Document:

May 30, 2006

Thomas Equipment, Inc.
1818 North Farwell Avenue
Milwaukee, Wisconsin 53202

      RE: MODIFICATION TO REGISTRATION RIGHTS AGREEMENT AND DIVIDEND PAYMENTS
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Ladies and Gentlemen:

      Reference is made to the Securities  Purchase  Agreement dated as of April
19, 2005 (the "Purchase  Agreement")  among Thomas  Equipment,  Inc., a Delaware
corporation (the "Company"),  the undersigned (the "Investor") and certain other
parties,  the Registration Rights Agreement dated as of April 19, 2005 among the
Company,  the  Investor and certain  other  parties  (the  "Registration  Rights
Agreement"),  and the Company's Amended and Restated  Certificate of Designation
of Preferences,  Rights and Limitations of Series A Convertible  Preferred Stock
(the  "Certificate of  Designation").  Capitalized  terms not otherwise  defined
herein shall have the meanings ascribed to such terms in the Purchase Agreement.

      The Investor purchased an aggregate ____ shares of Preferred Stock with an
aggregate  purchase  price of  $________.  The  Company has  requested  that the
Investor accept certain payments of securities in lieu of amounts otherwise owed
to  the  Investor  pursuant  to  the  Registration   Rights  Agreement  and  the
Certificate of  Designation,  and waive certain  provisions of the  Registration
Rights  Agreement and the Certificate of Designation and the Investor is willing
to do so on the terms and conditions set forth below.

      Farwell  Equity  Partners,  LLC,  a  Delaware  limited  liability  company
("Farwell"),  is the  principal  stockholder  of the  Company  and is willing to
transfer  certain shares of common stock of the Company (the "Common  Stock") to
the Investor in consideration  for a like number of shares of Common Stock to be
transferred from the Investor to Farwell.

      In   consideration   of  the   foregoing   and  other  good  and  valuable
consideration,  the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:

      1. Pursuant to Section 3 of the Certificate of  Designation,  the Investor
is  entitled  to  receive  cumulative  dividends  at the  rate per  share  (as a
percentage of the Stated Value per share) of 5% per annum,  payable quarterly on
March 30, June 30,  September 30 and December 31. The Company is in arrears with
respect to such  payments to the Investor  for the periods  payable on September
30,  2005,  December  31,  2005 and March 31,  2006 in the  aggregate  amount of
$_________ (the "Dividend Payments").

      2.  Pursuant to Section 2(b) of the  Registration  Rights  Agreement,  the
Investor is entitled to receive in cash, as partial  liquidated  damages and not
as a penalty,  an amount equal to 1% of the aggregate purchase price paid by the
Investor pursuant to the Purchase  Agreement for any Registrable  Securities (as
defined in the  Registration  Rights  Agreement)  held by the  Investor for each
monthly  period  after the  Effectiveness  Date (as defined in the  Registration
Rights  Agreement)  during  which a  Registration  Statement  (as defined in the
Registration Rights Agreement) was not effective. The Registration Statement was
not made  effective  by the SEC for an  aggregate  of  3.387  months  after  the
Effectiveness  Date  and  accordingly  the  Investor  is  due  an  aggregate  of
$_________ for partial liquidated damages (the "Liquidated Damages").

<PAGE>

      3. (a) In consideration  for all amount due to the Investor for payment of
Dividend Payments and Liquidated Damages  (collectively,  the "Payment Amount"),
the Company shall issue to the Investor such number of shares of Common Stock as
equal the Payment Amount,  divided by $1.92 (85% of the average closing price of
the Common Stock for the ten trading days immediately  preceding the date of the
execution of this Agreement) (the "Payment  Shares").  In addition,  the Company
shall also issue to the Investor a common stock purchase  warrant in the form of
Exhibit A attached  hereto to purchase  such number of shares of Common Stock as
equal 25% of the Payment  Shares (the  "Warrants").  The Warrants  shall have an
exercise price of $3.00 per share and an exercise period of five years.

      (b) The  Payment  Shares  and the  shares of Common  Stock  issuable  upon
exercise  of the  Warrants  (the  "Warrant  Shares")  shall  be  subject  to the
Registration   Rights   Agreement   attached  hereto  as  Exhibit  B  (the  "New
Registration Rights Agreement").

      (c) At the Closing, the Company shall deliver the legal opinion of Company
Counsel, in the form of Exhibit C attached hereto; and

      (d) At the  Closing,  the Company  shall  reimburse  the  Investor for its
actual,  reasonable,  out-of-pocket  legal fees and expenses in an amount not to
exceed $5,000.  The Company shall pay all transfer  agent fees,  stamp taxes and
other taxes and duties  levied in  connection  with the  issuance of any Payment
Shares or shares issued in connection  with the Warrants other than income taxes
of the  Investor  that may be  incurred  in  connection  with  the  transactions
contemplated hereby.

      (e) The consummation of the transactions contemplated hereby are expressly
conditioned  upon (i) receipt by the Company of approval from the American Stock
Exchange  to the  additional  listing  application  with  respect to the Payment
Shares  and the  Warrant  Shares,  and (ii)  the  filing  of the  post-effective
amendment to the Farwell Registration  Statement (as defined below) contemplated
by Section 4 below.

      (f) The closing of the  transactions  contemplated  hereby (the "Closing")
shall occur at 10:00 a.m.,  New York time,  on the first  business day following
the  satisfaction  of the  conditions  set forth in clause  (e) above or at such
other time as shall be agreed to by each of the parties hereto.

                                       2
<PAGE>

      4. (a) At the Closing,  Farwell  shall  exchange  with the  Investor  such
number of shares of Common Stock registered in the name of Farwell as equals the
Payment  Shares (the  "Farwell  Shares").  The Farwell  Shares are subject to an
effective   registration   statement  (file  number  333-124217)  (the  "Farwell
Registration  Statement")  pursuant  to which such  shares  may be sold  without
restriction. On or prior to the Closing, the Company shall file a post-effective
amendment to such registration statement pursuant to which the Investor is named
as the selling  stockholder  of the Farwell Shares and the Company agrees to use
commercially  reasonable best efforts to seek effectiveness of such registration
statement as soon as practicable.

      (b) The Company agrees to prepare and file with the Commission (as defined
below) such amendments to the Farwell Registration  Statement and the prospectus
used  in  connection   therewith  as  may  be  necessary  to  keep  the  Farwell
Registration  Statement  continuously effective until all Farwell Shares covered
by such  Farwell  Registration  Statement  have been sold or may be sold without
volume restrictions  pursuant to Rule 144(k) as determined by the counsel to the
Company  pursuant to a written  opinion  letter to such  effect,  addressed  and
acceptable to the Company's transfer agent and the Investor.

      (c)  The  Company  agrees  to  promptly  notify  the  Investor  as soon as
reasonably  practicable  of (i) the  issuance  by the  Commission  or any  other
federal  or state  governmental  authority  of any  stop  order  suspending  the
effectiveness  of the Farwell  Registration  Statement or the  initiation of any
proceedings  for  that  purpose,   (ii)  the  receipt  by  the  Company  of  any
notification  with respect to the suspension of the  qualification  or exemption
from  qualification of any of the Farwell Shares for sale in any jurisdiction or
the  initiation or  threatening of any proceeding for such purpose and (iii) the
occurrence of any event or passage of time that makes the  financial  statements
included in the Farwell Registration  Statement ineligible for inclusion therein
or any statement made in the Farwell Registration Statement or prospectus or any
document  incorporated or deemed to be incorporated  therein by reference untrue
in  any  material  respect  or  that  requires  any  revisions  to  the  Farwell
Registration  Statement or  prospectus or any document  incorporated  therein so
that, in the case of the Farwell  Registration  Statement or the prospectus,  as
the case may be, it will not contain any untrue  statement of a material fact or
omit to state any material  fact  required to be stated  therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

      (d) The Company  agrees to use its best  efforts to avoid the issuance of,
or,  if  issued,   obtain  the  withdrawal  of  (i)  any  order  suspending  the
effectiveness  of the Farwell  Registration  Statement or (ii) any suspension of
the qualification (or exemption from qualification) of any of the Farwell Shares
for sale in any jurisdiction, at the earliest practicable moment.

      (e) The Company agrees to deliver to the Investor, without charge, as many
copies of the prospectus included in the Farwell Registration Statement and each
amendment  or  supplement  thereto as the  Investor  may  reasonably  request in
connection with resales by the Investor of the Farwell Shares.

      (e) The Company agrees to cooperate with the Investor to facilitate timely
preparation and delivery of certificates  representing  the Farwell Shares to be
delivered to a transferee pursuant to the Farwell Registration Statement,  which
certificates  shall be free, to the extent permitted by the Purchase  Agreement,
of all  restrictive  legends,  and to enable such  Farwell  Shares to be in such
denominations and registered in such names as the Investor may request.

                                       3
<PAGE>

      (f) The Company  agrees upon the occurrence of any event  contemplated  by
clause (c) of this  Section 4, as  promptly  as  reasonably  possible  under the
circumstances  taking into account the  Company's  good faith  assessment of any
adverse  consequences  to the  Company  and its  stockholders  of the  premature
disclosure  of such event,  to prepare a supplement  or amendment to the Farwell
Registration Statement or a supplement to the related prospectus or any document
incorporated  or deemed  incorporated  therein by reference,  and file any other
required  document  so  that,  as  thereafter  delivered,  neither  the  Farwell
Registration Statement nor such prospectus will contain an untrue statement of a
material fact or omit 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.  If the Company  notifies the Investor to
suspend the use of any prospectus until the requisite changes to such prospectus
have been made the Investor  shall suspend use of such  prospectus.  The Company
will use its best  efforts  to  ensure  that  the use of the  prospectus  may be
resumed as promptly as is practicable. The Company shall be entitled to exercise
its right  under this  clause (f) to suspend  the  availability  of the  Farwell
Registration  Statement and prospectus for a period not to exceed 60 days (which
need not be consecutive days) in any 12-month period.

      (g) Indemnification

            (i)   Indemnification   by   the   Company.   The   Company   shall,
      notwithstanding  any  termination  of this  Agreement,  indemnify and hold
      harmless the Investor, the officers, directors, agents, brokers (including
      brokers who offer and sell  Farwell  Shares as  principal as a result of a
      pledge or any  failure to perform  under a margin  call of common  stock),
      investment  advisors and employees of the Investor,  each person or entity
      who  controls  the  Investor  (within  the  meaning  of  Section 15 of the
      Securities  Act or  Section  20 of the  Exchange  Act)  and the  officers,
      directors,  agents and employees of each such controlling  person,  to the
      fullest extent  permitted by applicable  law, from and against any and all
      losses,   claims,   damages,   liabilities,   costs  (including,   without
      limitation,   reasonable  attorneys'  fees)  and  expenses  (collectively,
      "Losses"),  as  incurred,  arising  out of or  relating  to any  untrue or
      alleged  untrue  statement  of a material  fact  contained  in the Farwell
      Registration  Statement,  any related prospectus or any form of prospectus
      or  in  any  amendment  or  supplement   thereto  or  in  any  preliminary
      prospectus,  or arising  out of or  relating  to any  omission  or alleged
      omission of a material fact required to be stated  therein or necessary to
      make the  statements  therein  (in the case of any  prospectus  or form of
      prospectus  or supplement  thereto,  in light of the  circumstances  under
      which they were made) not  misleading,  except to the extent,  but only to
      the extent,  that (i) such untrue statements or omissions are based solely
      upon  information  regarding  the  Investor  furnished  in  writing to the
      Company by the Investor  expressly for use therein,  or to the extent that
      such information relates to the Investor or the Investor's proposed method
      of distribution of Farwell Shares and was reviewed and expressly  approved
      in writing by the Investor  expressly for use in the Farwell  Registration
      Statement,  such prospectus or such form of prospectus or in any amendment
      or  supplement  thereto or (ii) the use by the  Investor of an outdated or
      defective  prospectus  after the  Company  has  notified  the  Investor in
      writing  that the  prospectus  is outdated or  defective  and prior to the
      Investor  is  advised  in  writing  by the  Company  that  the  use of the
      applicable  prospectus  may be  resumed.  The  Company  shall  notify  the
      Investor  promptly of the  institution,  threat or  assertion of any legal
      proceeding   arising  from  or  in   connection   with  the   transactions
      contemplated by this Agreement of which the Company is aware.

            (ii)  Indemnification by the Investor.  The Investor shall indemnify
      and hold  harmless  the  Company,  its  directors,  officers,  agents  and
      employees,  each person or entity who  controls  the  Company  (within the
      meaning of Section 15 of the Securities Act and Section 20 of the Exchange
      Act), and the directors, officers, agents or employees of such controlling
      persons,  to the fullest  extent  permitted by  applicable  law,  from and
      against all Losses,  as  incurred,  to the extent  arising out of or based
      solely  upon:  (x) the  Investor's  failure to comply with the  prospectus
      delivery  requirements  of the Securities Act or (y) any untrue or alleged
      untrue statement of a material fact contained in the Farwell  Registration
      Statement,  any related prospectus,  or any form of prospectus,  or in any
      amendment  or  supplement  thereto or in any  preliminary  prospectus,  or
      arising  out of or  relating  to any  omission  or alleged  omission  of a
      material  fact  required  to be stated  therein or  necessary  to make the
      statements  therein  not  misleading  (i) to the  extent,  but only to the
      extent,  that such  untrue  statement  or  omission  is  contained  in any
      information  so  furnished  in  writing  by the  Investor  to the  Company
      specifically for inclusion in the Farwell  Registration  Statement or such
      prospectus  or (ii) to the  extent  that (1)  such  untrue  statements  or
      omissions  are  based  solely  upon  information  regarding  the  Investor
      furnished  in writing to the  Company by the  Investor  expressly  for use
      therein, or to the extent that such information relates to the Investor or
      the Investor's  proposed  method of distribution of Farwell Shares and was
      reviewed and expressly  approved in writing by the Investor  expressly for
      use in the Farwell Registration Statement, such prospectus or such form of
      prospectus or in any amendment or supplement thereto or (2) in the case of
      the use by the Investor of an outdated or defective  prospectus  after the
      Company has  notified  the  Investor  in writing  that the  prospectus  is
      outdated or  defective  and prior to the Investor is advised in writing by
      the Company that the use of the applicable  prospectus may be resumed.  In
      no event  shall the  liability  of the  Investor  hereunder  be greater in
      amount than the dollar amount of the net proceeds received by the Investor
      upon the sale of the Farwell  Shares  giving rise to such  indemnification
      obligation.

                                       4
<PAGE>

            (iii)  Conduct  of   Indemnification   Proceedings.   If  any  legal
      proceeding  shall be  brought  or  asserted  against  any person or entity
      entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified
      Party shall  promptly  notify the person or entity from whom  indemnity is
      sought (the "Indemnifying  Party") in writing,  and the Indemnifying Party
      shall  have  the  right to  assume  the  defense  thereof,  including  the
      employment of counsel reasonably satisfactory to the Indemnified Party and
      the payment of all fees and expenses  incurred in connection  with defense
      thereof;  provided, that the failure of any Indemnified Party to give such
      notice  shall not relieve the  Indemnifying  Party of its  obligations  or
      liabilities  pursuant to this  Agreement,  except (and only) to the extent
      that it shall be finally  determined by a court of competent  jurisdiction
      (which determination is not subject to appeal or further review) that such
      failure shall have prejudiced the Indemnifying Party. An Indemnified Party
      shall  have the  right  to  employ  separate  counsel  in any  such  legal
      proceeding  and to participate  in the defense  thereof,  but the fees and
      expenses of such counsel shall be at the expense of such Indemnified Party
      or Parties unless: (1) the Indemnifying Party has agreed in writing to pay
      such fees and  expenses;  (2) the  Indemnifying  Party  shall have  failed
      promptly  to assume the  defense of such  legal  proceeding  and to employ
      counsel  reasonably  satisfactory  to such  Indemnified  Party in any such
      legal  proceeding;  or (3) the named parties to any such legal  proceeding
      (including any impleaded  parties) include both such Indemnified Party and
      the  Indemnifying  Party,  and such  Indemnified  Party  shall  reasonably
      believe  that a material  conflict  of  interest is likely to exist if the
      same counsel were to represent such Indemnified Party and the Indemnifying
      Party (in which case, if such Indemnified  Party notifies the Indemnifying
      Party in writing that it elects to employ separate  counsel at the expense
      of the Indemnifying Party, the Indemnifying Party shall not have the right
      to assume the defense  thereof and the reasonable fees and expenses of one
      separate counsel shall be at the expense of the Indemnifying  Party).  The
      Indemnifying  Party  shall not be liable  for any  settlement  of any such
      legal proceeding effected without its written consent, which consent shall
      not be unreasonably  withheld.  No Indemnifying  Party shall,  without the
      prior written consent of the Indemnified  Party,  effect any settlement of
      any pending legal proceeding in respect of which any Indemnified  Party is
      a party, unless such settlement includes an unconditional  release of such
      Indemnified Party from all liability on claims that are the subject matter
      of such  legal  proceeding.  Subject to the terms of this  Agreement,  all
      reasonable  fees  and  expenses  of  the  Indemnified   Party   (including
      reasonable  fees and expenses to the extent  incurred in  connection  with
      investigating or preparing to defend such legal proceeding in a manner not
      inconsistent with this Section) shall be paid to the Indemnified Party, as
      incurred,  within  ten  trading  days of  written  notice  thereof  to the
      Indemnifying  Party;  provided,  that the Indemnified Party shall promptly
      reimburse  the  Indemnifying  Party  for  that  portion  of such  fees and
      expenses  applicable to such actions for which such  Indemnified  Party is
      not  entitled  to  indemnification  hereunder,  determined  based upon the
      relative faults of the parties.

            (iv) Contribution.  If a claim for indemnification  under clause (i)
      or (ii) above is unavailable to an Indemnified  Party (by reason of public
      policy  or  otherwise),   then  each   Indemnifying   Party,  in  lieu  of
      indemnifying such Indemnified  Party,  shall contribute to the amount paid
      or payable by such Indemnified  Party as a result of such Losses,  in such
      proportion  as is  appropriate  to  reflect  the  relative  fault  of  the
      Indemnifying  Party and Indemnified  Party in connection with the actions,
      statements or omissions  that resulted in such Losses as well as any other
      relevant equitable considerations. The relative fault of such Indemnifying
      Party and  Indemnified  Party shall be  determined  by reference to, among
      other  things,  whether any action in  question,  including  any untrue or
      alleged  untrue  statement  of a  material  fact or  omission  or  alleged
      omission  of a  material  fact,  has been  taken or made by, or relates to
      information supplied by, such Indemnifying Party or Indemnified Party, and
      the  parties'  relative  intent,  knowledge,  access  to  information  and
      opportunity to correct or prevent such action,  statement or omission. The
      amount  paid or  payable  by a party as a result  of any  Losses  shall be
      deemed to include, subject to the limitations set forth in this Agreement,
      any reasonable attorneys' or other reasonable fees or expenses incurred by
      such party in  connection  with any  Proceeding  to the extent  such party
      would  have  been   indemnified   for  such  fees  or   expenses   if  the
      indemnification  provided for in this Section was  available to such party
      in accordance  with its terms.  The parties hereto agree that it would not
      be just and  equitable if  contribution  pursuant to this clause (iv) were
      determined  by pro rata  allocation  or by any other method of  allocation
      that does not take into account the equitable  considerations  referred to
      above.  Notwithstanding  the  provisions of this clause (iv), the Investor
      shall not be  required  to  contribute,  in the  aggregate,  any amount in
      excess of the  amount  by which  the  proceeds  actually  received  by the
      Investor  from  the  sale  of the  Farwell  Shares  subject  to the  legal
      proceeding  exceeds  the  amount  of any  damages  that the  Investor  has
      otherwise  been required to pay by reason of such untrue or alleged untrue
      statement or omission or alleged omission,  except in the case of fraud by
      the Investor. The indemnity and contribution  agreements contained in this
      Section are in addition to any liability that the Indemnifying Parties may
      have to the Indemnified Parties.

                                       5
<PAGE>

      5. Upon consummation of the transactions  contemplated in Sections 3 and 4
(a)  above,  the  Investor  waives and  agrees  not to seek  enforcement  of any
Triggering Event (as defined in the Certificate of Designation)  pursuant to the
Certificate  of Designation  which exists or otherwise  arose on or prior to the
date hereof which was based upon the circumstances described in Sections 1 and 2
above.

      6. Representations of Investor.  The Investor hereby makes, as of the date
hereof and as of the Closing, the representations and warranties set forth below
to the Company:

            6.1  RELIANCE ON  EXEMPTIONS.  The Investor  acknowledges  that this
transaction  has not been reviewed by the United States  Securities and Exchange
Commission or any state agency because it is intended to be a nonpublic offering
exempt from the  registration  requirements  of the  Securities  Act of 1933, as
amended  (the  "Securities  Act"),  and  state  securities  laws.  The  Investor
understands  that the Company is relying in part upon the truth and accuracy of,
and the Investor's compliance with, the representations, warranties, agreements,
acknowledgments  and understandings of the Investor set forth herein in order to
determine the availability of such exemption and the eligibility of the Investor
to acquire the Payment Shares and the Warrants.

            6.2 INVESTMENT  PURPOSE.  Except as otherwise  provided in Section 4
(a) above,  Investor  represents  that the Payment  Shares and the  Warrants are
being  acquired for its own account,  for  investment  purposes only and not for
distribution  or  resale  to  others  in   contravention   of  the  registration
requirements of the Securities Act. The Investor agrees that it will not sell or
otherwise  transfer the Payment  Shares,  the  Warrants  and the Warrant  Shares
unless they are registered  under the Securities Act or unless an exemption from
such registration is available.

            6.3 ACCREDITED  INVESTOR.  The Investor represents and warrants that
it is an "accredited investor" as such term is defined in Rule 501 of Regulation
D promulgated under the Securities Act.

      7.  Representations  of Company.  The Company hereby makes, as of the date
hereof and as of the Closing, the representations and warranties set forth below
to the Investor:

                                       6
<PAGE>

            7.1  Authorization;  Enforcement.  The  Company  has  the  requisite
corporate  power and authority to enter into and to consummate the  transactions
contemplated  by each of this  Agreement,  the Warrant and the New  Registration
Rights  Agreement (the  "Transaction  Documents") and otherwise to carry out its
obligations  thereunder.  The execution and delivery of each of the  Transaction
Documents  by  the  Company  and  the  consummation  by it of  the  transactions
contemplated  thereby have been duly  authorized by all necessary  action on the
part of the  Company  and no  further  action  is  required  by the  Company  in
connection  therewith other than in connection  with the Required  Approvals (as
defined below).  Each Transaction  Document has been (or upon delivery will have
been) duly  executed by the Company and, when  delivered in accordance  with the
terms hereof,  will  constitute the valid and binding  obligation of the Company
enforceable  against  the  Company in  accordance  with its terms  except (i) as
limited by applicable  bankruptcy,  insolvency,  reorganization,  moratorium and
other laws of general  application  affecting  enforcement of creditors'  rights
generally and (ii) as limited by laws relating to the  availability  of specific
performance, injunctive relief or other equitable remedies.

            7.2 No Conflicts.  The  execution,  delivery and  performance of the
Transaction  Documents by the Company and the consummation by the Company of the
other transactions  contemplated  thereby do not and will not: (i) conflict with
or violate any provision of the  Company's or any  Subsidiary's  certificate  or
articles of incorporation,  bylaws or other organizational or charter documents,
or (ii) conflict  with, or constitute a default (or an event that with notice or
lapse of time or both would become a default)  under,  result in the creation of
any Lien upon any of the  properties or assets of the Company or any  Subsidiary
or  give to  others  any  rights  of  termination,  amendment,  acceleration  or
cancellation (with or without notice,  lapse of time or both) of, any agreement,
credit facility,  debt or other  instrument  (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals,  conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental  authority to which the
Company or a Subsidiary is subject  (including federal and state securities laws
and  regulations),  or by  which  any  property  or asset  of the  Company  or a
Subsidiary is bound or affected.

            7.3 Filings,  Consents and Approvals. The Company is not required to
obtain any consent,  waiver,  authorization  or order of, give any notice to, or
make any filing or registration  with, any court or other federal,  state, local
or  other  governmental  authority  or  other  Person  in  connection  with  the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing of a Current  Report on Form 8-K, (ii) the filing with
Securities  and Exchange  Commission  (the  "Commission")  of the a registration
statement  meeting the  requirements  set forth in the New  Registration  Rights
Agreement  and  covering  the resale of the  Warrant  Shares by the  Investor as
provided for in the New Registration  Rights Agreement,  (iii) the notice and/or
application(s)  to each  applicable  Trading  Market (as defined in the Purchase
Agreement)  for the issuance and sale of the Payment Shares and Warrants and the
listing  of the  Warrants  Shares  for  trading  thereon  in the time and manner
required  thereby  and (iv) the  filing of Form D with the  Commission  and such
filings  as are  required  to be made under  applicable  state  securities  laws
(collectively, the "Required Approvals").

                                       7
<PAGE>

            7.4 Listing and Maintenance Requirements. The Company's Common Stock
is registered  pursuant to Section 12(b) of the Securities  Exchange Act of 1934
and is listed on the American Stock  Exchange.  The Company has not received any
notification that the Commission is contemplating  terminating such listing. The
Company  is,  and has no reason to believe  that it will not in the  foreseeable
future  continue to be, in  compliance  with all such  listing  and  maintenance
requirements.  The Company has filed all  required  notices and or  applications
with the American Stock Exchange for the issuance and sale of the Payment Shares
and the Warrant  Shares and the  listing of the  Payment  Shares and the Warrant
Shares for trading thereon.

            7.5 Issuance of the Securities.  The Payment Shares and Warrants are
duly  authorized and, when issued and paid for in accordance with the applicable
Transaction  Documents,  will  be  duly  and  validly  issued,  fully  paid  and
nonassessable,  free and clear of all Liens  imposed by the  Company  other than
restrictions on transfer provided for in the Transaction Documents.  The Warrant
Shares,  when issued in accordance with the terms of the Transaction  Documents,
will be validly  issued,  fully paid and  non-assessable,  free and clear of all
Liens imposed by the Company.  The Company has reserved from its duly authorized
capital  stock a number of shares of Common  Stock for  issuance  of the Warrant
Shares at least equal to the maximum  aggregate number of shares of Common Stock
then issued or potentially  issuable in the future  pursuant to the  Transaction
Documents,  on the date hereof. The Company has not, and to the knowledge of the
Company,  no  Affiliate  of the Company has sold,  offered for sale or solicited
offers to buy or otherwise  negotiated in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of  the  Payment  Shares  and  Warrants  in a  manner  that  would  require  the
registration  under the  Securities  Act of the sale of the  Payment  Shares and
Warrants to the Investor,  or that would be integrated with the offer or sale of
the Payment Shares and Warrants for purposes of the rules and regulations of any
Trading Market.

            7.6  Private  Placement.  Assuming  the  accuracy  of  the  Investor
representations and warranties set forth in Section 6, no registration under the
Securities  Act is required for the issuance of the Payment  Shares and Warrants
by the Company to the Investors as contemplated hereby. The issuance and sale of
the Payment  Shares and Warrants  hereunder  does not  contravene  the rules and
regulations of the Trading Market.

            7.7  Farwell   Registration   Statement.   The  Farwell  Shares  are
registered  under the Farwell  Registration  Statement  and may be sold  without
restriction.  The Farwell Registration  Statement has been declared effective by
the  Commission  and is  effective  as of the date  hereof.  The Company has not
received any notification  that the Commission is  contemplating  terminating or
suspending the effectiveness of the Farwell Registration Statement.  The Farwell
Registration  Statement does not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the  statements  therein,  in light of the  circumstances  under which they
made, not misleading.

                                       8
<PAGE>

            7.8  Non-Public  Information.  The  Company  has  not  provided  the
Investor or its agents or counsel with any information that the Company believes
constitutes material non-public information about the Company.

      8. Representations of Farwell. Farwell hereby makes, as of the date hereof
and as of the Closing, the representations and warranties set forth below to the
Investor:

            8.1 Investment  Purpose.  Farwell represents that the Payment Shares
being  acquired by it in exchange for the Farwell  Shares are being acquired for
its own account, for investment purposes only and not for distribution or resale
to others in contravention  of the  registration  requirements of the Securities
Act.  Farwell  agrees that it will not sell or  otherwise  transfer  the Payment
Shares  acquired  by it in  exchange  for the  Farwell  Shares  unless  they are
registered   under  the   Securities  Act  or  unless  an  exemption  from  such
registration is available.

            8.2 Accredited Investor;  Investment Experience.  Farwell represents
and warrants that it is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act, and that it is able to
bear  the  economic  risk  of any  investment  in the  Payment  Shares.  Farwell
recognizes  that its investment in the Payment Shares  involves a high degree of
risk in that:  (a) an investment in the Company is highly  speculative  and only
investors  who can afford the loss of their entire  investment  should  consider
investing  in the Company and the  Securities;  and (b)  transferability  of the
Payment Shares is limited.  Farwell  acknowledges  that it has prior  investment
experience and that it recognizes the highly  speculative  nature of the Payment
Shares.

            8.3 Legends. Farwell understands that the certificates  representing
the  Payment  Shares,  until  such time as they have been  registered  under the
Securities Act, shall bear a restrictive  legend in substantially  the following
form  (and a  stop-transfer  order  may  be  placed  against  transfer  of  such
certificates or other instruments):

            THE SECURITIES  REPRESENTED BY THIS CERTIFICATE HAVE NOT
            BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS
            AMENDED,   OR  APPLICABLE  STATE  SECURITIES  LAWS.  THE
            SECURITIES   MAY  NOT  BE   OFFERED   FOR  SALE,   SOLD,
            TRANSFERRED  OR  ASSIGNED  (I) IN THE  ABSENCE OF (A) AN
            EFFECTIVE  REGISTRATION  STATEMENT  FOR  THE  SECURITIES
            UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED,  OR
            APPLICABLE  STATE  SECURITIES LAWS, OR (B) AN OPINION OF
            COUNSEL,   IN  A  REASONABLY   ACCEPTABLE   FORM,   THAT
            REGISTRATION   IS  NOT   REQUIRED   UNDER  SAID  ACT  OR
            APPLICABLE  STATE  SECURITIES  LAWS, OR (II) UNLESS SOLD
            PURSUANT TO RULE 144 UNDER SAID ACT.

                                        9
<PAGE>

            8.4  Information.  Farwell  has been  given the  opportunity  to ask
questions of, and receive  answers from,  the Company  concerning  the terms and
conditions of this Agreement and to obtain such additional  information,  to the
extent  the  Company  possesses  such  information  or can  acquire  it  without
unreasonable effort or expense,  necessary to verify the accuracy of same as the
Investor  reasonably  desires in order to evaluate the investment in the Payment
Shares. Farwell understands this Agreement,  and Farwell has had the opportunity
to discuss any  questions  regarding  this  Agreement  with its counsel or other
advisors. Farwell does not desire to receive any further information.

            8.5 Status of Farwell Shares.  Farwell is the sole beneficial  owner
of the  Farwell  Shares,  and owns the  Farwell  Shares,  free and  clear of all
mortgages,  pledges,  restrictions,   liens,  charges,  encumbrances,   security
interests, obligations or other claims.

            8.6  Farwell   Registration   Statement.   The  Farwell  Shares  are
registered  under the Farwell  Registration  Statement  and may be sold  without
restriction.

            8.7 Non-Public Information. Farwell has not provided the Investor or
its agents or counsel with any  information  that Farwell  believes  constitutes
material non-public information about the Company.

            8.8  Authorization;  Enforcement.  Farwell has the requisite limited
liability  company  power and  authority  to enter  into and to  consummate  the
transactions  contemplated  by this  Agreement  and  otherwise  to carry out its
obligations thereunder.  The execution and delivery of this Agreement by Farwell
and the  consummation by it of the transactions  contemplated  thereby have been
duly  authorized by all  necessary  action on the part of Farwell and no further
action is required by Farwell in connection  therewith.  This Agreement has been
duly  executed by Farwell and  constitutes  the valid and binding  obligation of
Farwell  enforceable  against Farwell in accordance with its terms except (i) as
limited by applicable  bankruptcy,  insolvency,  reorganization,  moratorium and
other laws of general  application  affecting  enforcement of creditors'  rights
generally and (ii) as limited by laws relating to the  availability  of specific
performance, injunctive relief or other equitable remedies.

            8.9 No Conflicts.  The execution,  delivery and  performance of this
Agreement by Farwell and the  consummation by Farwell of the other  transactions
contemplated  hereby do not and will  not:  (i)  conflict  with or  violate  any
provision of Farwell's  certificate  of  formation,  limited  liability  company
agreement or other  organizational or charter documents,  or (ii) conflict with,
or  constitute  a default (or an event that with notice or lapse of time or both
would  become a default)  under,  result in the creation of any Lien upon any of
the properties or assets of Farwell or give to others any rights of termination,
amendment,  acceleration or cancellation (with or without notice,  lapse of time
or  both)  of,  any  agreement,   credit  facility,  debt  or  other  instrument
(evidencing a Farwell debt or otherwise) or other understanding to which Farwell
is a party or by which any property or asset of Farwell is bound or affected, or
(iii)  conflict  with or result in a  violation  of any law,  rule,  regulation,
order,  judgment,  injunction,  decree  or  other  restriction  of any  court or
governmental  authority to which Farwell is subject (including federal and state
securities laws and  regulations),  or by which any property or asset of Farwell
is bound or affected.

                                       10
<PAGE>

      9. Miscellaneous

            9.1 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Warrant and the
Registration  Rights  Agreement  supersede  all  other  prior  oral  or  written
agreements  between the  Investor,  the Company and Farwell  with respect to the
matters  discussed  herein and therein,  and this  Agreement the Warrant and the
Registration  Rights Agreement  contain the entire  understanding of the parties
with  respect  to  the  matters  covered  herein  and  therein  and,  except  as
specifically set forth herein or therein,  neither the Company,  Farwell nor the
Investor  makes any  representation,  warranty,  covenant  or  undertaking  with
respect to such matters. No provision of this Agreement may be amended or waived
other than by an instrument in writing  signed by the Company,  the Investor and
Farwell.

            9.2  SEVERABILITY.  If any  provision  of this  Agreement  shall  be
invalid   or   unenforceable   in   any   jurisdiction,   such   invalidity   or
unenforceability  shall  not  affect  the  validity  or  enforceability  of  the
remainder  of  this   Agreement  in  that   jurisdiction   or  the  validity  or
enforceability of any provision of this Agreement in any other jurisdiction.

            9.3 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. All questions
concerning the construction,  validity,  enforcement and  interpretation of this
Agreement  shall be  governed  by the  internal  laws of the  State of New York,
without  giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other  jurisdictions)  that would cause
the  application  of the laws of any  jurisdictions  other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the  state and  federal  courts  sitting  in New York  County,  New York for the
adjudication  of any dispute  hereunder  or in  connection  herewith or with any
transaction  contemplated  hereby or discussed  herein,  and hereby  irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit, action or proceeding is brought in an inconvenient  forum or that the
venue of such  suit,  action  or  proceeding  is  improper.  Each  party  hereby
irrevocably  waives  personal  service of process and consents to process  being
served in any such suit,  action or proceeding by mailing a copy thereof to such
party at the address  for such  notices to it at the end of this  Agreement  and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve  process in any manner  permitted  by law.  Each party hereby
irrevocably  waives any right it may have,  and agrees  not to  request,  a jury
trial for the  adjudication  of any dispute  hereunder or in connection  with or
arising out of this Agreement or any transaction contemplated hereby.

            9.4 HEADINGS.  The headings of this Agreement are for convenience of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Agreement.

            9.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective  successors and assigns
and may not be assigned without the written consent of all other parties hereto.

                                       11
<PAGE>

            9.6 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

            9.7 FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed,  all such further acts and things,  and shall execute and
deliver all such other agreements,  certificates,  instruments and documents, as
any other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

            9.8  COUNTERPARTS.  This  Agreement  may be  executed in one or more
identical  counterparts,  all of  which  shall  be  considered  one and the same
agreement and shall become effective when  counterparts have been signed by each
party and delivered to the other  parties;  provided that a facsimile  signature
shall be  considered  due  execution  and shall be  binding  upon the  signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

            9.9 SURVIVAL AND INDEMNIFICATION. The representations and warranties
contained herein shall survive the consummation of the transactions contemplated
by this Agreement for the applicable  statute of limitations.  Each party agrees
to  indemnify  and hold  harmless  the other  parties  from any and all  losses,
claims, damages, liabilities, costs (including, without limitations,  reasonable
attorneys' fees) and expenses  incurred by such other parties as a result of any
breach of the representations,  warranties and covenants made by such party. All
covenants contained herein which, by their terms, are not fully performed on the
date of the  consummation  of the  transactions  contemplated  by this Agreement
shall survive such date until fully performed.

                                        INVESTOR:

                                        ----------------------------------------

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        Address:
                                                --------------------------------

                                                --------------------------------

                                                --------------------------------

                                       12
<PAGE>

CONSENTED AND AGREED TO:

THOMAS EQUIPMENT, INC.

By:
     -------------------------------
     Name:  David Marks
     Title:  Chairman

FARWELL EQUITY PARTNERS, LLC                1818 N. Farwell Avenue
                                            Milwaukee, WI 53202

By:
     -------------------------------
     Name:  David Marks
     Title:  Managing Member

                                       13EXHIBIT A

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.

                          COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                             THOMAS EQUIPMENT, INC.

            THIS COMMON STOCK PURCHASE  WARRANT (the "Warrant")  certifies that,
for value received,  _____________ (the "Holder"),  is entitled,  upon the terms
and subject to the  limitations on exercise and the conditions  hereinafter  set
forth, at any time on or after the date hereof (the "Initial Exercise Date") and
on or prior to the close of  business  on the fifth  anniversary  of the Initial
Exercise Date (the "Termination Date") but not thereafter,  to subscribe for and
purchase from Thomas Equipment, Inc., a Delaware corporation (the "Company"), up
to ______  shares (the "Warrant  Shares") of Common  Stock,  par value $.001 per
share, of the Company (the "Common  Stock").  The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise Price, as defined
in  Section  2(b).  Section  1.  Definitions.  Capitalized  terms  used  and not
otherwise  defined  herein  shall have the  meanings  set forth in that  certain
Securities Purchase Agreement (the "Purchase Agreement"),  dated April 19, 2005,
among the Company and the purchasers signatory thereto.

      Section 2. Exercise.

            a) Exercise of Warrant.  Exercise of the purchase rights represented
      by this  Warrant  may be made at any time or times on or after the Initial
      Exercise  Date and on or before the  Termination  Date by  delivery to the
      Company of a duly executed  facsimile  copy of the Notice of Exercise Form
      annexed  hereto (or such other  office or agency of the  Company as it may
      designate by notice in writing to the registered  Holder at the address of
      such Holder  appearing on the books of the  Company);  provided,  however,
      within 5 Trading  Days of the date said Notice of Exercise is delivered to
      the Company, the Holder shall have surrendered this Warrant to the Company
      and the Company  shall have  received  payment of the  aggregate  Exercise
      Price of the shares thereby  purchased by wire transfer or cashier's check
      drawn on a United States bank.

<PAGE>

            b) Exercise Price. The exercise price of the Common Stock under this
      Warrant shall be $3.00,  subject to adjustment  hereunder  (the  "Exercise
      Price").

            c) Cashless Exercise. If at any time after one year from the date of
      issuance of this  Warrant  there is no  effective  Registration  Statement
      registering  the resale of the  Warrant  Shares by the  Holder,  then this
      Warrant  may  also be  exercised  at such  time by  means  of a  "cashless
      exercise" in which the Holder  shall be entitled to receive a  certificate
      for the  number  of  Warrant  Shares  equal to the  quotient  obtained  by
      dividing [(A-B) (X)] by (A), where:

           (A)=   the VWAP on the Trading Day immediately  preceding the date of
                  such election;

           (B)=   the Exercise Price of this Warrant, as adjusted; and

           (X)=   the number of Warrant  Shares  issuable  upon exercise of this
                  Warrant in accordance  with the terms of this Warrant by means
                  of a cash exercise rather than a cashless exercise.

            d)    Exercise Limitations.

                                       2
<PAGE>

                  i. Holder's Restrictions.  The Holder shall not have the right
            to exercise any portion of this Warrant, pursuant to Section 2(c) or
            otherwise,  to the extent that after giving  effect to such issuance
            after exercise,  the Holder (together with the Holder's affiliates),
            as  set  forth  on  the   applicable   Notice  of  Exercise,   would
            beneficially  own in excess of 4.99% of the  number of shares of the
            Common Stock  outstanding  immediately  after giving  effect to such
            issuance.  For  purposes of the  foregoing  sentence,  the number of
            shares of Common  Stock  beneficially  owned by the  Holder  and its
            affiliates  shall  include  the  number of  shares  of Common  Stock
            issuable  upon  exercise of this  Warrant  with respect to which the
            determination  of such sentence is being made, but shall exclude the
            number of shares of Common  Stock which  would be issuable  upon (A)
            exercise  of the  remaining,  nonexercised  portion of this  Warrant
            beneficially  owned by the Holder or any of its  affiliates  and (B)
            exercise or conversion of the unexercised or nonconverted portion of
            any other securities of the Company (including,  without limitation,
            any other  Preferred  Stock or Warrants)  subject to a limitation on
            conversion or exercise analogous to the limitation  contained herein
            beneficially owned by the Holder or any of its affiliates. Except as
            set forth in the  preceding  sentence,  for purposes of this Section
            2(d),  beneficial  ownership  shall be calculated in accordance with
            Section 13(d) of the Exchange Act, it being  acknowledged  by Holder
            that the Company is not representing to Holder that such calculation
            is in  compliance  with Section 13(d) of the Exchange Act and Holder
            is solely  responsible  for any  schedules  required  to be filed in
            accordance therewith. To the extent that the limitation contained in
            this Section 2(d) applies, the determination of whether this Warrant
            is exercisable (in relation to other securities owned by the Holder)
            and of which a portion of this  Warrant is  exercisable  shall be in
            the sole  discretion of such Holder,  and the submission of a Notice
            of Exercise  shall be deemed to be such  Holder's  determination  of
            whether this Warrant is exercisable (in relation to other securities
            owned  by such  Holder)  and of which  portion  of this  Warrant  is
            exercisable,  in each  case  subject  to such  aggregate  percentage
            limitation,  and the Company  shall have no  obligation to verify or
            confirm the  accuracy of such  determination.  For  purposes of this
            Section 2(d), in  determining  the number of  outstanding  shares of
            Common  Stock,  the  Holder  may rely on the  number of  outstanding
            shares of Common Stock as reflected in (x) the Company's most recent
            Form  10-QSB or Form  10-KSB,  as the case may be, (y) a more recent
            public  announcement  by the Company or (z) any other  notice by the
            Company or the Company's  Transfer Agent setting forth the number of
            shares of Common Stock outstanding. Upon the written or oral request
            of the Holder,  the Company  shall  within two Trading  Days confirm
            orally  and in  writing to the Holder the number of shares of Common
            Stock  then  outstanding.  In any case,  the  number of  outstanding
            shares of Common Stock shall be  determined  after giving  effect to
            the  conversion or exercise of securities of the Company,  including
            this Warrant,  by the Holder or its affiliates  since the date as of
            which  such  number  of  outstanding  shares  of  Common  Stock  was
            reported.  The  provisions of this Section 2(d) may be waived by the
            Holder upon,  at the election of the Holder,  not less than 61 days'
            prior notice to the Company, and the provisions of this Section 2(d)
            shall  continue to apply until such 61st day (or such later date, as
            determined  by the  Holder,  as may be  specified  in such notice of
            waiver);  provided  however  that upon any such  waiver,  the Holder
            shall not have the right to exercise  any  portion of this  Warrant,
            pursuant  to Section  2(c) or  otherwise,  to the extent  that after
            giving effect to such issuance after exercise,  the Holder (together
            with the Holder's affiliates), as set forth on the applicable Notice
            of Exercise, would beneficially own in excess of 9.99% of the number
            of shares of the Common Stock  outstanding  immediately after giving
            effect to such issuance.

                  ii.  Trading  Market  Restrictions.  If the  Company  has  not
            obtained Shareholder  Approval (as defined below) if required,  then
            the  Company  may not issue  upon  exercise  of this  Warrant in the
            aggregate,  in excess of  19.999%  of the number of shares of Common
            Stock  outstanding  on the Trading  Day  immediately  preceding  the
            Closing Date, less any shares of Common Stock issued upon conversion
            of or as payment of dividends on the  Preferred  Stock or upon prior
            exercise  of  this  or any  other  Warrant  issued  pursuant  to the
            Purchase Agreement (such number of shares, the "Issuable  Maximum").
            If on any  attempted  exercise  of this  Warrant,  the  issuance  of
            Warrant  Shares would  exceed the  Issuable  Maximum and the Company
            shall not have  previously  obtained the vote of  shareholders  (the
            "Shareholder  Approval"),   if  any,  as  may  be  required  by  the
            applicable  rules and  regulations  of the  Trading  Market  (or any
            successor  entity) to approve the issuance of shares of Common Stock
            in excess of the Issuable Maximum pursuant to the terms hereof, then
            the Company shall issue to the Holder  requesting a Warrant exercise
            such number of Warrant  Shares as may be issued  below the  Issuable
            Maximum and, with respect to the  remainder of the aggregate  number
            of Warrant Shares,  this Warrant shall not be exercisable  until and
            unless Shareholder Approval has been obtained.

                                       3
<PAGE>

      e) Mechanics of Exercise.

                  i. Authorization of Warrant Shares. The Company covenants that
            all  Warrant  Shares  which may be issued  upon the  exercise of the
            purchase  rights  represented by this Warrant will, upon exercise of
            the purchase rights represented by this Warrant, be duly authorized,
            validly  issued,  fully  paid and  nonassessable  and free  from all
            taxes, liens and charges in respect of the issue thereof (other than
            taxes in respect of any transfer  occurring  contemporaneously  with
            such  issue).  The  Company  covenants  that  during  the period the
            Warrant is  outstanding,  it will  reserve from its  authorized  and
            unissued  Common Stock a sufficient  number of shares to provide for
            the issuance of the Warrant Shares upon the exercise of any purchase
            rights under this Warrant.  The Company  further  covenants that its
            issuance of this  Warrant  shall  constitute  full  authority to its
            officers  who  are  charged   with  the  duty  of  executing   stock
            certificates to execute and issue the necessary certificates for the
            Warrant  Shares upon the exercise of the purchase  rights under this
            Warrant.  The Company will take all such reasonable action as may be
            necessary  to  assure  that  such  Warrant  Shares  may be issued as
            provided   herein  without   violation  of  any  applicable  law  or
            regulation,  or of any requirements of the Trading Market upon which
            the Common Stock may be listed.

                  ii. Delivery of Certificates  Upon Exercise.  Certificates for
            shares  purchased  hereunder  shall be  transmitted  by the transfer
            agent of the Company to the Holder by  crediting  the account of the
            Holder's prime broker with the Depository  Trust Company through its
            Deposit  Withdrawal Agent Commission  ("DWAC") system if the Company
            is a participant in such system,  and otherwise by physical delivery
            to the  address  specified  by the Holder in the Notice of  Exercise
            within 3 Trading Days from the delivery to the Company of the Notice
            of  Exercise  Form,  surrender  of this  Warrant  and payment of the
            aggregate Exercise Price as set forth above ("Warrant Share Delivery
            Date").  This Warrant shall be deemed to have been  exercised on the
            date the  Exercise  Price is  received by the  Company.  The Warrant
            Shares shall be deemed to have been issued,  and Holder or any other
            person so  designated  to be named  therein  shall be deemed to have
            become a holder of record of such shares for all purposes, as of the
            date the Warrant has been exercised by payment to the Company of the
            Exercise Price and all taxes  required to be paid by the Holder,  if
            any,  pursuant to Section  2(e)(vii)  prior to the  issuance of such
            shares, have been paid.

                                       4
<PAGE>

                  iii.  Delivery of New Warrants Upon Exercise.  If this Warrant
            shall have been exercised in part, the Company shall, at the time of
            delivery of the  certificate or  certificates  representing  Warrant
            Shares,  deliver to Holder a new  Warrant  evidencing  the rights of
            Holder to purchase the unpurchased Warrant Shares called for by this
            Warrant,  which new Warrant shall in all other respects be identical
            with this Warrant.

                  iv.  Rescission  Rights.  If the  Company  fails to cause  its
            transfer   agent  to  transmit  to  the  Holder  a  certificate   or
            certificates  representing  the  Warrant  Shares  pursuant  to  this
            Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder
            will have the right to rescind such exercise.

                  v.  Compensation  for  Buy-In on  Failure  to  Timely  Deliver
            Certificates  Upon  Exercise.   In  addition  to  any  other  rights
            available to the Holder,  if the Company fails to cause its transfer
            agent to  transmit  to the  Holder  a  certificate  or  certificates
            representing the Warrant Shares pursuant to an exercise on or before
            the Warrant Share  Delivery  Date, and if after such date the Holder
            is required by its broker to purchase (in an open market transaction
            or otherwise) shares of Common Stock to deliver in satisfaction of a
            sale  by  the  Holder  of  the  Warrant   Shares  which  the  Holder
            anticipated  receiving  upon such  exercise (a  "Buy-In"),  then the
            Company  shall (1) pay in cash to the Holder the amount by which (x)
            the Holder's total purchase price (including brokerage  commissions,
            if any) for the shares of Common Stock so purchased  exceeds (y) the
            amount obtained by multiplying (A) the number of Warrant Shares that
            the Company was required to deliver to the Holder in connection with
            the  exercise  at issue  times (B) the price at which the sell order
            giving rise to such purchase obligation was executed, and (2) at the
            option of the Holder,  either  reinstate  the portion of the Warrant
            and equivalent  number of Warrant Shares for which such exercise was
            not  honored or deliver to the Holder the number of shares of Common
            Stock that would have been  issued had the Company  timely  complied
            with its exercise and delivery obligations  hereunder.  For example,
            if the Holder  purchases  Common Stock having a total purchase price
            of $11,000 to cover a Buy-In with respect to an  attempted  exercise
            of shares of Common Stock with an  aggregate  sale price giving rise
            to such  purchase  obligation  of $10,000,  under  clause (1) of the
            immediately  preceding sentence the Company shall be required to pay
            the Holder  $1,000.  The Holder  shall  provide the Company  written
            notice  indicating  the amounts  payable to the Holder in respect of
            the  Buy-In,  together  with  applicable   confirmations  and  other
            evidence reasonably  requested by the Company.  Nothing herein shall
            limit a Holder's right to pursue any other remedies  available to it
            hereunder,  at law or in equity  including,  without  limitation,  a
            decree of specific performance and/or injunctive relief with respect
            to the Company's failure to timely deliver certificates representing
            shares of Common  Stock upon  exercise  of the  Warrant as  required
            pursuant to the terms hereof.

                                       5
<PAGE>

                  vi. No Fractional  Shares or Scrip.  No  fractional  shares or
            scrip  representing  fractional  shares  shall  be  issued  upon the
            exercise of this Warrant. As to any fraction of a share which Holder
            would  otherwise  be entitled to purchase  upon such  exercise,  the
            Company  shall  pay a cash  adjustment  in  respect  of  such  final
            fraction  in an  amount  equal to such  fraction  multiplied  by the
            Exercise Price.

                  vii. Charges, Taxes and Expenses. Issuance of certificates for
            Warrant  Shares shall be made  without  charge to the Holder for any
            issue or transfer tax or other incidental  expense in respect of the
            issuance of such certificate,  all of which taxes and expenses shall
            be paid by the Company, and such certificates shall be issued in the
            name of the  Holder or in such name or names as may be  directed  by
            the Holder;  provided,  however,  that in the event certificates for
            Warrant Shares are to be issued in a name other than the name of the
            Holder,   this  Warrant  when  surrendered  for  exercise  shall  be
            accompanied by the Assignment  Form attached hereto duly executed by
            the Holder; and the Company may require, as a condition thereto, the
            payment of a sum  sufficient  to  reimburse  it for any transfer tax
            incidental thereto.

                  viii.  Closing  of  Books.  The  Company  will not  close  its
            stockholder books or records in any manner which prevents the timely
            exercise of this Warrant, pursuant to the terms hereof.

      Section 3. Certain Adjustments.

            a) Stock  Dividends  and Splits.  If the Company,  at any time while
      this Warrant is outstanding: (A) pays a stock dividend or otherwise make a
      distribution or  distributions  on shares of its Common Stock or any other
      equity or equity equivalent  securities  payable in shares of Common Stock
      (which,  for  avoidance  of doubt,  shall not include any shares of Common
      Stock  issued by the Company  pursuant to this  Warrant),  (B)  subdivides
      outstanding  shares of Common  Stock into a larger  number of shares,  (C)
      combines  (including by way of reverse stock split)  outstanding shares of
      Common  Stock  into  a  smaller  number  of  shares,   or  (D)  issues  by
      reclassification of shares of the Common Stock any shares of capital stock
      of the Company,  then in each case the Exercise  Price shall be multiplied
      by a  fraction  of which the  numerator  shall be the  number of shares of
      Common Stock (excluding  treasury shares, if any) outstanding  before such
      event and of which the denominator shall be the number of shares of Common
      Stock  outstanding after such event and the number of shares issuable upon
      exercise of this Warrant shall be proportionately adjusted. Any adjustment
      made  pursuant to this  Section 3(a) shall  become  effective  immediately
      after the record date for the  determination  of stockholders  entitled to
      receive  such  dividend  or  distribution   and  shall  become   effective
      immediately  after  the  effective  date  in the  case  of a  subdivision,
      combination or re-classification.

                                       6
<PAGE>

            b) Pro Rata Distributions.  If the Company, at any time prior to the
      Termination Date, shall distribute to all holders of Common Stock (and not
      to Holders of the  Warrants)  evidences of its  indebtedness  or assets or
      rights or warrants to subscribe  for or purchase  any security  other than
      the  Common  Stock,  then in each such case the  Exercise  Price  shall be
      adjusted by multiplying the Exercise Price in effect  immediately prior to
      the record  date  fixed for  determination  of  stockholders  entitled  to
      receive such  distribution by a fraction of which the denominator shall be
      the VWAP  determined as of the record date mentioned  above,  and of which
      the  numerator  shall be such VWAP on such  record  date less the then per
      share fair market  value at such record date of the portion of such assets
      or evidence of indebtedness  so distributed  applicable to one outstanding
      share of the Common Stock as  determined by the Board of Directors in good
      faith.  In either case the  adjustments  shall be described in a statement
      provided  to  the  Holders  of the  portion  of  assets  or  evidences  of
      indebtedness so distributed or such subscription  rights applicable to one
      share of Common  Stock.  Such  adjustment  shall be made whenever any such
      distribution  is made and shall  become  effective  immediately  after the
      record date mentioned above.

            c) Calculations. All calculations under this Section 3 shall be made
      to the nearest cent or the nearest 1/100th of a share, as the case may be.
      The number of shares of Common Stock  outstanding  at any given time shall
      not includes shares of Common Stock owned or held by or for the account of
      the Company,  and the description of any such shares of Common Stock shall
      be  considered  on issue or sale of Common  Stock.  For  purposes  of this
      Section  3, the number of shares of Common  Stock  deemed to be issued and
      outstanding as of a given date shall be the sum of the number of shares of
      Common Stock (excluding treasury shares, if any) issued and outstanding.

            d) Notice to Holders.

                  i. Adjustment to Exercise  Price.  Whenever the Exercise Price
            is adjusted  pursuant to this Section 3, the Company shall  promptly
            mail to each Holder a notice  setting forth the Exercise Price after
            such  adjustment  and setting  forth a brief  statement of the facts
            requiring such adjustment.

                                       7
<PAGE>

                  ii.  Notice to Allow  Exercise  by Holder.  If (A) the Company
            shall declare a dividend (or any other  distribution)  on the Common
            Stock;  (B) the Company  shall declare a special  nonrecurring  cash
            dividend on or a  redemption  of the Common  Stock;  (C) the Company
            shall  authorize  the  granting to all  holders of the Common  Stock
            rights or  warrants  to  subscribe  for or  purchase  any  shares of
            capital stock of any class or of any rights; (D) the approval of any
            stockholders of the Company shall be required in connection with any
            reclassification of the Common Stock, any consolidation or merger to
            which  the  Company  is a  party,  any  sale or  transfer  of all or
            substantially  all of the assets of the Company,  of any  compulsory
            share  exchange  whereby the Common  Stock is  converted  into other
            securities,  cash or property;  (E) the Company shall  authorize the
            voluntary or involuntary  dissolution,  liquidation or winding up of
            the affairs of the Company;  then,  in each case,  the Company shall
            cause to be mailed to the Holder at its last  addresses  as it shall
            appear  upon  the  Warrant  Register  of the  Company,  at  least 10
            calendar  days  prior to the  applicable  record or  effective  date
            hereinafter  specified,  a  notice  stating  (x) the date on which a
            record  is  to  be  taken  for  the   purpose   of  such   dividend,
            distribution,  redemption, rights or warrants, or if a record is not
            to be taken, the date as of which the holders of the Common Stock of
            record to be entitled to such dividend,  distributions,  redemption,
            rights or  warrants  are to be  determined  or (y) the date on which
            such  reclassification,  consolidation,  merger,  sale,  transfer or
            share  exchange is expected to become  effective  or close,  and the
            date as of which it is expected  that holders of the Common Stock of
            record  shall be  entitled to  exchange  their  shares of the Common
            Stock for securities,  cash or other property  deliverable upon such
            reclassification,  consolidation,  merger,  sale,  transfer or share
            exchange;  provided,  that the  failure  to mail such  notice or any
            defect  therein  or in the  mailing  thereof  shall not  affect  the
            validity of the  corporate  action  required to be specified in such
            notice.  The Holder is entitled to exercise this Warrant  during the
            10-day  period  commencing  the date of such notice to the effective
            date of the event triggering such notice.

      e)  Fundamental  Transaction.  If,  at any  time  while  this  Warrant  is
outstanding,  (A) the Company effects any merger or consolidation of the Company
with  or into  another  Person,  (B)  the  Company  effects  any  sale of all or
substantially all of its assets in one or a series of related transactions,  (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed  pursuant to which  holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects  any  reclassification  of the  Common  Stock  or any  compulsory  share
exchange  pursuant to which the Common Stock is  effectively  converted  into or
exchanged  for  other  securities,  cash  or  property  (in  any  such  case,  a
"Fundamental  Transaction"),  then,  upon  any  subsequent  conversion  of  this
Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise absent such Fundamental Transaction,
at the option of the Holder,  (a) upon exercise of this  Warrant,  the number of
shares of Common  Stock of the  successor  or  acquiring  corporation  or of the
Company,  if  it is  the  surviving  corporation,  and  Alternate  Consideration
receivable upon or as a result of such reorganization, reclassification, merger,
consolidation  or  disposition  of assets by a Holder of the number of shares of
Common Stock for which this  Warrant is  exercisable  immediately  prior to such
event or (b) cash equal to the value of this Warrant as determined in accordance
with the Black-Scholes  option pricing formula (the "Alternate  Consideration").
For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate  Consideration based on the
amount of  Alternate  Consideration  issuable  in respect of one share of Common
Stock in such  Fundamental  Transaction,  and the Company  shall  apportion  the
Exercise  Price  among  the  Alternate  Consideration  in  a  reasonable  manner
reflecting  the relative  value of any  different  components  of the  Alternate
Consideration.  If  holders  of Common  Stock  are  given  any  choice as to the
securities,  cash or property to be received in a Fundamental Transaction,  then
the Holder shall be given the same choice as to the Alternate  Consideration  it
receives  upon  any  exercise  of  this  Warrant   following  such   Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or  surviving  entity in such  Fundamental  Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and  evidencing  the Holder's  right to exercise  such  warrant  into  Alternate
Consideration.  The  terms of any  agreement  pursuant  to  which a  Fundamental
Transaction  is effected  shall  include terms  requiring any such  successor or
surviving  entity  to  comply  with the  provisions  of this  paragraph  (f) and
insuring that this Warrant (or any such replacement  security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

                                       8
<PAGE>

      f)  Exempt  Issuance.   Notwithstanding  the  foregoing,  no  adjustments,
Alternate  Consideration  nor notices  shall be made,  paid or issued under this
Section 3 in respect of an Exempt Issuance.

      g) Voluntary Adjustment By Company. The Company may at any time during the
term of this Warrant  reduce the then current  Exercise  Price to any amount and
for any  period of time  deemed  appropriate  by the Board of  Directors  of the
Company.

Section 4. Transfer of Warrant.

      a) Transferability.  Subject to compliance with any applicable  securities
laws and the  conditions  set forth in Sections  5(a) and 4(d) hereof and to the
provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights
hereunder are transferable,  in whole or in part, upon surrender of this Warrant
at the principal  office of the Company,  together with a written  assignment of
this Warrant  substantially  in the form  attached  hereto duly  executed by the
Holder or its agent or attorney and funds  sufficient to pay any transfer  taxes
payable upon the making of such transfer.  Upon such surrender and, if required,
such payment, the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the  denomination or  denominations
specified in such  instrument of  assignment,  and shall issue to the assignor a
new Warrant  evidencing  the portion of this Warrant not so  assigned,  and this
Warrant shall promptly be cancelled.  A Warrant,  if properly  assigned,  may be
exercised by a new holder for the purchase of Warrant  Shares  without  having a
new Warrant issued.

      b) New  Warrants.  This  Warrant  may be  divided or  combined  with other
Warrants  upon  presentation  hereof at the  aforesaid  office  of the  Company,
together with a written notice  specifying the names and  denominations in which
new  Warrants  are to be issued,  signed by the Holder or its agent or attorney.
Subject  to  compliance  with  Section  4(a),  as to any  transfer  which may be
involved in such division or combination,  the Company shall execute and deliver
a new Warrant or Warrants in exchange  for the Warrant or Warrants to be divided
or combined in accordance with such notice.

                                        9
<PAGE>

      c) Warrant Register. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the  "Warrant  Register"),  in
the name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any  distribution  to the Holder,  and for all
other purposes, absent actual notice to the contrary.

      d) Transfer Restrictions. If, at the time of the surrender of this Warrant
in connection  with any transfer of this  Warrant,  the transfer of this Warrant
shall not be registered  pursuant to an effective  registration  statement under
the Securities Act and under  applicable  state securities or blue sky laws, the
Company may  require,  as a condition  of allowing  such  transfer  (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written  opinion of counsel  (which  opinion  shall be in form,  substance and
scope  customary  for  opinions of counsel in  comparable  transactions)  to the
effect that such transfer may be made without  registration under the Securities
Act and under applicable state securities or blue sky laws, (ii) that the holder
or transferee  execute and deliver to the Company an  investment  letter in form
and  substance  acceptable  to the Company and (iii) that the  transferee  be an
"accredited investor" as defined in Rule 501(a)(1),  (a)(2),  (a)(3), (a)(7), or
(a)(8) promulgated under the Securities Act or a qualified  institutional  buyer
as defined in Rule 144A(a) under the Securities Act.

Section 5. Miscellaneous.

      a) Title  to  Warrant.  Prior  to the  Termination  Date  and  subject  to
compliance with applicable laws and Section 4 of this Warrant,  this Warrant and
all rights  hereunder  are  transferable,  in whole or in part, at the office or
agency of the  Company by the Holder in person or by duly  authorized  attorney,
upon surrender of this Warrant  together with the Assignment Form annexed hereto
properly  endorsed.  The transferee shall sign an investment  letter in form and
substance reasonably satisfactory to the Company.

      b) No Rights as Shareholder Until Exercise.  This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder  of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the  aggregate  Exercise  Price  (or by means of a  cashless  exercise),  the
Warrant  Shares so purchased  shall be and be deemed to be issued to such Holder
as the record  owner of such  shares as of the close of business on the later of
the date of such surrender or payment.

      c)  Loss,  Theft,  Destruction  or  Mutilation  of  Warrant.  The  Company
covenants that upon receipt by the Company of evidence  reasonably  satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate  relating  to the  Warrant  Shares,  and in case of  loss,  theft or
destruction,  of indemnity or security reasonably  satisfactory to it (which, in
the case of the  Warrant,  shall not include the posting of any bond),  and upon
surrender and cancellation of such Warrant or stock  certificate,  if mutilated,
the Company  will make and deliver a new  Warrant or stock  certificate  of like
tenor  and  dated  as of such  cancellation,  in lieu of such  Warrant  or stock
certificate.

                                       10
<PAGE>

      d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the  expiration of any right  required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.

      e) Authorized Shares.

            The  Company  covenants  that  during  the  period  the  Warrant  is
      outstanding, it will reserve from its authorized and unissued Common Stock
      a  sufficient  number of shares to provide for the issuance of the Warrant
      Shares upon the exercise of any purchase  rights under this  Warrant.  The
      Company  further  covenants  that  its  issuance  of  this  Warrant  shall
      constitute full authority to its officers who are charged with the duty of
      executing   stock   certificates   to  execute  and  issue  the  necessary
      certificates  for the  Warrant  Shares upon the  exercise of the  purchase
      rights  under this  Warrant.  The  Company  will take all such  reasonable
      action as may be  necessary  to assure  that such  Warrant  Shares  may be
      issued as provided  herein  without  violation  of any  applicable  law or
      regulation,  or of any  requirements  of the Trading Market upon which the
      Common Stock may be listed.

            Except and to the extent as waived or  consented  to by the  Holder,
      the  Company  shall  not by any  action,  including,  without  limitation,
      amending its certificate of incorporation  or through any  reorganization,
      transfer of assets, consolidation,  merger, dissolution,  issue or sale of
      securities  or any  other  voluntary  action,  avoid or seek to avoid  the
      observance or performance of any of the terms of this Warrant, but will at
      all times in good faith  assist in the  carrying out of all such terms and
      in the taking of all such actions as may be necessary  or  appropriate  to
      protect  the  rights  of  Holder  as set  forth  in this  Warrant  against
      impairment.  Without limiting the generality of the foregoing, the Company
      will (a) not increase the par value of any Warrant Shares above the amount
      payable therefor upon such exercise  immediately prior to such increase in
      par value,  (b) take all such action as may be necessary or appropriate in
      order that the  Company  may  validly  and  legally  issue  fully paid and
      nonassessable  Warrant  Shares upon the exercise of this Warrant,  and (c)
      use  commercially  reasonable  efforts to obtain all such  authorizations,
      exemptions or consents from any public regulatory body having jurisdiction
      thereof  as  may be  necessary  to  enable  the  Company  to  perform  its
      obligations under this Warrant.

            Before  taking any action which would result in an adjustment in the
      number of Warrant  Shares for which this Warrant is  exercisable or in the
      Exercise  Price,  the  Company  shall  obtain all such  authorizations  or
      exemptions  thereof,  or consents  thereto,  as may be necessary  from any
      public regulatory body or bodies having jurisdiction thereof.

      f)  Jurisdiction.  All questions  concerning the  construction,  validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.

                                       11
<PAGE>

      g) Restrictions.  The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant,  if not  registered,  will have  restrictions
upon resale imposed by state and federal securities laws.

      h) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right  hereunder on the part of Holder shall operate as a waiver of
such  right  or  otherwise  prejudice  Holder's  rights,   powers  or  remedies,
notwithstanding  the fact that all rights hereunder terminate on the Termination
Date. If the Company  willfully and knowingly fails to comply with any provision
of this  Warrant,  which  results in any  material  damages to the  Holder,  the
Company  shall pay to Holder such  amounts as shall be  sufficient  to cover any
costs and expenses  including,  but not limited to, reasonable  attorneys' fees,
including those of appellate  proceedings,  incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights,  powers
or remedies hereunder.

      i) Notices. Any notice, request or other document required or permitted to
be given or  delivered  to the  Holder  by the  Company  shall be  delivered  in
accordance with the notice provisions of the Purchase Agreement.

      j)  Limitation of Liability.  No provision  hereof,  in the absence of any
affirmative  action by Holder to  exercise  this  Warrant  or  purchase  Warrant
Shares, and no enumeration  herein of the rights or privileges of Holder,  shall
give rise to any liability of Holder for the purchase  price of any Common Stock
or as a stockholder  of the Company,  whether such  liability is asserted by the
Company or by creditors of the Company.

      k) Remedies.  Holder, in addition to being entitled to exercise all rights
granted by law,  including  recovery  of  damages,  will be entitled to specific
performance  of its rights under this Warrant.  The Company agrees that monetary
damages would not be adequate  compensation for any loss incurred by reason of a
breach by it of the  provisions  of this Warrant and hereby  agrees to waive the
defense  in any action for  specific  performance  that a remedy at law would be
adequate.

      l) Successors and Assigns.  Subject to applicable  securities  laws,  this
Warrant  and the rights and  obligations  evidenced  hereby  shall  inure to the
benefit of and be binding upon the  successors of the Company and the successors
and permitted assigns of Holder.  The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.

      m)  Amendment.  This Warrant may be modified or amended or the  provisions
hereof waived with the written consent of the Company and the Holder.

      n) Severability.  Wherever possible,  each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any  provision of this Warrant  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 provisions
or the remaining provisions of this Warrant.

      o) Headings.  The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.

                              ********************

                                       12
<PAGE>

      IN WITNESS WHEREOF,  the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.

Dated:  May   , 2006

                                        THOMAS EQUIPMENT, INC.

                                        By:
                                            ------------------------------------
                                            Name: Clifford M. Rhee
                                            Title:  President

                                       13
<PAGE>

                               NOTICE OF EXERCISE

TO:      THOMAS EQUIPMENT, INC.

      (1)______The undersigned hereby elects to purchase ________ Warrant Shares
of the Company  pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders  herewith payment of the exercise price in full,  together
with all applicable transfer taxes, if any.

      (2)______Payment shall take the form of (check applicable box):

                        |_| in lawful money of the United States; or

                        |_| the cancellation of such number of Warrant Shares as
                        is necessary,  in accordance  with the formula set forth
                        in  subsection  2(c),  to  exercise  this  Warrant  with
                        respect  to  the  maximum   number  of  Warrant   Shares
                        purchasable  pursuant to the cashless exercise procedure
                        set forth in subsection 2(c).

      (3)______Please  issue a certificate  or  certificates  representing  said
Warrant  Shares  in the  name of the  undersigned  or in such  other  name as is
specified below:

                  ________________________________________

The Warrant Shares shall be delivered to the following:

                  ________________________________________

                  ________________________________________

                  ________________________________________

      (4) Accredited  Investor.  The undersigned is an "accredited  investor" as
defined  in  Regulation  D  promulgated  under the  Securities  Act of 1933,  as
amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

      FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to

_______________________________________________ whose address is

________________________________________________________________

________________________________________________________________

                                                 Dated:  ______________, _______

                   Holder's Signature: _________________________
                   Holder's Address:   _________________________

Signature Guaranteed:  _________________________________________

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00104-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00104-of-00352.parquet"}]]