THIS LOAN AGREEMENT made as of the 28th day of January, 2003.

B E T W E E N :

               WORLD HEART CORPORATION
               (hereinafter called the "Borrower")

                                                               OF THE FIRST PART

               and

               ARGOSY BRIDGE FUND L.P.I.
               (hereinafter called "Argosy") and
               SHERFAM INC. (hereinafter called "Sherfam" and together with
               Argosy, the "Lenders")

                                                              OF THE SECOND PART

               and

               WORLD HEART INC.
               (hereinafter called the "Guarantor")

                                                               OF THE THIRD PART

     WHEREAS the Lenders have agreed to loan to the Borrower the  principal  sum
of SEVEN MILLION DOLLARS  ($7,000,000)  (the  "Principal  Sum") on the terms and
conditions set forth in this Agreement;

     NOW THEREFORE  WITNESSETH that in consideration of the mutual covenants set
forth in this Agreement the parties hereto covenant and agree as follows:

1.  Interpretation:  Capitalized  terms  used  herein  shall  have the  meanings
ascribed  to them  herein  and the  following  terms  shall  have the  following
meanings:

"Business Day" means a day, other than a Saturday, Sunday or statutory holiday,
on which banks are open for the transaction of normal business in the City of
Toronto, Ontario.

"Non Cash Accounting Entries" means:

     (a)  adjustments to goodwill;

     (b)  reserves against provincial tax credits receivable; and

     (c)  the implicit value of the Warrants.

"Operating Loss" occurs when net income from operations, before foreign exchange
expense, interest expense, depreciation expense and amortization expense is less
than zero.

"Permitted Encumbrances" means the encumbrances described on Schedule "A".

                                      -2-
<PAGE>

"Potential Prior-Ranking Claims" means all amounts owing or required to be paid,
where the failure to pay any such amount could give rise to a claim  pursuant to
any law,  statute,  regulation  or  otherwise,  which  ranks,  or is  capable of
ranking,  in priority to the  Lenders'  security or otherwise in priority to any
claim by the Lenders for repayment of any amounts owing under this Agreement;

"Replacement  Financing"  means one or more financings in favour of the Borrower
whether by way of new debt or equity in an  aggregate  amount at least  equal to
$7,000,000 but not including the Required Funding.

"Required  Funding"  means  financings in an aggregate  amount at least equal to
$6,000,000 consisting of:

     (d)  a  common  share  equity  funding  in an  amount  at  least  equal  to
          $3,000,000; and

     (e)  a subordinated loan in amount at least equal to $3,000,000.

"Shareholders' Equity" means the sum of the value of the preferred shares of the
Borrower and the common shares of the Borrower.

2.  Establishment  of  Credit:  Subject  to the  terms  and  conditions  of this
Agreement, the Lenders hereby establish in favour of the Borrower a term loan in
an aggregate principal amount of $7,000,000, comprised of $5,000,000 from Argosy
and $2,000,000 from Sherfam (the "Loan"),  for the purposes of (i) financing the
working capital  requirements of the Borrower and its subsidiaries,  as approved
by the  Lender  and (ii)  repayment  of the  existing  term  loan  with The Rose
Corporation and the obligations  arising  therefrom.  The first and only advance
under the Loan shall occur on such date (the  "Funding  Date") which shall be no
later than  January  31,  2003 or such  other  date as agreed to by the  Lender,
failing which all obligations on the part of the Lender  hereunder shall, at the
Lender's option, become null and void. The Borrower may avail itself of the Loan
by way of one advance.

3.   (a)  Term: The Loan shall be repaid in full upon the earlier of:

          (i)  July 31, 2003 ("Maturity Date");

          (ii) the completion of the Replacement Financing; and

         (iii) the occurrence of an Event of Default which is continuing.

     (b)  Prepayment:  Notwithstanding  the provisions of Subsection 3(a) above,
          the  Borrower  shall  have the right to prepay the Loan in full or any
          part thereof  together with all other  amounts owing  hereunder at any
          time. Any part or all of the Loan shall be available for prepayment on
          two (2) Business Days' prior written  notice to the Lenders;  provided
          that  in  the  event  the  Loan  is  repaid  prior  to the  six  month
          anniversary  date of the  Funding  Date  the  Borrower  shall  pay the
          Lenders a  prepayment  fee equal to the amount of interest  that would
          have accrued on the Loan during the period  commencing  on the date of
          such prepayment and ending on the six month anniversary of the Funding
          Date.
<PAGE>

                                      -3-

4.   (a)  Interest:  The Borrower shall pay interest to the Lenders collectively
          on the  amount  outstanding  under the Loan  from  time to time,  both
          before and after any or all of maturity,  judgment and default, at the
          rate of  eighteen  per cent  (18%) per  annum  (the  "Interest  Rate")
          calculated and  compounded  monthly (on the basis of the actual number
          of days  elapsed  over a year of 365 or 366, as the case may be),  and
          paid monthly in arrears on the first day of each and every month.

     (b)  Application  of Funds:  The  Lender  shall  apply  any funds  received
          hereunder  from time to time, in the  following  order of priority (i)
          towards current  interest owing,  (ii) towards accrued interest owing,
          if any, (iii) toward fees owing, and (iv) towards  principal,  in each
          case owing under the Loan until repaid in full.

5. Place and Time of Payment:  All payments of the Loan, interest and fees shall
be  paid  to  each  of the  Lenders  in  respect  of  each  Lender's  respective
contribution  to the Loan at the  addresses  of the  Lenders  set out in Section
27(b) or such  other  place as the  Lenders  may from time to time  direct.  Any
payments  made on account of the Loan must be delivered to, and received by, the
Lenders by no later than one (1) p.m. Toronto time for same day credit.

6.  Administration  Fee: The Borrower  acknowledges  and agrees that the Lenders
have fully  earned a fee,  representing  compensation  to the  Lenders for their
efforts and  expenditures  of time by its officers,  agents and employees in the
review and study of the documentation pertaining to this transaction,  review of
financial  statements,  physical inspections and reviews, and for committing the
Loan,  in the sum of TWO HUNDRED AND EIGHTY  THOUSAND  DOLLARS  ($280,000)  (the
"Commitment Fee"), $200,000 of the Commitment Fee shall be apportioned to Argosy
(of which  $100,000  has already  been paid by the  Borrower to Argosy as of the
date  hereof)  and  the  remaining  $80,000  of  the  Commitment  Fee  shall  be
apportioned  to Sherfam.  The unpaid balance of the Commitment Fee shall be paid
on the Funding  Date by way of a payment to Argosy of $100,000  and a payment to
Sherfam of $80,000.

7. Advance:  The Lenders shall not be required to make an advance under the Loan
unless the following  conditions have been satisfied by the Borrower at or prior
to the time of such advance under the Loan:

     (a)  no Event of Default or  circumstance  or event which with the lapse of
          time  or  notice  or  both  would   constitute  an  Event  of  Default
          ("Default"), shall have occurred and be continuing;

     (b)  the  Borrower  shall have  delivered a request for funds not less than
          five (5)  Business  Days prior to the date of the  requested  advance,
          which request shall provide that interest as provided for herein shall
          be  payable on the amount of the  advance  requested,  notwithstanding
          that  funds may not be  advanced  on the date  requested,  unless  the
          failure to advance is attributable to the Lenders;

     (c)  the Borrower  shall have, as security for the payment and  performance
          of the obligations  and liabilities of the Borrower  contained in this
          Agreement,  executed and delivered in form and content satisfactory to
          the Lenders and its counsel each of the following:
<PAGE>

                                      -4-

          (i)  a general  security  agreement from the Borrower  charging all of
               its right, title and interest in all of its property,  assets and
               undertaking subject only to Permitted Encumbrances;

          (ii) an  assignment  of  insurance  coverages  for the  assets  of the
               Borrower  satisfactory  to the Lenders with the Lenders  noted as
               additional insured and as loss payee;

         (iii) an assignment of all pending and registered,  present and future,
               patents,  trademarks  and  license  agreements  of  the  Borrower
               subject to Permitted Encumbrances (the "Borrower IP Security");

          (iv) a guarantee  ("Guarantee") of the obligations  arising  hereunder
               from the Guarantor;

          (v)  a general security  agreement from the Guarantor  charging all of
               its right, title and interest in all of its property,  assets and
               undertaking subject only to prior Permitted Encumbrances;

          (vi) assignment of insurance coverages for the assets of the Guarantor
               satisfactory  to the Lenders with the Lenders noted as additional
               insured and as loss payee;

          (vii)an assignment of all pending and registered,  present and future,
               patents,  trademarks  and  license  agreements  of the  Guarantor
               subject to Permitted Encumbrances (the "Guarantor IP Security");

               (collectively, the "Security");

     (d)  the  Security or a notice,  caveat or financing  statement  shall have
          been  registered  or filed in all places  necessary  or  advisable  in
          connection  therewith  to  preserve,  perfect and protect the security
          interests  created  thereby  and all other  additional  documents  and
          opinions  incidental  thereto  shall have been provided to the Lenders
          and all action  required by the  Borrower,  the Guarantor or any other
          individual,   partnership,   corporation,   trust  or   unincorporated
          organization,  including a government agency or political  subdivision
          thereof  (collectively  "person")  to fully  perfect and  maintain the
          Security as a charge and assignment of and upon the properties secured
          thereby  shall have been  successfully  completed;  provided  that the
          Borrower  IP  Security  and the  Guarantor  IP  Security  need  not be
          registered  until  such  time  as the  Lenders  elect  in  their  sole
          discretion;

     (e)  the Lenders shall have received evidence satisfactory to them that the
          Borrower has not granted any security in  competition  with any of the
          Security, save and except for Permitted Encumbrances;

     (f)  the Borrower  shall have  executed and issued in favour of the Lenders
          1,680,000 common shares warrants (the "Warrants") of the Borrower,  of
          which  1,200,000  Warrants  shall be apportioned to Argosy and 480,000
          Warrants  shall be  apportioned  to  Sherfam,  in form  and  substance
          satisfactory to the Lender together
<PAGE>

                                      -5-

          with all necessary approvals from the Toronto Stock Exchange approving
          the issuance and  exercise of the Warrants  shall have been  received.
          Each Warrant shall be  exercisable  in accordance  with its terms at a
          price of $1.60 per share up to 5:00 p.m. on fifth  anniversary date of
          this Agreement.

     (g)  the Lenders shall have  received  opinions of counsel for the Borrower
          and the Guarantor acceptable to the Lenders;

     (h)  receipt and approval by the Lenders of evidence  that the Borrower has
          filed all material tax returns and paid or made  provision for payment
          of  all  taxes  (including   interest  and  penalties)  and  Potential
          Prior-Ranking Claims when due;

     (i)  the Lenders  shall have  received and approved a detailed  schedule of
          fixed assets owned by each of the Borrower and the Guarantor;

     (j)  the  Lenders  shall have  received  and  approved  a current  accounts
          receivable listing for each of the Borrower and the Guarantor;

     (k)  the Lenders shall have received and approved the most recent available
          quarterly and monthly  financial  statements  for each of the Borrower
          and the Guarantor;

     (l)  in the opinion of the Lenders, acting reasonably,  no material adverse
          change in the business of the Borrower or any  associated,  affiliated
          or related company to the Borrower shall have occurred and there shall
          not have occurred since  September 30, 2002 any occurrence of national
          or international  consequence or any event,  action,  condition,  law,
          governmental action of any nature whatsoever,  which in the reasonable
          opinion of the Lenders, could materially adversely affect the business
          operations, assets or affairs of World Heart or any related company or
          enterprise; and

     (m)  the Lenders shall have received  evidence  satisfactory to it that the
          Required Funding has been received by the Borrower or will be received
          concurrently with the advance hereunder.

     The  Lenders  shall  have the sole  discretion  to waive (in  writing)  any
     condition set forth above for the advance of the Loan.

8. Covenants:  The Borrower and the Guarantor,  as the case may be, covenant and
agree with the Lenders  that until all amounts  advanced  under the Loan and all
interest,  fees and any other amounts owing under this Agreement or the Security
have been paid in full:

     (a)  not to,  without the express  written  consent of the  Lenders,  which
          consent may be unreasonably withheld,  further mortgage, charge, or in
          any  manner  encumber  or  grant  a  security  interest  in any of the
          collateral  secured by the  Security  save and  except  for  Permitted
          Encumbrances,  ordinary  course  equipment  leases and purchase  money
          security interests;

     (b)  not to incur or create any further  funded debt (other than in respect
          of  Permitted  Encumbrances)  which for  greater  certainty  shall not
          include  accounts  payable
<PAGE>

                                      -6-

          or debts incurred in the ordinary  course of business,  or provide any
          security  by way  of  debenture,  charge,  pledge,  specific  security
          interest, general security agreement, general assignment of its assets
          or  undertaking  or otherwise  without the prior  written  consent and
          approval of the Lenders which the Lenders may arbitrarily withhold;

     (c)  to obey or cause to be obeyed the laws, rules, regulations and by-laws
          whether federal, provincial, state, regional or municipal which in any
          way relate to their assets or the use thereof;

     (d)  to allow the Lenders and their  authorized  representatives  access to
          the assets of the  Borrower  and the  Guarantor  from time to time and
          also access to the business and financial  records of the Borrower and
          the Guarantor at all reasonable times;

     (e)  to maintain full and complete up-to-date  accounting  records,  income
          statements,  appropriate cash management systems, controls and reports
          acceptable  to the  Lenders  and to provide  copies of same to Lenders
          upon  request.  In the event the  Borrower or the  Guarantor  fails to
          provide  proper  accounting,  as provided for herein,  the Lenders may
          hire as an agent of the Borrower or the  Guarantor  and at the expense
          of the Borrower, appropriate accountants or bookkeepers as the Lenders
          deems  necessary to prepare such  information and each of the Borrower
          and the Guarantor covenants to cooperate fully with any such parties;

     (f)  to provide to the Lenders:

          (i)  within 21 days of each month  end,  internally  prepared  monthly
               financial  statements of the Borrower and the Guarantor  together
               with an Officer's Certificate  substantially in the form attached
               hereto as Schedule "C";

          (ii) within 140 days of each fiscal year end of the  Borrower  and the
               Guarantor audited consolidated annual financial statements of the
               Borrower and the Guarantor audited by PricewaterhouseCoopers LLP;

         (iii) a detailed  operating  budget,  monthly reports,  profit and loss
               statement,  balance sheet and operating and variance  report upon
               request of the Lender;

     (g)  to  promptly  deliver to the  Lenders  all  material  and  information
          presented  to the Board of Directors of the Borrower and to permit the
          Lenders  to meet with the  management  of the  Borrower  at least once
          during  each  fiscal  quarter  of  the  Borrower  while  the  Loan  is
          outstanding;

     (h)  to promptly deliver to the Lenders regular progress reports on:

          (i)  any and all efforts made by the Borrower  and/or the Guarantor to
               raise further debt and/or equity funds;

          (ii) updates with respect to all Federal Drug Administration  approval
               matters and like  approvals in the United  States  together  with
               copies  of any and all
<PAGE>

                                      -7-

               materials  provided  from time to time to members of the Board of
               Directors of the Borrower and the  Guarantor or their  respective
               committees;

          and such other reports as the Lenders may reasonably request from time
          to time.  The Borrower and the Guarantor and their  consultants  shall
          cooperate  fully in  providing  the above  and any  other  information
          requested by the Lenders;

     (i)  to ensure that each financial  statement provided to the Lenders shall
          be  prepared  in  accordance   with  generally   accepted   accounting
          principles  consistently  applied,  shall be correct and  complete and
          fairly  present the  financial  position of the person or entity which
          each  purports to reflect and, if such  statement is audited,  will be
          accompanied by a report of the auditor, acceptable to the Lenders;

     (j)  to  promptly  pay all  reasonable  legal  fees or other  out-of-pocket
          expenses incurred by the Lenders in connection with the Loan;

     (k)  save and except for a conversion of preferred  shares held by Edwards,
          not to effect  or allow to be  effected  a change  in the  Guarantor's
          corporate  structure  without the express prior written consent of the
          Lenders, which consent may not be unreasonably withheld;

     (l)  to pay out and discharge any and all liens,  charges and  encumbrances
          affecting the collateral  secured by the Security save and except only
          the Permitted Encumbrances;

     (m)  except as provided herein or in the ordinary  course of business,  not
          to  sell,  transfer,  convey  or  encumber  in any way the  collateral
          secured  by the  Security,  or any part  thereof,  without  the  prior
          written consent of the Lenders;

     (n)  to file all material tax returns which are to be filed by the Borrower
          and the  Guarantor  from time to time,  to pay or make  provision  for
          payment of all taxes (including  interest and penalties) and Potential
          Prior-Ranking  Claims when due, and to provide  adequate  reserves for
          the payment of any tax, the payment of which is being contested; and

     (o)  not to, without prior written consent of the Lenders:

          (i)  declare any dividends or distributions payable to shareholders of
               the Borrower;

          (ii) reduce the Borrower's  share capital by any means,  including but
               not limited to redeeming, purchasing or otherwise retiring any of
               its issued and outstanding shares;

         (iii) directly   or   indirectly   invest  in  or  lend  money  to  its
               shareholders,   directors,   officers   or  to  any   individual,
               partnership,  joint venture, trust,  incorporated organization or
               other  person,  which for  greater  certainty  shall not  include
               inter-company payments between the Borrower and the Guarantor;
<PAGE>

                                      -8-

          (iv) directly or indirectly guarantee or otherwise provide for direct,
               indirect or on a contingent  basis,  the payment of any monies or
               the performance of any obligations by any third party; or

          (v)  increase the remuneration paid to Mr. Roderick Bryden or Dr. Tofy
               Mussivand  beyond their current  levels whether by way of salary,
               bonus or otherwise.

9. Representations and Warranties:  The Borrower and the Guarantor,  as the case
may be,  hereby  represent  and warrant (to the extent such  representation  and
warranty is applicable to it) to the Lenders that:

     (a)  each of this  Agreement  and the Security  has been duly  executed and
          delivered by or on behalf of the Borrower and the  Guarantor  and each
          of this Agreement,  the Security and the Warrants constitutes a legal,
          valid and binding obligation of the Borrower and the Guarantor, as the
          case may be, enforceable in accordance with its terms;

     (b)  each of the  Borrower  and the  Guarantor  has  and  will at all  time
          hereafter have title to the collateral  secured by the Security,  free
          and clear of any registered  restrictions,  mortgages,  charges, liens
          and other  encumbrances  subject  to prior  encumbrances  agreed to in
          writing by the Lenders;

     (c)  all  the  warranties  and  representations  of the  Borrower  and  the
          Guarantor  and  the  covenants  contained  in this  Section  9 of this
          Agreement  and in the  Security,  will be true as at the time they are
          made and will continue to be true and correct until the Loan is repaid
          in full, and all covenants and agreements  herein  contained have been
          observed and performed;

     (d)  none of the  Borrower or the  Guarantor  is in default in any material
          respect under, nor will the execution,  delivery or performance by the
          Borrower  and the  Guarantor  of the  Security,  the Warrants and this
          Agreement  conflict with or constitute a default under any  agreement,
          document or instrument to which any of them is a party or by which any
          of them may be  bound or under  any  valid  regulation,  order,  writ,
          injunction  or decree of any court or  governmental  authority  and no
          consent or approval of any such  authority  is required in  connection
          with the valid execution, delivery and performance by the Borrower and
          the Guarantor of this Agreement, the Security or the Warrants;

     (e)  each of the Borrower and the  Guarantor is duly  qualified to carry on
          its  business  and to own its  assets,  and has all  necessary  power,
          authority,  licenses and  approvals  required in  connection  with its
          business and undertaking;

     (f)  each of the  Borrower and the  Guarantor is in good  standing and is a
          valid,  subsisting  corporation  under  the laws of its  incorporating
          jurisdiction;

     (g)  the contents of the documents furnished to the Lenders by or on behalf
          of the  Borrower  and the  Guarantor  to induce it to lend the  monies
          hereby  provided for
<PAGE>

                                      -9-

          are true and correct and  accurately set out all the facts required by
          the Lenders and contained therein;

     (h)  save and except for the existing  proceedings  involving MicroHelix in
          Oregon  described  on  Schedule  "B" hereto,  there is no  outstanding
          judgment or award against the Borrower or the  Guarantor,  there is no
          undisclosed   material  liability  and  there  is  no  action,   suit,
          proceeding  pending or threatened against or affecting the Borrower or
          the  Guarantor,  which if  determined  against  the  interests  of the
          Borrower  or the  Guarantor,  would  result in a material  and adverse
          change in or effect on its  financial  position or business or ability
          to  repay  the  obligations  and  liabilities  owing  to  the  Lenders
          hereunder and under the Loan;

     (i)  the Borrower and the  Guarantor  are in material  compliance  with all
          conditions,  ordinances,  codes,  regulations and laws of governmental
          departments, and all agencies having authority,  direction over or any
          interest in their respective assets;

     (j)  the  corporate  structure  provided  to the  Lenders  relating  to the
          parties hereto is true and correct and  accurately  sets out the facts
          required by the Lenders contained therein; and

     (k)  the  registrations   made  in  favour  of  Edwards   Lifesciences  LLC
          ("Edwards")  against the  Borrower  or  Guarantor  under the  Personal
          Property Security Act (Ontario)  including those having reference file
          numbers  889333938  and  889333947,   and  similar  filings  with  the
          Secretary  of States  of  California  and  Delaware  relate  solely to
          transfers  of certain  accounts  receivables  made by the  Borrower to
          Edwards pursuant to agreements, copies of which have been delivered to
          the Lenders and are not in respect of any security  interests  granted
          by the Borrower in favour of Edwards.

10. Default:  Each of the following  events shall constitute an event of default
("Event of Default") under this Agreement:

     (a)  (i)  if the Borrower defaults in payment of

               1.   any principal  payment due from time to time under the Loan;
                    or

               2.   interest on the principal amount due from time to time under
                    the Loan; or

               3.   any  fee,  or any  other  sum  due  under  the  Loan  or the
                    Security; and

          (ii) any such  default  is not  remedied  within  ten (10) days of its
               occurrence;

     (b)  if  any  representation  or  warranty  made  by  the  Borrower  or the
          Guarantor and contained in this Agreement or the Security or otherwise
          in writing in connection  herewith or therewith shall be untrue on the
          date as of which made,  on the Funding  Date, or any date prior to the
          date the Loan is repaid;

     (c)  if the Borrower or the Guarantor  shall fail to perform or observe any
          covenant, condition or provision to be performed or observed by either
          of them  under  the
<PAGE>

                                      -10-

          terms of this  Agreement,  the  Security or the  Warrants or any other
          agreement  in writing in  connection  therewith  or herewith  and such
          default  is not  remedied  within ten (10) days  following  receipt of
          written notice from the Lender;

     (d)  if  any  material  order,  approval,  consent,  exemption,  permit  or
          authorization  having  been made or  granted  to the  Borrower  or the
          Guarantor shall be revoked, rescinded,  suspended or otherwise limited
          in effect,  the result of which would cause a material  adverse effect
          on  the  financial  position  or  operations  of the  Borrower  or the
          Guarantor;

     (e)  if Mr. Roderick Bryden or Dr. Tofy Mussivand cease to hold directly or
          indirectly  any of  their  direct  or  indirect  shareholdings  in the
          Borrower  or shall  otherwise  dispose  of or  encumber  any rights or
          interest in such shares;  provided that the pledges of any such shares
          made  prior to the date  hereof  shall be  permitted  to exist but any
          enforcement  of such  pledges  will  result  in a default  under  this
          Section 10(e);

     (f)  if the Shareholders'  Equity  (determined  before Non-Cash  Accounting
          Entries) is less than  $6,000,000  and such  shortfall  occurs in each
          month for any consecutive two month period;

     (g)  if revenues  (determined  before Non-Cash  Accounting  Entries) of the
          Borrower on a consolidated  basis are less than $600,000 for any given
          month or, on a rolling  three month basis  starting in March 2003,  is
          less than $2.5 million for the relevant rolling three month period;

     (h)  if the Borrower has an Operating Loss in excess of $2,500,000 for each
          month during any consecutive two month period;

     (i)  if any  insurance  policies  to be  provided  by the  Borrower  or the
          Guarantor  pursuant hereto shall be or become cancelled or invalidated
          or altered in any material  respect for any reason  before such policy
          is replaced with another  policy which  complies  with the  provisions
          hereof;

     (j)  if an  encumbrancer  shall  commence an action to enforce its security
          against the collateral  secured under the Security or take  possession
          of or  appoint a  receiver,  trustee,  conservator  or  liquidator  in
          respect  of  the   collateral   secured  under  the  Security  or  any
          substantial part thereof or if a distress, execution,  attachment, tax
          levy  or any  similar  process  be  levied  or  enforced  against  the
          collateral  secured  under the  Security  and remain  unsatisfied  for
          thirty (30) days or such shorter period as would permit the collateral
          secured under the Security or such part thereof to be sold thereunder;

     (k)  if  the  Borrower  or  the  Guarantor  suspends  or  discontinues  its
          business,  or if the Borrower or the Guarantor shall become  insolvent
          (however  such  insolvency  may be evidenced) or bankrupt or commit an
          act of bankruptcy or shall make an assignment  for the benefit of or a
          composition with creditors, or shall be unable or admit in writing its
          inability  to  pay  its  debts  as  they  mature,  or  if  bankruptcy,
          reorganization,  arrangement,  insolvency or similar  proceedings  for
          relief of
<PAGE>

                                      -11-

          financially   distressed  debtors  shall  be  instituted  against  the
          Borrower or the Guarantor,  or if the Borrower or the Guarantor  shall
          petition  for or there  shall be  appointed  for the  Borrower  or the
          Guarantor,  or for a substantial part of the assets of the Borrower or
          the  Guarantor,  receiver  or  liquidator,  or if the  Borrower or the
          Guarantor  shall take any action for the purpose of  effecting  any of
          the foregoing;

     (l)  if the Borrower or the  Guarantor  is in default of any  indebtedness,
          which for  greater  certainty  shall not include  accounts  payable or
          debts  incurred in the ordinary  course of business,  in excess of the
          aggregate  amount of $500,000 and such default shall continue for more
          than any period of grace  specified with respect to such  indebtedness
          or if there is any other  unremedied  default under any encumbrance in
          respect of the assets of the Borrower or the Guarantor, or if there is
          any  unremedied  default under any  encumbrance of the Borrower or the
          Guarantor  which could  result in the  encumbrancer  accelerating  the
          payment of debt or exercising its remedies under its security;

     (m)  if any adverse  change  occurs in the  information  supplied or in the
          financial  stability  of  the  Borrower,   the  Guarantor  and/or  the
          collateral  given as security for the Loan, or the  enforceability  of
          the  Lender's  Security,  or have a material  adverse  impact upon the
          value of the  Lender's  Security at any time,  or should  there be any
          action,  suits or  pending  proceedings  which in the  opinion  of the
          Lender,  acting reasonably,  may have a material adverse impact on the
          Borrower or the Guarantor or if any event shall have occurred which in
          the opinion of the Lender, acting reasonably, materially and adversely
          effects the  financial  position or  operations of the Borrower or the
          Guarantor;

     (n)  if at any time the  shares  of the  Borrower  are  subject  to a cease
          trading order for a period of 7  consecutive  days on which trading is
          conducted on the Toronto Stock Exchange other than for a cease trading
          for technical  reasons  relating solely to the Toronto Stock Exchange;
          or

     (o)  if the  Borrower is in default of any of its other  obligations  under
          this  Agreement  or the  Security  and  such  default  shall  continue
          unremedied for thirty (30) days.

11.  Remedies:  If any  amount  shall  become due and  payable  by the  Borrower
hereunder or under the Security,  whether by demand,  default or otherwise,  and
shall not be paid when due or if any Event of Default shall have occurred and be
continuing, then and in each such event any one or more of the following actions
may be taken:

     (a)  the  Lenders may make  demand for  repayment  of the Loan and the Loan
          shall thereupon become due and payable in full without further demand,
          protest or other notice of any kind to the Borrower,  all of which are
          hereby expressly waived;

     (b)  the Lenders may realize  upon any and all  security  granted to it and
          may commence such legal actions or proceedings against the Borrower or
          the  Guarantor  or against  its or their  property or assets as may be
          permitted hereby, by the Security or by any one or more of them; or at
          law or in equity,  all as in its sole
<PAGE>

                                      -12-

          discretion  the Lenders  deems  expedient;  and the  Borrower  and the
          Guarantor  acknowledge  that the Lenders'  remedies are cumulative and
          not exclusive;

     (c)  the  security  constituted  by the Security and each and every part of
          them shall forthwith be and become enforceable by the Lenders; and

     (d)  the Lenders shall have the right, but shall not be obliged:

          (i)  to pay  (either  out of the monies to be  advanced  hereunder  or
               otherwise  if the full amount to be advanced  hereunder  has been
               advanced)  any sums of money  required  to be paid  hereunder  or
               under  the  Security  by  all or any  of  the  Borrower  and  the
               Guarantor  and providing  that any monies so advanced  shall bear
               interest at the Interest Rate; and

          (ii) to perform any covenant,  agreement or obligation of the Borrower
               or the Guarantor hereunder or under the Security.

12.  Set-off:  The Lenders is authorized (but not obligated) at any time or from
time to time (upon the occurrence of an Event of Default which is continuing and
has not been  waived) to set off and apply any and all  amounts at any time held
by or owing by the Lenders to or for the credit of the  account of the  Borrower
against and on account of the  obligations and liabilities of the Borrower under
this Agreement  irrespective of currency and although any of the obligations and
liabilities of any of them are matured or contingent.

13. Assignment:  None of the Borrower or the Guarantor shall assign any of their
rights or obligations  under this  Agreement or any of the Security  without the
prior written consent of the Lenders, which consent may be arbitrarily withheld.

14. Syndication: The Lenders' rights and obligations under this Agreement may be
assigned by way of  syndication  or otherwise,  providing that the Lenders shall
not be released from its obligations to the Borrower hereunder,  save and except
that any Lender may,  following  an Event of Default,  assign all its rights and
obligations  to any  person.  In  connection  with  any such  assignment  by the
Lenders,  the Borrower and the Guarantor agree to execute estoppel  certificates
or other  acknowledgments as required by the Lenders, and agree that the Lenders
may make available to the assignee such  documentation and information  relating
to the Borrower and the Guarantor and the Loan as may be reasonably  required in
connection therewith.

15. No Waiver  of  Breach:  No  failure  of the  Lenders  to pursue  any  remedy
resulting from a breach of this Agreement or any document or agreement delivered
pursuant  hereto by the Borrower or the Guarantor shall be construed as a waiver
of that breach by the Lenders or as a waiver of any  subsequent or other breach,
and no exercise of any right  hereunder  shall preclude the exercise of any such
right on any subsequent occasion.

16. Further Assurances: The Borrower and the Guarantor shall execute and deliver
to the Lenders such  additional  documents  and shall  provide  such  additional
information as the Lenders may reasonably require to carry out the terms of this
Agreement.
<PAGE>

                                      -13-

17.  Governing Law: The parties agree that this Agreement  shall be conclusively
deemed to be a contract  made under,  and shall for all  purposes be governed by
and  construed in accordance  with,  the laws of the Province of Ontario and the
federal laws of Canada applicable therein.

18. Amendment and Waiver:  No provision of this Agreement or the Security or any
of the  documents  collateral  hereto or thereto  may be  changed,  modified  or
amended  other than by an  agreement  in writing  signed by each of the  parties
hereto or thereto.

19. No Joint  Venture:  This  Agreement  does not and shall not be  construed to
create any joint venture or partnership or agency whatsoever.

20. Interest:  Notwithstanding  any term or condition of this Agreement,  in the
event that interest payable in respect of the Loan exceeds the maximum amount of
interest  payable by law, then the amount of the interest  payable in respect of
the Loan shall be  automatically  reduced to be the  maximum  amount of interest
permitted  by law and  the  Lenders'  right  to  receive  payments  shall  be so
automatically reduced.

21.  Severability:  Any  provision  of this  Agreement  which 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. Any such prohibition or  unenforceability  in any
jurisdiction shall not invalidate or render unenforceable such provisions in any
other jurisdiction.

22. No  Obligation  to  Advance:  Neither  the  execution  nor  delivery of this
Agreement,  in and of itself,  shall obligate the Lenders to make any advance to
the Borrower hereunder.

23.  Survival and Non-Merger:  All  representations,  warranties,  covenants and
agreements  made in this  Agreement or otherwise in writing in  connection  with
this  Agreement  by the Borrower  and the  Guarantor,  as the case may be, shall
remain  binding on each of the Borrower and the  Guarantor  notwithstanding  the
advance of the Loan.  The  covenant of the  Borrower to pay interest at the rate
provided  herein shall not merge in any judgment in respect of any obligation of
the Borrower under this  Agreement,  and any judgment shall bear interest at the
same rate.

24.  Conflict:  In the  event  of a  conflict  between  the  provisions  of this
Agreement and the  provisions of the Security the  provisions of this  Agreement
shall prevail.

25.  Currency:  All amounts set forth in this Agreement are in Canadian  dollars
unless otherwise indicated.

26. Time of Essence: Time shall be of the essence of this Agreement.
<PAGE>

                                      -14-

27. Notices: Any notice or other communication which may be or is required to be
given or made  pursuant to this  Agreement  shall,  unless  otherwise  expressly
provided  herein,  be in writing,  and shall be personally  delivered or sent by
telecopy to either party at its address set forth below:

     (a)  if to the Borrower and the Guarantor at:

          1 Laser Street
          Ottawa, Ontario  K2E 7V1

          Attention:  Chief Financial Officer
          Fax No.:  613-226-4744

     (b)  if to the Lenders, at:

          Argosy Bridge Fund L.P.I.
          141 Adelaide Street West, Suite 760, Toronto, Ontario  M5H 3L5

           Attention:  Mr. Michael Boyd
           Fax No:  (416) 367-3895

           - and -

           Sherfam Inc.
           150 Signet Drive
           Weston, Ontario  M9L 1T9

           Attention:  Mr. Meyer F. Florence
           Fax No:  (416) 401-3812

Either  party may change its  address  for  service  by  delivering  a notice in
accordance  with the foregoing  provisions  to the other party hereto.  All such
notices,  requests,  demands or other  communications  shall be  effective  when
delivered or sent by facsimile, receipt confirmed.

28.  Confidentiality:  The Lenders,  the Borrower and the  Guarantor  shall keep
confidential the existence and contents of this Agreement and all  documentation
executed  and  delivered  in  connection  therewith  and the Lenders  shall keep
confidential  all  information,  documents  and  materials  provided  to  it  in
connection  with the business and  operations  of the Borrower and the Guarantor
except as required  under  applicable  securities  law,  except for  information
required  to be given to their  professional  advisors in  connection  with this
transaction,  except as the Lenders  may be legally  compelled  to disclose  and
except for  information  which has become  generally  available  to the  public.
Provided   always  that  the  Lenders  may  disclose,   to  proposed   syndicate
participants and assigns contemplated by Section 14 hereof, this Agreement,  the
documents  delivered in  connection  therewith  and  information  regarding  the
Borrower and the Guarantor  provided to the Lenders as the Lenders may determine
to be necessary for its purposes outlined in Section 13 hereof provided that the
recipients  thereof execute an acknowledgement to the Borrower and the Guarantor
to be bound by the terms of this Section 28 with respect to all such materials.
<PAGE>

                                      -15-

29.  Indemnity:  The Borrower and the Guarantor  agree to indemnify and hold the
Lenders and their respective officers, directors, employees, counsel, agents and
attorneys in fact (each, an "Indemnified  Person") harmless from and against any
and  all  liabilities,   obligations,   losses,  damages,  penalties,   actions,
judgments,  suits,  costs,  charges,  expenses and  disbursements of any kind or
nature  whatsoever  which  may at any  time  (including  at any  time  following
repayment of the Loan) be imposed on,  incurred by or asserted  against any such
person in any way  relating to or arising out of this  Agreement or any document
contemplated by or referred to herein, or the transactions  contemplated hereby,
or any action  taken or omitted by any such person under or in  connection  with
any of the foregoing, including with respect to any investigation, litigation or
proceeding (including any insolvency proceeding or appellate proceeding) related
to or  arising  out of this  Agreement  or the  Loan or the use of the  proceeds
thereof,  whether  or not any  Indemnified  Person is a party  thereto  (all the
foregoing, collectively, the "Indemnified Liabilities");  provided, that neither
the  Borrower  nor the  Guarantor  shall have any  obligation  hereunder  to any
Indemnified Person with respect to Indemnified Liabilities resulting solely from
the gross  negligence  or wilful  misconduct  of such  Indemnified  Person.  The
agreements  in this  Section  shall  survive  payment  of all other  obligations
hereunder.

30. Interpretation:  This Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective  successors and permitted  assigns.
The section and other  headings  set forth in this  Agreement  are  inserted for
convenience and reference only and shall in no way define or limit the intent or
interpretation of any of the provisions hereof. This Agreement shall be read and
construed  with all the  changes  of gender  and  number of the party or parties
referred to in each case as required by the  context.  The terms and  conditions
set forth on any Schedules  referred to or attached to this Agreement are deemed
to be included in this Agreement and form a part hereof.

31.  Successors and Assigns:  All  covenants,  agreements,  representations  and
warranties  made herein or in any certificate  delivered in connection  herewith
shall bind and enure to the benefit of the successors  and permitted  assigns of
the Borrower and the Guarantor and the successors and assigns of the Lenders.

32. Counterparts: This Agreement may be executed in several counterparts, each
of which when so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same instrument.
<PAGE>

     IN WITNESS  WHEREOF the parties have executed this Loan Agreement as of the
day and year first above written.

                                          WORLD HEART CORPORATION

                                          Per: /s/Ian Malone
                                              ---------------------------------
                                              Name:   Ian W. Malone
                                              Title:  VP Finance and CFO


                                          ARGOSY BRIDGE FUND L.P.I. BY ITS
                                          GENERAL PARTNER ARGOSY BRIDGE
                                          MANAGEMENT INC.

                                          Per: /s/Michael Boyd
                                              ---------------------------------
                                              Name:   Michael Boyd
                                              Title:  President and CEO


                                          SHERFAM INC.

                                          Per: /s/Meyer Florence
                                              ---------------------------------
                                              Name:   Meyer F. Florence
                                              Title:  President


                                          WORLD HEART INC.

                                          Per: /s/Ian Malone
                                              ---------------------------------
                                              Name:   Ian W. Malone
                                              Title:  Vice President