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                                                                   EXHIBIT 4.3

                           MEMORANDUM OF UNDERSTANDING

           MDS INC., a corporation incorporated under the laws of the Province
           of Canada

           (hereinafter called "MDS")

           - and -

           HEMOSOL INC., a corporation incorporated under the laws of the
           Province of Ontario

           (hereinafter called "Hemosol")

WHEREAS MDS is a holder of securities in the capital of Hemosol;

AND WHEREAS Hemosol wishes to borrow Cdn.$20 million (the "Loan") from a
Canadian chartered bank or other suitable institutional lender (the "Lender"),
the proceeds of which shall be deployed to, among other things, pay for ongoing
clinical trials of its flagship product, HEMOLINK(TM) and complete construction
OF its Meadowpine manufacturing facility.

AND WHEREAS MDS is prepared to assist Hemosol in obtaining such Loan on
favourable terms by guaranteeing all of the obligations of Hemosol to the Lender
in respect of the Loan.

AND WHEREAS the intention of this memorandum of understanding ("MOU") is to set
out the principal terms and conditions pursuant to which MDS is prepared to
guarantee the obligations of Hemosol to the Lender in respect of the Loan.

NOW THEREFORE, in consideration of the mutual covenants and agreements contained
in this MOU and other good and valuable consideration (the receipt and adequacy
of which is hereby acknowledged by the parties hereto), the parties hereto agree
as set forth below.

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1.         BORROWING

1.1 Hemosol will seek to borrow $20 million from the Lender and the obligations
of Hemosol in connection with the Loan will be secured by a fixed and floating
first charge in favour of the Lender over all the real and personal property
assets of Hemosol (the "Security"). The Loan shall have a term of 18 months and,
subject to Hemosol obtaining all requisite approvals to issuing the additional
warrants referred to in paragraph 2.1, up to 30 months, the last business day of
such term being referred to herein as the "Latest Repayment Date".

1.2 The obligations of Hemosol under the Loan will be collaterally secured by a
guarantee from MDS in favour of the Lender (the "Guarantee"). The Guarantee
shall be in the form customarily used by the Lender, the terms of which shall
include however, but not be limited to, full rights of subrogation in favour of
MDS.

2.         GUARANTEE FEE

2.1 In consideration of providing the Guarantee, Hemosol shall cause to be
issued to MDS warrants entitling the holder, subject to the satisfaction of the
requirements set out in sections 2.2 and 2.3, to subscribe for and purchase up
to 6,000,000 fully paid and non-assessable common shares of Hemosol ("Shares")
(subject to customary adjustments including, but not limited to, any subdivision
or consolidation of the common shares of Hemosol) at a price per Share of Cdn.
$1.00 (the "Warrants"). In addition, to the extent Hemosol wishes to extend the
Loan from 18 months to 30 months, Hemosol shall issue to MDS up to an additional
four million warrants, at $1.00 per Warrant, on the terms set forth in paragraph
2.3 and shall obtain all requisite approvals, including TSX listing approval,
prior to the end of the first 18 month period.

2.2 Warrants entitling MDS to purchase up to 5,000,000 Shares at a price of Cdn.
$1.00 per Share shall be exercisable, in whole or in part, at any time and from
time to time, on or after the date upon which the Guarantee is delivered by MDS
to the Bank in connection with the Loan (the "Funding Date") and prior to the
later of:

           (a)        the third anniversary of the Funding Date; and

           (b)        if the Loan is not repaid within 15 months of the Funding
                      Date, the earlier of twelve months following the date upon
                      which the Loan is repaid in full and the fifth anniversary
                      of the Funding Date.

2.3 For each whole or part month that the Loan remains outstanding beyond 15
months (the "Fifteenth Month of the Term") (to a maximum of an additional 15
months) (each such whole or part month being an "Extension Month"), MDS may
exercise Warrants entitling it to subscribe for up to the number of Shares set
forth in Table 1 below (it being acknowledged that the warrants set forth in
months 4 through 15 are subject to the TSX listing approval as set forth in
paragraph 2.1 hereof) and such Warrants may be exercised at any time and from
time to time during the period from and after the first day of the subject
Extension Month and prior to the third anniversary of such date provided in no
event shall any Warrants be exercisable after the fifth anniversary of the
Funding Date.

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                                     TABLE 1

<TABLE>
<CAPTION>
    MONTHS LOAN IS OUTSTANDING                NUMBER OF ADDITIONAL WARRANTS
BEYOND FIFTEENTH MONTH OF THE TERM                 BECOMING EXERCISABLE
----------------------------------                 --------------------
<S>                                           <C>
                 1                                        333,333
                 2                                        333,333
                 3                                        333,333
                 4                                        333,333
                 5                                        333,333
                 6                                        333,334
                 7                                        333,333
                 8                                        333,333
                 9                                        333,333
                10                                        333,333
                11                                        333,333
                12                                        333,333
                13                                        333,333
                14                                        333,333
                15                                        333,337
                                                       ----------
               Total                                    5,000,000
</TABLE>

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           If the Loan is extended beyond the Fifteenth Month of the Term and
Hemosol repays in full all amounts owed under the Loan in any month prior to the
Latest Repayment Date, no Warrants, in excess of those which are already
exercisable as of the end of the month in which the Loan is repaid in full,
shall be exercisable.

3.         CONDITIONS

3.1 The conditions precedent to the provision of the Guarantee by MDS are the
following:

           (a)        MDS and its legal counsel must have sufficient opportunity
                      to review and must ultimately approve, in form and
                      substance, all documentation relating to the Loan
                      including, without limitation, the loan agreement and all
                      documentation relating to the Security and the Warrants;

           (b)        MDS and its legal counsel must be satisfied with the form
                      and substance of the Guarantee which shall provide,
                      without limiting the generality of the foregoing, that MDS
                      has full rights of subrogation upon MDS paying to the
                      Lender all amounts outstanding in connection with the Loan
                      at the time the Guarantee is called upon, and the Loan and
                      Guarantee transactions are in compliance with OSC Policy
                      61-501 and the Shares issuable upon exercise of the
                      Warrants shall be subject to a hold period of no more than
                      twelve (12) months;

           (c)        MDS shall receive an opinion from legal counsel to Hemosol
                      confirming, among other things, that there are no security
                      interests in, or other encumbrances on title to, any of
                      the real property assets of Hemosol that rank in priority
                      to the security interest in such assets granted to the
                      Lender as security for the Loan. MDS shall receive a
                      search report from legal counsel to Hemosol confirming,
                      subject to customary limitations with respect to the
                      accuracy, completeness and currency of the records of
                      public registries, that: (i) with the exception of
                      financing statements registered in respect of assets
                      leased by Hemosol from a secured creditor, there are no
                      secured parties with a financing statement registered in
                      the Ontario Personal Property Registry (the "PPSR")
                      registered in priority to the financing statement
                      registered in the PPSR in favour of the Lender; (ii) with
                      the exception of a notice of intention to grant special
                      security registered in favour of the Lender, there are no
                      banks with a notice of intention to grant special security
                      registered against Hemosol under the Bank Act (Canada);
                      and (iii) there are no executions registered against the
                      personal property of Hemosol in the land registry offices
                      in those countries in which Hemosol has located any
                      personal property;

           (d)        the approval and consent of the Toronto Stock Exchange in
                      respect of the issuance of the Warrants (other than the
                      4,000,000 warrants to be issued in the event the loan is
                      extended from 18 to 30 months which listing approval shall
                      be obtained at the time of such extension), must be
                      received;

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           (e)        no material adverse change shall have occurred with
                      respect to Hemosol between the time of execution of this
                      MOU and the date upon which MDS is required to execute and
                      deliver the Guarantee;

           (f)        Hemosol shall have obtained all necessary third party,
                      shareholder, director and regulatory consents required in
                      connection with the transactions contemplated herein; and

           (g)        any such other conditions as are commercially reasonable
                      and customary in transactions similar to those
                      contemplated herein.

4.         EXPENSES

4.1 Hemosol shall pay, or cause to be paid, all reasonable fees (including, but
not limited to, all legal and documentation fees) and expenses incurred by MDS
in connection with the preparation of this MOU, the Loan, the Guarantee, the
Security and any other documentation relating to the transaction contemplated
herein as well as the reasonable expenses of MDS in connection with the
enforcement of its rights, all whether or not documentation relating to the Loan
is promptly executed or any amounts are advanced thereunder.

5.         CONFIDENTIALITY AND PUBLIC DISCLOSURE

5.1 Except as otherwise agreed by MDS and Hemosol, neither MDS nor Hemosol will
disclose the existence of any details of this MOU or the transaction
contemplated herein to any party other than their respective directors, officers
and advisors who have a need to know and to the Lender and its advisors who have
agreed to maintain such information in confidence until such time as required by
applicable laws or regulations.

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6.         ASSIGNMENT

6.1 Neither MDS nor Hemosol shall be permitted to assign all or any portion of
its gift or obligations hereunder.

DATED on the 22nd day of October, 2002.

                                         MDS INC.

                                         By: /s/ Peter Brent
                                             -------------------------------

                                         HEMOSOL INC.

                                         By: /s/ Lee Hartwell
                                             -------------------------------

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