Exhibit 10.33

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IWT TESORO CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.

 

THIS NOTE IS SUBJECT TO THE TERMS OF THE SENIOR SUBORDINATION AGREEMENT BETWEEN
LAURUS MASTER FUND, LTD. AND FLEET CAPITAL CORPORATION TO WHICH REFERENCE IS
MADE FOR THE TERMS OF SUBORDINATION AND FOR LIMITATIONS OF ENFORCEMENT OF THE
PROVISIONS HEREOF.

 

SECURED TERM NOTE

 

FOR VALUE RECEIVED, IWT TESORO CORPORATION, a Nevada corporation (the
“Company”), promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate
Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or its
registered assigns or successors in interest, the sum of Two Million Dollars
($2,000,000), together with any accrued and unpaid interest hereon, on May 3,
2007 (the “Maturity Date”) if not sooner paid.

 

Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof by and between the Company and the Holder (as amended, modified
and/or supplemented from time to time, the “Purchase Agreement”).

 

The following terms shall apply to this Secured Term Note (this “Note”):

 

ARTICLE I

CONTRACT RATE AND AMORTIZATION

 

1.1                                 CONTRACT RATE. SUBJECT TO SECTIONS 4.2 AND
5.10, INTEREST PAYABLE ON THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE (THE
“PRINCIPAL AMOUNT”) SHALL ACCRUE AT A RATE PER ANNUM EQUAL TO FIFTEEN PERCENT
(15.0%) (THE “CONTRACT RATE”). INTEREST SHALL BE (I) CALCULATED ON THE BASIS OF
A 360 DAY YEAR, AND (II) PAYABLE MONTHLY, IN ARREARS, COMMENCING ON MAY 1, 2006,
ON THE FIRST BUSINESS DAY OF EACH CONSECUTIVE CALENDAR MONTH THEREAFTER THROUGH
AND INCLUDING THE MATURITY DATE, AND ON THE MATURITY DATE, WHETHER BY
ACCELERATION OR OTHERWISE.

 

ARTICLE II

REDEMPTION

 

2.1                                 OPTIONAL REDEMPTION IN CASH. THE COMPANY MAY
PREPAY THIS NOTE (“OPTIONAL REDEMPTION”) BY PAYING TO THE HOLDER A SUM OF MONEY
EQUAL TO ONE HUNDRED TEN

 

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PERCENT (100%) OF THE PRINCIPAL AMOUNT OUTSTANDING AT SUCH TIME TOGETHER WITH
ACCRUED BUT UNPAID INTEREST THEREON AND ANY AND ALL OTHER SUMS DUE, ACCRUED OR
PAYABLE TO THE HOLDER ARISING UNDER THIS NOTE, THE PURCHASE AGREEMENT OR ANY
OTHER RELATED AGREEMENT (THE “REDEMPTION AMOUNT”) OUTSTANDING ON THE REDEMPTION
PAYMENT DATE (AS DEFINED BELOW). THE COMPANY SHALL DELIVER TO THE HOLDER A
WRITTEN NOTICE OF REDEMPTION (THE “NOTICE OF REDEMPTION”) SPECIFYING THE DATE
FOR SUCH OPTIONAL REDEMPTION (THE “REDEMPTION PAYMENT DATE”), WHICH DATE SHALL
BE SEVEN (7) BUSINESS DAYS AFTER THE DATE OF THE NOTICE OF REDEMPTION (THE
“REDEMPTION PERIOD”).

 

2.2

 

ARTICLE III

EVENTS OF DEFAULT

 

3.1                                 EVENTS OF DEFAULT. THE OCCURRENCE OF ANY OF
THE FOLLOWING EVENTS SET FORTH IN THIS SECTION 4.1 SHALL CONSTITUTE AN EVENT OF
DEFAULT (“EVENT OF DEFAULT”) HEREUNDER:

 

(A)                                  FAILURE TO PAY. THE COMPANY FAILS TO PAY
WHEN DUE ANY INSTALLMENT OF PRINCIPAL, INTEREST OR OTHER FEES HEREON IN
ACCORDANCE HEREWITH, OR THE COMPANY FAILS TO PAY ANY OF THE OTHER OBLIGATIONS
(UNDER AND AS DEFINED IN THE MASTER SECURITY AGREEMENT) WHEN DUE, AND, IN ANY
SUCH CASE, SUCH FAILURE SHALL CONTINUE FOR A PERIOD OF THREE (3) DAYS FOLLOWING
THE DATE UPON WHICH ANY SUCH PAYMENT WAS DUE.

 

(B)                                 BREACH OF COVENANT. THE COMPANY OR ANY OF
ITS SUBSIDIARIES BREACHES ANY COVENANT OR ANY OTHER TERM OR CONDITION OF THIS
NOTE IN ANY MATERIAL RESPECT AND SUCH BREACH, IF SUBJECT TO CURE, CONTINUES FOR
A PERIOD OF FIFTEEN (15) DAYS AFTER THE OCCURRENCE THEREOF.

 

(C)                                  BREACH OF REPRESENTATIONS AND WARRANTIES.
ANY REPRESENTATION, WARRANTY OR STATEMENT MADE OR FURNISHED BY THE COMPANY OR
ANY OF ITS SUBSIDIARIES IN THIS NOTE, THE PURCHASE AGREEMENT OR ANY OTHER
RELATED AGREEMENT SHALL AT ANY TIME BE FALSE OR MISLEADING IN ANY MATERIAL
RESPECT ON THE DATE AS OF WHICH MADE OR DEEMED MADE.

 

(D)                                 DEFAULT UNDER OTHER AGREEMENTS. THE
OCCURRENCE OF ANY DEFAULT (OR SIMILAR TERM) IN THE OBSERVANCE OR PERFORMANCE OF
ANY OTHER AGREEMENT OR CONDITION RELATING TO ANY INDEBTEDNESS OR CONTINGENT
OBLIGATION OF THE COMPANY OR ANY OF ITS SUBSIDIARIES (INCLUDING, WITHOUT
LIMITATION, I. THE INDEBTEDNESS EVIDENCED BY THE WORKING CAPITAL LENDER LOAN
DOCUMENTS (AS SUCH TERM IS DEFINED IN THE PURCHASE AGREEMENT) OR THAT CERTAIN
SECURITY AGREEMENT DATED AS OF AUGUST 25, 2005 AMONG THE COMPANY, INTERNATIONAL
WHOLESALE TILE, INC., THE TILE CLUB, INC. AND IMPORT FLOORING GROUP, INC. IN
FAVOR OF THE HOLDER (THE “SECURITY AGREEMENT” AND II. THE INDEBTEDNESS EVIDENCED
BY THE SECURED CONVERTIBLE TERM NOTE DATED FEBRUARY 10, 2006) OR THE ANCILLARY
AGREEMENTS (AS SUCH TERM IS DEFINED IN THE SECURITY AGREEMENT) BEYOND THE PERIOD
OF GRACE (IF ANY), THE EFFECT OF WHICH DEFAULT IS TO CAUSE, OR PERMIT THE HOLDER
OR HOLDERS OF SUCH INDEBTEDNESS OR BENEFICIARY OR BENEFICIARIES OF SUCH
CONTINGENT OBLIGATION TO CAUSE, SUCH INDEBTEDNESS TO BECOME DUE PRIOR TO ITS
STATED MATURITY OR SUCH CONTINGENT OBLIGATION TO BECOME PAYABLE;

 

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(E)                                  MATERIAL ADVERSE EFFECT. ANY CHANGE OR THE
OCCURRENCE OF ANY EVENT WHICH COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT;

 

(F)                                    BANKRUPTCY. THE COMPANY OR ANY OF ITS
SUBSIDIARIES SHALL (I) APPLY FOR, CONSENT TO OR SUFFER TO EXIST THE APPOINTMENT
OF, OR THE TAKING OF POSSESSION BY, A RECEIVER, CUSTODIAN, TRUSTEE OR LIQUIDATOR
OF ITSELF OR OF ALL OR A SUBSTANTIAL PART OF ITS PROPERTY, (II) MAKE A GENERAL
ASSIGNMENT FOR THE BENEFIT OF CREDITORS, (III) COMMENCE A VOLUNTARY CASE UNDER
THE FEDERAL BANKRUPTCY LAWS (AS NOW OR HEREAFTER IN EFFECT), (IV) BE ADJUDICATED
A BANKRUPT OR INSOLVENT, (V) FILE A PETITION SEEKING TO TAKE ADVANTAGE OF ANY
OTHER LAW PROVIDING FOR THE RELIEF OF DEBTORS, (VI) ACQUIESCE TO, WITHOUT
CHALLENGE WITHIN TEN (10) DAYS OF THE FILING THEREOF, OR FAILURE TO HAVE
DISMISSED, WITHIN THIRTY (30) DAYS, ANY PETITION FILED AGAINST IT IN ANY
INVOLUNTARY CASE UNDER SUCH BANKRUPTCY LAWS, OR (VII) TAKE ANY ACTION FOR THE
PURPOSE OF EFFECTING ANY OF THE FOREGOING;

 

(G)                                 JUDGMENTS. ATTACHMENTS OR LEVIES IN EXCESS
OF $250,000 IN THE AGGREGATE ARE MADE UPON THE COMPANY OR ANY OF ITS
SUBSIDIARY’S ASSETS OR A JUDGMENT IS RENDERED AGAINST THE COMPANY’S PROPERTY
INVOLVING A LIABILITY OF MORE THAN $250,000 WHICH SHALL NOT HAVE BEEN VACATED,
DISCHARGED, STAYED OR BONDED WITHIN THIRTY (30) DAYS FROM THE ENTRY THEREOF;

 

(H)                                 INSOLVENCY. THE COMPANY OR ANY OF ITS
SUBSIDIARIES SHALL ADMIT IN WRITING ITS INABILITY, OR BE GENERALLY UNABLE, TO
PAY ITS DEBTS AS THEY BECOME DUE OR CEASE OPERATIONS OF ITS PRESENT BUSINESS;

 

(I)                                     CHANGE OF CONTROL. A CHANGE OF CONTROL
(AS DEFINED BELOW) SHALL OCCUR WITH RESPECT TO THE COMPANY, UNLESS HOLDER SHALL
HAVE EXPRESSLY CONSENTED TO SUCH CHANGE OF CONTROL IN WRITING. A “CHANGE OF
CONTROL” SHALL MEAN ANY EVENT OR CIRCUMSTANCE AS A RESULT OF WHICH (I) ANY
“PERSON” OR “GROUP” (AS SUCH TERMS ARE DEFINED IN SECTIONS 13(D) AND 14(D) OF
THE EXCHANGE ACT, AS IN EFFECT ON THE DATE HEREOF), OTHER THAN THE HOLDER, IS OR
BECOMES THE “BENEFICIAL OWNER” (AS DEFINED IN RULES 13(D)-3 AND 13(D)-5 UNDER
THE EXCHANGE ACT), DIRECTLY OR INDIRECTLY, OF 35% OR MORE ON A FULLY DILUTED
BASIS OF THE THEN OUTSTANDING VOTING EQUITY INTEREST OF THE COMPANY (OTHER THAN
A “PERSON” OR “GROUP” THAT BENEFICIALLY OWNS 35% OR MORE OF SUCH OUTSTANDING
VOTING EQUITY INTERESTS OF THE COMPANY ON THE DATE HEREOF), (II) THE BOARD OF
DIRECTORS OF THE COMPANY SHALL CEASE TO CONSIST OF A MAJORITY OF THE COMPANY’S
BOARD OF DIRECTORS ON THE DATE HEREOF (OR DIRECTORS APPOINTED BY A MAJORITY OF
THE BOARD OF DIRECTORS IN EFFECT IMMEDIATELY PRIOR TO SUCH APPOINTMENT OR
(III) THE COMPANY OR ANY OF ITS SUBSIDIARIES MERGES OR CONSOLIDATES WITH, OR
SELLS ALL OR SUBSTANTIALLY ALL OF ITS ASSETS TO, ANY OTHER PERSON OR ENTITY;);

 

(J)                                     INDICTMENT; PROCEEDINGS. THE INDICTMENT
OR CONVICTION OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR ANY EXECUTIVE OFFICER
OF THE COMPANY OR ANY OF ITS SUBSIDIARIES UNDER ANY CRIMINAL STATUTE, OR
COMMENCEMENT OR THREATENED COMMENCEMENT OF CRIMINAL OR CIVIL PROCEEDING AGAINST
THE COMPANY OR ANY OF ITS SUBSIDIARIES OR ANY EXECUTIVE OFFICER OF THE COMPANY
OR ANY OF ITS SUBSIDIARIES PURSUANT TO WHICH STATUTE OR PROCEEDING PENALTIES OR
REMEDIES SOUGHT OR AVAILABLE INCLUDE FORFEITURE OF ANY OF THE PROPERTY OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES;

 

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(K)                                  THE PURCHASE AGREEMENT AND RELATED
AGREEMENTS. (I) AN EVENT OF DEFAULT SHALL OCCUR UNDER AND AS DEFINED IN THE
PURCHASE AGREEMENT OR ANY OTHER RELATED AGREEMENT, (II) THE COMPANY OR ANY OF
ITS SUBSIDIARIES SHALL BREACH ANY TERM OR PROVISION OF THE PURCHASE AGREEMENT OR
ANY OTHER RELATED AGREEMENT IN ANY MATERIAL RESPECT AND SUCH BREACH, IS NOT
CURED WITHIN ANY APPLICABLE CURE OR GRACE PERIOD PROVIDED IN RESPECT THEREOF (IF
ANY) (III) THE COMPANY OR ANY OF ITS SUBSIDIARIES ATTEMPTS TO TERMINATE,
CHALLENGES THE VALIDITY OF, OR ITS LIABILITY UNDER, THE PURCHASE AGREEMENT OR
ANY RELATED AGREEMENT, (IV) ANY PROCEEDING SHALL BE BROUGHT TO CHALLENGE THE
VALIDITY, BINDING EFFECT OF THE PURCHASE AGREEMENT OR ANY RELATED AGREEMENT OR
(V) THE PURCHASE AGREEMENT OR ANY RELATED AGREEMENT CEASES TO BE A VALID,
BINDING AND ENFORCEABLE OBLIGATION OF THE COMPANY OR ANY OF ITS SUBSIDIARIES (TO
THE EXTENT SUCH PERSONS OR ENTITIES ARE A PARTY THERETO);

 

(L)                                     STOP TRADE. AN SEC STOP TRADE ORDER OR
PRINCIPAL MARKET TRADING SUSPENSION OF THE COMMON STOCK SHALL BE IN EFFECT FOR
FIVE (5) CONSECUTIVE DAYS OR FIVE (5) DAYS DURING A PERIOD OF TEN
(10) CONSECUTIVE DAYS, EXCLUDING IN ALL CASES A SUSPENSION OF ALL TRADING ON A
PRINCIPAL MARKET, PROVIDED THAT THE COMPANY SHALL NOT HAVE BEEN ABLE TO CURE
SUCH TRADING SUSPENSION WITHIN THIRTY (30) BUSINESS DAYS OF THE NOTICE THEREOF
OR LIST THE COMMON STOCK ON ANOTHER PRINCIPAL MARKET WITHIN SIXTY (60) BUSINESS
DAYS OF SUCH NOTICE; OR

 

3.2                                 DEFAULT PAYMENT. FOLLOWING THE OCCURRENCE
AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, THE HOLDER, AT ITS OPTION,
MAY DEMAND REPAYMENT IN FULL OF ALL OBLIGATIONS AND LIABILITIES OWING BY COMPANY
TO THE HOLDER UNDER THIS NOTE, THE PURCHASE AGREEMENT AND/OR ANY OTHER RELATED
AGREEMENT AND/OR MAY ELECT, IN ADDITION TO ALL RIGHTS AND REMEDIES OF THE HOLDER
UNDER THE PURCHASE AGREEMENT AND THE OTHER RELATED AGREEMENTS AND ALL
OBLIGATIONS AND LIABILITIES OF THE COMPANY UNDER THE PURCHASE AGREEMENT AND THE
OTHER RELATED AGREEMENTS, TO REQUIRE THE COMPANY TO MAKE A DEFAULT PAYMENT
(“DEFAULT PAYMENT”). THE DEFAULT PAYMENT SHALL BE 130% OF THE OUTSTANDING
PRINCIPAL AMOUNT OF THE NOTE, PLUS ACCRUED BUT UNPAID INTEREST, ALL OTHER FEES
THEN REMAINING UNPAID, AND ALL OTHER AMOUNTS PAYABLE HEREUNDER. THE DEFAULT
PAYMENT SHALL BE APPLIED FIRST TO ANY FEES DUE AND PAYABLE TO THE HOLDER
PURSUANT TO THIS NOTE, THE PURCHASE AGREEMENT, AND/OR THE OTHER RELATED
AGREEMENTS, THEN TO ACCRUED AND UNPAID INTEREST DUE ON THIS NOTE AND THEN TO THE
OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE. THE DEFAULT PAYMENT SHALL BE DUE AND
PAYABLE IMMEDIATELY ON THE DATE THAT THE HOLDER HAS EXERCISED ITS RIGHTS
PURSUANT TO THIS SECTION 4.3.

 

ARTICLE IV

MISCELLANEOUS

 

4.1                                 CUMULATIVE REMEDIES. THE REMEDIES UNDER THIS
NOTE SHALL BE CUMULATIVE.

 

4.2                                 FAILURE OR INDULGENCE NOT WAIVER. NO FAILURE
OR DELAY ON THE PART OF THE HOLDER HEREOF IN THE EXERCISE OF ANY POWER, RIGHT OR
PRIVILEGE HEREUNDER SHALL OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR
PARTIAL EXERCISE OF ANY SUCH POWER, RIGHT OR PRIVILEGE PRECLUDE OTHER OR FURTHER
EXERCISE THEREOF OR OF ANY OTHER RIGHT, POWER OR PRIVILEGE. ALL RIGHTS AND
REMEDIES EXISTING HEREUNDER ARE CUMULATIVE TO, AND NOT EXCLUSIVE OF, ANY RIGHTS
OR REMEDIES OTHERWISE AVAILABLE.

 

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4.3                                 NOTICES. ANY NOTICE HEREIN REQUIRED OR
PERMITTED TO BE GIVEN SHALL BE IN WRITING AND SHALL BE DEEMED EFFECTIVELY GIVEN:
(A) UPON PERSONAL DELIVERY TO THE PARTY NOTIFIED, (B) WHEN SENT BY CONFIRMED
TELEX OR FACSIMILE IF SENT DURING NORMAL BUSINESS HOURS OF THE RECIPIENT, IF
NOT, THEN ON THE NEXT BUSINESS DAY, (C) FIVE DAYS AFTER HAVING BEEN SENT BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, OR
(D) ONE DAY AFTER DEPOSIT WITH A NATIONALLY RECOGNIZED OVERNIGHT COURIER,
SPECIFYING NEXT DAY DELIVERY, WITH WRITTEN VERIFICATION OF RECEIPT. ALL
COMMUNICATIONS SHALL BE SENT TO THE COMPANY AT THE ADDRESS PROVIDED IN THE
PURCHASE AGREEMENT EXECUTED IN CONNECTION HEREWITH, AND TO THE HOLDER AT THE
ADDRESS PROVIDED IN THE PURCHASE AGREEMENT FOR SUCH HOLDER, WITH A COPY TO JOHN
E. TUCKER, ESQ., 825 THIRD AVENUE, 14TH FLOOR, NEW YORK, NEW YORK 10022,
FACSIMILE NUMBER (212) 541-4434, OR AT SUCH OTHER ADDRESS AS THE COMPANY OR THE
HOLDER MAY DESIGNATE BY TEN DAYS ADVANCE WRITTEN NOTICE TO THE OTHER PARTIES
HERETO.

 

4.4                                 AMENDMENT PROVISION. THE TERM “NOTE” AND ALL
REFERENCES THERETO, AS USED THROUGHOUT THIS INSTRUMENT, SHALL MEAN THIS
INSTRUMENT AS ORIGINALLY EXECUTED, OR IF LATER AMENDED OR SUPPLEMENTED, THEN AS
SO AMENDED OR SUPPLEMENTED, AND ANY SUCCESSOR INSTRUMENT AS SUCH SUCCESSOR
INSTRUMENT MAY BE AMENDED OR SUPPLEMENTED.

 

4.5                                 ASSIGNABILITY. THIS NOTE SHALL BE BINDING
UPON THE COMPANY AND ITS SUCCESSORS AND ASSIGNS, AND SHALL INURE TO THE BENEFIT
OF THE HOLDER AND ITS SUCCESSORS AND ASSIGNS, AND MAY BE ASSIGNED BY THE HOLDER
IN ACCORDANCE WITH THE REQUIREMENTS OF THE PURCHASE AGREEMENT. THE COMPANY MAY
NOT ASSIGN ANY OF ITS OBLIGATIONS UNDER THIS NOTE WITHOUT THE PRIOR WRITTEN
CONSENT OF THE HOLDER, ANY SUCH PURPORTED ASSIGNMENT WITHOUT SUCH CONSENT BEING
NULL AND VOID.

 

4.6                                 COST OF COLLECTION. IN CASE OF ANY EVENT OF
DEFAULT UNDER THIS NOTE, THE COMPANY SHALL PAY THE HOLDER REASONABLE COSTS OF
COLLECTION, INCLUDING REASONABLE ATTORNEYS’ FEES.

 

4.7                                 GOVERNING LAW, JURISDICTION AND WAIVER OF
JURY TRIAL.

 

(A)                                  THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

(B)                                 THE COMPANY HEREBY CONSENTS AND AGREES THAT
THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND,
PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS;
PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE
OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR
OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
IN ANY

 

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OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR
ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND
THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.

 

(C)                                  THE COMPANY DESIRES THAT ITS DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN THE HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH,
RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH THIS NOTE, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO
OR THERETO.

 

4.8                                 SEVERABILITY. IN THE EVENT THAT ANY
PROVISION OF THIS NOTE IS INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE
OR RULE OF LAW, THEN SUCH PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT
THAT IT MAY CONFLICT THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH
STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR
UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY OTHER PROVISION OF THIS NOTE.

 

4.9                                 MAXIMUM PAYMENTS. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO ESTABLISH OR REQUIRE THE PAYMENT OF A RATE OF INTEREST OR
OTHER CHARGES IN EXCESS OF THE MAXIMUM PERMITTED BY APPLICABLE LAW. IN THE EVENT
THAT THE RATE OF INTEREST REQUIRED TO BE PAID OR OTHER CHARGES HEREUNDER EXCEED
THE MAXIMUM RATE PERMITTED BY SUCH LAW, ANY PAYMENTS IN EXCESS OF SUCH MAXIMUM
RATE SHALL BE CREDITED AGAINST AMOUNTS OWED BY THE COMPANY TO THE HOLDER AND
THUS REFUNDED TO THE COMPANY.

 

4.10                           SECURITY INTEREST AND GUARANTEE. THE HOLDER HAS
BEEN GRANTED A SECURITY INTEREST (I) IN CERTAIN ASSETS OF THE COMPANY AND ITS
SUBSIDIARIES AS MORE FULLY DESCRIBED IN THE MASTER SECURITY AGREEMENT DATED AS
OF THE DATE HEREOF AND (II) IN THE EQUITY INTERESTS OF THE COMPANIES’
SUBSIDIARIES PURSUANT TO THE STOCK PLEDGE AGREEMENT DATED AS OF THE DATE HEREOF.
THE OBLIGATIONS OF THE COMPANY UNDER THIS NOTE ARE GUARANTEED BY CERTAIN
SUBSIDIARIES OF THE COMPANY PURSUANT TO THE SUBSIDIARY GUARANTY DATED AS OF THE
DATE HEREOF.

 

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4.11                           CONSTRUCTION. EACH PARTY ACKNOWLEDGES THAT ITS
LEGAL COUNSEL PARTICIPATED IN THE PREPARATION OF THIS NOTE AND, THEREFORE,
STIPULATES THAT THE RULE OF CONSTRUCTION THAT AMBIGUITIES ARE TO BE RESOLVED
AGAINST THE DRAFTING PARTY SHALL NOT BE APPLIED IN THE INTERPRETATION OF THIS
NOTE TO FAVOR ANY PARTY AGAINST THE OTHER.

 

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

 

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

 

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IN WITNESS WHEREOF, the Company has caused this Secured Term Note to be signed
in its name effective as of this      day of May, 2006.

 

 

IWT TESORO CORPORATION

 

 

 

By:

 

 

Name:

 

Title:

 

WITNESS:

 

 

 

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