Document:

Exhibit
10.45

PROJECT DEVELOPMENT AND

MANAGEMENT AGREEMENT

THIS
AGREEMENT is entered into this 20 day of November, 2006, by and among Italian
Tiles Technology, Inc., a         corporation,
                                                         ,
individually and collectively referred to as “Manager,” and American Gres,
Inc., a Delaware corporation herein referred to as “Owner.” and a wholly-owned
subsidiary IWT Tesoro Corporation, a Nevada corporation.

WHEREAS, Manager has invested
substantial time and efforts in the development of detailed plans and
specifications for a fully equipped modern, technologically advanced porcelain
and ceramic tile manufacturing facility in the United States, and

WHEREAS, Manager possesses the
technical knowledge and necessary skills to affect the efficient and profitable
development and operation of such manufacturing facility for porcelain and
ceramic tiles (trade and cut tiles , mosaics, special items and decorative
pieces, individually and collectively,  “Tiles”)
, and

WHEREAS, Owner desires to engage
Manager to develop, bring to production status and thereafter manage such Tiles
manufacturing facility (“Facility”) , currently projected to be located in               ,
United States and

WHEREAS, Manager is willing to
utilize all of its resources, expertise, experience, technical training and
other skills, to effectuate the development and management of such Facility,
and

WHEREAS, Owner desires to engage
Manager on the terms and conditions below set forth,

THE PARTIES HEREBY AGREE AS FOLLOWS:

ARTICLE 1.  
PROJECT

Manager covenants
to the Owner as follows: (i) Manager holds an option (“Option”), free and clear
of any liens or encumbrances of any kind or nature (“Lien”) and will maintain
such Option as such, or, as directed, assign such Option to Owner, to purchase
the land described in Exhibit A attached hereto and made a part hereof ( the ‘Land”)
upon which is proposed to be constructed certain improvements and buildings
(all improvements, buildings, and land, inclusive of the Facility,  herein collectively called “Project”) as
generally set forth and described in the TESORO PROJECT USA business plan to be
attached hereto as Exhibit C and made a part hereof. (ii) the Land, which is
not subject to any Lien and on which there is good and marketable title may be
purchased upon exercise of the Option for $1,200,000; and (iii) at least each
of and                                                         
a development, production or manufacturing professional to be agreed by the
parties, in addition to                        ,
will, on the 

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commencement of
the duties of Manager hereunder, be able to devote their full time attention
and efforts to their obligations hereunder and their undertaking of such duties
will not conflict with any contractual undertaking which any of them have to
third persons or parties.  If any of the
foregoing persons die or become disabled, then a replacement having like
professional skills must be promptly advised to the Owner and provided by the
Manager.  It is acknowledged by Manager
that none of the individual parties will receive any compensation from the
Owner except indirectly by reason of the payment of the fees set forth in
Exhibit B, Parts I and II.

Upon assignment of the
option to the Owner, the Manager will have no further interest therein and the
payments made by the Manager to the seller of the Land and any legal fees
($20,100.00)  incurred by the Manager
with respect to the Option shall be reimbursed to the Manager by the
Owner.  The Owner shall pay any similarly
billed but as yet unpaid legal fees directly. While the holder of the Option
the Owner shall make the extension of Option payments to the seller of the
Land.  The Owner shall make such payments
to such seller of the Land and any other costs associated with holding such
Option under the Option Agreement with the seller of the Land.  Except as provided above, the transfer of the
Option to the Owner will be without additional costs or expense to Owner.

It is understood that
currently the Option may be extended from month to month, beginning in
November, 2006, until 11:59 P.M. on May 1, 2007, upon payment to the owner of
the Land of the sum of $10,000 per month and the first of two of such payments
will be applied to the purchase price of the Land and those thereafter will not
be credited to the purchase price of the Land. Subject to the foregoing, and
the conditions precedent set forth in Section 9.03, Owner desires to purchase
the Land and to engage the Manager to design, develop and construct and then
manage the Facility thereon.

The Manager further
covenants to Owner that the Facility will have at least three presses, three
glazing lines, 2 kilns and have a capacity for a third kiln and two additional
presses and lines. Each of such installations will be capable of producing in
three eight (8) hour shifts 5,000,000 square meters of quality Tiles per shift
per annum no later than 12 months after the Owner secures financing for the
Project at a full manufacturing capacity of 5,000,000 square meters per year
and, starting within fifteen (15) months following the financial closing.

ARTICLE 2.  
ENGAGEMENTAS DEVELOPER AND MANAGER

2.01.          Owner hereby retains
Manager to serve as the manager of the Project from the date hereof until the
end of the 60th month following the date the Owner secures the
Financing. Manager accepts such engagement, as an independent contractor and in
no other capacity, and shall perform the management duties and obligations and
furnish the services in a proper,continuous and efficient manner in all
respects and instances in accordance with this Agreement and the Exhibits
attached hereto.

It is specifically
understood by the Manager that Owner shall have no obligations hereunder until
such time as Owner has secured the Financing and Manager is advised in writing
by Owner to 

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proceed with the
Project. The individual parties named in Article 1 shall conduct all of their
obligations hereunder from offices in                        and
after construction has been completed at the Facility and be available at all
times to Owner for discussions of any aspect of the Project. Concurrently with
the payment to Manager of the $1 Million fee referred to in Exhibit B, the
Manager shall deliver to the Owner all plans (engineering and otherwise), drawings,
schematics, ideas, concepts and intellectual property, all equipment and
machinery lists and specifications and such other materials as may be necessary
for the build out and operation of the Project. Thereafter, all of the
foregoing shall be owned by Owner free of Liens.

2.02           It is specifically
understood that (i) the Project shall be managed by the Manager strictly in
accordance with the design, development, construction, production processes and
operational budgets prepared by the Manager and approved by the Owner attached
to Exhibit D [the Project also includes purchasing and putting in place all
machinery, equipment and systems (electrical and otherwise) necessary for the
Facility and the Project]; and (ii) the Manager shall not incur any expense or
cost for which the Owner shall be responsible except those which are in the
budgets to be attached to Exhibit D.

2.03.          Manager shall design,
supervise the construction of, and otherwise develop the Facility so it is of a
size, have the functionality and realized production capacity within time
parameters all in accordance with Exhibit D. 
All negotiations undertaken in connection therewith shall be conducted
by Manager, subject to securing the prior written approval of the Owner before
executing or entering into any contract, or series of contracts, related in any
manner to the Project with a value of more than $10,000.  Manager shall schedule and coordinate all
construction activities, maintain personal contact with all general and
subcontractors engaged in the development and construction of the Project.  All inquiries to Owner regarding any aspect
of the development and construction of the Facility and all negotiations
undertaken in connection therewith shall be conducted by the Manager. Manager
shall obtain the prior written approval of Owner in each instance before
executing, modifying, terminating, renewing, or otherwise amending any
contract, or series of contracts, valued at more than $10,000. Wherever
reference is made herein to an approval it shall be deemed to be required to be
in writing. Manager shall secure in a timely manner all requisite licenses,
permits and approvals from any governmental or regulatory body in order to
develop the Project and build and operate the Facility.

2.04.          Manager shall assist
Owner in the development and implementation of a comprehensive marketing
program (including use of market aids such as brochures, presentation
facilities, displays, models, renderings, signs, advertisements, news releases,
newsletters, and entertainment) in accordance with Exhibit D, the budgets
attached to Exhibit C and in a manner compatible with the quality of the
Project. All marketing and other activities shall make clear thatthe Manager is
not the owner of the Project or the Facility.

2.05.          Subject to the budgets
agreed to by Owner, Manager is authorized and agrees to enlist the services of
such other contractors as may be necessary or prudent to aid in the development
of the Project.

2.06           Manager shall maintain
complete records of all arrangements with such contractors and in respect to
all aspects of the Project.

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2.07   (1) 
Manager shall:

(a)   Maintain
and provide all services to the Project in accordance with standards as agreed
and acceptable to Owner, including, without limitation, maintenance of
mechanical systems and equipment, and such other maintenance, alteration, and
repair work as may be reasonably prudent or necessary, provided, however, the
expense to be incurred for any one item or related series of items of
maintenance, alteration, refurbishing, or repair shall not exceed the sum of
$10,000, unless such expense is specifically approved by Owner, or is incurred
under such circumstances as Manager shall reasonably deem to be an emergency.
In an emergency where repairs are immediately necessary for the preservation
and safety of the Project, or to avoid the suspension of any essential service
to the Project, or to avoid danger to life or property, such emergency repairs
shall be made by Manager at Owner’s cost without the prior approval of Owner,
provided such emergency expenditure shall not exceed the sum of $100,000 per
emergency.  When Manager learns of such
emergency, Manager shall promptly telephone or wire Owner, and in no event later
than twenty-four (24) hours after Manager learns of such emergency, notify
Owner in writing of such emergency;

(b)          Obtain
and keep in effect, at the expense of the Owner, such policies of insurance as
required by Article 4 hereof and obtain and keep in effect, at Manager’s own
expense, such policies of insurance as are required of Manager under the agreed
Insurance Schedule attached as Exhibit F.

(c)          Make
contracts on behalf of Owner for security services and maintenance, and other
similar operating services as Manager or Owner (whose decision shall govern)
shall deem necessary or prudent; such contracts shall provide for cancellation
by Owner without penalty on thirty days prior written notice from Owner unless
Owner has agreed otherwise in writing;

(d)          Make
such action as may be necessary to comply with any and all laws, ordinances,
regulations obligations, rules or requirements affecting the Project
promulgated by any governmental body and/or boards of fire underwriters having
jurisdiction over the Project, and

(e)          Purchase
and make arrangements for the installation of all machinery, equipment,
systems, tools, appliances, materials, and supplies to be used solely in
connection with the Project.  When taking
bids or issuing purchase orders, Manager shall act at all times in the best
interest of Owner and shall be under a duty to secure for and credit to Owner
any discounts, commissions, or rebates obtainable as a result of such
purchases. None of such activities pursuant to this subparagraph shall be done
other than in accordance with the budgets in Exhibit B.

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(2)           In addition to the
above duties, Manager shall:

(a)           Provide
regular and systematic inspections and oversight of the entire Project,
included but not limited to all aspects of running and operating the plant
facility and adjacent facilities owned by the Owner, subject to the policies,
procedures, rules and regulations of the Owner and those required by applicable
laws and regulations, including, but not limited to, human resources, OSHA,
disability laws and environmental matters;

(b)           Comply
with any requirements concerning the management or maintenance of the Project
necessary for the effective and efficient construction or operation of the
Facility or imposed upon Owner, including without limitation, the selection and
supervision of all contractors or employees of Manager performing work or
repair or capital expenditures or replacement work at the Project;

(c)           Keep
Owner informed of the Project’s physical condition;

(d)           Maintain,
in a manner customary and consistent with good accounting principles as
requested from time to time by the Owner , a system of records and accounts to
which shall be entered fully and accurately each and every financial and other
transaction undertaken by Manager at Owner’s direction, such books and records
to be maintained by Manager at Manager’s office located in the town where the
Facility is to be located and after construction at the Facility, and all of
such shall be available to Owner at all reasonable times. All of such records
and accounts shall be maintained in a secure and confidential manner and
provisions for back up and redundancy shall be in force and effect at all
times;

(e)           Execute
in time to file all forms, reports and returns required by law related to
employment of personnel employed by Manager at the Project;

(f)            Promptly
cause the issuance or transfer of any necessary business licenses and permits
for the Project; and

(g)           Promptly
investigate and make, subject to Owner’s approval in each instance, a complete
and timely written report to the appropriate insurance company of all damages,
accidents, or claims relating to the ownership, operation, and maintenance of
the Project. No settlement of any claim shall be made without the Owner’s
approval.

Manager is further authorized to:

(h)           Open
an impress account only for the Project up to $2,500.00 with funds provided by
Owner All proposed expenditures of any nature relating to the Project shall be
sent to the Owner, with appropriate back up materials, for approval and
payment.

(i)            Institute
legal proceedings in the name of Owner to otherwise enforce the rights 

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of Owner through legal means, subject, in each
instance, to the prior written approval of Owner;

(j)            Negotiate
for reduction in ad valorem or other taxes or assessments applicable to
Project;

(k)           Obtain
all necessary governmental approvals and permits and to take all necessary acts
to comply with all laws, rules, ordinances, statutes, and regulations
applicable to the Project and Facility; and

(l)            Do
any other things on behalf of Owner consistent with this Agreement and
necessary or appropriate, in the judgment of the Manager, for the Facility and
the profitable operation of the Project on behalf of Owner.

(m)          Manager
shall, subject to the budgets in Exhibit D and the approval of the Owner,
including but not limited to all aspects of running and operating the plant
facility and adjacent facilities owned by the Owner, subject to the policies,
procedures, rules and regulations of the owner and those required by applicable
laws and regulations, including, but not limited to, human resources, OSHA,
disability laws, environmental and safety issues, and shall engage the services
of such manufacturing, supervisory and other employees (technical and
otherwise)  as may be necessary and
prudent to aid in the conduct and management of the Project.  Manager agrees to maintain complete records
in this regard consistent with subparagraph (d) above.  All employee costs, other than those which
the Manager undertakes pursuant to Article 7.02, incurred as provided in the
preceding sentence shall be paid for by the Owner.

(n)           Except
for costs and expenses which this Agreement expressly requires Manager to bear,
the costs and expenses of managing and maintaining the Project shall be borne
by the Owner as though the Owner were directly managing the Project; however,
Manager’s costs and expenses of employing persons to act on its behalf in the
supervisory capacities required of it under this Agreement shall be borne by
Manager.

2.07         In engaging any persons
or entities to perform services in connection with the Project, all need be
pre-qualified, have excellent references and professional backgrounds for the
work or services to be performed and shall be licensed in all respects.

ARTICLE 3.  
STANDARDS FOR MANAGER

In undertaking its
duties hereunder,  Manager shall render
continuous, diligent and competent service and care in performance of its
responsibilities hereunder consistent with standards expected of a first class
contractor, designer, manager and operations firm and shall at all times apply
prudent and business practices consistent therewith.

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ARTICLE 4.  
INSURANCE REPORTS AND CLAIMS

4.01         Manager shall be
responsible for obtaining and maintaining certain insurance coverage as set forth
in Exhibit F attached hereto and made a part hereof. Except where indicated on
Exhibit F, all such insurance shall be for the benefit of the Owner as insured
and be paid for by Owner.

4.02         Manager shall, at the
Owner’s request,  prepare, execute, and
file (or cause to be prepared, executed, and filed) such reports and documents
and make all proper payments to comply with the provisions of the United States
Social Security Act, unemployment compensation laws, workers’ compensation laws
or similar laws in effect in the Project’s state as to all personnel employed
by Manager in connection with the operation of the Project.

ARTICLE 5.  
REPORTS AND STATEMENTS

Monthly Report

5.01.        At its expense, Manager
shall prepare and furnish to Owner on or before the twenty-fifth of each month
a written report of the status of Project for the preceding month. Each such
report shall include:

(1) A
discussion of the current status of the Project during the development stage,
and of the production capacity and operations of the Project during the
production/operation/ management stages of this Agreement with times lines for
completion or commencement of actions.to be taken.  Each report should be accompanied with actual
and pro forma production reports.

(2) A
discussion of any unexpected or anticipated changes or reserves (and the
reasons for them)  required or necessary
from adopted budgets for the Project (which need not be accepted by Owner).

Budget

5.02.        In
addition to budgets to be attached to Exhibit D, the Manager shall from time to
time but not less frequently than semi-annually, prepare and submit to the
Owner for its consideration, which the Owner may adopt or not in its
discretion, together for the reasons necessitating the same, proposed revisions
to the budgets attached to Exhibit D. The Owner acceptance of any revisions to
prior budgets does not constitute a waiver by Owner of any claims it may have
against Manager for failure to adhere to the budgets.

(1) Operating expenses;

(2) On-site personnel
needs at the Project;

(3) Forecast of
production capacity and potential sales of goods produced;

(4) Review of all pending
or anticipated contracts and results to date ; and

(5) Analysis of
the overall operation of the Project.

As approved by the Owner,
shall form the basis on which the Manager shall incur items of expense for the
operation of the Project.

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ARTICLE 6.  
AUDIT

Owner may at any
time, at its option and expense, cause the books and financial operations of
the Project to be audited by any persons selected by it. Manager agrees to
cooperate with each of such persons and to make each of its facilities located
at the Project available to such auditors.

ARTICLE 7.  
ALL PERSONNEL FOR THE PROJECT

Subject to the
provisions of Article 1 (iii):

Personnel

7.01.        Manager shall cause to be
at the Project, subject to the approval of the Owner, qualified personnel if
needed in addition to those of the Manager and if consistent with the approved
budgets,  to diligently develop and
manage the Project.

Manager’s Employees

7.02.        Manager’s employees may
include but need not be limited to the shareholders of Manager.  Manager may, from time to time, accommodate
the Owner through the contracting of additional employees for management
purposes.  The compensation associated
with these contracted employees, when approved by Owner and consistent with the
approved budgets, shall be paid by Owner.

Manager shall
investigate, hire, pay, supervise, and discharge the personnel required by this
Article, all solely in accordance with rules, policies and procedures of the
Owner and consistent with approved budgets and otherwise necessary to be
employed in order to properly develop, maintain, operate, and manage the
Project. Such personnel shall, in each case, be deemed employees of Manager and
not of Owner and shall be deemed employed solely at Manager’s expense and not
of Owner, subject, however, to those specific cases approved in advance by
Owner in its discretion where such expense shall be reimbursable by Owner.
Owner shall have no obligation to directly supervise or direct on a day to day
basis such employees of Manager, or the manner or method by which Manager or
its employees perform their responsibilities under this Agreement; provided,
however, if any such employee negatively impacts the Project or the efficient
operation of the Facility, the Owner may request that such employee not be on
the premises or to work on the Project.

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ARTICLE 8.  
MANAGER’S COMPENSATION

Development Fee

8.01.        Owner agrees to pay to
Manager as a fee for Manager performing the development services required of
Manager under this Agreement on and in the amount set forth in Part II of
Exhibit B.

Management Fee

8.02.        (1) Owner shall pay to
Manager as a management fee for Manager performing the services required of
Manager hereunder a monthly management fee as set forth in Part II of Exhibit
B.

(2) Should the
term hereof end or begin on a day other than the first day of the month, the
8.2 shall be prorated for any partial month.

Reimbursement

8.03.        In the event Manager
should advance any amounts from the impress account in payment of any of the
obligations of Owner set forth herein, Owner shall, upon request, promptly
reimburse Manager for such amounts.

ARTICLE
9. TERM OF AGREEMENT

Term

9.01.        The term of this Agreement
shall be for a period of five (5) years from the date the Owner gives notice to
Manager that it has obtained the Financing.

Termination

9.02.        (1) Upon termination of
this Agreement at the end of its term or upon declaration of a breach thereof,
Manager shall:

(a)           Surrender
and deliver to Owner all monies of Owner on hand, including any money of Owner
received after the effective date of such termination;

(b)           Deliver to Owner all
materials, equipment, keys, plans, drawings, schematics, specifications,
documents, processes, procedures and records relating directly or indirectly to
the Project, all of which are owned by Owner and Manager acknowledges it has no
interest therein.

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(c)           Assign any contracts
relating to the operation of the Project not otherwise in the name of Owner;
and

(d)           Furnish such other
information and take such other action as Owner shall reasonably require.

(2)
Within sixty (60) days after such termination, Manager shall deliver to Owner a
complete written report relative to the Project.  Upon receipt of such report, Owner shall pay
to Manager all reimbursements and other monies, if any (none if there has been
a breach of contract by Manager) then due Manager.

(3)           It is understood that
if there is a breach by Manager of the provisions of this Agreement or its
obligations hereunder, the Owner shall have the right to pursue all rights and
remedies it has under law or in equity, inclusive but limited to a right of set
off or to withhold monies which otherwise would be due to Manager hereunder.

Conditions Precedent

9.03         Notwithstanding anything
contained elsewhere in this Agreement, the obligations of the parties are
subject to the following conditions:

(a)           Owner obtaining and
closing satisfactory financing for the Project on or before (i) the later of
March 31, 2007, or (ii) if elected by Owner and agreed by Manager, the date
immediately prior to the expiration date of any extension which is secured by
Owner to exercise the Option to purchase the Land.

(b)           Development of
acceptable budgets, pro forma financial information and their financial
exhibits, to be attached to this Agreement as Exhibit D, on or before January
31, 2007.

(c)           Agreement by the
parties to a satisfactory definition of “EBITDA” as required for the
calculation of the Incentive Fee set forth in Exhibit B.

(d)           Development of an
acceptable revised Business Plan, to be attached as Exhibit C on or before
January 31, 2007.

(e)           Agreement on an
acceptable Insurance Schedule to be attached as Exhibit F, on or before January
31, 2007.

(f)            Entry of the parties
into an Escrow Agreement, substantially in the form attached hereto as Exhibit
G, on or before January 31, 2007.

9.04         The Manager will use its
best efforts to work with the Owner and the Owner will use its best efforts to
work with the Manager with diligence and continuity to meet the deadlines set
forth above in Section 9.03 of this Agreement. 
If any of the conditions precedent set forth in Section 9.03 are not
secured by the dates above set forth, then either Owner or Manger may terminate

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this Agreement
without further obligation of any kind to the other party, but with notice to
the other party to cure a missed deadline within ten (10) business days.

ARTICLE 10. ACTIVITIES OF OWNER

Owner
covenants and agrees that even though it may have either ownership interest in
or managerial responsibility for other operations, the products of which
compete with the products produced by the Project, Owner will use its best
efforts to deal with the Project on an equitable basis.

ARTICLE 11. INDEMNITY OF OWNER

The Manager shall
indemnify and hold harmless the Owner from and against (i) a breach by Manager
of any of its covenants or obligations hereunder; and (ii) all costs, expenses,
claims actions or proceedings of any kind or nature which arise as a results of
the acts or omissions of the Manager or its employees, contractors, agents or
representatives during the development or implementation of the Project. Owner
shall give notice to Manager of any of the matters referenced in the preceding
sentence.

ARTICLE 12. MISCELLANEOUS PROVISIONS

Laws and Interpretation of Laws

12.01.      This Agreement shall be
interpreted and construed in accordance with the laws of the State             .
Any disputes with respect to the interpretation of this Agreement or the rights
and obligations of the parties shall be brought exclusively in the United
States District Court for the Northern District of              or
if such court lacks subject matter jurisdiction in the state courts of the
State of                      .
Each of the parties waives the right to contest the jurisdiction or venue of
either of such courts or to claim it is an inconvenient forum. Each of the
individual parties hereto who are not U.S. persons select                   
as his agent for the service of any process and service on such person shall
constitute service on such party.

Successors and Assigns

12.02.      This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors at law, but the Manager may not assign its rights or obligations
herunder.

Independent Contractor

12.03.      This Agreement is a
management agreement only and does not grant to Manager any ownership right or
interest whatsoever in any part of the Project, the concepts, plans or ideas
used to effectuate the Project or any property or rights of Owner pertaining to
any of the foregoing.. In carrying out its obligations hereunder, Manager is
acting as an independent contractor and this Agreement is not intended to and
does not constitute or result in a partnership or joint venture of any kind
between Owner and Manager with respect to the operation of the Project or any
other matter.

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Notices

12.04.      Any notice or other
communication required or permitted to be given to the parties hereto shall be
deemed to have been given or submitted when delivered by hand, or, on the fifth
day after such notice is deposited in the mail in registered form, first class
postage prepaid, addressed as follows:

If to Owner:

Original to:            Henry J. Boucher, Jr.

Chief Executive
Officer

American Gres,
Inc.

Suite 10

191 Post Road West

Westport,
CT 06880

Copy to:                 David W. Sloan

Senior Managing
Director

BlueLight Capital
LLC

12 Roscrea

Weston,
CT 06883

If to Manager:

Original
to:

 

Copy to:

 

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Changes

12.05.      No change or modification of
this Agreement shall be valid or binding upon the parties hereto, nor shall any
waiver of any term or condition in the future, unless such change or
modification or waiver shall be in writing and signed by the parties hereto.

Entire Agreement

12.06.      This Agreement, together
with the Exhibits attached hereto, 
represent the entire agreement of the parties hereto with respect to the
subject matter hereof, and all prior discussions, representations, agreements,
covenants, and warranties of the parties are null and void and superceded by the
provisions hereof.

Set-Off
Provisions

12.07       If and to the extent Owner is owed any sum under
this Agreement by Manager, Owner may, without in any way limiting or
compromising any rights to which either of them may be entitled at law, set off
against or withheld from any sums which Manager may then be owed.  Any such set off or withholding shall be made
by Owner against any payments due or to become due as Owner may determine.

Counterparts

12.08       This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall be one and the same instrument.

IN WITNESS WHEREOF, the
undersigned have duly executed this Agreement on the date first above written.

	
  

  	
  OWNER:

  
	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
  Henry J. Boucher, Jr., Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MANAGER:

  
	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SHAREHOLDERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  

 

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EXHIBIT B

PART
I.   DEVELOPMENT FEES TO MANAGER

The development
stage of the project, as defined in the Agreement, shall extend until the
Project is producing porcelain and ceramic tile at the rate of eighty percent
of projected capacity of five million square meters per year with ninety
percent of such production being first quality production.

Manager’s fees for
the development of the Project shall include the following:

(1)           Upon the Owner
confirming that Financing has been secured shall receive a one time development
fee of One Million Dollars ($1,000,000), of which sum ten percent (10%) shall
be held in escrow pursuant to the terms of the Escrow Agreement attached hereto
as Exhibit G and made a part hereof, to assure the faithful performance by
Manager of its development obligations under the Agreement.

(2)           During the development
stage of the Project, Manager shall receive an annual fee of One Million Four
Hundred Fifty Thousand Dollars ($1,450,000) payable in equal monthly
installments at the end of each calendar month, in arrears (the “Fee”).  For any portion of a year, the Fee shall be
prorated, accordingly.  The sum of ten
percent (10%) of each such payment shall be placed in escrow pursuant to the
Escrow Agreement referenced in the preceding paragraph.

(3)           Manager shall receive
such number of shares of restricted stock of IWT Tesoro Corporation as is equal
in value to $250,000 based upon the average closing stock price for such
securities in the 30-day period prior to date the Financing has been confirmed
by the Owner to have been secured.  Such
shares may not be sold by Manager prior to the third anniversary of the Owner
securing the Financing for the Project, and the certificate for such shares
shall be held by the Escrow Agent.

The project
development period is the time from the securing of the Financing until the end
of the development stage as described in the opening paragraph of this Part I.

 14
 

 

PART II. MANAGEMENT FEES TO MANAGER

The management
stage of the Project extends from the conclusion of the development stage of
the Project until the end of the term of the Agreement, subject to the
provisions of subparagraph (4), below.

Manager’s fees for
managing the Project shall be computed as follows:

(1)           Commencing immediately
upon the end of the Project Development period and during the balance of the
term of this Agreement, Manager shall receive an annual management fee equal to
the Fee, payable
monthly in arrears.

(2)           Monies to be reimbursed
to Manager by Owner under any other provision of this Agreement.

(3)           In addition, Manager
shall receive an “Incentive Fee” at the conclusion of the term of this
Agreement.  Said Incentive Fee shall be
equal to                     of
the financial value of the Project as of the last day of the Term of this
Agreement, calculated as follows:

(a)           Value of the Project
=                         .

(b)           Incentive Fee =                                   ;

it
being understood that the Incentive Fee amount and calculation shall be subject
to the provisions of Section 9.03(c).

The
value of the Project, for purposes of the calculation of the Incentive Fee due
to Manager shall be determined by the independent certified accounting firm
regularly engaged by Owner whose decision shall be final and binding.  The Incentive Fee shall be determined by the
regularly engaged certified public accounting firm of the Owner in accordance
with the formula for determining the Incentive Fee as agreed by the parties and
such firm’s determination shall be binding or the parties in all respects.

The
Incentive Fee shall be calculated at the conclusion of the Term.  Upon mutual agreement, the Incentive Fee may
be paid either: in cash; or, in the common stock of the Owner; or, in some
combination of cash and common stock of the Owner; it being understood that
neither party shall be obligated to agree to pay any portion of the Incentive
Fee as the common stock of Owner.

(4)           Other than in a
transaction in which the Owner, its parent or affiliate of either of them is a
purchaser or surviving or controlling party, upon any sale of, merger or
consolidation of or any other transfer of the entire ownership of the
manufacturing facility prior to the end of the initial term of the Agreement to
any entity in which the obligations of the Owner under this Agreement are not
assumed and the credit worthiness of the purchaser or survivor is not at least
as good as that of the Owner at the time of such transaction and the entire
proceeds of the transaction is paid in cash to the Owner, then in such event,
and only in such event, the Manager shall be entitled to elect (which election
shall be exercised within ten (10) days of the notice to Manager of the date of
the closing of the transaction) to accelerate the payment of the Incentive Fee
in subparagraph (3), above, however such Incentive Fee shall be calculated as
of the date of any 

 15
 

 

such transaction
and not as the date it would have been calculated if the transaction had not
occurred.  In such case only, in lieu of
the determination of the value of the Project and Incentive Fee, as per
subparagraph (3), above, the Incentive Fee shall be calculated as                              of
the “net cash” proceeds to the Owner in such transaction.  Such election of the Manager shall be subject
to claims, if any, against it by the Owner. 
If the acceleration is elected and the Incentive Fee is paid to the
Manager, as of such payment date the Fee to the Manager pursuant to Part I (2)
and Part II (1), above, shall cease and terminate.

(5)           Any and all funds due
Manager under this Part II, above, of this Exhibit B, shall be subject to the
terms of the Escrow Agreement attached hereto as Exhibit G.

 16Exhibit 4.1

FORM OF REGISTRATION
RIGHTS AGREEMENT

This Registration Rights Agreement (the “Agreement”)
is made and entered into as of this  13th  day of November, 2006 by and among
World Heart Corporation, a corporation continued under the laws of the Canada
(the “Company”), and the “Investors” named in that certain Purchase Agreement
by and among the Company and the Investors (the “Purchase Agreement”) and the Agent.
Capitalized terms used herein have the respective meanings ascribed thereto in
the Purchase Agreement unless otherwise defined herein.

The parties hereby
agree as follows:

1.             Certain Definitions.

As used in this Agreement, the following terms shall
have the following meanings:

“Agent” shall
mean ThinkEquity Partners LLC.

“Agent Shares”
shall mean the common shares to be issued to the Agent on the Second Closing.

“Common Stock”
shall mean the Company’s Common Shares, and any securities into which such
shares may hereinafter be reclassified.

“Initial Registrable
Securities” shall mean (i) the Initial Shares, and (ii) any
other securities issued or issuable with respect to or in exchange for Initial
Registrable Securities; provided, that, a security shall cease to be an Initial
Registrable Security upon (A) sale pursuant to a Registration Statement or
Rule 144 under the 1933 Act, or (B) such security becoming eligible
for sale by the Investors pursuant to Rule 144(k).

“Investors”
shall mean the Investors identified in the Purchase Agreement and any Affiliate
or permitted transferee of any Investor who is a subsequent holder of any
Registrable Securities.

“Prospectus”
shall mean (i) the prospectus included in any Registration Statement, 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 such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated
by reference in such prospectus, and (ii) any “free writing prospectus” as
defined in Rule 405 under the 1933 Act.

“Register,” “registered” and “registration”
refer to a registration made by preparing and filing a Registration Statement
or similar document in compliance with the 1933 Act (as defined below), and the
declaration or ordering of effectiveness of such Registration Statement or
document.

“Registrable Securities”
shall mean the Initial Registrable Securities and the Remaining Registrable
Securities.

“Registration Statement”
shall mean any registration statement of the Company filed under the 1933 Act
that covers the resale of any of the Registrable Securities pursuant to the
provisions of this Agreement, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all material
incorporated by reference in such Registration Statement.

“Remaining Registrable
Securities” shall mean (i) the Remaining Shares, (ii) the
Agent Shares and (iii) any other securities issued or issuable with
respect to or in exchange for Remaining Registrable Securities; provided, that,
a security shall cease to be a Remaining Registrable Security upon (A) sale
pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such
security becoming eligible for sale by the Investors or the Agent, as
applicable, pursuant to Rule 144(k).

 1
 

“Required Investors”
means the Investors holding a majority of the Initial Registrable Securities
and/or the Remaining Registrable Securities, as applicable, not counting any
Remaining Registrable Securities that are held by the Agent.

2.             Registration.

(a)           Registration Statements.

(i)            Promptly
following the First Closing but no later than five (5) business days after
the First Closing Date (the “First Filing Deadline”), the Company shall prepare
and file with the SEC one Registration Statement on Form S-3 (or, if
Form S-3 is not then available to the Company, on such form of
registration statement as is then available to effect a registration for resale
of the Initial Registrable Securities) covering the resale of the Initial
Registrable Securities. Such Registration Statement shall include the plan of
distribution attached hereto as Exhibit A,
subject to any SEC comments thereon. Such Registration Statement also shall
cover, to the extent allowable under the 1933 Act and the rules promulgated
thereunder (including Rule 416), such indeterminate number of additional
shares of Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Initial Registrable Securities. Except as
provided in clause (ii) below, such Registration Statement shall not
include any shares of Common Stock or other securities for the account of any
other holder without the prior written consent of the Required Investors. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in
accordance with Section 3(c) to the Investors and their counsel prior
to its filing or other submission. If a Registration Statement covering the
Initial Registrable Securities is not filed with the SEC on or prior to the
First Filing Deadline, the Company will make pro rata payments to each Initial
Investor, as liquidated damages and not as a penalty, in an amount equal to 1.0%
of the aggregate amount invested by such Initial Investor for each 30-day
period or pro rata for any portion thereof following the First Filing Deadline
for which no Registration Statement is filed with respect to the Initial
Registrable Securities. Such payments shall constitute the Initial Investors’
exclusive monetary remedy for such events, but shall not affect the right of
the Initial Investors to seek injunctive relief. Such payments shall be made to
each Initial Investor in cash.

(ii)           Promptly
following the Second Closing but no later than five (5) business days
after the Second Closing Date (the “Second Filing Deadline”), the Company shall
prepare and file with the SEC one Registration Statement on Form S-3
or amend the Registration Statement filed in connection with the First Closing,
if not yet effective, (or, if Form S-3 is not then available to the
Company, on such form of registration statement as is then available to effect
a registration for resale of the Remaining Registrable Securities) covering the
resale of the Remaining Registrable Securities. Such Registration Statement
shall include the plan of distribution attached hereto as Exhibit A,
subject to any SEC comments thereon. Such Registration Statement also shall
cover, to the extent allowable under the 1933 Act and the rules promulgated
thereunder (including Rule 416), such indeterminate number of additional
shares of Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Remaining Registrable Securities. Such
Registration Statement shall not include any shares of Common Stock or other
securities for the account of any other holder without the prior written
consent of the Required Investors. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to
the Investors and their counsel prior to its filing or other submission. If a
Registration Statement covering the Remaining Registrable Securities is not
filed with the SEC on or prior to the Second Filing Deadline, the Company will
make pro rata payments to each Remaining Investor, as liquidated damages and
not as a penalty, in an amount equal to 1.0% of the aggregate amount invested
by such

 2
 

Remaining Investor for
each 30-day period or pro rata for any portion thereof following the
Second Filing Deadline for which no Registration Statement is filed with
respect to the Remaining Registrable Securities. Such payments shall constitute
the Remaining Investors’ exclusive monetary remedy for such events, but shall
not affect the right of the Remaining Investors to seek injunctive relief. Such
payments shall be made to each Remaining Investor in cash.

(iii)          Notwithstanding
the provisions of Section 2(a)(ii), if at any time the SEC takes the
position that the offering of the Remaining Registrable Securities as
contemplated by the Registration Statement violates the provisions of Rule 415
under the 1933 Act because of the number of shares included in such
Registration Statement, the Company shall (i) remove from the Registration
Statement such portion of the Remaining Registrable Securities and/or (ii) agree
to such restrictions and limitations on the registration and resale of the
Remaining Registrable Securities as the SEC may require to assure the Company’s
compliance with the requirements of Rule 415. Any cut-back imposed
pursuant to this Section 2(a)(iii) shall be allocated among the
Remaining Investors on a pro rata basis. The provisions of this Section 2(a)(iii) shall
not limit or otherwise affect the obligations of the Company, which are
absolute and unconditional, to effect the registration of the Registrable
Securities as provided in this Agreement. In the event of any cut-back imposed
pursuant to this Section 2(a)(iii), the Company shall use commercially
reasonable efforts to effect the registration of any Registrable Securities
excluded from a Registration Statement as promptly as practicable.

(b)           Expenses.   The Company will pay all expenses associated
with each registration, including filing and printing fees, counsel and
accounting fees and expenses, costs associated with clearing the Registrable
Securities for sale under applicable state securities laws, listing fees, fees
and expenses of one counsel to the Investors and the Investors’ reasonable
expenses in connection with the registration, but excluding discounts,
commissions, fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals with respect to the Registrable Securities
being sold.

(c)           Effectiveness.

(i)            The
Company shall use commercially reasonable efforts to have each Registration
Statement declared effective as soon as practicable. The Company shall notify
the Initial Investors or the Remaining Investors, as applicable, by facsimile
or e-mail as promptly as practicable, and in any event, within twenty-four (24)
hours, after any Registration Statement is declared effective and shall
simultaneously provide the Initial Investors or the Remaining Investors, as
applicable, with copies of any related Prospectus to be used in connection with
the sale or other disposition of the securities covered thereby. If (A)(x) a
Registration Statement covering the Initial Registrable Securities is not
declared effective by the SEC on or prior to the earlier of (i) five (5) Business
Days after the SEC shall have informed the Company that no review of the
Registration Statement will be made or that the SEC has no further comments on
the Registration Statement, or (ii) the 60th day after the First Closing Date (the 90th day if the SEC comments on the Registration
Statement), or (y) a Registration Statement covering the Remaining
Registrable Securities is not declared effective by the SEC on or prior to the
earlier of (i) five (5) Business Days after the SEC shall have
informed the Company that no review of the Registration Statement will be made
or that the SEC has no further comments on the Registration Statement, or (ii) the
60th day after
the Second Closing Date (the 90th day if the SEC comments on the Registration
Statement), or (B) after a Registration Statement has been declared
effective by the SEC, sales cannot be made pursuant to such Registration
Statement for any reason (including without limitation by reason of a stop
order, or the Company’s failure to update the Registration Statement), but
excluding the inability of any Investor to sell the Registrable Securities
covered thereby due to

 3
 

market conditions and
except as excused pursuant to subparagraph (ii) below, then the Company
will make pro rata payments to each Initial Investor or Remaining Investor, as
applicable , as liquidated damages and not as a penalty, in an amount equal to
1.0% of the aggregate amount invested by such Investor for each 30-day
period or pro rata for any portion thereof following the date by which such
Registration Statement should have been effective (the “Blackout Period”);
provided, however, that no liquidated damages shall be payable to any Remaining
Investor resulting solely from the application of the provisions of Section 2(a)(iii).
Such payments shall constitute the Initial Investors’ exclusive monetary remedy
for such events, but shall not affect the right of the Initial Investors to
seek injunctive relief. Such payments shall be made to each Initial Investor in
cash. The amounts payable as liquidated damages pursuant to this paragraph
shall be paid monthly within three (3) Business Days of the last day of
each month following the commencement of the Blackout Period until the
termination of the Blackout Period. Such payments shall be made to each
Investor in cash.

(ii)           No
more than twice in any twelve (12) month period for an aggregate of not more
than thirty (30) day, the Company may delay the disclosure of material
non-public information concerning the Company, by suspending the use of any
Prospectus included in any registration contemplated by this Section containing
such information, the disclosure of which at the time is not, in the good faith
opinion of the Company, in the best interests of the Company (an “Allowed Delay”);
provided, that the Company shall promptly (a) notify the affected
Investors in writing of the existence of (but in no event, without the prior
written consent of an affected Investor, shall the Company disclose to such
Investor any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay, and (b) advise the affected
Investors in writing to cease all sales under the Registration Statement until the
end of the Allowed Delay.

3.             Company Obligations.   The Company will use commercially
reasonable efforts to effect the registration of the Registrable Securities in
accordance with the terms hereof, and pursuant thereto the Company will, as
expeditiously as possible:

(a)           use
commercially reasonable efforts to cause such Registration Statement to become
effective and to remain continuously effective for a period that will terminate
upon the earlier of (i) the date on which all Registrable Securities
covered by such Registration Statement as amended from time to time, have been
sold, and (ii) the date on which all Registrable Securities covered by
such Registration Statement may be sold pursuant to Rule 144(k) and
shall advise the affected Investors when such period has expired;

(b)           prepare
and file with the SEC such amendments and post-effective amendments to the
Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective for the period specified in Section 3(a) and
to comply with the provisions of the 1933 Act and the 1934 Act with respect to
the distribution of all of the Registrable Securities covered thereby;

(c)           provide
copies to and permit counsel designated by the Investors to review each
Registration Statement and all amendments and supplements thereto no fewer than
three (3) Business Days prior to their filing with the SEC and not file any
document to which such counsel reasonably objects;

(d)           furnish
to the Investors and their legal counsel (i) promptly after the same is
prepared and publicly distributed, filed with the SEC, or received by the
Company (but not later than two (2) Business Days after the filing date,
receipt date or sending date, as the case may be) one (1) copy of any
Registration Statement and any amendment thereto, each preliminary prospectus
and Prospectus and each amendment or supplement thereto, and each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement (other than any portion of any thereof

 4
 

which contains
information for which the Company has sought confidential treatment), and (ii) such
number of copies of a Prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as each Investor
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor that are covered by the related
Registration Statement;

(e)           use
commercially reasonable efforts to (i) prevent the issuance of any stop
order or other suspension of effectiveness and, (ii) if such order is
issued, obtain the withdrawal of any such order at the earliest possible
moment;

(f)            prior
to any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with the Investors and their
counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions requested by the Investors and do any and all other
commercially reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (i) qualify
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(f), (ii) subject itself to general
taxation in any jurisdiction where it would not otherwise be so subject but for
this Section 3(f), or (iii) file a general consent to service of
process in any such jurisdiction;

(g)           use
commercially reasonable efforts to cause all Registrable Securities covered by
a Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed;

(h)           immediately
notify the Investors, at any time when the Company is required to maintain the
effectiveness of a Registration Statement on behalf of such Investors, upon
discovery that, or upon the happening of any event as a result of which, the
Prospectus as then in effect, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
then existing, and at the request of any such holder, promptly prepare, file
with the SEC and furnish to such holder a reasonable number of copies of a
supplement to or an amendment of such Prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus shall not include 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 not misleading in light of the circumstances then existing;

(i)            otherwise
use commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, including, without
limitation, Rule 172 under the 1933 Act, file any final Prospectus,
including any supplement or amendment thereof, with the SEC pursuant to Rule 424
under the 1933 Act, promptly inform the Investors in writing if, at any time
during the period during which the Company is required to maintain an effective
Registration Statement, the Company does not satisfy the conditions specified
in Rule 172 and, as a result thereof, the Investors are required to
deliver a Prospectus in connection with any disposition of Registrable
Securities and take such other actions as may be reasonably necessary to facilitate
the registration of the Registrable Securities hereunder; and make available to
its security holders, as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement covering a period
of at least twelve (12) months, beginning after the effective date of each
Registration Statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the 1933 Act, including Rule 158 promulgated
thereunder (for the purpose of this subsection 3(i), “Availability Date” means
the 45th day following the end of the fourth fiscal quarter that includes the
effective date of such Registration Statement, except that, if such fourth
fiscal quarter is the last 

 5
 

quarter of the Company’s
fiscal year, “Availability Date” means the 90th day after the end of such
fourth fiscal quarter); and

(j)            With
a view to making available to the Investors the benefits of Rule 144 (or
its successor rule) and any other rule or regulation of the SEC that may
at any time permit the Investors to sell shares of Common Stock to the public
without registration, the Company covenants and agrees to: (i) make and
keep public information available, as those terms are understood and defined in
Rule 144, until the earlier of (A) six months after such date as all
of the Registrable Securities may be resold pursuant to Rule 144(k) or
any other rule of similar effect or (B) such date as all of the
Registrable Securities shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the
1934 Act; and (iii) furnish to each Investor upon request, as long as such
Investor owns any Registrable Securities, (A) a written statement by the
Company that it has complied with the reporting requirements of the 1934 Act, (B) a
copy of the Company’s most recent Annual Report on Form 10-KSB and
most recent Quarterly Report on Form 10-QSB, and (C) such other
information as may be reasonably requested in order to avail such Investor of
any rule or regulation of the SEC that permits the selling of any such
Registrable Securities without registration.

4.             Due Diligence Review; Information.   The Company shall
make available, during normal business hours, for inspection and review by the
Investors, advisors to and representatives of the Investors (who may or may not
be affiliated with the Investors and who are reasonably acceptable to the
Company), all financial and other records, all SEC Filings (as defined in the
Purchase Agreement) and other filings with the SEC, and all other corporate
documents and properties of the Company as may be reasonably necessary for the
purpose of such review, and cause the Company’s officers, directors and
employees, within a reasonable time period, to supply all such information
reasonably requested by the Investors or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling
the Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of such Registration
Statement.

The Company shall
not disclose material nonpublic information to the Investors, or to advisors to
or representatives of the Investors, unless prior to disclosure of such
information the Company identifies such information as being material nonpublic
information and provides the Investors, such advisors and representatives with
the opportunity to accept or refuse to accept such material nonpublic
information for review and any Investor wishing to obtain such information
enters into an appropriate confidentiality agreement with the Company with
respect thereto.

5.             Obligations of the Investors and Agent.

(a)           Each
Investor and the Agent shall furnish in writing to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it, as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least five (5) Business Days prior to the first
anticipated filing date of any Registration Statement, the Company shall notify
each Investor and the Agent of the information the Company requires from such
Investor or the Agent if such Investor or the Agent elect to have any of the
Registrable Securities included in the Registration Statement. An Investor and
the Agent shall provide such information to the Company at least two
(2) Business Days prior to the first anticipated filing date of such
Registration Statement if such Investor or the Agent elect to have any of the
Registrable Securities included in the Registration Statement.

 6

(b)           Each
of the Investors and the Agent, by its acceptance of the Registrable Securities
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of a Registration Statement
hereunder, unless such Investor or the Agent has notified the Company in
writing of its election to exclude all of its Registrable Securities from such
Registration Statement.

(c)           Each
of the Investors and the Agent agrees that, upon receipt of any notice from the
Company of either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or
(ii) the happening of an event pursuant to Section 3(j) hereof,
such Investor and the Agent will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities, until the Investor’s or the Agent’s receipt of the
copies of the supplemented or amended prospectus filed with the SEC and
declared effective and, if so directed by the Company, the Investor and the
Agent shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in the
Investor’s and the Agents possession of the Prospectus covering the Registrable
Securities current at the time of receipt of such notice.

6.             Indemnification.

(a)           Indemnification by the Company.   The Company will
indemnify and hold harmless each Investor and its officers, directors, members,
employees and agents, successors and assigns, and each other person, if any,
who controls such Investor within the meaning of the 1933 Act and the Agent against
any losses, claims, damages or liabilities, joint or several, to which they may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement, any preliminary Prospectus or
final Prospectus, or any amendment or supplement thereof; (ii) any blue
sky application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company filed in any
state or other jurisdiction in order to qualify any or all of the Registrable
Securities under the securities laws thereof (any such application, document or
information herein called a “Blue Sky Application”); (iii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; (iv) any violation
by the Company or its agents of any rule or regulation promulgated under
the 1933 Act applicable to the Company or its agents and relating to action or
inaction required of the Company in connection with such registration; or (v) any
failure to register or qualify the Registrable Securities included in any such
Registration in any state where the Company or its agents has affirmatively
undertaken or agreed in writing that the Company will undertake such
registration or qualification on an Investor’s or the Agent’s behalf and will
reimburse such Investor or the Agent, and each such officer, director or member
and each such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not be liable in any such
case if and to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information furnished
by such Investor or the Agent or any such controlling person in writing
specifically for use in such Registration Statement or Prospectus.

(b)           Indemnification by the Investors and the Agent.   In
connection with any registration pursuant to the terms of this Agreement, each
Investor and the Agent will furnish to the Company in writing such information
as the Company reasonably requests concerning the holders of Registrable
Securities or the proposed manner of distribution for use in connection with
any Registration Statement or Prospectus and agrees, severally but not jointly,
to indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors, officers, employees, stockholders and each person who
controls the Company (within the meaning of the 1933 Act) against any losses,
claims, damages, liabilities and expense (including reasonable attorney fees)
resulting from any untrue statement of a material fact or any omission of a 

 7
 

material fact required to be stated in the
Registration Statement or Prospectus or preliminary Prospectus or amendment or
supplement thereto or necessary to make the statements therein not misleading,
to the extent, but only to the extent that such untrue statement or omission is
contained in any information furnished in writing by such Investor or the Agent
to the Company specifically for inclusion in such Registration Statement or
Prospectus or amendment or supplement thereto. In no event shall the liability
of an Investor or the Agent be greater in amount than the dollar amount of the
proceeds (net of all expense paid by such Investor or the Agent in connection
with any claim relating to this Section 6 and the amount of any damages
such holder has otherwise been required to pay by reason of such untrue
statement or omission) received by such Investor or the Agent upon the sale of
the Registrable Securities included in the Registration Statement giving rise
to such indemnification obligation.

(c)           Conduct of Indemnification Proceedings.   Any person
entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification
hereunder shall have the right to employ separate counsel and to participate in
the defense of such claim, but the fees and expenses of such counsel shall be
at the expense of such person unless (a) the indemnifying party has agreed
to pay such fees or expenses, or (b) the indemnifying party shall have
failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest exists
between such person and the indemnifying party with respect to such claims (in
which case, if the person notifies the indemnifying party in writing that such
person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations hereunder, except to the extent that such failure to give notice
shall materially adversely affect the indemnifying party in the defense of any
such claim or litigation. It is understood that the indemnifying party shall
not, in connection with any proceeding in the same jurisdiction, be liable for
fees or expenses of more than one separate firm of attorneys at any time for
all such indemnified parties. No indemnifying party will, except with the
consent of the indemnified party, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation.

(d)           Contribution.   If for any reason the indemnification
provided for in the preceding paragraphs (a) and (b) is unavailable
to an indemnified party or insufficient to hold it harmless, other than as
expressly specified therein, then the indemnifying party shall contribute to
the amount paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations. No person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the 1933 Act
shall be entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a holder of
Registrable Securities be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by such holder in connection with any claim
relating to this Section 6 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of the
Registrable Securities giving rise to such contribution obligation.

7.             Miscellaneous.

(a)           Amendments and Waivers.   This Agreement may be amended
only by a writing signed by the Company and the Required Investors. The Company
may take any action herein prohibited, or omit to 

 8
 

perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of the Required Investors.

(b)           Notices.   All notices and other communications provided
for or permitted hereunder shall be made as set forth in Section 9.4 of
the Purchase Agreement.

(c)           Assignments and Transfers by Investors and the Agent.   The
provisions of this Agreement shall be binding upon and inure to the benefit of
the Investors and the Agent and their respective successors and assigns. An
Investor and the Agent may transfer or assign, in whole or from time to time in
part, to one or more persons its rights hereunder in connection with the
transfer of Registrable Securities by such Investor or the Agent to such
person, provided that such Investor or the Agent complies with all laws
applicable thereto and provides written notice of assignment to the Company
promptly after such assignment is effected.

(d)           Assignments and Transfers by the Company.   This
Agreement may not be assigned by the Company (whether by operation of law or
otherwise) without the prior written consent of the Required Investors,
provided, however, that the Company may assign its rights and delegate its
duties hereunder to any surviving or successor corporation in connection with a
merger or consolidation of the Company with another corporation, or a sale,
transfer or other disposition of all or substantially all of the Company’s
assets to another corporation, without the prior written consent of the
Required Investors, after notice duly given by the Company to each Investor.

(e)           Benefits of the Agreement.   The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.

(f)            Counterparts; Faxes.   This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement may
also be executed via facsimile, which shall be deemed an original.

(g)           Titles and Subtitles.   The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

(h)           Severability.   Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which renders any provisions hereof
prohibited or unenforceable in any respect.

(i)            Further Assurances.   The parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained.

(j)            Entire Agreement.   This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.

(k)           Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.   This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive 

 9
 

jurisdiction of the courts of the State of New York
located in New York County and the United States District Court for the
Southern District of New York for the purpose of any suit, action, proceeding
or judgment relating to or arising out of this Agreement and the transactions
contemplated hereby. Service of process in connection with any such suit,
action or proceeding may be served on each party hereto anywhere in the world
by the same methods as are specified for the giving of notices under this
Agreement. Each of the parties hereto irrevocably consents to the jurisdiction
of any such court in any such suit, action or proceeding and to the laying of
venue in such court. Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY
IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL
HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 10
 

IN WITNESS WHEREOF, the parties have executed this
Agreement or caused their duly authorized officers to execute this Agreement as
of the date first above written.

	
  The Company:

  	
  WORLD HEART CORPORATION

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 11
 

 

	
  The Investors:

  	
  [name]

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
  [name]

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
  [name]

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
  [name]

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
  The Agent:

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 12

Exhibit A

Plan of
Distribution

The selling stockholders, which as used herein
includes donees, pledgees, transferees or other successors-in-interest selling
shares of common stock or interests in shares of common stock received after
the date of this prospectus from a selling stockholder as a gift, pledge,
partnership distribution or other transfer, may, from time to time, sell,
transfer or otherwise dispose of any or all of their shares of common stock or
interests in shares of common stock on any stock exchange, market or trading
facility on which the shares are traded or in private transactions. These
dispositions may be at fixed prices, at prevailing market prices at the time of
sale, at prices related to the prevailing market price, at varying prices determined
at the time of sale, or at negotiated prices.

The selling
stockholders may use any one or more of the following methods when disposing of
shares or interests therein:

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

·       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;

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

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

·       privately negotiated
transactions;

·       short sales effected after
the date the registration statement of which this Prospectus is a part is
declared effective by the SEC;

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

·       broker-dealers may agree
with the selling stockholders to sell a specified number of such shares at a
stipulated price per share; and

·       a combination of any such
methods of sale.

The selling stockholders may, from time to time,
pledge or grant a security interest in some or all of the shares of common
stock owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the shares of
common stock, from time to time, under this prospectus, or under an amendment
to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act amending the list of selling stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus. The selling stockholders also may transfer the shares of
common stock in other circumstances, in which case the transferees, pledgees or
other successors in interest will be the selling beneficial owners for purposes
of this prospectus.

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 

 13
 

broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).

The aggregate proceeds to the selling stockholders
from the sale of the common stock offered by them will be the purchase price of
the common stock less discounts or commissions, if any. Each of the selling
stockholders reserves the right to accept and, together with their agents from
time to time, to reject, in whole or in part, any proposed purchase of common
stock to be made directly or through agents. We will not receive any of the
proceeds from this offering. Upon any exercise of the warrants by payment of
cash, however, we will receive the exercise price of the warrants.

The selling stockholders also may resell all or a
portion of the shares in open market transactions in reliance upon Rule 144
under the Securities Act of 1933, provided that they meet the criteria and
conform to the requirements of that rule.

The selling stockholders and any underwriters,
broker-dealers or agents that participate in the sale of the common stock or
interests therein may be “underwriters” within the meaning of Section 2(11)
of the Securities Act. Any discounts, commissions, concessions or profit they
earn on any resale of the shares may be underwriting discounts and commissions
under the Securities Act. Selling stockholders who are “underwriters” within
the meaning of Section 2(11) of the Securities Act will be subject to the
prospectus delivery requirements of the Securities Act.

To the extent required, the shares of our common stock
to be sold, the names of the selling stockholders, the respective purchase
prices and public offering prices, the names of any agents, dealer or
underwriter, any applicable commissions or discounts with respect to a particular
offer will be set forth in an accompanying prospectus supplement or, if
appropriate, a post-effective amendment to the registration statement that
includes this prospectus.

In order to comply with the securities laws of some
states, if applicable, the common stock may be sold in these jurisdictions only
through registered or licensed brokers or dealers. In addition, in some states
the common stock may not be sold unless it has been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with.

We have advised the selling stockholders that the
anti-manipulation rules of Regulation M under the Exchange Act may apply
to sales of shares in the market and to the activities of the selling stockholders
and their affiliates. In addition, to the extent applicable we will make copies
of this prospectus (as it may be supplemented or amended from time to time)
available to the selling stockholders for the purpose of satisfying the
prospectus delivery requirements of the Securities Act. The selling
stockholders may indemnify any broker-dealer that participates in transactions
involving the sale of the shares against certain liabilities, including
liabilities arising under the Securities Act.

We have agreed to indemnify the selling stockholders
against liabilities, including liabilities under the Securities Act and state
securities laws, relating to the registration of the shares offered by this
prospectus.

We have agreed with the selling stockholders to keep
the registration statement of which this prospectus constitutes a part
effective until the earlier of (1) such time as all of the shares covered
by this prospectus have been disposed of pursuant to and in accordance with the
registration statement or (2) the date on which the shares may be sold
pursuant to Rule 144(k) of the Securities Act.

 14

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