Document:

REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement (this "Agreement") is made and
entered into as of April 19, 2005, among Thomas Equipment, Inc., a Delaware
corporation (the "Company"), and the purchasers signatory hereto (each such
purchaser is a "Purchaser" and all such purchasers are, collectively, the
"Purchasers").

         This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").

         The Company and the Purchasers hereby agree as follows:

         1. Definitions

         Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:

                  "Advice" shall have the meaning set forth in Section 6(c).

                  "Effectiveness Date" means, with respect to the initial
         Registration Statement required to be filed hereunder, the date which
         is six months after the date hereof and, with respect to any additional
         Registration Statements which may be required pursuant to Section 3(c),
         the 120th calendar day following the date on which the Company first
         knows, or reasonably should have known, that such additional
         Registration Statement is required hereunder; provided, however, in the
         event the Company is notified by the Commission that one of the above
         Registration Statements will not be reviewed or is no longer subject to
         further review and comments, the Effectiveness Date as to such
         Registration Statement shall be the fifth Trading Day following the
         date on which the Company is so notified if such date precedes the
         dates required above.

                  "Effectiveness Period" shall have the meaning set forth in
         Section 2(a).

                  "Event" shall have the meaning set forth in Section 2(b).

                  "Event Date" shall have the meaning set forth in Section 2(b).

                  "Filing Date" means, with respect to the initial Registration
         Statement required hereunder, the earlier of the 30th calendar day
         following (i) the effective date of the Company's registration
         statement on Form SB-2, original file No. 333-123717, or (ii) the date
         more than 90 days from the hereof on which any Purchaser demands in
         writing that a Registration Statement be filed, and, with respect to
         any additional Registration Statements which may be required pursuant
         to Section 3(c), the 30th day following the date on which the Company
         first knows, or reasonably should have known that such additional
         Registration Statement is required hereunder.

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                  "Holder" or "Holders" means the holder or holders, as the case
         may be, from time to time of Registrable Securities.

                  "Indemnified Party" shall have the meaning set forth in
         Section 5(c) hereof.

                  "Indemnifying Party" shall have the meaning set forth in
         Section 5(c) hereof.

                  "Losses" shall have the meaning set forth in Section 5(a).

                  "Proceeding" means an action, claim, suit, investigation or
         proceeding (including, without limitation, an investigation or partial
         proceeding, such as a deposition), whether commenced or threatened.

                  "Prospectus" means the prospectus included in a Registration
         Statement (including, without limitation, a prospectus that includes
         any information previously omitted from a prospectus filed as part of
         an effective registration statement in reliance upon Rule 430A
         promulgated under the Securities Act), as amended or supplemented by
         any prospectus supplement, with respect to the terms of the offering of
         any portion of the Registrable Securities covered by a Registration
         Statement, and all other amendments and supplements to the Prospectus,
         including post-effective amendments, and all material incorporated by
         reference or deemed to be incorporated by reference in such Prospectus.

                  "Registrable Securities" means, as of the date in question,
         (i) all of the shares of Common Stock issuable upon conversion in full
         of the shares of Preferred Stock, (ii) all Warrant Shares, (iii) any
         securities issued or issuable upon any stock split, dividend or other
         distribution recapitalization or similar event with respect to the
         foregoing and (iv) any additional shares issuable in connection with
         any anti-dilution provisions associated with the Preferred Stock and
         Warrants.

                  "Registration Statement" means the registration statements
         required to be filed hereunder and any additional registration
         statements contemplated by Section 3(c), including (in each case) the
         Prospectus, amendments and supplements to such registration statement
         or Prospectus, including pre- and post-effective amendments, all
         exhibits thereto, and all material incorporated by reference or deemed
         to be incorporated by reference in such registration statement.

                  "Rule 415" means Rule 415 promulgated by the Commission
         pursuant to the Securities Act, as such Rule may be amended from time
         to time, or any similar rule or regulation hereafter adopted by the
         Commission having substantially the same purpose and effect as such
         Rule.

                  "Rule 424" means Rule 424 promulgated by the Commission
         pursuant to the Securities Act, as such Rule may be amended from time
         to time, or any similar rule or regulation hereafter adopted by the
         Commission having substantially the same purpose and effect as such
         Rule.

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        2. Shelf Registration

         (a) On or prior to each Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering the resale of the
Registrable Securities on such Filing Date for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be on
Form S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance herewith) and shall contain (unless
otherwise directed by the Holders) substantially the "Plan of Distribution"
attached hereto as Annex A. Subject to the terms of this Agreement, the Company
shall use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, but in any event prior to the applicable Effectiveness Date, and shall
use its best efforts to keep such Registration Statement continuously effective
under the Securities Act until all Registrable Securities covered by such
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 affected Holders (the "Effectiveness Period").
The Company shall immediately notify the Holders via facsimile or e-mail of the
effectiveness of the Registration Statement on the same day that the Company
receives notification of the effectiveness from the Commission.

         (b) If: (i) a Registration Statement is not filed on or prior to its
Filing Date, or (ii) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration Statement
will not be "reviewed," or not subject to further review, or (iii) prior to its
Effectiveness Date, the Company fails to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission in respect of
such Registration Statement within 20 calendar days after the receipt of
comments by or notice from the Commission that such amendment is required in
order for a Registration Statement to be declared effective, unless such delay
is caused by the unavailability of required financial statements, or (iv) a
Registration Statement filed or required to be filed hereunder is not declared
effective by the Commission by its Effectiveness Date, or (v) after the
Effectiveness Date, a Registration Statement ceases for any reason to remain
continuously effective as to all Registrable Securities for which it is required
to be effective, or the Holders are not permitted to utilize the Prospectus
therein to resell such Registrable Securities for 20 consecutive calendar days
but no more than an aggregate of 30 calendar days during any 12-month period
(which need not be consecutive Trading Days) (any such failure or breach being
referred to as an "Event", and for purposes of clause (i) or (iv) the date on
which such Event occurs, or for purposes of clause (ii) the date on which such
five Trading Day period is exceeded, or for purposes of clause (iii) the date
which such 20 calendar day period is exceeded, or for purposes of clause (v) the
date on which such 20 or 30 calendar day period, as applicable, is exceeded
being referred to as "Event Date"), then in addition to any other rights the
Holders may have hereunder or under applicable law, on each such Event Date and
on each monthly anniversary of each such Event Date (if the applicable Event
shall not have been cured by such date) until the applicable Event is cured, the
Company shall pay to each Holder an amount in cash, as partial liquidated
damages and not as a penalty, equal to 1% of the aggregate purchase price paid
by such Holder pursuant to the Purchase Agreement for any Registrable Securities
then held by such Holder. The partial liquidated damages pursuant to the terms
hereof shall apply on a daily pro-rata basis for any portion of a month prior to
the cure of an Event.

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        3. Registration Procedures

         In connection with the Company's registration obligations hereunder,
the Company shall:

         (a) Not less than two Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to each
Holder copies of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference) will be
subject to the review of such Holders, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities shall reasonably object in good faith,
provided that, the Company is notified of such objection, including the
substance of such objection, in writing no later than two Trading Days after the
Holders have been so furnished copies of such documents. Each Holder, severally
and not jointly agrees to furnish to the Company a completed Questionnaire in
the form attached to this Agreement as Annex B (a "Selling Holder
Questionnaire") not less than two Trading Days prior to the Filing Date or by
the end of the fourth Trading Day following the date on which such Holder
receives draft materials in accordance with this Section.

         (b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep a Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and as so supplemented or amended to be filed pursuant
to Rule 424; (iii) respond as promptly as reasonably possible to any comments
received from the Commission with respect to a Registration Statement or any
amendment thereto and as promptly as reasonably possible provide the Holders
true and complete copies of all correspondence from and to the Commission
relating to a Registration Statement; and (iv) comply in all material respects
with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by a Registration
Statement during the applicable period in accordance (subject to the terms of
this Agreement) with the intended methods of disposition by the Holders thereof
set forth in such Registration Statement as so amended or in such Prospectus as
so supplemented.

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         (c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file as soon as
reasonably practicable but in any case prior to the applicable Filing Date, an
additional Registration Statement covering the resale by the Holders of such
additional Registrable Securities.

         (d) Notify the Holders of Registrable Securities to be sold (which
notice shall, pursuant to clauses (ii) through (vi) hereof, be accompanied by an
instruction to suspend the use of the Prospectus until the requisite changes
have been made) as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than five Trading Days prior to such filing) and (if requested
by any such Person) confirm such notice in writing no later than one Trading Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; (v) of the occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in a 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 a
Registration Statement, Prospectus or other documents so that, in the case of a
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; and
(vi) the occurrence or existence of any pending corporate development with
respect to the Company that the Company believes may be material and that, in
the determination of the Company, makes it not in the best interest of the
Company to allow continued availability of the Registration Statement or
Prospectus; provided that any and all of such information shall remain
confidential to each Holder until such information otherwise becomes public,
unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder's agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.

         (e) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

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<PAGE>

         (f) Furnish to each Holder, without charge, at least one conformed copy
of each such Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.

         (g) Promptly deliver to each Holder, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request in
connection with resales by the Holder of Registrable Securities. Subject to the
terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto, except after
the giving on any notice pursuant to Section 3(d).

         (h) Prior to any resale of Registrable Securities by a Holder, use its
commercially reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or qualification (or
exemption from the Registration or qualification) of such Registrable Securities
for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of
the Registrable Securities covered by each Registration Statement; provided,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so subject or file a
general consent to service of process in any such jurisdiction.

         (i) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such Holders may request.

         (j) Upon the occurrence of any event contemplated by this Section 3, 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, prepare a supplement
or amendment, including a post-effective amendment, to a Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither a 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 Holders in accordance with clauses
(ii) through (v) of Section 3(d) above to suspend the use of any Prospectus
until the requisite changes to such Prospectus have been made, then the Holders
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
Section 3(j) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial liquidated damages pursuant to
Section 2(b), for a period not to exceed 60 days (which need not be consecutive
days) in any 12 month period.

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         (k) Comply with all applicable rules and regulations of the Commission.

         (l) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if required by the Commission, the person
thereof that has voting and dispositive control over the Shares. During any
periods that the Company is unable to meet its obligations hereunder with
respect to the registration of the Registrable Securities solely because any
Holder fails to furnish such information within three Trading Days of the
Company's request, any liquidated damages that are accruing at such time as to
such Holder only shall be tolled and any Event that may otherwise occur solely
because of such delay shall be suspended as to such Holder only, until such
information is delivered to the Company.

      4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holders), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in a Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.

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      5. Indemnification

         (a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities 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 each of them, each Person who controls any such Holder (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 a Registration Statement, any 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 such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (ii) in the case of an occurrence
of an event of the type specified in Section 3(d)(ii)-(vi), the use by such
Holder of an outdated or defective Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated or defective and prior to
the receipt by such Holder of the Advice contemplated in Section 6(d). The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding arising from or in connection with the transactions
contemplated by this Agreement of which the Company is aware.

         (b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person 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) such Holder'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 any Registration Statement, any 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 such
Holder to the Company specifically for inclusion in such Registration Statement
or such Prospectus or (ii) to the extent that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement (it being understood that the Holder has approved Annex A hereto for
this purpose), such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (2) in the case of an occurrence of an event of the type
specified in Section 3(d)(ii)-(vi), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder
of the Advice contemplated in Section 6(d). In no event shall the liability of
any selling Holder hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

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         (c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
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 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 Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such 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 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 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 Proceeding.

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         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
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.

         (d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) 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 Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder 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
such Holder.

         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.

      6. Miscellaneous

         (a) Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each other Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.

                                       10
<PAGE>

         (b) Compliance. Each Holder, severally and not jointly, covenants and
agrees that it will comply with the prospectus delivery requirements of the
Securities Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement.

         (c) Discontinued Disposition. Each Holder, severally and not jointly,
agrees by its acquisition of such Registrable Securities that, upon receipt of a
notice from the Company of the occurrence of any event of the kind described in
Section 3(d), such Holder will forthwith discontinue disposition of such
Registrable Securities under a Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement, or until it is advised in writing (the "Advice") by the Company that
the use of the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus or Registration
Statement. The Company will use its best efforts to ensure that the use of the
Prospectus may be resumed as promptly as it practicable. The Company agrees and
acknowledges that any periods during which the Holder is required to discontinue
the disposition of the Registrable Securities hereunder shall be subject to the
provisions of Section 2(b).

         (d) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice of
such determination and, if within five days after the date of such notice, any
such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered; provided, that, the Company shall not be
required to register any Registrable Securities pursuant to this Section 6(e)
that are eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act or that are the subject of a then effective Registration
Statement.

         (e) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and each
Holder of the then outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of all of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.

                                       11
<PAGE>

         (f) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set forth
in the Purchase Agreement.

         (g) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
all of the Holders of the then-outstanding Registrable Securities. Each Holder
may assign their respective rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.

         (h) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof.

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

         (j) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined with the
provisions of the Purchase Agreement.

         (k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.

         (l) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

         (m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

                                       12
<PAGE>

         (n) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be
joined as an additional party in any proceeding for such purpose.

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

                                       13
<PAGE>

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

THOMAS EQUIPMENT, INC.

By:__________________________________________
   Name:  David Marks
   Title:  Chairman

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       14
<PAGE>

                    [PURCHASER'S SIGNATURE PAGE TO TEQI RRA]

Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________

                           [SIGNATURE PAGES CONTINUE]

                                       15
<PAGE>

                                     ANNEX A

                              Plan of Distribution

         Each Selling Stockholder (the "Selling Stockholders") of the common
stock ("Common Stock") of Thomas Equipment, Inc., a Delaware corporation (the
"Company") and any of their pledgees, assignees and successors-in-interest may,
from time to time, sell any or all of their shares of Common Stock on the
Trading Market or any other stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:

         o   ordinary brokerage transactions and transactions in which the
             broker-dealer solicits purchasers;

         o   block trades in which the broker-dealer will attempt to sell the
             shares as agent but may position and resell a portion of the block
             as principal to facilitate the transaction;

         o   purchases by a broker-dealer as principal and resale by the
             broker-dealer for its account;

         o   an exchange distribution in accordance with the rules of the
             applicable exchange;

         o   privately negotiated transactions;

         o   settlement of short sales entered into after the date of this
             prospectus;

         o   broker-dealers may agree with the Selling Stockholders to sell a
             specified number of such shares at a stipulated price per share;

         o   a combination of any such methods of sale;

         o   through the writing or settlement of options or other hedging
             transactions, whether through an options exchange or otherwise; or

         o   any other method permitted pursuant to applicable law.

         The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.

         Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each Selling Stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.

                                       16
<PAGE>

         In connection with the sale of our common stock or interests therein,
the Selling Stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

         The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling Stockholder has
informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock.

         The Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares. The Company has agreed
to indemnify the Selling Stockholders against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.

         Because Selling Stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
Each Selling Stockholder has advised us that they have not entered into any
agreements, understandings or arrangements with any underwriter or broker-dealer
regarding the sale of the resale shares. There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
Selling Stockholders.

         We agreed to keep this prospectus effective until the earlier of (i)
the date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

                                       17
<PAGE>

         Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to our common stock for a period
of two business days prior to the commencement of the distribution. In addition,
the Selling Stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M,
which may limit the timing of purchases and sales of shares of our common stock
by the Selling Stockholders or any other person. We will make copies of this
prospectus available to the Selling Stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or prior to the
time of the sale.

                                       18
<PAGE>

                                                                        Annex B

                             THOMAS EQUIPMENT, INC.

                 Selling Securityholder Notice and Questionnaire

         The undersigned beneficial owner of common stock, par value $0.001 per
share (the "Common Stock"), of Thomas Equipment, Inc., a Delaware corporation
(the "Company"), (the "Registrable Securities") understands that the Company has
filed or intends to file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of
April___, 2005 (the "Registration Rights Agreement"), among the Company and the
Purchasers named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

         Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.

                                     NOTICE

         The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.

                                       19
<PAGE>

The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:

                                  QUESTIONNAIRE

1.       Name.

         (a)      Full Legal Name of Selling Securityholder

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

         (b)      Full Legal Name of Registered Holder (if not the same as (a)
                  above) through which Registrable Securities Listed in Item 3
                  below are held:

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

         (c)      Full Legal Name of Natural Control Person (which means a
                  natural person who directly you indirectly alone or with
                  others has power to vote or dispose of the securities covered
                  by the questionnaire):

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

2.  Address for Notices to Selling Securityholder:

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

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

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

Telephone:
          ----------------------------------------------------------------------
Fax:
     ---------------------------------------------------------------------------
Contact Person:
               -----------------------------------------------------------------

3.  Beneficial Ownership of Registrable Securities:

         (a) Type and Number of Registrable Securities beneficially owned:

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

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

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

                                       20
<PAGE>

4.  Broker-Dealer Status:

         (a) Are you a broker-dealer?

                                      Yes  |_|    No |_|

         Note: If yes, the Commission's staff has indicated that you should be
             identified as an underwriter in the Registration Statement.

         (b) Are you an affiliate of a broker-dealer?

                                      Yes  |_|    No |_|

         (c)      If you are an affiliate of a broker-dealer, do you certify
                  that you bought the Registrable Securities in the ordinary
                  course of business, and at the time of the purchase of the
                  Registrable Securities to be resold, you had no agreements or
                  understandings, directly or indirectly, with any person to
                  distribute the Registrable Securities?

                                      Yes   |_|   No |_|

         Note: If no, the Commission's staff has indicated that you should be
             identified as an underwriter in the Registration Statement.

5.       Beneficial Ownership of Other Securities of the Company Owned by the
         Selling Securityholder.

         Except as set forth below in this Item 5, the undersigned is not the
         beneficial or registered owner of any securities of the Company other
         than the Registrable Securities listed above in Item 3.

         (a) Type and Amount of Other Securities beneficially owned by the
             Selling Securityholder:

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

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

                                       21
<PAGE>

6.  Relationships with the Company:

         Except as set forth below, neither the undersigned nor any of its
         affiliates, officers, directors or principal equity holders (owners of
         5% of more of the equity securities of the undersigned) has held any
         position or office or has had any other material relationship with the
         Company (or its predecessors or affiliates) during the past three
         years.

         State any exceptions here:

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

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

         The undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Registration Statement
remains effective.

         By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus. The undersigned understands that such information will be relied
upon by the Company in connection with the preparation or amendment of the
Registration Statement and the related prospectus.

         IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.

Dated:                        Beneficial Owner:
       --------------------                    ---------------------------------

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

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

                                       22EXHIBIT C

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 , 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.

                  b) Exercise Price. The exercise price of the Common Stock
         under this Warrant shall be $3.75, 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.

                         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

                                       2
<PAGE>

                  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).

                         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.

                         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.

                                       4
<PAGE>

                         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.

                         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.

                                       7
<PAGE>

                  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.

                  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.

                                       9
<PAGE>

                  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.

                  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.

                                       10
<PAGE>

                  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.

                  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.

                                       11
<PAGE>

                  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:  April   , 2005

THOMAS EQUIPMENT, INC.

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

                                       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.

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