter shall maintain such registration) as to both
      principal and any stated interest. Notwithstanding any document, instrument
      or
      agreement relating to this Note to the contrary, transfer of this Note (or
      the
      right to any payments of principal or stated interest thereunder) may only
      be
      effected by (i) surrender of this Note and either the reissuance by the
      Borrowers of this Note to the new holder or the issuance by the Borrowers of
      a
      new instrument to the new holder, or (ii) transfer through a book entry system
      maintained by the Borrowers (or its agent), within the meaning of Treasury
      Regulation Section 1.871-14(c)(1)(i)(B).

     

    [Balance
      of page intentionally left blank; signature page follows.]

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Borrower has caused this Secured Term Note to be signed in its name effective
      as
      of this 19th day of January, 2007.

     

    
      	 	 	 
	 	THOMAS
              EQUIPMENT, INC. 
	 
 	 
 	 
 
	 	By:  	/s/ MICHAEL
              LUTHER
	 	
              
Name:
              Michael Luther
	 	Title:
              CRO

    

     

    
      	 	 	 
	 	THOMAS
              VENTURES, INC.
	 
 	 
 	 
 
	 	By:  	/s/ MICHAEL
              LUTHER
	 	
              
Name:
              Michael Luther
	 	Title:
              CRO

    

     

    
      
        
        

      

      
        5

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