Document:

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL
CONDITION  AND RESULTS OF OPERATIONS

INTRODUCTION

World Heart Corporation and its subsidiaries are collectively referred to as
"WorldHeart" or the "Corporation". The following discussion explains material
changes in the Corporation's financial condition and results of operations for
the year ended December 31, 2002 with comparisons to the years ended December
31, 2001 and 2000. Such discussion and comments on the liquidity and capital
resources of the Corporation should be read in conjunction with the information
contained in the consolidated financial statements and related notes to the
financial statements of the Corporation. In this discussion, references to
"dollars" or "$" or "Cdn $" are to Canadian dollars and references to "US
dollars" or "US$" are to United States dollars.

The discussion and comments contained herunder, include both historical
information and forward-looking information. The forward-looking information,
which generally is information stated to be anticipated, expected, or projected
by the Corporation, involves known and unknown risks, uncertainties and other
factors that may cause the actual results and performance of the Corporation to
be materially different from any future results and performance expressed or
implied by such forward-looking information. Potential risks and uncertainties
include, without limitation, the uncertainties inherent in the development of
new products for use in the human body, the Corporation's need for significant
additional funding, the Corporation's need to establish reimbursement mechanisms
and product acceptance from third-party payers, extensive government regulation
of the Corporation's products, and rapid developments in technology, including
developments by competitors.

OVERVIEW

WorldHeart is a medical device company currently focused on the development and
commercialization of pulsatile ventricular assist devices through operations in
Oakland, California, United States and Ottawa, Ontario, Canada. WorldHeart is
currently focused on two technologies, Novacor(R) LVAS (Novacor LVAS) and
HeartSaverVAD(TM) (HeartSaver).

The HeartSaver program originated from licensed artificial heart and related
technologies developed by the Cardiovascular Devices Division (CVD) of the
Ottawa Heart Institute Research Corporation. During 1996, the Corporation
entered into a research agreement with CVD under which the Corporation agreed to
fund a substantial portion of CVD's remaining research efforts relating to the
HeartSaver artificial heart technology, and all of the costs related to the
commercialization of the technology.

On June 30, 2000, the Corporation, through World Heart Inc., a wholly owned
subsidiary of World Heart Corporation, acquired the business, including assets
and liabilities, of Edwards Novacor LLC (Novacor) from Edwards Lifesciences LLC
(Edwards). The total purchase price of the acquisition was approximately $62.5
million, which included $58.9 million of Series A cumulative participating
preferred shares of World Heart Inc. The acquisition was accounted for using the
purchase method and World Heart Inc.'s operating results have been included in
the consolidated financial statements from June 30, 2000.

As a result of the acquisition, WorldHeart manufactures and distributes the
Novacor LVAS. The Corporation sells this product internationally through
Edwards, with the exception of the United

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<PAGE>

States where the Corporation sells directly. Prior to the acquisition, the
Corporation had no commercial sales.

During 2002 there were a number of significant events which impacted on delivery
of the Corporation's key strategic objectives, as follows:

     o    the Corporation's ePTFE enhanced inflow conduit, which leads blood
          from the heart to the device, was released for sale in Europe and,
          subsequent to year-end on January 14, 2003, was approved for use in
          the U.S. by the Food and Drug Administration (FDA);

     o    the Corporation submitted a pre-market approval (PMA) supplemental
          application to the FDA requesting approval for "Destination Therapy"
          or the long-term use of the Novacor LVAS in the U.S. The application
          was accepted for filing by the FDA on November 22, 2002, and granted
          expedited review status;

     o    the Novacor LVAS became the first heart assist device approved for
          commercial sale in Japan; initial sales to this market exceeded our
          expectations; and

     o    the Corporation suspended its pre-clinical trial program for its
          original HeartSaverVAD, and announced the consolidation of next
          generation product development efforts into an optimized
          HeartSaverVAD.

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<PAGE>

RESULTS OF OPERATIONS

All financial information is prepared in accordance with generally accepted
accounting principles (GAAP) in Canada and is stated in Canadian dollars.

Consolidated results of operations

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                     Year ended   As a %     Year ended   As a %     Year ended     As a %
                                   December 31, of gross   December 31, of gross   December 31,   of gross
                                           2002  revenue           2001  revenue           2000    revenue
-----------------------------------------------------------------------------------------------------------

<S>                                <C>                    <C>                       <C>
Revenue
  Gross revenues                   $ 10,764,473           $  9,086,504             $ 5,173,061
  Less : Edwards guarantee fee        (657,542)       6%     (833,880)       9%      (498,576)        10%
                               ----------------------------------------------------------------------------
                                     10,106,931      94%     8,252,624      91%      4,674,485        90%

Cost of goods sold
  Direct materials and labour       (4,593,627)      43%    3,925,702)      43%    (2,443,610)        47%
  Overhead and other                (5,275,104)      49%    4,361,356)      48%    (4,825,735)        93%
                               ----------------------------------------------------------------------------
                                    (9,868,731)      92%   (8,287,058)      91%    (7,269,345)       140%
                               ----------------------------------------------------------------------------

Gross margin                            238,200       2%      (34,434)       0%    (2,594,860)      (50)%

Selling, general and admin.        (10,499,075)           (11,078,320)             (6,760,277)
Research and development           (25,016,365)           (35,774,623)            (18,395,885)
Amortization of intangibles         (7,322,503)           (15,209,647)             (7,491,865)
Foreign exchange gain (loss)            476,649            (2,913,150)                (16,686)
Investment income                       134,255              1,209,125               2,380,983
Interest and financing
expenses                            (7,772,300)            (6,853,763)             (3,049,792)
Recovery of future income
taxes taxes                                   -              4,988,244               5,542,960
                               ----------------------------------------------------------------------------

Net loss                          $(49,761,139)           $(65,666,568)           $(30,385,422)
-----------------------------------------------------------------------------------------------------------
</TABLE>

Revenues. WorldHeart sells its products through a direct sales force in the
United States and through its distributor, Edwards, outside the United States.
The Novacor LVAS and related equipment account for all of WorldHeart's product
sales.

Revenues for the fiscal years ended December 31, 2002 and 2001 reflect
commercial activities relating to Novacor LVAS for a full fiscal year. Revenues
for the fiscal year ended December 31, 2000 reflect the six-month period from
July 1, 2000 to December 31, 2000. As mentioned above, there were no commercial
activities prior to the June 30, 2000 acquisition of Novacor.

In its distribution agreement with Edwards, WorldHeart is required to pay a
minimum gross margin guarantee in the event that Edwards' gross margin generated
on the sales of WorldHeart's products are below US$2 million annually. The
guarantee shortfall is accounted for as a reduction of revenues.

Revenues from sales of the Novacor LVAS and related equipment during fiscal 2002
increased by 22% from 2001 to $10.1 million. Revenue growth was lower than
anticipated, largely as a result of the later than expected European roll-out of
ePTFE conduits late in the second quarter,

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<PAGE>

rather than during the first quarter, as had been anticipated. U.S. sales were
also flat, due in part to some clinics preferring to wait for an FDA approval of
the ePTFE conduits (which occurred subsequent to year end) and also to concerns
about product delivery related to the Corporation's strained working capital
position. WorldHeart regards the slowdown in growth of U.S. sales as temporary,
in light of the addition and/or re-activation of 14 U.S. clinics during 2002,
and having in mind strong sales growth in Europe and Canada as well as stronger
than expected sales in Japan during the product's first year of commercial
availability.

The significant increase in gross revenues in 2001 over 2000 is on account of
the acquisition of the revenue producing Novacor assets at the end of the second
quarter of 2000.

Cost of Goods Sold. With the aforementioned change in product and development
strategy that has resulted in WorldHeart concentrating its commercial efforts
exclusively on the Novacor LVAS until at least 2006, an initiative is now under
way to reduce the cost of sales of the Novacor LVAS and related hardware and
equipment.

Reduced unit cost of sales is expected to result from increased volume and
corresponding pricing and labour efficiencies; by employing more conventional
manufacturing processes; and through the modernization of the manufacturing
operations.

For 2002 the overall cost of sales remained relatively constant at 92% of gross
sales as compared to 91% in 2001.

Direct material and labour costs were 43% of gross sales for both 2002 and 2001
and was 47% in 2000.

Overhead and other costs include direct overhead costs, indirect overhead
allocations and royalties. The Company is currently operating at levels
significantly below its capacity and, therefore, in general, overhead and other
costs should be declining in proportion to increases in gross revenues. In 2002
overhead and other costs increased by $914,000 to $5.3 million from $4.4
million. Overheads were lower in 2001 as a result of an adjustment to previous
periods' estimates for required net realizable inventory reserve and provision
for warranty costs. The effect was an increase of approximately $712,000 to
inventory and correspondingly lower overhead and other costs attributable to
Novacor sales. In addition, royalty costs of 5% of sales have increased during
2002 as a result of higher sales.

Overall, the gross margin is expected to continue to improve as sales volumes of
the Novacor LVAS increase.

Selling, General and Administrative. Selling, general and administrative
expenses consist primarily of payroll and related expenses for executives,
sales, marketing, accounting and administrative personnel, professional fees,
communications, promotional activities, costs associated with meeting
multi-jurisdictional regulatory requirements, insurance, occupancy and other
general corporate expenses.

In 2002 selling, general and administrative expenses decreased by $579,000, or
5%, to approximately $10.5 million. Increases in selling and marketing costs of
approximately $.9 million were mainly on account of higher employee costs
associated with the Corporation's actions to increases its direct sales presence
in the U.S. and as a result of commissions on higher

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<PAGE>

sales. These increases were more than offset by reductions in general and
administration costs of approximately $1.5 million.

2001 selling, general and administrative expenses increased by $4.3 million or
64% as compared to 2000 and reflect the first full year of operations subsequent
to the mid-year acquisition of Novacor and the corresponding Oakland facility in
2000. These incremental Oakland and Novacor costs added approximately $1.2
million to the selling, general and administrative costs in 2001 as compared to
2000. Also, approximately $2.0 million of the year-over-year increase related to
initiatives the the Corporation took in order to increase clinical awareness of
WorldHeart and its products.

The Corporation will continue to increase its marketing and promotional activity
during 2003 associated with enhancements to the Novacor LVAS and, potentially,
in response to a destination therapy approval in the U.S.

Research and Development. Research and development expenses consist principally
of payroll and related expenses for development staff, prototype manufacturing,
testing, and configuration of equipment, trial expenses, regulatory affairs and
quality control with respect to prototype development.

Research and development costs in 2002 decreased by approximately $10.8 million
or 30% to $25.0 million. Lower research and development costs are on account of
lower Novacor LVAS INTrEPID trial costs in 2002 and the decision that was made
mid-year to merge the three HeartSaver development programs into one optimized
HeartSaverVAD development program. The INTrEPID trial commenced in 2000 to
support the use of the Novacor LVAS as an alternative to medical therapy. The
merged HeartSaver development program resulted in a reduction of research and
development-related employees and costs. In addition, government assistance
accounted for approximately $1.7 million of the decrease as reductions to
research and development expenses on account of government programs increased in
2002 to $4.5 million from $2.8 million.

In 2001 research and development expenses increased by $17.4 million or 94% from
2000. A significant portion of the increase is on account of only six months of
activity relating to the Oakland operation in the 2000 fiscal year from the date
of the Novacor acquisition. The increase is also the result of expenses relating
to the INTrEPID trial for Novacor LVAS, research activities undertaken to
further the development of HeartSaver and commencement of formal pre-clinical
trials of HeartSaver.

Amortization of Goodwill and Intangibles. Due to changes in accounting
pronouncements (Canadian Institute of Chartered Accountants Section 3062
"Goodwill and Other Intangible Assets"), which was adopted by the Corporation at
the start of the fiscal year beginning January 1, 2002, amortization has been
significantly reduced as goodwill and indefinite life intangibles are no longer
amortized. This has resulted in a significant decrease in amortization from
$15.2 million in 2001 to $7.3 million in 2002. These assets are now tested
annually for impairment. The results of the impairment testing during 2002 lead
management to determine that no impairment exists and that no adjustment to
goodwill was required.

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<PAGE>

Other intangible assets, consisting of purchased technology, patents, trademarks
and other identified rights, continue to be amortized over their legal or
estimated useful lives, whichever is shorter, which range from 3 to 5 years.

Fiscal 2000 reflects only six months of amortization from the date of the
acquisition of the Novacor assets.

Foreign Exchange Gains and Losses. WorldHeart recorded a foreign exchange gain
of $477,000 for 2002 compared to a loss of $2.9 million in 2001 and a nominal
loss in 2000. Certain balance sheet items are denominated in foreign currencies
(predominantly the U.S. dollar). Foreign exchange gains and losses arise when
the value of the Canadian dollar changes relative to the value of these foreign
currencies. The majority of the foreign exchange gains and losses can be
attributed to the Company's preferred shares which are denominated in U.S.
dollars. In 2002 the Canadian dollar strengthened by approximately 1.1% versus
the U.S. dollar which resulted in a foreign exchange gain of approximately
$477,000. In 2001 the Canadian dollar weakened by approximately 6.2% against the
U.S. dollar which resulted in a foreign exchange loss of $2.9 million.

Investment Income. Interest income primarily represents interest earned by the
Corporation on its cash equivalents and short-term investments.

Interest income has decreased to $134,000 in 2002 from $1.2 million in 2001 and
$2.4 million in 2000 reflecting significantly lower average cash equivalents and
short-term investment balances during the year and, in general, a declining
interest rate environment during the period.

Interest Expense and Financing Costs. The preferred shares are being accounted
for in accordance with their substance and are presented in the financial
statements according to their debt and equity components measured at their
respective fair values at the time of issue. The debt components have been
calculated as the present value of the interest payments discounted at 12%,
approximating the interest rate that would have been applicable to
non-convertible debt at the time the preferred shares were issued. Interest
expense is determined on the debt component as the amount necessary to increase
the debt component to its face amount plus accumulated dividends at maturity.
Total non-cash interest expense for the 2002 fiscal year was approximately $7.7
million. The corresponding amount for the 2001 fiscal year was $6.8 million and
for 2000, which included only six months of interest, was approximately $3.0
million. Other interest and financing costs in 2002 totaled approximately
$122,000.

Recovery of Future Income Taxes. At the date of the acquisition of the Novacor
assets in 2000 the Corporation recognized an income tax liability of $10.5
million. The Corporation has subsequently recognized future income tax recovery
amounts on the losses incurred in the United States only to the extent of the
$10.5 million liability (2001 - $5.0 million; 2000 - $5.5 million). This
recovery was calculated as 41% of the net loss of World Heart Inc. The Canadian
operations have both operating loss carryforwards and scientific research and
experimental development expenditure carryforwards available to offset future
income taxes. The benefit of these carryforwards has not been recorded in the
financial statements.

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<PAGE>

CAPITAL EXPENDITURES

------------------------------------------------------------------------------
                                    2002            2001             2000
------------------------------------------------------------------------------

Capital Expenditures            $610,198      $1,205,121         $ 902,398
------------------------------------------------------------------------------

Capital expenditures declined in 2002 and related primarily to various
manufacturing, research, testing and office equipment. Higher capital
expenditures of the same nature were made in 2001 as WorldHeart prepared for
pre-clinical and clinical trials.

At December 31, 2002, WorldHeart occupied two locations. The main Ottawa
location comprises 22,755 square feet of manufacturing and office space with a
lease that is being renewed on an annual basis on terms consistent with prior
years. A satellite office in Ottawa was vacated during the fourth quarter in
light of the reduction in staff resulting from the above-mentioned strategic
change implemented in the third quarter. The lease on this space would have
expired in December 2003, but an early cancellation, at a breakage cost of
$43,000 was negotiated subsequent to year-end. The third location is in Oakland
with two buildings consisting of approximately 40,000 square feet of
manufacturing and office space. The Oakland leases were renewed in 2002 for a
five-year term expiring on April 30, 2007.

EMPLOYEES

The Corporation is committed to employing qualified personnel with appropriate
expertise in its research and development and its business operations. At
December 31, 2002, the Corporation employed approximately 150 full-time staff
and consultants.

In addition to these staff members, there are approximately 90 clinical and
professional staff and volunteers, affiliated with CVD, involved in the
HeartSaver project.

LIQUIDITY AND CAPITAL RESOURCES

WorldHeart will continue to be dependent on its ability to obtain additional
capital in order to fund its HeartSaverVAD research and development program and
to fund its current commercial operations until they achieve profitability.

Financing Transactions. In January 2003, subsequent to year-end, WorldHeart
completed financings for gross proceeds of $13 million. These transactions
consisted of a private placement of equity of $3 million ($2.6 million net of
costs and fees) and debt totaling $10 million. The private placement included
2,343,750 units at a price of $1.28 per unit. Each unit comprises one WorldHeart
common share and one warrant to purchase a common share of WorldHeart for a
period of five years at $1.60 per share. In addition, a total of 234,374
warrants were also granted to the placement agent. Each warrant is exercisable
for two years at a price of $1.60 into one WorldHeart common share and one
compensation warrant. Each compensation warrant is exercisable at a price of
$1.60 into one WorldHeart common share at any time prior to the end of fiscal
2007. The debt consisted of a $7 million senior loan and a $3 million
subordinated loan. The loans mature on July 31, 2003 and bear an annual interest
rate of 18% payable monthly. The

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<PAGE>

Lenders were paid a fee equal to 4% of the gross loan amounts and also received
a total of 3,000,000 warrants, each exercisable into one WorldHeart common share
for a period of five years at a price of $1.60 per share. As collateral for the
loans the Corporation provided general security agreements over all of its
assets.

Late in 2002 the Corporation completed a $2 million loan transaction in order to
fund short-term working capital until the above noted transactions could be
completed. The interest rate was 2% per month and included 400,000 warrants each
exercisable for a five year period into one WorldHeart common share at a price
of $1.30 per share and with a provision that, in the event that the loan was
repaid prior to its June 18, 2003 maturity date, the number of warrants would be
reduced to 200,000. Subsequent to the 2002 year-end the loan was repaid from the
proceeds of the debt transactions detailed above, and the number of warrants
issued with respect to this transaction was reduced to 200,000.

Also, during the fourth quarter of 2002 WorldHeart sold accounts receivable
totaling US$1,095,000 to Edwards for cash totaling US$540,000 and the set off of
accounts payable owed by WorldHeart to Edwards totaling US$555,000. The proceeds
of this sale were used to fund short-term working capital requirements until the
above noted transactions could be completed.

Funding in 2001 resulted from the issue of 3,027,000 special warrants through a
private placement for net proceeds of $14.9 million. Each special warrant was
convertible into one common share and one warrant to purchase a common share.
During 2002 the special warrants were converted into an equivalent number of
common shares and warrants. In addition, during 2001 the Corporation and New
Generation Biotech (Equity) Fund ("NewGen"), an Ontario labour sponsored venture
capital investment fund, subscribed for an equal number of common shares of
2007262 Ontario Inc. ("2007262"). In return for preferred shares and a
promissory note in the amount of $2.0 million, the Corporation transferred
certain technology and assets to 2007262. The promissory note was paid to the
Corporation prior to year-end and the remainder of the cash was used in 2002 to
fund research and development activities. NewGen purchased preferred shares in
2007262 for gross proceeds of $3.5 million. The Corporation consolidated 2007262
Ontario Inc. into its results for the year ended December 31, 2001.

In 2000, the Corporation issued 850,000 common shares for net proceeds of $15
million and as part of the Novacor acquisition, the Corporation issued
convertible preferred shares for US$20 million. The preferred shares are
convertible at US$14.55 into 1,374,570 common shares, plus additional common
shares for the accumulated but unpaid dividends to the date of conversion. Also
during 2000, 12,282 shares were issued for $116,147 upon the exercise of stock
options issued under the Employee Stock Option Plan. Additionally, during 2000,
common shares were issued for $765,054 to underwriters of previous equity issues
who exercised a portion of their compensation warrants.

Year-end Liquidity. At December 31, 2002, the Corporation had a working capital
deficiency of $8.1 million as compared to working capital of $26.2 million in
2001. The Corporation had available cash of $248,000 versus cash, cash
equivalents and short-term investments of $22.2 million in 2001.

The decrease in working capital in 2002 and 2001 is the result of an investment
of cash and increase in accounts payable in order to fund research and
development activities associated with the HeartSaverVAD and the net losses
associated with the Novacor LVAS commercial operations and other general
corporate costs.

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<PAGE>

Cash totaling $1.2 million has been pledged against a US$750,000 letter of
credit issued by WorldHeart in support of the Company's obligations under its
Oakland, California premises leases and is not available for general operations.

As noted previously WorldHeart completed equity and debt transactions totaling
$13 million subsequent to the 2002 year-end. In order to repay the $10 million
of collateralized loans which matures July 31, 2003, and continue to fund losses
from operations and other obligations, WorldHeart will have to complete one or
more financing transactions within the first half of fiscal 2003.

Commitments

As at December 31, 2002 the Corporation's obligations and commitments to make
payments are as follows.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                             Payments Due by Period
Contractual Obligations                       Total    Less than 1   1 - 3 years   4 - 5 years      After 5
                                                              year                                    years
------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>           <C>           <C>              <C>
Capital Lease Obligations                $   64,923     $   64,923    $        -    $        -       $    -
Operating Leases                          5,179,528      1,729,141     2,153,939     1,296,448            -
Guaranteed Distribution Fees
    (in US$)                              6,000,000      2,000,000     4,000,000             -            -
Short-term Loan                           2,000,000      2,000,000             -             -            -
------------------------------------------------------------------------------------------------------------
</TABLE>

The Guaranteed Distribution Fee amounts relate to the US$2 million minimum gross
profit guarantee under the distribution agreement with Edwards . US$2 million
per year is the maximum exposure; the shortfall offset against revenue in 2002
was approximately US$426,000 (2001 - US$547,369; 2000 - US$332,074). The 2001
shortfall included an accrual for 2002 in the amount of $318,000; no amounts
have been accrued for years subsequent to 2002.

<TABLE>
------------------------------------------------------------------------------------------------------------
                                                  Amount of Commitment Expiration Per Period
Other Commercial Commitments           Total Amounts     Less than 1  1 - 3 years  4 - 5            After 5
                                           Committed            year                    years         years
------------------------------------------------------------------------------------------------------------
<S>                                          <C>             <C>
Standby Letters of Credit:
     Canadian dollars                       $ 78,312        $ 78,312            -           -             -
     US dollars                           US$750,000      US$750,000            -           -             -
------------------------------------------------------------------------------------------------------------
</TABLE>

The Canadian dollar letter of credit is in support of obligations under the
capital lease which will be repaid in 2003. The U.S. dollar letter of credit is
in support of WorldHeart's lease obligations for its premises in Oakland,
California. Cash in the amount of US$750,000 has been pledged in support of the
letter of credit.

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<PAGE>

MARKET RISK

WorldHeart is subject to interest rate risk occasionally on investments that it
makes with excess cash.

Market risk is mitigated by close adherence to an established investment policy,
which has been approved by the Board of Directors. The policy sets conservative
criteria with respect to liquidity and counter-party diversification. Management
believes the Corporation is not significantly exposed to capital risk as the
portfolio consists of high quality instruments that are short term in nature and
are well diversified. There exists modest income exposure to a decline in
interest rates. This is not significant due to the short terms to maturity of
the instruments held.

The Corporation has a significant level of assets and liabilities denominated in
foreign currencies, predominantly U.S. dollars as a result of its U.S.
operations, and U.S. dollar-denominated preferred shares. Occasionally
WorldHeart enters into foreign exchange contracts in order to manage its foreign
exchange exposure. At December 31, 2002 there were no outstanding foreign
exchange forward contracts.

CRITICAL ACCOUNTING ESTIMATES

The Corporation's critical accounting estimates relate to the following:

     o    Estimating future sales to ascertain if an obligation exists under the
          Edwards' distribution agreement;

     o    Estimating slow moving and obsolete inventory;

     o    Valuation of intangible assets and goodwill;

     o    Accounting for government assistance;

     o    Tax credit receivable; and

     o    Income taxes.

Under a distribution agreement with Edwards, Edwards is guaranteed a minimum of
US $2 million in annual gross margin from the sales of the Corporation's
products. The Corporation's policy is to accrue as payable any shortfall in the
US $2 million guaranteed gross margin for the year or for future years when,
based on estimated future sales to Edwards, it appears likely that the
guaranteed gross margin will not be met. If sales to Edwards were to drop from
the current estimates, the amount ultimately owed would be greater than the
current estimate. At December 31, 2002 there is no reserve for additional
guarantee fees that may be incurred subsequent to 2002 as the Corporation
believes that sales levels will be sufficient to meet the minimum guarantee.

The Corporation has established reserves for slow moving inventory. To the
extent inventory movement is not as anticipated, the current inventory reserve
needed for slow moving items may be higher or lower than that reserved at
December 31, 2002.

During the year, the Corporation adopted the new rules on accounting for
goodwill and other intangible assets. As a result, goodwill is no longer
amortized but, rather, is tested for impairment annually and any impairment
recognized. WorldHeart has completed its goodwill impairment tests and concluded
that no impairment exists and has made no adjustment to goodwill during 2002.
Other intangible assets were also reviewed and it was determined that no
impairment has

                                                                              10
<PAGE>

occurred. The Corporation continues to amortize other intangible assets over
their estimated useful life.

Government assistance is recognized when the expenditures that qualify for
assistance are made and the Corporation has complied with the conditions for
receipt of government assistance. Government assistance is applied first to
reduce the carrying value of any assets and next to reduce eligible expenses
incurred in the year. A liability to repay government assistance, if any, is
recorded in the period when the conditions arise that cause the assistance to
become repayable. At December 31, 2002 there is no accrual for receivables from
Technology Partnerships Canada because the Company has determined that it may be
ineligible for further funding as a result of scope changes that resulted form
the merging of the three HeartSaver development programs in 2002. The
Corporation is considering a revision to the current TPC contribution agreement
and/or a new TPC application that would cover the optimized HeartSaver
development program. To date, the Corporation has received approximately $7.0
million of the $10.0 million that was available under the current contribution
agreement.

Under the Ontario Business Research Institute (OBRI) tax credit program, the
Corporation accrued a tax credit receivable in the amount of $2.8 million during
2001. This was associated with research payments made to the Cardiovascular
Devices Division (CVD) of the Ottawa Heart Institute Research Corporation from
1997 to 2000. At year-end this claim was in the process of being audited by the
Ontario Government's Ministry of Finance (Ministry).

On April 14, 2003, subsequent to year-end, the Corporation received a
preliminary assessment from the Ministry detailing adjustments that it is
proposing to reduce the Corporation's claim under the OBRI tax credit program.
This preliminary assessment was issued subsequent to changes that were proposed
to the OBRI program in the 2003 Ontario Budget presented on March 27, 2003.

In response to the preliminary assessment, in the first quarter of 2003 the
Corporation determined that it was appropriate to record a reserve of $1.7
million against the $2.8 million that it had previously recorded as a tax credit
receivable for claims that the Corporation had made under the OBRI program.

As part of the process of preparing the Corporation's consolidated financial
statements, the Corporation is required to estimate the income taxes in each of
the jurisdictions in which it operates. This process involves estimating the
Corporation's current tax exposure together with assessing temporary differences
resulting from differing treatment of items for tax and accounting purposes. The
Corporation has future income tax assets, the principal components of which are
undeducted Scientific Research and Experimental Development expenditures and net
operating loss carry forwards. The Corporation believes sufficient uncertainty
exists regarding the realizability of these future income tax assets such that a
valuation allowance has been taken on the entire amounts. Assumptions regarding
the realizability of these future income tax assets are revisited at each
balance sheet date. Any changes in the Corporation's overall operating
environment and financial performance could result in adjustments to the
valuation allowance.

OTHER FACTORS

WorldHeart's near-term commercial operations are exclusively focused on its
Novacor LVAS product. Initial commercial success will, therefore, be dependant
on the Corporation's ability to continue to increase Novacor sales. Novacor is
approved for sale, without limitation, in Europe

                                                                              11
<PAGE>

and Japan and as a bridge-to-transplant device in the United States and Canada.
In the U.S. the Federal Drug Administration has filed, with expedited review
status, the Corporation's PMA (pre-market approval) supplemental request for use
in the long-term or Destination Therapy market. We believe that approval of this
submission would increase the market for Novacor substantially.

Pulsatile VADs. WorldHeart has several competitors with commercially approved
pulsatile VADs having pumps that are externally located and one that is
abdominally implanted. The devices developed by the Corporation's competitors
are now primarily used as bridges to transplant. The competitive implantable
product was approved during the fourth quarter for destination therapy
indications in the U.S. Some of the Corporation's existing known competitors
have significantly greater financial, production and marketing resources than
the Corporation. WorldHeart believes HeartSaver is the only pulsatile device
that is currently at an advanced stage of development.

Non-pulsatile VADs. Research and development is proceeding in several centres
for non-pulsatile continuous flow assist devices. Some of these devices are
currently being tested in humans. It has not been determined whether these
non-pulsatile devices will be acceptable for long-term use. If proven safe and
effective, and subject to regulatory approval, non-pulsatile assist devices
approved for long-term use could have an adverse effect on the market for
WorldHeart's devices.

HeartSaver Development. During 2002 management merged the three HeartSaver
development programs into one optimized HeartSaver development program. Although
it is expected that the commercialization of the HeartSaver will occur in 2006,
which is two years later than the most recent estimates for the original
HeartSaver, the development program is expected to result in a heart-assist
device that will offer significant improvements over previous versions of
HeartSaver in terms of size, weight, ease and flexibility of implant including
the ability to implant in the chest cavity or abdomen and for use for left,
right or bi-ventricular heart assist, reliability, durability and enhanced
manufacturability. Management is confident that the development program,
including pre-clinical and clinical trials will be successful and that the
necessary regulatory approvals will be received. However, there can be no
assurance that this will occur.

Commercial Sales of the Novacor LVAS. Sales of the Novacor LVAS contribute to
overhead and other indirect costs of producing the Novacor LVAS product. At
current volumes, however, the Novacor commercial operations have contributed
only modest gross margin or have resulted in gross margin deficits. To the
extent that the Corporation is unable to significantly increase sales and/or
reduce per unit manufacturing costs, there is risk that the Corporation could be
adversely effected and the Novacor operations could increase the Corporation's
net cash consumption.

OUTLOOK

External Environment. The market for an effective device treatment for
late-stage heart failure has not diminished during 2002, and despite significant
progress on many fronts, no competitive breakthroughs in heart assist products
have been announced, or are believed to be imminent. The scope of heart failure
is increasing as a result of both population demographic trends, and also as

                                                                              12
<PAGE>

a response to the increasing number of survivors from sudden cardiac events,
many of who subsequently develop congestive heart failure. The Corporation
believes the potential market for its heart assist devices exceeds 100,000
patients per annum in North America, Europe, Japan and certain other countries.

There is growing evidence of increasing clinical acceptance of the use of
mechanical circulatory assist therapies in the treatment of late stage heart
failure, and the current review by the Centers for Medicare and Medicaid
Services in the U.S. of reimbursement coverage for both bridge and destination
therapy LVAD use is expected to result in increased payments for procedures
using such devices. These developments are expected to accelerate the use of
VADs both in the U.S. and elsewhere.

Internal Environment. The Corporation expects to incur further losses from
operations at least until 2006 as it continues its HeartSaver research and
development program. In addition, increased marketing expenses will result as
WorldHeart continues to promote the use of its enhanced Novacor LVAS product in
response to both recently received, and anticipated regulatory approvals. These
cost increases will be potentially offset by increased net contributions from
higher Novacor LVAS sales.

ACCOUNTING POLICIES

Significant differences between GAAP in Canada and the United States are
presented in Note 22 to the consolidated financial statements.

                                                                              13THIS 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

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