**Exhibit 10.38**

**AMENDMENT**

This AMENDMENT #2 (this “**Amendment 2**”), dated as of March 31, 2006, but  effective as of August 25, 2005 (“AmendmentEffective Date”), is entered into by and between IWT TESORO CORPORATION, aNevada corporation (the “**Company**”),INTERNATIONAL WHOLESALE TILE INC., a Florida corporation (“**Tile**” and, together with the Company, the “**Credit Parties**” and, each a “**Credit Party**”)****and LAURUS MASTER FUND, LTD., a Cayman Islands company (“**Laurus**”), for the purpose of amending theterms of (i) the Security Agreement, dated as of August 25, 2005, byand between the Credit Parties and Laurus (as amended, modified or supplementedfrom time to time, the “**Security Agreement**”)and (ii) the Convertible Minimum Borrowing Note by and between the Companyand Credit Parties, dated as of August 25, 2005 (as amended, modified orsupplemented from time to time, the ”Minimum Note” and, together with theSecurity Agreement and the other Ancillary Documents referred to in theSecurity Agreement, the ”**Loan Documents**”).Capitalized terms used herein without definition shall have the meaningsascribed to such terms in the Security Agreement.

A.            TheCredit Parties and Laurus agree to amend the Minimum Note in order toaccurately reflect the intent of the parties.

NOW,THEREFORE, in consideration of the above, and for other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, theparties hereto agree as follows:

1.             Sections 3.6 (c) ShareIssuances and 3.6(d) Computation of Consideration of theMinimum Note shall be deleted in their entirety and shall have no further forthor effect.

2.             The Company understands that theCompany has an affirmative obligation to make prompt public disclosure ofmaterial agreements and material amendments to such agreements. The Companyhereby agrees that Laurus shall not be in violation of any duty to the Companyor its shareholders, nor shall Laurus be deemed to be misappropriating anyinformation of the Company, if Laurus sells shares of common stock of theCompany, or otherwise engages in transactions with respect to securities of theCompany, while in possession of the information contained in this Amendment.

3.             Each Credit Party hereby representsand warrants to Laurus that (i) no Event of Default exists on the datehereof, (ii) on the date hereof, all representations, warranties andcovenants made by the Company in connection with the Loan Documents are true,correct and complete and (iii) on the date hereof, all of the Company’sand its Subsidiaries’ covenant requirements have been met.

4.             From and after the AmendmentEffective Date, all references in the Loan Documents and in the other RelatedAgreements to the Minimum Note shall be deemed to reference to the MinimumNote, as the case may be, as modified hereby.

5.             This Amendment shall be bindingupon the parties hereto and their respective successors and permitted assignsand shall inure to the benefit of and be enforceable by each of the partieshereto and their respective successors and permitted assigns. **THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH ANDGOVERNED BY THE LAW OF THE STATE OF NEW YORK.**This Amendmentmay be executed in any number of counterparts, each of which shall be anoriginal, but all of which shall constitute one instrument.

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**IN WITNESS WHEREOF**, each Credit Party andLaurus have caused this Amendment to the Loan Documents to be signed in itsname as of this      day of             ,2006, but shall be effective as of the Amendment Effective Date..

**IWTTESORO CORPORATION**

By:________________________________

     Henry J.Boucher, Jr., President and CEO

**INTERNATIONALWHOLESALE TILE, INC.**

By:________________________________

     Paul F.Boucher, President

**LAURUS MASTER FUND, LTD.**

By:______________________________

Name:

Title:

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