Document:

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                                                                   EXHIBIT 4.1

                                                     THE BANK OF NOVA SCOTIA
                                                     Scotia Plaza
                                                     44 King Street West
                                                     Toronto, Ontario
                                                     Canada M5H 1H1

                                                     SCOTIABANK

October 25, 2002

Hemosol Inc.
2585 Meadowpine Blvd.
Mississauga, Ontario
L5N 8H9

Attention: Mr. L. Hartwell, Chief Financial Officer

Dear Sirs:

We confirm that subject to acceptance by Hemosol Inc. (the "Borrower"), The Bank
of Nova Scotia (the "Bank") will make available to the Borrower, credit
facilities on the terms and conditions set out in the attached Terms and
Conditions Sheet and Schedule "A".

If the arrangements set out in this letter, and in the attached Terms and
Conditions Sheet and Schedule "A" (collectively the "Commitment Letter") are
acceptable to you, please sign the enclosed copy of this letter in the space
indicated below and return the letter to us, together with the balance of the
commitment fee owing, by the close of business on October 30, 2002, after which
date this offer will lapse.

This Commitment Letter replaces all previous commitments issued by the Bank to
the Borrower.

                                                Yours very truly,

/s/ J. Zelikovitz                               /s/ A.M. Eastman
----------------------------                    -------------------------------
J. Zelikovitz                                   A.M. Eastman
Senior Relationship Manager                     Vice President & Centre Manager

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The arrangements set out above and in the attached Terms and Conditions Sheet
and Schedule "A" (collectively the "Commitment Letter") are hereby acknowledged
and accepted by:

BORROWER:                                       GUARANTOR:

HEMOSOL INC.                                    MDS INC.

By: /s/ Lee Hartwell                            By: /s/ Peter E. Brent
    ----------------------------------              ---------------------------
    Name: Lee Hartwell                              Name: Peter E. Brent
    Title: VP/CFO                                   Title: Senior VP and
                                                           General Counsel

Date: October 25, 2002                          Date: October 25, 2002

                                     Page 2

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TERMS AND CONDITIONS

CREDIT NUMBER: 01                               AUTHORIZED AMOUNT: $20,000,000

TYPE:

           Non-Revolving

PURPOSE:

           Assist with construction costs for 2585 Meadowpine Blvd. and
           replenish working capital.

CURRENCY:

           Canadian Dollars

AVAILMENT:

           The Borrower may avail the Credit by way of direct advances evidenced
           by Promissory Notes and/or Bankers' Acceptances in Canadian dollars
           in multiples of $100,000 (subject to a minimum availment amount of
           $1,000,000) and having terms of maturity of 30 to 180 days (provided
           terms of maturity do not exceed the expiry date of the facility).

INTEREST RATE:

           The Bank's Prime Lending Rate from time to time, plus 1.0% per annum
           with interest payable monthly.

           Bankers' Acceptance Fee of 2.0% per annum payable at time of
           acceptance.

           A Standby Fee of 3/8% per annum on the daily unused portion of the
           Credit payable in dollars, is payable monthly from the date of
           acceptance of this commitment.

DRAWDOWN:

           $10,000,000 of the Credit is to be drawn down by February 28, 2003
           and the Credit is to be fully drawn down by April 30, 2003. The
           Bank's obligation to advance the Credit shall be terminated to the
           extent it is not drawn down on April 30, 2003.

           Advances are to be made in minimum multiples of $5,000,000.

REPAYMENT:

           Monthly interest payments.

           Facility is repayable on the earlier of:

                     (i)       May 25, 2005, unless MDS Inc. provides notice to
                               the Bank that the Guarantee will not be extended
                               beyond the Initial Term (as defined herein), in

                                     Page 3

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                               which case the Facility shall be repayable on May
                               25, 2004; and

                     (ii)      demand by the Bank following the occurrence of an
                               event of default hereunder which is continuing.

PREPAYMENT:

           Provided 10 business days prior written notice has been given to the
           Bank, prepayment is permitted without penalty at any time in whole or
           in part.

FEES:

           A Commitment Fee of $100,000 is payable in connection with the
           Credit. $25,000 of such amount is deemed to be earned and payable
           upon presentation of this commitment and the balance of $75,000 is
           deemed to be earned and payable upon acceptance of this commitment.

           An additional fee of $25,000 is due and payable on the first day of
           the 16th month of the Facility and the first day of the 25th month of
           the Facility. For the purpose of determining the payment date of such
           fees only, the Facility will be deemed to have commenced on November
           25, 2002.

SPECIFIC SECURITY:

           The following security, evidenced by documents and supported by
           certificates and legal opinions satisfactory to the Bank and
           registered or recorded as required by the Bank, is to be provided
           prior to any advances or availment being made under the Credit:

           Guarantee of MDS Inc. (with resolution) in the principal amount of
           $20,000,000 (the "Guarantee").

           The Guarantee is to expressly state recourse is available under it
           directly against MDS Inc. prior to any Bank enforcement against the
           Borrower or any of its property or assets. Bank to covenant in
           Guarantee not to enforce against property and assets of Borrower
           unless MDS Inc. has failed to pay amount demanded under Guarantee
           within 10 days of demand under Guarantee. The Guarantee shall also
           provide that MDS Inc. shall be subrogated to the Bank upon its full
           satisfaction of all amounts demanded by the Bank under the Guarantee
           and that the Bank will assign to MDS Inc. all of its right, title and
           interest in this Credit and the General Security granted to it by the
           Borrower. The Guarantee shall have an initial term of 18 months (the
           "Initial Term"). To the extent that the Borrower has not fully repaid
           the Credit during the Initial Term and subject to the Borrower
           obtaining TSX listing approval for an additional 4,000,000 warrants
           for common shares of the Borrower being issued to MDS Inc. at an
           issue price of $1 in consideration of extending the term of the
           Guarantee, MDS Inc. has agreed with the Borrower to extend the term
           of the Guarantee a further 12 months. The term of the Guarantee shall
           be automatically extended for such additional 12 month period unless
           MDS Inc. delivers written notice to the Bank stating otherwise.

                                     Page 4

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CREDIT NUMBER: 02                                  AUTHORIZED AMOUNT: $300,000

TYPE:

           Standby Letter(s) of Credit to expire 1 year from issuance, renewable
           annually upon request and at the Bank's option.

PURPOSE:

           In favour of the Canadian Imperial Bank of Commerce to support
           foreign exchange facilities.

CURRENCY:

           U.S. dollars

AVAILMENT:

           The Borrower has availed the Credit by way of Standby Letters of
           Credit (with each availment subject to completion of an Application
           and Agreement for Irrevocable Standby Letter of Credit in a form
           satisfactory to the Bank).

COMMISSION:

           1.0% per annum, calculated on the issue amount, based on increments
           of 30 days or multiples thereof from date of issuance to expiry date.
           Periods of less than 30 days will be counted as a thirty day
           increment. The amount is subject to the Bank's minimum fee as well as
           revision at any time and is payable upon issuance.

REPAYMENT:

           Advances made by the Bank as a result of a call under any Standby
           Letter of Credit are due and payable on demand by the Borrowers upon
           notice by the Bank.

SPECIFIC SECURITY:

           The following security, evidenced by documents in form satisfactory
           to the Bank and registered or recorded as required by the Bank, is to
           be provided prior to any advances or availment being made under the
           Credit(s):

                     Reimbursement Agreement for Standby Letter of Credit.

                     100% cash collateral for Credit.

                     Authority to Hold Funds on Deposit.

                                     Page 5

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CREDIT NUMBER: 03                                  AUTHORIZED AMOUNT: $138,980

TYPE:

           Standby Letter of Credit to expire 1 year from issuance, renewable
           annually upon request and at the Bank's option.

PURPOSE:

           In favour of the City of Mississauga to support issuance of building
permits.

CURRENCY:

           Canadian dollars

AVAILMENT:

           The Borrower has availed the Credit by way of Standby Letters of
           Credit (with each availment subject to completion of an Application
           and Agreement for Irrevocable Standby Letter of Credit in a form
           satisfactory to the Bank).

COMMISSION:

           1.0% per annum, calculated on the issue amount, based on increments
           of 30 days or multiples thereof, from date of issuance to expiry
           date. Periods of less than 30 days will be counted as a thirty-day
           increment. The amount is subject to the Bank's minimum fee as well as
           revision at any time and is payable upon issuance.

REPAYMENT:

           Advances made by the Bank as a result of a call under any Standby
           Letter of Credit are due and payable on demand by the Borrowers upon
           notice by the Bank.

SPECIFIC SECURITY:

           The following security, evidenced by documents in form satisfactory
           to the Bank and registered or recorded as required by the Bank, is to
           be provided prior to any advances or availment being made under the
           Credit(s):

                     Reimbursement Agreement for Standby Letter of Credit.

                     100% cash collateral for Credit.

                     Authority to Hold Funds on Deposit.

                                     Page 6

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GENERAL SECURITY, TERMS, AND CONDITIONS APPLICABLE TO ALL CREDITS

GENERAL SECURITY

           The following security, evidenced by documents and supported by
           certificates and legal opinions (including title opinions)
           satisfactory to the Bank and registered or recorded as required by
           the Bank, is to be provided prior to any advances or availment being
           made under the Credits; provided that the Bank agrees that the
           Specific Assignment of Contracts, Third Party Consents and Assignment
           of Security over Patents, Trademarks and Intellectual Property, all
           specified below, shall not be effective until the Borrower has
           received all consents and approvals necessary to allow it to grant
           such security and that if the Borrower undertakes to use its best
           efforts to obtain all consents and approvals necessary to allow such
           security documents to be granted, the Bank will make advances and
           availments hereunder notwithstanding the foregoing; and provided
           further that recourse under the Guarantee shall not be affected by
           any failure of the Borrower to obtain such consents and approvals:

                     Debenture for $25,000,000 secured by a first fixed
                     Charge/Mortgage over the property located at 2585
                     Meadowpine Boulevard, Mississauga, Ontario together with a
                     floating charge over all other assets, with insurance
                     coverage, including business interruption insurance, to
                     reasonable commercial standards, and loss payable endorsed
                     to the Bank, with an IBC insurance clause endorsement.

                     General Security Agreement over all present and future
                     personal property with appropriate insurance coverage, loss
                     if any, payable to the Bank.

                     Security under Section 427 of the Bank Act with
                     appropriate insurance coverage, loss, if any payable to
                     the Bank.

                     Specific Assignment of Contracts as the Bank may require
                     or as MDS may require prior to November 15, 2002.

                     Third Party consents and agreements to assignment of
                     contracts as the Bank may require or as MDS may require
                     prior to November 15, 2002.

                     Assignment of Security over all Patents, Trademarks and
                     Intellectual Property.

                     Bank's security documents contain covenants,
                     representations and warranties of a standard nature to
                     which the Borrower shall be bound, in addition to matters
                     contained herein.

CONDITIONS PRECEDENT:

           The following conditions, in addition to those referred to elsewhere
           herein, are to be met to the satisfaction of the Bank and its
           solicitors prior to any and all advances or availments being made
           under the Credit(s):

                                     Page 7

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                     Formal release of security/Lender rights by the National
                     Bank of Canada and termination of November 10, 2000 Senior
                     Credit Agreement with National Bank of Canada and November
                     24, 2000 Subordination and Inter-Creditor Agreement with
                     The Manufacturers Life Insurance Company.

                     Subsearch of 2585 Meadowpine Boulevard, Mississauga,
                     Ontario confirming the property to be free of liens other
                     than encumbrances permitted by the Bank, acting reasonably.

                     In connection with each advance, provision of a Drawdown
                     Certificate certifying, inter alia, all representations and
                     warranties are true and correct, covenants are in
                     compliance and no events of default have occurred which are
                     continuing.

GENERAL CONDITIONS:

           Until all debts and liabilities under the Credits have been
           discharged in full, the following conditions will apply in respect of
           the Credits:

           (a)       The occurrence of any event of default under any senior
                     debt credit facility of MDS Inc. which is continuing
                     (including the syndicated senior facility led by Canadian
                     Imperial Bank of Commerce which the Bank is a participant
                     in (the "MDS Syndicated Facility")), will constitute a
                     default under the credit arrangements provided for herein,
                     as set forth in Section 10(a)(xi).

           (b)       Without the Bank's prior written consent:

                      (i)        Guarantees or other contingent liabilities
                                 (other than contingent liabilities incurred in
                                 the ordinary course of business and cheques and
                                 other instruments endorsed for deposit) are not
                                 to be entered into and assets are not to be
                                 further encumbered by the Borrower.

                      (ii)       No mergers, acquisitions or change in the
                                 Borrower's line of business are permitted.

SPECIFIC BORROWER REPORTING CONDITIONS:

           Until all debts and liabilities under the Credits have been
           discharged in full, the Borrower will provide the Bank with the
           following:

                     Annual Audited Unconsolidated Financial Statements within
                     120 days of the Borrower's fiscal year end. To be
                     accompanied by the Auditors Letter to Management.

                     The Guarantee will provide for delivery by MDS Inc. of
                     Annual Audited Consolidated Financial Statements, within
                     120 days of the Guarantor's fiscal year end.

                                     Page 8

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                     Quarterly Unconsolidated Interim Financial Statements and
                     Compliance Certificate of the Borrower, certified by a
                     senior officer of the Borrower, within 60 days of the
                     period end after the first 3 quarter ends.

                     The Guarantee will provide for delivery by MDS Inc. of
                     Quarterly Unconsolidated Interim Financial Statements and
                     copy of Compliance Certificate of MDS Inc. provided by it
                     in connection with MDS Syndicated Facility, certified by a
                     senior officer of MDS Inc., within 60 days of the period
                     end after the first 3 quarter ends and 90 days after the
                     end of the fiscal year.

                                     Page 9

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SCHEDULE A

ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO ALL CREDITS

CALCULATION AND PAYMENT OF INTEREST:

1.         Interest on loans/advances made in Canadian dollars will be
           calculated on a daily basis and payable monthly on the 22nd day of
           each month (unless otherwise stipulated by the Bank). Interest shall
           be payable not in advance on the basis of a calendar year for the
           actual number of days elapsed both before and after demand of payment
           or default and/or judgment.

INTEREST ON OVERDUE INTEREST:

2.         Internet on overdue interest shall be calculated at the same rate as
           interest on the loans/advances in respect of which interest is
           overdue, but shall be compounded monthly and be payable on demand,
           both before and after demand and judgment.

INDEMNITY PROVISION:

3.         If the introduction or implementation of, or any change in, or in the
           interpretation of, or any change in its application to the Borrower
           of any law or any regulation or guideline issued by any central bank
           or other governmental authority (whether or not having the force of
           law), including, without limitation, any reserve or special deposit
           requirement or any tax (other than tax on the Bank's general income
           or capital) or any capital requirement, has due to the Bank's
           compliance the effect directly or indirectly, of (i) increasing the
           cost to the Bank of performing its obligations hereunder or under any
           availment hereunder, (ii) reducing any amount received or receivable
           by the Bank or its effective return hereunder or in respect of any
           availment hereunder or on its capital; or (iii) causing the Bank to
           make any payment or to forgo any return based on any amount received
           or receivable by the Bank hereunder or in respect at any availment
           hereunder, then upon demand from time to time the Borrower shall pay
           such amount as shall compensate the Bank for any such cost,
           reduction, payment or forgone return (collectively "Increased Costs")
           as such amounts are calculated in a certificate reasonably prepared
           by the Bank.

4.         In the event of the Borrower becoming liable for such Increased
           Costs, the Borrower shall have the right to prepay in full, without
           penalty, the outstanding principal balance under the affected credit
           other than the face amount of any document or instrument issued or
           accepted by the Bank for the account of the Borrower, including,
           without limitation, a Letter of Credit, a Letter of Guarantee or a
           Bankers' Acceptance. Upon any such prepayment, the Borrower shall
           also pay the then accrued interest on the amount prepaid and the
           Increased Costs to the date of prepayment together with such amount
           as will compensate the Bank for the cost of any early termination of
           its funding arrangements in accordance with its normal practices, as
           such amounts are calculated in a certificate reasonably prepared by
           the Bank.

                                    Page 10

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CALCULATION AND PAYMENT OF BANKERS' ACCEPTANCE FEE:

5.         The fee for the acceptance of each Bankers' Acceptance will be
           payable on the face amount of each Bankers' Acceptance at the time of
           acceptance of each draft calculated on the basis of a calendar year
           for the actual number of days elapsed from and including the date of
           acceptance to the due date of the draft.

CALCULATION AND PAYMENT OF STANDBY FEE:

6.         Standby fees shall be calculated daily and payable monthly on the
           basis of a calendar year for Canadian dollar credits and on the basis
           of a 360 day year for U.S. dollar credits from the date of acceptance
           by the Borrower of this Commitment Letter.

ENVIRONMENT:

7.         The Borrower agrees:

           (a)        to obey all applicable Laws and requirements or any
                      federal, provincial, or any other governmental authority
                      relating to the environment and the operation of the
                      business activities of the Borrower;

           (b)        to allow the Bank access at all times to the business
                      premises of the Borrower to monitor and inspect all
                      property and business activities of the Borrower;

           (c)        to notify the Bank from time to time of any material
                      adverse change to the business activities conducted by the
                      Borrower which would increase the environmental liability
                      of the Borrower in any material adverse manner, it being
                      recognized that the Borrower's business activities
                      currently involve the use and handling of hazardous
                      materials;

           (d)        to notify the Bank of any proposed material change in the
                      use or occupation of the property of the Borrower from
                      that currently carried on or contemplated as part of the
                      Borrower's business;

           (e)        to provide the Bank with immediate written notice of any
                      material environmental problem and any hazardous materials
                      or substances which have had a material adverse effect on
                      the property, equipment, or business activities of the
                      Borrower and with any other environmental information
                      requested by the Bank from time to time;

           (f)        to conduct all environmental remedial activities which a
                      commercially reasonable person would perform in similar
                      circumstances to meet its environmental responsibilities
                      and if the Borrower fails to do so, the Bank may perform
                      such activities; and

           (g)        to pay for any environmental investigations, assessments
                      or remedial activities with respect to any property of the
                      Borrower that may be performed for or by the Bank from
                      time to time. It is understood that prior to incurring
                      such expenses, the Borrower will be consulted, other than

                                    Page 11

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                      on costs incurred should the Bank find it necessary to
                      realize upon its security.

           If the Borrower notifies the Bank of any specified activity or change
           or provides the Bank with any information pursuant to subsections
           (c), (d), or (e), or if the Bank receives any environmental
           information from other sources, the Bank, in its sole discretion, may
           decide that a material adverse change in the environmental condition
           of the Borrower or any of the property, equipment, or business
           activities of the Borrower has occurred which decision will
           constitute, in the absence of manifest error, conclusive evidence of
           the material adverse change. Following this decision being made by
           the Bank, the Bank shall notify the Borrower of the Bank's decision
           concerning the material adverse change.

           If the Bank decides or is required to incur expenses in compliance or
           to verify the Borrower's compliance with applicable environmental or
           other regulations, the Borrower shall indemnify the Bank in respect
           of such expenses, which will constitute further advances by the Bank
           to the Borrower under this Agreement. It is understood that prior to
           incurring such expenses, the Borrower will be consulted, other than
           on costs incurred should the Bank find it necessary to realize upon
           its security.

INITIAL DRAWDOWN:

8.         The right of the Borrower to obtain the initial drawdown under the
           Credit(s) is subject to the condition precedent that there shall not
           have been any material adverse changes in the financial condition of
           MDS Inc. or the environmental condition of the Borrower.

EVIDENCE OF INDEBTEDNESS:

9.         The Bank's accounts, books and records constitute, in the absence of
           manifest error, conclusive evidence of the advances made under this
           Credit, repayments on account thereof and the indebtedness of the
           Borrower to the Bank.

ACCELERATION:

10.        (a) All indebtedness and liability of the Borrower to the Bank shall,
           at the option of the Bank, become immediately due and payable, the
           security held by the Bank shall immediately become enforceable, and
           the obligation of the Bank to make further advances or other
           accommodation available under the Credits shall terminate, it any one
           of the following Events of Default occurs and is continuing:

           (i)        the Borrower or any guarantor fails to make when due,
                      whether on demand or at a fixed payment date, by
                      acceleration or otherwise, any payment of interest,
                      principal, fees, commissions or other amount payable to
                      the Bank under this Commitment Letter or the Security;

           (ii)       there is a breach by the Borrower of any other term or
                      condition contained in this Commitment Letter or in any
                      other agreement to which the Borrower and the Bank are
                      parties which shall have continued for a period of 10 days

                                    Page 12

<PAGE>

                      after written notice thereof has been provided to the
                      Borrower and MDS Inc.;

           (iii)      any default occurs under any security (the "Security")
                      listed in this Commitment Letter under the headings
                      "Specific Security" or "General Security" or under any
                      other credit, loan or security agreement to which the
                      Borrower is a party which shall have continued for a
                      period of 10 days after written notice thereof has been
                      provided to the Borrower and MDS Inc.;

           (iv)       any representation or warranty made or given herein or
                      under any Security is incorrect in any material respect so
                      as to make such representation or warranty materially
                      misleading and such misrepresentation continues to be
                      incorrect for a period of 10 days after written notice
                      thereof has been delivered to the Borrower and MDS Inc.;

           (v)        any bankruptcy, re-organization, compromise, arrangement,
                      insolvency or liquidation proceedings or other proceedings
                      for the relief of debtors are instituted by or against the
                      Borrower or any guarantor and, if instituted against the
                      Borrower or any guarantor, or are allowed against or
                      consented to by the Borrower or any guarantor or are not
                      dismissed or stayed within 60 days after such institution;

           (vi)       a receiver is appointed over any property of the Borrower
                      or any judgement or order or any process of any court
                      becomes enforceable against the Borrower or any property
                      of the Borrower or any creditor takes possession of any
                      property of the Borrower;

           (vii)      any judgement or award by an arbitrator is rendered
                      against the Borrower in an amount greater than $1,000,000
                      and such judgement or award is not payable by an insurer
                      pursuant to insurance maintained by the Borrower, or such
                      judgement or award is not being actively and diligently
                      contested in good faith and has not been vacated,
                      discharged, stayed or bonded pending appeal within 35 days
                      from the entry thereof or such shorter period within which
                      any property of the Borrower may be sold or forfeited
                      thereunder;

           (viii)     any execution, sequestration, extent, or other similar
                      process of any court shall become enforceable against the
                      Borrower, or if a distress or any analogous process shall
                      be levied against any of the properties or assets of the
                      Borrower and the aggregate amount claimed pursuant to all
                      such executions or other processes which are not being
                      actively or diligently contested in good faith or in
                      respect of which the creditors are not being effectively
                      restrained from enforcing such execution or other
                      processes, exceeds $1,000,000;

                                    Page 13

<PAGE>

           (ix)       any course of action is undertaken by the Borrower which
                      would result in the Borrower's reorganization,
                      amalgamation or merger with another corporation or the
                      transfer of all or substantially all of the Borrower's
                      assets or the Borrower ceasing to carry on all or
                      substantially all of its business;

           (x)        any guarantee of indebtedness and liability under any of
                      the Credits herein is withdrawn, determined to be invalid
                      or otherwise rendered ineffective;

           (xi)       any event of default by MDS Inc. under any senior debt
                      credit facility to which MDS Inc. is a party, including
                      the MDS Syndicated Facility, and as a consequence thereof
                      the maturity of such indebtedness has been or may be
                      accelerated or payments in respect thereof have been
                      rescheduled, and such default has not been waived or
                      cured.

COSTS:

11.        All out-of-pocket costs, including reasonable legal and appraisal
           fees incurred by the Bank relative to security and other
           documentation and the enforcement thereof, shall be for the account
           of the Borrower and may be charged to the Borrower's deposit account
           when submitted.

                                    Page 14<PAGE>

                                                                   EXHIBIT 4.2

                             SUPPLEMENTAL AGREEMENT

THIS AGREEMENT dated as of the 22nd day of November, 2002.

B E T W E E N:

                      HEMOSOL INC., a corporation constated pursuant to the laws
                      of the Province of Ontario (the "Borrower")

                                          - and -

                      THE BANK OF NOVA SCOTIA (the "Lender")

WHEREAS the Lender issued to the Borrower a commitment letter (the "Commitment
Letter") dated October 25, 2002 respecting certain credit facilities to be made
available by the Lender to the Borrower;

AND WHEREAS the parties hereto wish to enter into this agreement to amend and
further clarify certain matters referred to in the Commitment Letter;

NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises,
the sum of $1.00 now paid by each of the parties hereto to the other and other
good and valuable consideration (the receipt and adequacy whereof are hereby
acknowledged), the parties hereto covenant and agree as follows:

1.         The security (the "General Security") listed under the heading
           "General Security" on page 7 of the Commitment Letter shall secure
           Credit no.: 01 under the Commitment Letter (being the non-revolving
           credit (the "Non-Revolving Credit") in the principal amount of
           $20,000,000) and not Credit nos.: 02 and 03 (being the standby
           letters of credit facilities and herein referred to as the "Letter of
           Credit Facilities"). The Letter of Credit Facilities shall be secured
           only by the Specific Security (the "L/C Specific Security") referred
           to on pages 5 and 6 of the Commitment Letter, respectively, and the
           General Security shall not attach to the cash collateral which forms
           part of the L/C Specific Security.

2.         The provisions set forth in Schedule "I" hereto shall apply to all
           Bankers' Acceptances accepted under the Commitment Letter.

3.         The drawdown certificate referred to on page 8 of the Commitment
           Letter to be provided in connection with each advance under the
           Non-Revolving Credit shall be in the form set forth in Schedule "II"
           hereto.

4.         The Commitment Letter, as amended and supplemented hereby, remains in
           full force and effect and is hereby confirmed.

<PAGE>

5.         This agreement shall enure to the benefit of and be binding upon the
           parties hereto and their respective successors and assigns.

IN WITNESS whereof the parties hereto have duly executed these presents as of
the day first above written.

                               HEMOSOL INC.

                               Per: /s/ Lee Hartwell
                                    ------------------------------------------
                                    Name: Lee Hartwell
                                    Title: VP Corporate Development and CFO

                               THE BANK OF NOVA SCOTIA

                               Per: /s/ Jeff Zelikovitz
                                    ------------------------------------------
                                    Name: Jeff Zelikovitz
                                    Title: VP and Manager, Scotia Plaza Branch

AGREED TO AND ACCEPTED this 22nd day of November, 2002.

                               MDS INC.

                               Per: /s/ Peter E. Brent
                                    ------------------------------------------
                                    Name: Peter E. Brent
                                    Title: Senior VP and General Counsel

                                        2

<PAGE>

                                  SCHEDULE "I"

(i)        "Bankers' Acceptance" herein means a bill of exchange under the Bills
           of Exchange Act (Canada) and a depository bill under the Depository
           Bills and Notes Act (Canada) denominated in Canadian Dollars which
           has been drawn by the Borrower and accepted by the Lender in
           accordance with the provisions of the Commitment Letter, as
           supplemented hereby, and this Schedule "A".

(ii)       Each draft tendered by the Borrower for acceptance by the Lender as a
           Bankers' Acceptance shall be payable in Canada and shall have a term
           of not less than 30 days and not more than 180 days.

(iii)      Each draft to be accepted by the Lender shall be tendered on the
           applicable drawdown day by the Borrower to the Lender and the amount
           advanced thereby shall be the face amount of such draft and shall be
           deemed to be a drawdown under Credit Number: 01 (the "Non-Revolving
           Loan") pursuant to the Commitment Letter. No draft shall be tendered
           by the Borrower for acceptance by the Lender if such draft, together
           with all other outstanding amounts pursuant to the Non-Revolving
           Loan, exceeds the maximum authorized principal amount of the
           Non-Revolving Loan.

(iv)       To facilitate the issuance of Bankers' Acceptances, the Borrower
           hereby appoints the Lender as its attorney to sign and endorse on its
           behalf (in accordance with a drawdown request relating to the
           issuance of Bankers' Acceptances), in handwriting or by facsimile or
           mechanical signature as and when deemed necessary by the Lender,
           blank forms of Bankers' Acceptances in the form requested by the
           Lender. All Bankers' Acceptances signed and/or endorsed by the Lender
           on behalf of the Borrower shall bind the Borrower as fully and
           effectually as if signed in the handwriting of and duly issued by the
           proper signing officers of the Borrower. The Lender is hereby
           authorized (in accordance with a drawdown request relating to the
           issuance of Bankers' Acceptances) to issue such Bankers' Acceptances
           endorsed in blank in such face amounts as may be determined by the
           Lender; provided that the aggregate amount thereof is equal to the
           aggregate amount of Bankers' Acceptances required to be accepted and
           purchased by the Lender. The Lender shall not be liable for any
           damage, loss or other claim arising by reason of any loss or improper
           use of any such instrument except to the extent such damage, loss or
           other claim is determined by a court of competent jurisdiction by
           final and nonappealable judgment to have resulted from the fraud,
           gross negligence or wilful misconduct of the Lender or any person
           controlling, controlled by or under common control with the Lender.
           The Lender shall maintain a record with respect to Bankers'
           Acceptances (i) received by it in blank hereunder, (ii) voided by it
           for any reason, (iii) accepted and purchased by it hereunder, and
           (iv) cancelled at their respective maturities. On request by or on
           behalf of the Borrower, the Lender shall cancel all forms of Bankers'
           Acceptances which have been pre-signed or pre-endorsed on behalf of
           the Borrower and which are held by the Lender and are not required to
           be issued in accordance with the Borrower's irrevocable notice.

(v)        Upon tender of a draft by the Borrower for acceptance by a Lender in
           accordance with the terms hereof, the Borrower, on the applicable
           drawdown day, shall pay to such Lender a fee in Canadian Dollars

                                       3

<PAGE>

           equal to 2.00% multiplied by the face amount of such draft. The
           Lender shall have the right to purchase any Banker's Acceptance at
           the BA Discount Rate and to dispose of each Banker's Acceptance
           stamped by such Lender hereunder in any manner. The Lender shall
           deposit the BA Discount Proceeds less the aforesaid 2.00% stamping
           fee, if not already paid, into the Borrower's account with the
           Lender. "BA Discount Rate" herein means, with respect to any Bankers'
           Acceptance, the rate quoted by the Lender at or about 10:00 a.m. on
           the date of acceptance of such Bankers' Acceptance as the discount
           rate applicable to bankers' acceptances accepted and purchased by the
           Lender on such date, based upon a year of 365 days and having a
           comparable face amount and an identical maturity date to the face
           amount and maturity date of such Bankers' Acceptance. "BA Discount
           Proceeds" herein means, with respect to any Bankers' Acceptance, an
           amount (rounded to the nearest full cent), calculated on the
           applicable drawdown day which is equal to the face (or principal)
           amount of such Bankers' Acceptance divided by the sum of one plus the
           product of (i) the BA Discount Rate applicable to such Bankers'
           Acceptance multiplied by (ii) a fraction, the numerator of which is
           the term of such Bankers' Acceptance and the denominator of which is
           365.

(vi)       On the date of maturity of each Bankers' Acceptance, the Borrower
           shall provide to the Lender through payment to the Lender in
           accordance with the terms hereof the necessary Canadian Dollars to
           discharge its obligations under such Bankers' Acceptance and, if the
           Borrower fails to do so, the Lender may in its discretion decline to
           stamp additional Bankers' Acceptances and the Lender shall make an
           advance to the Borrower pursuant to the Non-Revolving Loan for such
           purpose in the principal amount of the necessary Canadian Dollars
           required to discharge the Borrower's obligations pursuant to such
           Bankers' Acceptance. The Lender shall promptly give notice to the
           Borrower of any such advance, and the Borrower shall accept and use,
           and hereby irrevocably directs the Lender to apply, the proceeds of
           any such advance made from time to time to discharge the Borrower's
           obligations pursuant to such Bankers' Acceptance.

(vii)      To facilitate the acceptance of Bankers' Acceptances pursuant to this
           Agreement, the Borrower shall from time to time provide the Lender
           upon request with drafts, drawn in blank by the Borrower upon the
           Lender in quantities sufficient for the Lender to fulfil its
           obligations hereunder, and such drafts shall be kept by the Lender
           with the same care as if such drafts were the property of the Lender.

(viii)     If any Bankers' Acceptance is outstanding at any time that payment of
           the indebtedness under the Non-Revolving Loan is demanded or
           accelerated in accordance with the instruments respecting same, the
           Borrower shall immediately upon such demand or acceleration, pay to
           the Lender an amount of Canadian Dollars equal to the principal face
           amount of such Banker's Acceptance. Such amount of Canadian Dollars
           (together with interest thereon) shall be held by the Lender for
           set-off against the liability of the Borrower to the Lender in
           respect of such Bankers' Acceptance, shall be invested from time to
           time by the Lender in deposits in the name of the Borrower for such
           terms as the Lender may determine and shall bear interest at the rate
           per annum payable by the Lender on deposits of similar currency,
           amount and maturity.

                                        4

<PAGE>

                                  SCHEDULE "II"

TO:                    THE BANK OF NOVA SCOTIA (THE "LENDER")

DATE:      o

1.         This Drawdown Notice is delivered to you pursuant to a commitment
           letter (the "Credit Agreement") dated October 25, 2002, as amended
           and supplemented, issued by the Lender to Hemosol Inc. (the
           "Borrower"). All Capitalized terms set forth in this drawdown notice
           and not defined herein shall have the respective meanings set forth
           in a General Security Agreement (the "GSA") issued by the Borrower to
           the Lender dated November 22, 2002.

2.         We certify to you the matters referred to in paragraphs 4 and 5
           herein.

3.         We hereby request an advance under Credit Number: 01 provided for in
           the Credit Agreement as follows:

                     (a) Type of Accommodation:
                                                --------------------------------
                     (b) Date of Advance:
                                          --------------------------------------
                     (c) Amount of Advance:
                                            ------------------------------------
                     (d) B.A. term, if applicable:
                                                   -----------------------------
                     or

                     (a) Type of Accommodation:
                                                --------------------------------
                     (b) Date of rollover drawdown:
                                                    ----------------------------
                     (c) Amount of rollover drawdown:
                                                     ---------------------------
                     (d) B.A. term, if applicable:
                                                   -----------------------------
                     (e) Type of Accommodation being rolled over:
                                                                  --------------
                     (f) Maturity Date of Accommodation being rolled over:
                                                                          ------

4.         All of the representations and warranties of the Borrower contained
           in the Credit Agreement, the GSA and all instruments issued pursuant
           to the Credit Agreement are true and correct on and as of the date
           hereof as though made on and as of the date hereof except where such
           representations and warranties are made as of a specified date, in
           which case such representations and warranties are true and correct
           as of the date such representations and warranties were made.

                                       5

<PAGE>

5.         No Event of Default has occurred and is continuing nor will any Event
           of Default occur as a result of the advance requested hereunder.

DATED at Toronto this o day of o, 200o.

                                     HEMOSOL INC.

                                     Per:
                                          -------------------------------------
                                          Name:
                                          Title:

                                     Per:
                                          -------------------------------------
                                          Name:
                                          Title:

                                    I/We have authority to bind the Corporation

                                        6

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