Document:

Exhibit 10.30

 

REAFFIRMATION AND
RATIFICATION AGREEMENT

 

February 10, 2006

 

Laurus Master Fund, Ltd.

c/o Laurus Capital Management, LLC

825 Third Avenue

New York, New York 10022

 

Ladies and Gentlemen:

 

Reference is made to the (a) Security Agreement, dated as of August 25,
2005 among IWT Tesoro Corporation, a Nevada corporation (the “Parent”),
International Wholesale Tile, Inc., a Florida corporation (“IWT”) The Tile
Club, Inc., a Delaware corporation (“Tile Club”) and Import Flooring Group, Inc.,
a Delaware corporation (“IFG”) in favor of Laurus Master Fund, Ltd., a Cayman
Islands company (“Laurus”) (as amended, modified or supplemented from time to
time, the “Security Agreement”), (b) the Security Agreement, dated as of August 25,
2005 made by IWT Tesoro Transport, Inc., a Florida corporation (“Transport”),
IFG, Tile Club and IWT Tesoro International Ltd., a Bermuda corporation (“International”)
in favor of Laurus (as amended, modified or supplemented from time to time, the
“Subsidiary Security Agreement”), (c) the Continuing Guaranty Agreement,
dated as of August 25, 2005 made by International, Transport, Tile Club
and IFG in favor of Laurus (as amended, modified or supplemented, the “Continuing
Guaranty”), and (d) the Grant of Security Interest in Patent and
Trademarks, dated as of August 25, 2005 made by IWT in favor of Laurus
(the “IP Assignment”, and together with the Security Agreement, the Subsidiary
Security Agreement and the Continuing Guaranty, the “Existing Security and
Guaranty Agreements”).

 

To induce
Laurus to provide additional financial accommodations to the Parent evidenced
by (i) that certain Secured Convertible Term Note, dated the date hereof,
made by the Parent in favor of Laurus (as amended, modified or supplemented
from time to time, the “New Laurus Term Note”), (ii) the Purchase
Agreement referred to in the New Laurus Term Note (as amended, modified or
supplemented from time to time, the “New Laurus Purchase Agreement”); (iii) the
Related Agreements referred to in, and defined in, the New Laurus Purchase
Agreement (the agreements set forth in the preceding clauses (i) through
(iii), inclusive, collectively, the “New Laurus Agreements”) as of the date
hereof, each of the Parent, IWT, International, Transport, Tile Club and IFG, hereby:

 

(a)       represents
and warrants to Laurus that it has reviewed and approved the terms and
provisions of each of the New Laurus Agreements and the documents, instruments
and agreements entered into in connection therewith;

 

(b)       acknowledges,
ratifies and confirms that all indebtedness incurred by, and all other
obligations and liabilities of, each of the Parent, Tile Club, IWT, IFG,
Transport and International under each of the New Laurus Agreements are  (i) “Obligations” under, and as defined
in the Security Agreement and (ii) “Guaranty Obligations” under, and as
defined in the

 

 

Continuing
Guaranty, acknowledges, ratifies and confirms that each of the New Laurus
Agreements are (i) “Ancillary Agreements” under, and as defined in  the Security Agreement and (ii) “Loan
Documents” under, and as defined in, the Continuing Guaranty;

 

(c)       acknowledges,
ratifies and confirms that all of the terms, conditions, representations and
covenants contained in the Existing Security and Guaranty Agreements are in
full force and effect and shall remain in full force and effect after giving
effect to the execution and effectiveness of each of the New Laurus Agreements;

 

(d)       represents
and warrants that no offsets, counterclaims or defenses exist as of the date
hereof with respect to any of the undersigned’s obligations under any Existing
Security and Guaranty Agreement;

 

(e)       acknowledges,
ratifies and confirms the grant by each of the Parent, Tile Club, IFG, IWT,
Transport and International to Laurus of a security interest in its assets  (including the equity interests owned by it),
as more specifically set forth in the Existing Security and Guaranty Agreements;
and

 

(f)        acknowledges,
ratifies and confirms that all indebtedness incurred by, and all other
obligations and liabilities of, each of the Parent, IWT, Tile Club, IFG,
Transport and International under each of the New Laurus Agreements are “Obligations”
under, and as defined in the IP Assignment.

 

Laurus
hereby acknowledges and agrees that all of the aforementioned security interests
are subject to the terms of that certain Senior Subordination Agreement dated
as of August 25, 2005 by and between Laurus and Fleet Capital Corporation,
as the same may be amended, modified or supplemented from time to time.

 

[The remainder of this page is
intentionally left blank]

 

2

 

This letter agreement
shall be governed by and construed in accordance with the laws of the State of
New York.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  IWT TESORO CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Henry J. Boucher, Jr., CEO

  
	
   

  	
  191 Post Road West, Suite 10

  
	
   

  	
  Westport, CT 06880

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTERNATIONAL WHOLESALE TILE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Paul F. Boucher, President

  
	
   

  	
  3500 N.W. 42nd Ave

  
	
   

  	
  Palm City, Florida 34990

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IWT TESORO TRANSPORT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Henry J. Boucher, Jr., CEO

  
	
   

  	
  191 Post Road West, Suite 10

  
	
   

  	
  Westport, CT 06880

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE TILE CLUB, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Henry J. Boucher, Jr., CEO

  
	
   

  	
  191 Post Road West, Suite 10

  
	
   

  	
  Westport, CT 06880

  

 

3

 

	
   

  	
  IMPORT FLOORING GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Henry J. Boucher, Jr., CEO

  
	
   

  	
  191 Post Road West, Suite 10

  
	
   

  	
  Westport, CT 06880

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IWT TESORO INTERNATIONAL, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Henry J. Boucher, Jr., Director

  
	
   

  	
  191 Post Road West, Suite 10

  
	
   

  	
  Westport, CT 06880

  
	
   

  	
   

  
	
   

  	
   

  
	
  Acknowledged
  and Agreed to by:

  	
   

  
	
   

  	
   

  
	
  LAURUS MASTER FUND, LTD.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
						

 

4Exhibit 10.1

 

October 17, 2005

 

 

Jeff Mathiesen

13640 Duluth Drive

Apple Valley, MN 55124

 

Jeff:

 

I would like to offer you
the position of Vice President and Chief Financial Officer with Waters
Instruments, Inc. The details of the position are confirmed below:

 

	
  Title:

  	
   

  	
  Vice President and
  Chief Financial Officer

  
	
  First Day of Employment:

  	
   

  	
  On or about December 1,
  2005

  
	
  Location:

  	
   

  	
  Based in Plymouth,
  travel as needed

  
	
  Report to:

  	
   

  	
  Jerry Grabowski,
  President and CEO

  
	
  Salary:

  	
   

  	
  $167,000 with bonus
  potential of 35% first year of employment

  
	
  Stock Options:

  	
   

  	
  35,000 shares

  
	
  Vacation:

  	
   

  	
  208 hours accrued first
  year of employment

  
	
  Benefits:

  	
   

  	
  Insurance eligibility
  begins on or about December 1, 2005. Health, Dental, Life Insurance, and
  Disability premiums will be reimbursed as taxable income 401(k) eligibility
  begins after 6 months of employment

  

 

I hope to welcome you to
Waters Instruments, Inc. If you have any questions, please let me know.

 

 

Sincerely,

 

 

	
  /s/ Jerry Grabowski

  	
   

  
	
  Jerry Grabowski

  
	
   

  
	
  President and Chief
  Executive Officer

  
	
  Waters Instruments, Inc.

  

 

1EXHIBIT 10.2

 

SECOND
AMENDMENT TO CREDIT AND SECURITY AGREEMENT

 

This Second Amendment,
dated as of December 23, 2005, is made by and among ZAREBA SYSTEMS, INC.,
f/k/a Waters Instruments, Inc., a Minnesota corporation (the “Original
Borrower”), WATERS MEDICAL SYSTEMS, INC., a Minnesota corporation (“Waters
Medical Systems”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, acting through
its WELLS FARGO BUSINESS CREDIT operating division (the “Lender”).

 

Recitals

 

Effective August 1,
2005, Wells Fargo Business Credit, Inc. (the “Original Lender”) merged
into Wells Fargo Bank, National Association.

 

The Original Borrower and
the Lender are parties to a Credit and Security Agreement dated as of September 7,
2004 as amended by the First Amendment to Credit and Security Agreement dated
as of April 29, 2005 (which, as the same is amended hereby, shall be the “Credit
Agreement”). Capitalized terms used in these recitals have the meanings given
to them in the Credit Agreement unless otherwise specified.

 

Effective on or about October 28,
2005, the Original Borrower changed its name to Zareba Systems, Inc. (“Zareba”).

 

The Original Borrower
organized Waters Medical Systems as a new wholly-owned subsidiary on March 2,
2005, and on June 30, 2005 transferred all the assets of the Original
Borrower’s medical products division to Waters Medical Systems. The Lender was
not at or before such times apprised of such transactions and has not consented
thereto.

 

The transfer of assets
and business operations to Waters Medical Systems as described above has caused
the assets owned by Waters Medical Systems to not be available for inclusion as
Collateral or in the Borrowing Base (as such terms are defined in the Credit
Agreement.)

 

The Original Borrower has
requested that certain amendments be made to the Credit Agreement to make the
assets of Waters Medical Systems available for inclusion in such Collateral and
Borrowing Base, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.

 

NOW, THEREFORE, in consideration
of the premises and of the mutual covenants and agreements herein contained, it
is agreed as follows:

 

1.                                       Defined
Terms. Capitalized terms used in this Second Amendment that are defined in the
Credit Agreement shall have the same meanings as defined therein, unless
otherwise defined herein.

 

2.                                       “Borrower”
Definition; Security Interest; Borrowing Base. The term “Borrower” shall for
all purposes as used herein and in the Credit Agreement and in any other Loan
Document refer to both the Original Borrower and Waters Medical Systems. From
and after the date of this Second Amendment (a) the Original Borrower and
Waters Medical Systems will be jointly and severally liable for all
Obligations, whether now existing or hereinafter created or incurred, and
whether originally owing to Wells Fargo Business Credit, Inc., as the
Original Lender, or to Wells Fargo Bank, National Association, as creditor
under any Wells Fargo Bank Obligation, or as Lender, and (b) Waters
Medical Systems will be deemed to have granted to the Lender a security
interest in and to all the Collateral as security for the payment and
performance of all the Obligations in accordance with Article III of the
Credit Agreement. Collateral owned by Waters Medical Systems will be included
in the Borrowing Base to the extent it otherwise satisfies the requirements
therefore; provided that Eligible Inventory will also exclude Inventory
constituting products sold by Waters Medical Systems.

 

 

3.                                       No
Other Changes. Except as explicitly amended by this Amendment, all of the terms
and conditions of the Credit Agreement shall remain in full force and effect
and shall apply to any advance or letter of credit thereunder.

 

4.                                       Effectiveness;
Post-Execution Covenants. This Second Amendment shall be effective immediately
upon execution hereof by the Original Borrower and Waters Medical Systems, and
delivery hereof to the Lender. Not later than 15 days after such date the
Borrower shall deliver to the Lender each of the following, each in substance
and form acceptable to the Lender in its sole discretion:

 

(a)                                  A
Certificate of the Secretary of the Original Borrower certifying as to (i) the
resolutions of the board of directors of the Original Borrower approving the
execution and delivery of this Second Amendment, (ii) the fact that the
articles of incorporation and bylaws of the Borrower, which were certified and
delivered to the Lender pursuant to the Certificate of Authority of the
Borrower’s secretary or assistant secretary dated as of August 25, 2004
continue in full force and effect and have not been amended or otherwise
modified except as set forth in the Certificate to be delivered (which shall
reflect the change in the name of the Original Borrower), and (iii) certifying
that the officers and agents of the Original Borrower who have been certified
to the Lender, pursuant to the Certificate of Authority of the Original
Borrower’s secretary or assistant secretary dated as of August 25, 2004 as
being authorized to sign and to act on behalf of the Original Borrower continue
to be so authorized or setting forth the sample signatures of each of the
officers and agents of the Original Borrower authorized to execute and deliver
this Second Amendment and all other documents, agreements and certificates on
behalf of the Original Borrower.

 

(b)                                 An
amended and restated Revolving Note (or other satisfactory joinder of Waters
Medical Systems as an obligor thereunder) executed by Zareba and Waters Medical
Systems.

 

(c)                                  An
amended and restated Real Estate Term Note (or other satisfactory joinder of
Waters Medical Systems as an obligor thereunder) executed by Zareba and Waters
Medical Systems.

 

(d)                                 An
amended and restated Equipment Term Note (or other satisfactory joinder of
Waters Medical Systems as an obligor thereunder) executed by Zareba and Waters
Medical Systems.

 

(e)                                  Any
item described in Section 4.1(d)-(i) of the Credit Agreement, to the
extent applicable to Waters Medical Systems, or a certificate executed thereby
stating such provisions are not applicable.

 

(f)                                    A
UCC Financing Statement filed with the Secretary of State for the State of
Minnesota perfecting the Lender’s interest in all assets of Waters Medical
Systems.

 

(g)                                 A
UCC financing search showing that Lender holds a first priority perfected
security interest in all assets of Waters Medical Systems.

 

(h)                                 Execution
and delivery by Waters Medical Systems of agreements substantially similar to,
or joinders to, the agreements referenced in Section 4.1(k)-(m) of the
Credit Agreement, in either case as required by and satisfactory to the Lender.

 

(i)                                     A
current certificate issued by the Secretary of State of Minnesota, certifying
that Waters Medical Systems is in compliance with all applicable organizational
requirements of the State of Minnesota.

 

(j)                                     Evidence
that Waters Medical Systems is duly licensed or qualified to transact business
in all jurisdictions where the character of the property owned or leased or the
nature of the business transacted by it makes such licensing or qualification
necessary.

 

(k)                                  An
opinion of counsel to the Borrower, addressed to the Lender, as to the certain
matters relating to Waters Medical Systems.

 

2

 

(l)                                     A
Customer Identification Information form and such other forms and
verification as Lender may need from Waters Medical Systems to comply with
the U.S.A. Patriot Act.

 

(m)                               With
respect to the Mortgaged Real Estate, an evaluation ordered by Lender or its
agent of said Real Estate and all improvements thereon reflecting that the
value of the Mortgaged Real Estate has been maintained at not less than the
amount at which it was appraised on or about the Funding Date.

 

(n)                                 A
certificate of Waters Medical Systems’s Secretary or Assistant Secretary
certifying that attached to such certificate are (i) the resolutions of
Waters Medical Systems’s Directors and, if required, Owners, authorizing the
execution, delivery and performance of this Agreement and the documents
required herein, (ii) true, correct and complete copies of the Waters
Medical Systems’s Constituent Documents, and (iii) examples of the
signatures of the Waters Medical Systems’s Officers or agents authorized to
execute and deliver the Agreement and the other documents required herein.

 

(o)                                 Certificates
of the insurance for Waters Medical System as required under the Credit
Agreement, with all hazard insurance containing a lender’s loss payable
endorsement in the Lender’s favor and with all liability insurance naming the
Lender as an additional insured.

 

(p)                                 Payment
of the costs and expenses described in Section 9.

 

(q)                                 Such
other matters as the Lender may require.

 

Failure by the Borrower to deliver any of the
foregoing when required or perform any other obligation hereunder as
required hereby will constitute an Event of Default under the Credit Agreement.

 

5.                                       Representations
and Warranties. The Borrower hereby represents and warrants to the Lender as
follows:

 

(a)                                  The
Borrower has all requisite power and authority to execute this Amendment and to
perform all of its obligations hereunder, and this Second Amendment has
been duly executed and delivered by the Borrower and constitutes the legal,
valid and binding obligation of the Borrower, enforceable in accordance with
its terms.

 

(b)                                 The
execution, delivery and performance by the Borrower of this Second Amendment
have been duly authorized by all necessary corporate action and do not (i) require
any authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate
any provision of any law, rule or regulation or of any order, writ,
injunction or decree presently in effect, having applicability to the Borrower,
or the articles of incorporation or by-laws of the Borrower, or (iii) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Borrower is
a party or by which it or its properties may be bound or affected.

 

(c)                                  All
of the representations and warranties contained in Article V of the Credit
Agreement are correct on and as of the date hereof as though made on and as of
such date, except to the extent that such representations and warranties relate
solely to an earlier date.

 

6.                                       References.
All references in the Credit Agreement to “this Agreement” shall be deemed to
refer to the Credit Agreement as amended hereby; and any and all references in
the Security Documents to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.

 

7.                                       No
Waiver. The execution of this Second Amendment and acceptance of any documents
related hereto shall not be deemed to be a waiver of any Default or Event of
Default under the Credit Agreement (including, without limitation, any such
Event of Default arising by virtue of the transfer of assets to Water Medical

 

3

 

Systems) or breach, default or event of default under
any Security Document or other document held by the Lender, whether or not
known to the Lender and whether or not existing on the date of this Second
Amendment.

 

8.                                       Release.
The Borrower hereby absolutely and unconditionally releases and forever
discharges the Lender, and any and all participants, parent corporations,
subsidiary corporations, affiliated corporations, insurers, indemnitors,
successors and assigns thereof, together with all of the present and former
directors, officers, agents and employees of any of the foregoing, from any and
all claims, demands or causes of action of any kind, nature or description,
whether arising in law or equity or upon contract or tort or under any state or
federal law or otherwise, that the Borrower has had, now has or has made claim
to have against any such person for or by reason of any act, omission, matter, cause
or thing whatsoever arising from the beginning of time to and including the
date of this Second Amendment, whether such claims, demands and causes of
action are matured or unmatured or known or unknown.

 

9.                                       Costs
and Expenses. The Borrower hereby reaffirms its agreement under the Credit
Agreement to pay or reimburse the Lender on demand for all costs and expenses
incurred by the Lender in connection with the Loan Documents, including without
limitation all reasonable fees and disbursements of legal counsel. Without
limiting the generality of the foregoing, the Borrower specifically agrees to
pay all fees and disbursements of counsel to the Lender for the services
performed by such counsel in connection with the preparation of this Second
Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to
the Borrower under the Credit Agreement, or apply the proceeds of any loan, for
the purpose of paying any such fees, disbursements, costs and expenses.

 

10.                                 Miscellaneous.
This Second Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and all of
which counterparts, taken together, shall constitute one and the same
instrument.

 

IN WITNESS WHEREOF, the
parties hereto have caused this Second Amendment to be duly executed as of the
date first written above.

 

	
  ZAREBA SYSTEMS, INC., a Minnesota corporation 

  	
  WATERS MEDICAL SYSTEMS, INC., a Minnesota

  corporation 

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jerry Grabowski

  	
   

  	
  By:

  	
  /s/ Jerry Grabowski

  	
   

  
	
  Its:

  	
  President & CEO

  	
   

  	
  Its:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian J. Waldinger

  	
   

  
	
   

  	
  Its

  	
  Vice President

  

 

4

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