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
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
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".
"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