SUBORDINATION AND INTERCREDITOR AGREEMENT

SUBORDINATION AND INTERCREDITOR AGREEMENT

This Subordination and Intercreditor Agreement (this "Agreement") dated as

of February 28, 2005 among LAURUS MASTER FUND, LTD., a Cayman Islands

corporation ("Laurus"), ROYNAT MERCHANT CAPITAL INC., a Delaware corporation

("Roynat"), THOMAS EQUIPMENT, INC., a Delaware corporation ("Thomas Equipment"),

THOMAS VENTURES, INC., a Delaware corporation ("Thomas Ventures"), THOMAS

EQUIPMENT 2004 INC., a corporation organized under the laws of Canada ("Thomas

Canada"), PNEUTECH INC., a corporation organized under the laws of Canada

("Pneutech"), ROUSSEAU CONTROLS INC., a corporation organized under the laws of

Canada ("Rousseau"), and HYDRAMEN FLUID POWER LIMITED, a corporation organized

under the laws of Ontario ("Hydramen") (Thomas Equipment, Thomas Ventures,

Thomas Canada, Pneutech, Rousseau and Hydramen and their respective successors

and assigns, each a "Company" and, collectively, the "Companies").

BACKGROUND

Laurus and Roynat wish to set forth their agreement as to their respective

rights and obligations with respect to the indebtedness of the Companies owing

to Laurus and Roynat and the security interests, hypothecs and liens of Laurus

and Roynat in the assets and properties of the Companies and their understanding

relative to their respective positions in such indebtedness and such assets and

properties.

AGREEMENTS

NOW, THEREFORE, for good and valuable consideration, receipt of which is

hereby acknowledged, Laurus, Roynat and each Company hereby agree as follows:

1. Definitions.

1.1 General Terms. For purposes of this Agreement, the following

terms shall have the following meanings:

"Affiliate" means, with respect to a Person, any other Person (i)

which directly or indirectly through one or more intermediaries, controls, or is

controlled by, or is under common control with, such Person, (ii) which owns 10%

or more of the equity interests of such Person, (iii) 10% or more of the voting

stock (or in the case of a Person that is not a corporation, 10% or more of the

equity interests of such Person) of which is owned by such Person or (iv) who is

an executive officer or director of such Person. The term "control" means (a)

the power to vote more than 50% of the securities or other equity interests of a

Person having ordinary voting power (on a fully diluted basis), or (b) the

possession, directly or indirectly, of any other power to direct or cause the

direction of the management and policies of a Person, whether through ownership

of voting securities, by contract or otherwise.

"Bankruptcy Law" shall mean the Code, or any similar federal, state,

provincial or foreign law for the relief of debtors or any arrangement,

reorganization, insolvency, moratorium, assignment for the benefit of creditors,

any other marshalling of the assets and liabilities of any Company.

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"Business Day" means any day other than a Saturday, a Sunday or any

other day on which commercial banks in New York, New York are required or

permitted by law to close.

"Code" shall mean the United States Bankruptcy Code, as in effect

from time to time.

"Collateral" shall mean all of the property and interests in

property, tangible or intangible, real or personal, immovable or movable, now

owned or hereafter acquired by any Company in or upon which any Creditor at any

time has a Lien, including, without limitation, all proceeds and products of

such property and interests in property; provided, however, the Collateral shall

not include the Life Insurance Proceeds.

"Common Stock" means the common stock of Thomas Equipment, par value

of $0.01 per share.

"Company" and "Companies" shall have the meanings set forth in the

introductory paragraph of this Agreement.

"Creditor Agreements" shall mean, collectively, the Laurus

Agreements and the Roynat Agreements.

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

"Distribution" shall mean any payment, whether in cash, in kind, by

offset, securities or any other property, or security for any such payment

(other than (i) securities, including Common Stock, issued by Thomas Equipment

to Roynat in connection with the Roynat Warrant or (ii) other property issued by

Thomas Equipment to Roynat under Section 6(a)(ii) of the Roynat Warrant as in

effect on the date hereof) for any such payment.

"Enumerated Collateral" shall mean the Collateral of Pneutech,

Rousseau and Hydramen.

"Enumerated Companies" shall mean, collectively, Pneutech, Rousseau

and Hydramen.

"Insolvency or Liquidation Proceeding" shall mean, collectively, (a)

any voluntary or involuntary case, proceeding or filing under any Bankruptcy Law

with respect to any Company, (b) any other voluntary or involuntary insolvency,

reorganization or bankruptcy case, proceeding or filing, or any receivership,

liquidation, reorganization or other similar case, proceeding or filing with

respect to any Company or with respect to any of its assets, (c) any

liquidation, dissolution or winding up of any Company, whether voluntary or

involuntary and whether or not involving insolvency or bankruptcy, (d) any

assignment for the benefit of creditors or any other marshaling of assets and

liabilities of any Company, and (e) the cessation of the operation of a

substantial part of any Company's business.

"Laurus Agreements" shall mean, collectively, the Laurus Security

Agreement, the Laurus Guaranty and Security Agreements, the other Ancillary

Agreements (as defined in the Laurus Security Agreement) and all other

promissory notes, agreements, documents and instruments now or at any time

hereafter executed and/or delivered by any Company or any other Person to, with

or in favor of Laurus in connection therewith or related thereto, as all of the

foregoing now exist or may hereafter be amended, modified, supplemented,

extended, renewed, restated or replaced, in each case to the extent permitted

herein.

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"Laurus Amendment" shall mean the Amendment Agreement dated as of

the date hereof among Thomas Equipment, Thomas Ventures and Laurus.

"Laurus Default" shall mean and include a Laurus Realization Default

and/or a Laurus Non-Realization Default.

"Laurus Default Notice" shall mean and include a Laurus Realization

Default Notice and/or a Laurus Non-Realization Default Notice.

"Laurus Guaranty and Security Agreements" shall mean, collectively,

(a) each General Security Agreement, deed of hypothecs and shares pledge

agreements made by Thomas Canada, Pneutech, Rousseau and Hydramen in favor of

Laurus, (b) each Guarantee made by Thomas Canada, Pneutech, Rousseau and

Hydramen in favor of Laurus and (c) each Security Agreement made by Thomas

Canada, Pneutech, Rousseau and Hydramen in favor of Laurus, as each of the same

may be amended, modified and supplemented from time to time.

"Laurus Indebtedness" shall mean all monetary obligations of any

kind owed by any Company or the Companies to Laurus from time to time under or

pursuant to any of the Laurus Agreements including, without limitation, all

principal, interest accruing thereon, charges, expenses, fees and other sums

(including all interest, charges, expenses, fees and other sums accruing after

commencement of any Insolvency or Liquidation Proceeding) chargeable to any

Company or the Companies by Laurus, and reimbursement, indemnity or other

obligations due and payable to Laurus.

"Laurus Non-Realization Default" shall mean an Event of Default (or

similar term) under and as such term is defined in any Laurus Agreement, other

than a Laurus Realization Default.

"Laurus Non-Realization Default Notice" shall mean written notice

from Laurus to Thomas Equipment and, to the extent applicable, any other Company

of the occurrence and continuance of a Laurus Non-Realization Default which

written notice shall describe such Laurus Non-Realization Default and declare

Thomas Equipment and, to the extent applicable, such other Company in default

under any of the Laurus Agreements.

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"Laurus Realization Default" shall mean an Event of Default (or

similar term) under and as such term is defined in any Laurus Agreement arising

from (a) the failure by any Company to make any payment, whether for principal,

interest or fees, in respect of the Laurus Indebtedness (whether at maturity or

at a date fixed for prepayment or by declaration, acceleration or otherwise)

and/or (b) the failure by Thomas Equipment to deliver or cause to be delivered

Common Stock to Laurus pursuant to and in accordance with the requirements set

forth in any of the Laurus Agreements.

"Laurus Realization Default Notice" shall mean written notice from

Laurus to Thomas Equipment and, to the extent applicable, any other Company of

the occurrence and continuance of a Laurus Realization Default which written

notice shall describe such Laurus Realization Default and declare Thomas

Equipment and, to the extent applicable, such other Company in default under any

of the Laurus Agreements.

"Laurus Security Agreement" shall mean the Security and Purchase

Agreement dated as of November 9, 2004 among Thomas Equipment, Thomas Ventures

and Laurus, amended by the Laurus Amendment and as the same may be further

amended, supplemented, modified and/or restated from time to time, to the extent

permitted herein.

"Lien" shall mean any mortgage, deed of trust, pledge,

hypothecation, hypothecs, assignment, deposit arrangement, security interest,

encumbrance (including, but not limited to, easements, rights of way and the

like), lien (statutory or other), security agreement or transfer intended as

security including, without limitation, any conditional sale or other title

retention agreement, the interest of a lessor under a capital lease or any

financing lease having substantially the same economic effect as any of the

foregoing.

"Life Insurance Proceeds" shall mean the proceeds of any life

insurance policy on the life of Clifford Rhee specifically assigned to Roynat.

"Maximum Laurus Principal Amount" shall mean an amount equal to (a)

$30,800,000, plus (b) interest, fees and other costs and expenses which may

become part of or added to the principal amount of the Laurus Indebtedness,

minus (c) any amounts received by Laurus from the Companies and applied to the

outstanding principal amount of the Term Loans (as defined in the Laurus

Security Agreement), minus (d) any permanent commitment reductions in any

revolving credit facility under the Laurus Security Agreement.

"Maximum Roynat Principal Amount" shall mean an amount equal to (a)

$6,500,000, plus (b) interest, fees and other costs and expenses which may

become part of or added to the principal amount of the Roynat Indebtedness,

minus (c) any amounts received by Roynat from the Companies and applied to the

outstanding principal amount of the Roynat Indebtedness.

"Permitted Payments" shall mean payments of:

(a) interest, fees and expenses due and payable by the Companies to

Roynat pursuant to the Roynat Agreements as in effect on the date hereof

including, without limitation, any fees under the Registration Rights Agreement

dated as of the date hereof between Thomas Equipment and Roynat;

(b) on or after December 30, 2005, any principal and any other

amounts which comprise all or part of the Roynat Indebtedness; and

(c) any or all of the Roynat Indebtedness provided such payment is

made or derived from the proceeds received by Thomas Equipment as a result of

any public offering of Common Stock.

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"Person" shall mean an individual, a partnership, a corporation

(including a business trust), a company, a joint stock company, a trust, an

unincorporated association, a joint venture, a limited liability company, an

unlimited liability company, a limited liability partnership or other entity, or

a government or any agency, instrumentality or political subdivision thereof.

"Post-Petition Financing" shall mean all extensions of credit under

any financing extended or provided to any Company under any Bankruptcy Law.

"Roynat Agreements" shall mean, collectively, the Roynat Debenture,

the Roynat Warrant and all promissory notes, warrants, agreements, documents and

instruments now or at any time hereafter executed and/or delivered by any

Company or any other Person to, with or in favor of Roynat in connection

therewith or related thereto, as all of the foregoing now exist or may hereafter

be amended, modified, supplemented, extended, renewed, restated or replaced, in

each case to the extent permitted herein.

"Roynat Debenture" shall mean the Debenture dated as of the date

hereof by and between Roynat and Thomas Equipment, as amended to the extent

permitted herein.

"Roynat Default" shall mean an "event of default" (or similar term)

under and as such term in any Roynat Agreement as in effect on the date hereof.

"Roynat Default Notice" shall mean written notice from Roynat to any

Company of the occurrence of a Roynat Default which written notice shall

describe such Roynat Default and refer to this Agreement.

"Roynat Indebtedness" shall mean all monetary obligations of any

kind owed by any Company or the Companies to Roynat from time to time under or

pursuant to any of the Roynat Agreements including, without limitation, all

principal, interest accruing thereon, charges, expenses, fees and other sums

(including all interest, charges, expenses, fees and other sums accruing after

commencement of any Insolvency or Liquidation Proceeding) chargeable to any

Company or the Companies by Roynat, and reimbursement, indemnity or other

obligations due and payable to Roynat.

"Roynat Warrant" shall mean the Stock Purchase Warrant issued on the

date hereof by Thomas Equipment in favor of Roynat and any reissue or amendment

thereof to the extent permitted herein.

"Secured Lender Remedies" shall mean the taking possession of

(either directly or through an agent or mandatary), the sale, foreclosure,

realization upon, and/or a liquidation of any of the Collateral including,

without limitation, the exercise of any of the rights or remedies of a "secured

party" under Article 9 of the New York Uniform Commercial Code, or under the

Personal Property Security Act of the applicable province or territory of Canada

or the Civil Code of Quebec, such as, without limitation, the notification of

account debtors.

1.2 Certain Matters of Construction. The terms "herein", "hereof"

and "hereunder" and other words of similar import refer to this Agreement as a

whole and not to any particular section, paragraph or subdivision. Any pronoun

used shall be deemed to cover all genders. Wherever appropriate in the context,

terms used herein in the singular also include the plural and vice versa. All

references to statutes and related regulations shall include any amendments of

same and any successor statutes and regulations. Except as expressly set forth

herein, all references to any instruments or agreements, including, without

limitation, references to any of the Creditor Agreements shall include any and

all modifications or amendments thereto and any and all extensions or renewals

thereof, in each case, to the extent permitted herein. All references to

security interests or mortgages shall mean and include hypothecs.

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2. Priorities.

2.1 Subordination Provisions. Notwithstanding any other provision of

the Roynat Agreements to the contrary, to the extent provided below in this

Agreement, any Distribution with respect to the Roynat Indebtedness is and shall

be expressly junior and subordinated in right of payment to all amounts due and

owing upon all the Laurus Indebtedness outstanding from time to time in the

manner and to the extent provided in this Agreement. Until the indefeasible

payment in full of the Laurus Indebtedness and the irrevocable termination of

the Laurus Agreements, no Company shall make and Roynat shall not accept or

retain any Distribution in respect of the Roynat Indebtedness except, subject to

the provisions of this Section 2, Roynat may accept and retain (a) Permitted

Payments, (b) subject to the last sentence hereof, any Distribution arising from

the exercise of Secured Lender Remedies and (c) subject to the last sentence

hereof, any proceeds of Collateral pursuant to an Insolvency or Liquidation

Proceeding. Notwithstanding anything contained herein to the contrary, to the

extent any Creditor receives any Distribution arising from such Creditor's

exercise of its Secured Lender Remedies or any proceeds of Collateral pursuant

to an Insolvency or Liquidation Proceeding, in each case, as permitted by and in

accordance with the terms and conditions of this Agreement, the application of

such Distribution to the Laurus Indebtedness or the Roynat Indebtedness, as the

case may be, shall be governed by the priorities set forth in Section 3.2

hereof.

2.2 Payments.

(a) From and after receipt by Roynat of a Laurus Realization Default

Notice from Laurus (which expressly states that such Default Notice is a Laurus

Realization Default Notice), no Company shall make any Distribution on the

Roynat Indebtedness and Roynat shall not be entitled to receive or retain any

such Distribution in respect of the Roynat Indebtedness until the earliest to

occur of (i) the date on which all Laurus Defaults described in such Laurus

Realization Default Notice shall have been cured or waived in writing by Laurus,

(ii) the date the Laurus Indebtedness is indefeasibly paid in full and the

Laurus Agreements are irrevocably terminated or (iii) the expiration of a period

of one-hundred and fifty (150) days commencing from and including the date of

Roynat's receipt of such Laurus Realization Default Notice from Laurus.

(b) From and after receipt by Roynat of a Laurus Non-Realization

Default Notice from Laurus (which expressly states that such Default Notice is a

Laurus Non-Realization Default Notice), no Company shall make any Distribution

on the Roynat Indebtedness and Roynat shall not be entitled to receive or retain

any such Distribution in respect of the Roynat Indebtedness until the earliest

to occur of (i) the date on which all Laurus Non-Realization Defaults described

in such Laurus Non-Realization Default Notice shall have been cured or waived in

writing by Laurus, (ii) the date the Laurus Indebtedness is indefeasibly paid in

full and the Laurus Agreements are irrevocably terminated or (iii) the

expiration of a period of sixty (60) days commencing from and including the date

of Roynat's receipt of such Laurus Non-Realization Default Notice from Laurus.

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(c) No Laurus Realization Default Notice shall be effective under

clause (a) above if Laurus previously delivered a Laurus Realization Default

Notice to Roynat. No Laurus Non-Realization Default Notice shall be effective

under clause (b) above if Laurus previously delivered a Laurus Non-Realization

Default Notice to Roynat.

(d) Any Company may make and Roynat may accept and retain any

Permitted Payments other than during any period described in Section 2.2(a)

and/or Section 2.2(b) and, after the expiration of any such period, any Company

may resume making and Roynat may accept and retain Permitted Payments including

those Permitted Payments that were due as of the commencement of such period or

became due during such period.

(e) Notwithstanding anything contained herein to the contrary, if

Thomas Equipment receives any proceeds from any public offering of Common Stock,

the proceeds of such public offering shall first be applied to repay the Roynat

Indebtedness regardless of whether or not there has occurred and is continuing

any Laurus Realization Default or Laurus Non-Realization Default. For greater

certainty, it is hereby acknowledged that nothing in this Agreement shall bar or

in any way affect the ability of Roynat to receive such payments following the

consummation of any public offering by Thomas Equipment.

(f) In the event that Roynat delivers to any Company a Roynat

Default Notice declaring that there exists a Roynat Default, any Distribution

received by Roynat during the ten (10) Business Days following the delivery of

such notice to Laurus shall be paid over to Laurus if Laurus delivers a Laurus

Realization Default Notice or a Laurus Non-Realization Default Notice to Roynat

during such ten (10) Business Day period.

(g) Notwithstanding anything contained herein to the contrary,

Roynat shall be permitted to receive (i) securities, including Common Stock,

issued by Thomas Equipment in connection with the Roynat Warrant and/or (ii)

other property issued by Thomas Equipment under Section 6(a)(ii) of the Roynat

Warrant (as in effect on the date hereof).

2.3 Knowledge; Delivery of Default Notice. Subject to compliance

with Section 2.2(f) hereof, Roynat shall not at any time be charged with

knowledge of any of the events described in Section 2.2 hereof or on such

account be prohibited from receiving or retaining any Permitted Payments, unless

and until Roynat shall have received the Laurus Default Notice. Each Laurus

Default Notice shall be deemed to be properly given by Laurus to Roynat if such

Laurus Default Notice is delivered in accordance with Section 5.6 hereof.

2.4 Payments Held in Trust. Should any Distribution or the proceeds

thereof, in respect of any Roynat Indebtedness, be collected or received by

Roynat or any Affiliate of Roynat at a time when Roynat is not permitted to

receive any such Distribution or proceeds thereof, then Roynat will forthwith

deliver, or cause to be delivered, the same to Laurus in precisely the form held

by Roynat or such Affiliate (except for any necessary endorsement) and until so

delivered, the same shall be held in trust by Roynat, or any such Affiliate, as

the property of Laurus and shall not be commingled with other property of Roynat

or any such Affiliate.

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2.5 Subrogation. After the Laurus Indebtedness has been indefeasibly

paid in full and the Laurus Agreements have been irrevocably terminated, to the

extent that Laurus has received any Distribution on Laurus Indebtedness which,

but for this Agreement, would have been applied to Roynat Indebtedness, Roynat

shall be subrogated to the then or thereafter rights of Laurus including,

without limitation, the right to receive any Distribution made on Laurus

Indebtedness until the principal of, interest on and other amounts payable under

the Roynat Indebtedness shall be indefeasibly paid in full; and, for the

purposes of such subrogation, no Distribution to Laurus to which Roynat would be

entitled except for the provisions of this Agreement shall, as between any

Company, its creditors (other than Laurus) and Roynat, be deemed to be a

Distribution by such Company to or on account of the Laurus Indebtedness, it

being understood that the provisions hereof are and are intended solely for the

purpose of defining the relative rights of Roynat on the one hand, and Laurus on

the other hand.

2.6 Scope of Subordination. The provisions of this Agreement are

solely to define the relative rights of Roynat and Laurus. Nothing in this

Agreement shall impair, as between any Company and Roynat, the unconditional and

absolute obligation of such Company to punctually pay the principal, interest

and any other amounts and obligations owing under the Roynat Agreements in

accordance with the terms thereof, subject to the rights of Laurus under this

Agreement.

3. Security and Remedies.

3.1 Acknowledgment of Lien. Each Creditor hereby agrees and

acknowledges that the other Creditor has been granted a Lien upon the

Collateral.

3.2 Priority. Notwithstanding the order or time of grant or

attachment, or the order, time or manner of perfection or rendering enforceable,

or the order or time of filing, registration, publication or recordation of any

document or instrument, or other method of perfecting or rendering enforceable a

Lien in favor of each Creditor in any Collateral and notwithstanding any

conflicting terms or conditions which may be contained in any of the Creditor

Agreements, the Liens of each Creditor shall have the following priorities:

(a) With respect to the Collateral (other than in respect of the

Enumerated Collateral), the Liens of Laurus have and shall have priority over

the Liens of Roynat upon the Collateral (other than in respect of the Enumerated

Collateral) and the Liens of Roynat are and shall be, in all respects, subject

and subordinate to the Liens of Laurus therein to the full extent of the Laurus

Indebtedness outstanding from time to time; and

(b) With respect to the Enumerated Collateral, the Liens of Laurus

and Roynat shall have the following priorities in the following order:

(i) First, the Liens of Laurus have and shall have priority

over the Liens of Roynat to the extent of an amount equal to the sum of (x)

$1,900,000, (y) any accrued and unpaid interest on the principal amount set

forth in subsection (x) immediately above and (z) all costs and expenses

incurred by Laurus in its enforcement of any Secured Lender Remedies with

respect to the Enumerated Collateral;

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(ii) Second, the Liens of Roynat have and shall have priority

over the Liens of Laurus to the full extent of the Roynat Indebtedness

outstanding from time to time; and

(iii) Third, the Liens of Laurus have and shall have priority

to the remaining amounts of the outstanding Laurus Indebtedness.

3.3 No Alteration of Priority. The Lien priorities provided in

Section 3.2 hereof shall not be altered or otherwise affected by any amendment,

modification, supplement, extension, renewal, restatement or refinancing of any

Laurus Indebtedness or Roynat Indebtedness, nor by any action or inaction which

either Creditor may take or fail to take in respect of the Collateral.

3.4 Perfection.

(a) Each Creditor shall be solely responsible for perfecting and

rendering enforceable and maintaining the perfection and enforceability of its

Lien in and to each item constituting the Collateral in which such Creditor has

been granted a Lien. The foregoing provisions of this Agreement are intended

solely to govern the respective Lien priorities as between the Creditors and

shall not impose on Laurus or Roynat any obligations in respect of the

disposition of proceeds of foreclosure or enforcement of security on any

Collateral which would conflict with prior perfected and enforceable claims

therein in favor of any other Person. Each Creditor agrees that it will