Exhibit 10.2


 


DEBTOR-IN-POSSESSION


SECURITY AGREEMENT


 


This Security Agreement (this “Agreement”)
is dated as of November 16, 2009 and entered into by and among deCODE genetics, Inc., a Delaware corporation (“Borrower”) and each of its Subsidiaries party hereto
(Borrower and such Subsidiaries, collectively, “Grantors”
and each a “Grantor”)  and
Saga Investments LLC, a Delaware
limited liability company (the “Secured Party”).


 


PRELIMINARY STATEMENTS


 


A.            Pursuant to that certain Debtor-in-Possession Loan
Agreement dated as of November 16, 2009 by and between Borrower and the
Secured Party (said Debtor-in-Possession Loan Agreement, as it may hereafter be
amended, restated, supplemented or otherwise modified from time to time, being
the “Loan Agreement”; terms defined therein
and not otherwise defined herein being used herein as therein defined), the
Secured Party has made certain commitments, subject to the terms and conditions
set forth in the Loan Agreement, to make a loan to Borrower.


 


B.            It is a condition to the making or maintaining of then
loan by the Secured Party under the Loan Agreement that Grantors shall have
granted the security interests and undertaken the obligations contemplated by
this Agreement.


 


NOW,
THEREFORE, in
consideration of the agreements set forth herein and in order to induce the
Secured Party to make and maintain the loan under the Loan Agreement, each
Grantor hereby agrees with the Secured Party as follows:


 


SECTION 1.         Grant of Security.


 


Each
Grantor hereby, and as enabled by a resolution duly adopted by each of the
Board of Directors of Íslensk erfðagreining ehf., a company organized under the
laws of Iceland, and the Board of Directors of UVS—Urður, Verðandi, Skuld ehf.,
a company organized under the laws of Iceland (the “Iceland Subsidiaries”)
prior to the execution and delivery of this Agreement in order to make
effective a grant of a security interest in the shares of the Iceland
Subsidiaries held by Borrower, copies of which have been provided to the
Secured Party and are in full force and effect (the “Iceland Resolutions”),
assigns to the Secured Party, and hereby grants to the Secured Party a security
interest in, all of such Grantor’s right, title and interest in and to all of
the personal property of such Grantor including the following, in each case
whether now or hereafter existing, whether tangible or intangible, whether now
owned or hereafter acquired and wherever the same may be located (the “Collateral”):


 


(a)           all Accounts;


 


(b)           all Chattel Paper;


 


(c)           all Money and all Deposit
Accounts, together with all amounts on deposit from time to time in such
Deposit Accounts;


 

















 


(d)           all Documents;


 


(e)           all General Intangibles
(including contract rights where no consent is required and patents,
trademarks, service marks, copyrights, and other intellectual property),
Payment Intangibles and Software;


 


(f)            all Goods, including
Inventory, Equipment, Farm Products and Fixtures;


 


(g)           all Instruments;


 


(h)           all Investment Property,
including the pledged equity set forth on Schedule 3 hereto;


 


(i)            all Letter-of-Credit Rights
and other Supporting Obligations;


 


(j)            all Records;


 


(k)           all Commercial Tort Claims,
including those set forth on Schedule 4 hereto; and


 


(l)            all Proceeds and Accessions
with respect to any of the foregoing Collateral.


 


Each
category of Collateral set forth above shall have the meaning set forth in the
UCC, it being the intention of the Grantors that the description of the
Collateral set forth above be construed to include the broadest possible range
of assets.  Notwithstanding the
foregoing, no grant of a security interest will be made where such a grant is
statutorily precluded by applicable law.


 


SECTION 2.         Security for Obligations.


 


This
Agreement secures, and the Collateral is collateral security for, the prompt
payment in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise, of all Secured Obligations of
each Grantor.  “Secured
Obligations” means all obligations and liabilities of every nature
of such Grantor now or hereafter existing under or arising out of or in
connection with the Loan Agreement  and the other
Loan Documents, together with all extensions or renewals thereof, whether for
principal, interest, reimbursement of amounts drawn under letters of credit,
fees, expenses, indemnities or otherwise, whether voluntary or involuntary,
direct or indirect, absolute or contingent, liquidated or unliquidated, whether
or not jointly owed with others, and whether or not from time to time decreased
or extinguished and later increased, created or incurred, and all or any
portion of such obligations or liabilities that are paid, to the extent all or
any part of such payment is avoided or recovered directly or indirectly from
the Secured Party as a preference, fraudulent transfer or otherwise, and all
obligations of every nature of Grantors now or hereafter existing under this
Agreement (including, without limitation, interest and other amounts that, but
for the filing of a petition in bankruptcy with respect to any Grantor, would
accrue on such obligations, whether or not a claim is allowed against such
Grantor for such amounts in the related bankruptcy proceeding).


 


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SECTION 3.         Representations and Warranties.


 


Each Grantor
represents and warrants as follows:


 


(a)           Jurisdiction of Organization.  Each Grantor’s name as it appears in official
filings in the jurisdiction of its organization, type of organization (i.e.,
corporation, limited partnership, etc.), jurisdiction of organization and
organization number provided by the applicable government authority of the
jurisdiction of organization are set forth on Schedule 1  annexed hereto.


 


(b)           Names.  No Grantor (or predecessor by merger or
otherwise of such Grantor) has, within the five-year period preceding the date
hereof had a different name from the name of such Grantor listed on the
signature pages hereof, except as set forth on Schedule 2 annexed
hereto.


 


(c)           Due Authorization, etc.  Each Grantor is duly formed,
validly existing and, if the legal concept of “good standing” has meaning under
the law of its jurisdiction of organization, in good standing under the law of
its jurisdiction of organization and has full entity power and authority to
execute, deliver and perform this Agreement. 
The execution, delivery and performance of this Agreement by Grantors
have been duly authorized by all necessary entity action.  This Agreement constitutes a legally valid
and binding obligation of each Grantor, enforceable against such Grantor in
accordance with its terms, subject to the Iceland Resolutions and the
provisions of Section 25 below, except as enforcement hereof may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors’ rights generally or by general
equitable principles.


 


(d)           No Conflict.  The execution, delivery and performance of
this Agreement by each Grantor will not violate the organizational documents of
such Grantor, any provision of law applicable to such Grantor or any order,
judgment or decree of any court or other governmental agency binding on such
Grantor.


 


(e)           Security Interests.  The security interests in the Collateral
granted hereunder, including, without limitation, those enabled by the Iceland
Resolutions, constitute valid security interests in the Collateral, securing
payment of the Secured Obligations.


 


SECTION 4.         Further Assurances.


 


Each
Grantor agrees that from time to time, at the expense of Grantors, such Grantor
will promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that the
Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any Collateral.  Without limiting the
generality of the foregoing, each Grantor will: 
(a) (i) execute (if necessary) and file such financing or
continuation statements, or amendments thereto, (ii) execute and deliver,
and cause to be executed and delivered, agreements establishing that the
Secured Party has control of Deposit Accounts and Investment Property of such
Grantor, (iii) deliver to the Secured Party all certificates or
Instruments representing or evidencing Investment Property, accompanied by duly
executed endorsements or instruments of transfer or assignment 


 


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in blank, all in form and substance satisfactory to
the Secured Party, (iv) deliver such other instruments or notices, in each
case, as may be necessary or desirable, or as the Secured Party may request, in
order to perfect and preserve the security interests granted or purported to be
granted hereby, and (vi) cause to be kept in force and effect and not
modify or rescind the Iceland Resolutions and to be made such notations or
other entries in the appropriate books and records of the Iceland Subsidiaries
to keep in force and effect the security interest in the equity interest in the
Iceland Subsidiaries granted hereby; (b) furnish to the Secured Party from
time to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Secured Party may reasonably request, all in reasonable detail; (c) at any
reasonable time, upon request by the Secured Party, exhibit the Collateral to
and allow inspection of the Collateral by the Secured Party, or persons
designated by the Secured Party; (d) at the Secured Party’s request,
appear in and defend any action or proceeding that may affect such Grantor’s
title to or the Secured Party’s security interest in all or any part of the
Collateral; and (e) use commercially reasonable efforts to obtain any
necessary consents of third parties to the creation and perfection of a
security interest in favor of the Secured Party with respect to any
Collateral.  Each Grantor hereby
authorizes the Secured Party to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral (including any financing statement indicating that it covers “all
assets” or “all personal property” of such Grantor).


 


SECTION 5.         Certain Covenants of Grantors.


 


Each
Grantor shall:


 


(a)           not use or permit any
Collateral to be used unlawfully or in violation of any provision of this
Agreement or any applicable statute, regulation or ordinance or any policy of
insurance covering the Collateral;


 


(b)           give the Secured Party at
least 30 days’ prior written notice of any change in such Grantor’s name,
identity or corporate structure;


 


(c)           give the Secured Party at
least 30 days’ prior written notice of any reincorporation, reorganization or
other action that results in a change of the jurisdiction of organization of
such Grantor;


 


(d)           pay promptly when due all
property and other taxes, assessments and governmental charges or levies
imposed upon, and all claims (including claims for labor, services, materials
and supplies) against, the Collateral except to the extent the validity thereof
is being contested in good faith; provided that such Grantor shall in any event
pay such taxes, assessments, charges, levies or claims not later than three (3) Business
Days prior to the date of any proposed sale under any judgment, writ or warrant
of attachment entered or filed against such Grantor or any of the Collateral as
a result of the failure to make such payment; and


 


(e)           permit representatives of
the Secured Party, upon prior notice, at any time during normal business hours
to inspect and make abstracts from Records of the Collateral, and each Grantor
agrees to render to the Secured Party, at such Grantor’s cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto.


 


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SECTION 6.         Special Covenants with Respect to Accounts.


 


Except
as otherwise provided in this section, each Grantor shall continue to collect,
at its own expense, all amounts due or to become due to such Grantor under the
Accounts.  In connection with such
collections, each Grantor may take (and, at the Secured Party’s direction,
shall take) such action as such Grantor or the Secured Party may deem necessary
or advisable to enforce collection of amounts due or to become due under the
Accounts; provided, however, that the Secured Party shall have the right at any
time, upon the occurrence and during the continuation of an Event of Default
and upon written notice to such Grantor of its intention to do so, to (a) notify
the account debtors or obligors under any Accounts of the assignment of such
Accounts to the Secured Party and to direct such account debtors or obligors to
make payment of all amounts due or to become due to such Grantor thereunder
directly to the Secured Party, (b) notify each Person maintaining a
lockbox or similar arrangement to which account debtors or obligors under any
Accounts have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent to or
deposited in such lockbox or other arrangement directly to the Secured Party, (c) enforce
collection of any such Accounts at the expense of Grantors, and (d) adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as such Grantor might have done.  After receipt by such Grantor of the notice
from the Secured Party referred to in the proviso to the preceding sentence, (i) all
amounts and proceeds (including checks and other Instruments) received by such
Grantor in respect of the Accounts shall be received in trust for the benefit
of the Secured Party hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over or delivered to the Secured Party in
the same form as so received (with any necessary endorsement), and (ii) such
Grantor shall not, without the written consent of the Secured Party, adjust,
settle or compromise the amount or payment of any Account, or release wholly or
partly any account debtor or obligor thereof, or allow any credit or discount
thereon.


 


SECTION 7.         Special Covenants with respect to Iceland
Subsidiaries.


 


Each
Grantor that is an Iceland Subsidiary shall:


 


(a) 
make, or cause to be made, an inscription into the shareholders’ register of
such Iceland Subsidiary, acknowledging and affirming the pledge of such Iceland
Subsidiary’s capital stock hereunder; and


 


(b) 
amend, or cause to be amended, the Articles of Association of such Iceland
Subsidiary to include (i) a provision acknowledging and affirming the
pledge of such Iceland Subsidiary’s capital stock hereunder and (ii) a
provision stating that no further lien on of pledge of the capital stock such
Iceland Subsidiary, directly or indirectly, shall be created, incurred, assumed
or permitted to exist.


 


SECTION 8.         Secured Party Appointed Attorney-in-Fact.


 


Each
Grantor hereby irrevocably appoints the Secured Party as such Grantor’s
attorney-in-fact, with full authority in the place and stead of such Grantor
and in the name of such Grantor, the Secured Party or otherwise, from time to
time in the Secured Party’s discretion 


 


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to take any action and to execute any instrument that
the Secured Party may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation:


 


(a)           upon the occurrence and
during the continuance of an Event of Default, to obtain and adjust insurance
required to be maintained by such Grantor;


 


(b)           upon the occurrence and
during the continuance of an Event of Default, to ask for, demand, collect, sue
for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Collateral;


 


(c)           upon the occurrence and
during the continuance of an Event of Default, to receive, endorse and collect
any drafts or other Instruments, Documents, Chattel Paper and other documents
in connection with clauses (a) and (b) above;


 


(d)           upon the occurrence and
during the continuance of an Event of Default, to file any claims or take any
action or institute any proceedings that the Secured Party may deem necessary
or desirable for the collection of any of the Collateral or otherwise to
enforce or protect the rights of the Secured Party with respect to any of the
Collateral;


 


(e)           to pay or discharge liens
(other than liens permitted under this Agreement or the Loan Agreement) levied
or placed upon or threatened against the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by the
Secured Party in its sole discretion, any such payments made by the Secured
Party to become obligations of such Grantor to the Secured Party, due and
payable immediately without demand;


 


(f)            upon the occurrence and
during the continuance of an Event of Default, to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications and notices in
connection with Accounts and other documents relating to the Collateral; and


 


(g)           upon the occurrence and
during the continuance of an Event of Default, generally to sell, transfer,
pledge, make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Secured Party was the absolute
owner thereof for all purposes, and to do, at the Secured Party’s option and
Grantors’ expense, at any time or from time to time, all acts and things that
the Secured Party deems necessary to protect, preserve or realize upon the
Collateral and the Secured Party’s security interest therein in order to effect
the intent of this Agreement, all as fully and effectively as such Grantor
might do.


 


SECTION 9.         Secured Party May Perform; Standard of Care .


 


If any
Grantor fails to perform any agreement contained herein, the Secured Party may
itself perform, or cause performance of, such agreement, and the expenses of
the Secured Party incurred in connection therewith shall be payable by Grantors
under Section 12(b) hereof. 
The powers conferred on the Secured Party hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers.  Except for the
exercise of reasonable care in the custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, the Secured
Party shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any 


 


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other rights pertaining to any Collateral.  The Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which the Secured Party accord its own property.


 


SECTION 10.               Remedies.


 


(a)           Generally.  If any Event of Default shall have occurred
and be continuing, the Secured Party may exercise in respect of the Collateral,
in addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the UCC (whether or not the UCC applies to the affected Collateral), and
also may (i) require each Grantor to, and each Grantor hereby agrees that
it will at its expense and upon request of the Secured Party forthwith,
assemble all or part of the Collateral as directed by the Secured Party and
make it available to the Secured Party at a place to be designated by the
Secured Party that is reasonably convenient to both parties, (ii) enter
onto the property where any Collateral is located and take possession thereof
with or without judicial process, (iii) prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or otherwise
prepare the Collateral for disposition in any manner to the extent the Secured
Party deems appropriate, (iv) take possession of any Grantor’s premises or
place custodians in exclusive control thereof, remain on such premises and use
the same and any of such Grantor’s equipment for the purpose of completing any
work in process, taking any actions described in the preceding clause (iii) and
collecting any Secured Obligation, (v) sell the Collateral or any part
thereof in one or more parcels at public or private sale, at the Secured Party’s
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as the Secured
Party may deem commercially reasonable, (vi) exercise dominion and control
over and refuse to permit further withdrawals from any Deposit Account
maintained with the Secured Party and provide instructions directing the
disposition of funds in Deposit Accounts not maintained with the Secured Party
and (vii) provide entitlement orders with respect to Security Entitlements
and other Investment Property constituting a part of the Collateral and,
without notice to any Grantor, transfer to or register in the name of the
Secured Party or any of its nominees any or all of the Collateral constituting
Investment Property.  The Secured Party
or any affiliate of the Secured Party may be the purchaser of any or all of the
Collateral at any such sale and the Secured Party or such affiliate, shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Secured Obligations as a credit on account of
the purchase price for any Collateral payable by the Secured Party at such
sale.  Each Grantor hereby waives any
claims against the Secured Party arising by reason of the fact that the price
at which any Collateral may have been sold at such a private sale was less than
the price which might have been obtained at a public sale, even if the Secured
Party accepts the first offer received and does not offer such Collateral to
more than one offeree; provided that such sale is conducted in a commercially reasonable
manner.  If the proceeds of any sale or
other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantors shall be jointly and severally liable for the deficiency
and the fees of any attorneys employed by the Secured Party to collect such
deficiency.  Each Grantor further agrees
that a breach of any of the covenants contained in this Section 10 will
cause irreparable injury to the Secured Party, that the Secured Party has no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section shall be specifically
enforceable against 


 


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such Grantor (including but not limited to the
covenants to take such as acts as may be requested by the Secured Party
pursuant to Section 4 hereof and the covenant to take such action as such
Grantor or the Secured Party may deem necessary or advisable to enforce
collection of amounts due or to become due under the Accounts), and each
Grantor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no default
has occurred giving rise to the Secured Obligations becoming due and payable
prior to their stated maturities.


 


(b)           Intellectual Property.  In addition to, and not by
way of limitation of, the granting of a security interest in the Collateral
pursuant hereto, each Grantor, effective upon the occurrence and during the
continuation of an Event of Default, hereby assigns, transfers and conveys to
the Secured Party the nonexclusive right and license to use all trademarks,
tradenames, copyrights, patents or technical processes owned or used by such
Grantor that relate to the Collateral, together with any goodwill associated
therewith, all to the extent necessary to enable the Secured Party to realize
on the Collateral in accordance with this Agreement and to enable any
transferee or assignee of the Collateral to enjoy the benefits of the
Collateral.  This right shall inure to
the benefit of all successors, assigns and transferees of the Secured Party and
their successors, assigns and transferees, whether by voluntary conveyance,
operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure
or otherwise.  Such right and license
shall be granted free of charge, without requirement that any monetary payment
whatsoever be made to such Grantor.


 


SECTION 11.               Application of Proceeds.


 


Except
as expressly provided elsewhere in this Agreement or the Loan Agreement, all
proceeds received by the Secured Party in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral shall be
applied in the following order of priority:


 


FIRST:  To the payment of all costs and expenses of
such sale, collection or other realization, including reasonable compensation
to the Secured Party and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by the Secured Party in connection
therewith, and all amounts for which the Secured Party is entitled to
indemnification hereunder and all advances made by the Secured Party hereunder
for the account of Grantors, and to the payment of all costs and expenses paid
or incurred by the Secured Party in connection with the exercise of any right
or remedy hereunder;


 


SECOND:  To the payment of all other Secured
Obligations (for the ratable benefit of the holders thereof) and, as to
obligations arising under the Loan Agreement, as provided in the Loan Agreement;
and


 


THIRD:  To the payment to or upon the order of
Borrower, or to whosoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.


 


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SECTION 12.               Indemnity and Expenses.


 


(a)           Grantors jointly and
severally agree to indemnify the Secured Party from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from the Secured Party’s
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.


 


(b)           Grantors jointly and
severally agree to pay to the Secured Party upon demand the amount of any and
all costs and expenses, including the fees and expenses of counsel and of any
experts and agents, that the Secured Party may incur in connection with the
custody or preservation of the Collateral, the exercise of rights or remedies
hereunder or the failure by any Grantor to perform or observe any of the
provisions hereof.


 


(c)           The obligations of Grantors
in this Section 12 shall survive the termination of this Agreement and the
discharge of Grantors’ other obligations under this Agreement, the Loan
Agreement and the other Loan Documents.


 


SECTION 13.               Amendments; Etc.


 


No
amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by any Grantor therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Secured Party and, in the case of any such amendment or modification, by
Grantors.  Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given.


 


SECTION 14.               Notices.


 


Any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served or sent by telefacsimile or United
States mail or courier service and shall be deemed to have been given when
delivered in person or by courier service, upon receipt of telefacsimile, or
three business days after depositing it in the United States mail with postage
prepaid and properly addressed; provided that notices to the Secured
Party shall not be effective until received. 
For the purposes hereof, the address of each party hereto shall be set
forth under such party’s name on the signature pages hereof or such other
address as shall be designated by such party in a written notice delivered to
the other parties hereto.


 


SECTION 15.               Failure or Indulgence Not
Waiver; Remedies Cumulative; Severability.


 


(a)           No failure or delay on the
part of the Secured Party in the exercise of any power, right or privilege
hereunder shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude any other or further
exercise thereof or of any other power, right or privilege.  All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise
available.


 


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(b)           In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining provisions
or obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.


 


SECTION 16.               Continuing Security
Interest; Transfer of Loans; Termination and Release.


 


(a)           Subject to the provisions of Section 24, this Agreement
shall create a continuing security interest in the Collateral and shall (i) remain
in full force and effect until the payment in full of the Secured Obligations
(other than Unasserted Obligations) and termination of all commitments to
extend credit under the Loan Agreement, (ii) be binding upon each Grantor
and its successors and assigns, and (iii) inure, together with the rights
and remedies of the Secured Party hereunder, to the benefit of the Secured
Party and its successors, transferees and assigns.  Without limiting the generality of the
foregoing clause (iii), the Secured Party may assign or otherwise transfer any
loans held by it to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to the Secured
Party herein or otherwise.


 


(b)           In addition to the Collateral release provisions of Section 24,
upon the payment in full of all Secured Obligations (other than Unasserted
Obligations) and termination of all commitments to extend credit under the Loan
Agreement, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to Grantors. 
Upon any such termination the Secured Party shall as soon as practicable, at Grantors’ or Borrower’s expense,
execute and deliver to Grantors such documents as Grantors shall reasonably
request to evidence such termination.


 


SECTION 17.               Headings.


 


Section and
subsection headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose or be given any substantive effect.


 


SECTION 18.               Governing Law; Rules of
Construction.


 


THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES, EXCEPT TO THE EXTENT THAT THE UCC  PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF DELAWARE, IN WHICH CASE THE LAWS OF SUCH
JURISDICTION SHALL GOVERN WITH RESPECT TO THE PERFECTION OF THE SECURITY
INTEREST IN, OR THE REMEDIES WITH RESPECT TO, SUCH PARTICULAR COLLATERAL.


 


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SECTION 19.                                             Consent to Jurisdiction
and Service of Process.


 


DURING
THE PENDENCY OF THE CHAPTER 11 CASE, ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST
GRANTOR ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
SHALL BE BROUGHT IN THE COURT (AS DEFINED IN THE LOAN AGREEMENT).  THEREAFTER, ALL JUDICIAL PROCEEDINGS BROUGHT
AGAINST ANY GRANTOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY
OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF DELAWARE.


 


SECTION 20.                                             Waiver of Jury Trial.


 


GRANTORS
AND THE SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT.  THE SCOPE OF THIS WAIVER IS INTENDED
TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL OTHER COMMON LAW AND STATUTORY CLAIMS.


 


SECTION 21.                                             Counterparts.


 


This
Agreement may be executed in one or more counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be
detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the
same document.


 


SECTION 22.                                             Definitions.


 


(a)                                  Each
capitalized term utilized in this Agreement that is not defined in this
Agreement, but that is defined in the UCC, including the categories of
Collateral listed in Section 1 hereof, shall have the meaning set forth in
Articles 1, 8 or 9 of the UCC.


 


(b)                                 In addition,
the following terms used in this Agreement shall have the following meanings:


 


“Collateral” has the meaning set forth in Section 1
hereof.


 


“Collateral
Documents” means
this Agreement and all other instruments or documents delivered by any Grantor
pursuant to this Agreement or any of the other Loan Documents in order to grant
to the Secured Party, a Lien (as defined in the Loan Agreement) on any property
of that Grantor as security for the Secured Obligations.


 


“Event of
Default” means
any Event of Default as defined in the Loan Agreement.


 


11

















 


“Guaranty” has the meaning set forth in the Loan
Agreement.


 


“Loan
Agreement” has
the meaning set forth in the Preliminary Statements of this Agreement.


 


“Loan
Documents” means
this Agreement, the Loan Agreement, the Guaranty and the other Collateral
Documents.


 


“Secured
Obligations” has
the meaning set forth in Section 2 hereof.


 


“Subsidiary”
with respect to
any person, means any corporation, partnership, trust, limited liability
company, association, joint venture or other business entity of which more than
50% of the total voting power of shares of stock or other ownership interests
entitled (without regard to the occurrence of any contingency) to vote in the
election of the members of the governing body is at the time owned or
controlled, directly or indirectly, by that person or one or more of the other
Subsidiaries of that person or a combination thereof.


 


“UCC” means the Uniform Commercial Code, as it
exists on the date of this Agreement or as it may hereafter be amended, in the
State of Delaware.


 


“Unasserted
Obligations”
means, at any time, obligations for taxes, costs, indemnifications,
reimbursements, damages and other liabilities (except for the principal of and
interest on, and fees relating to, any Debt) in respect of which no claim or
demand for payment has been made (or, in the case of obligations for
indemnification, no notice for indemnification has been issued by the
indemnitee) at such time.


 


SECTION 23.                                             Additional Grantors.


 


The
initial Grantors hereunder shall be Borrower and each of its direct and
indirect domestic and foreign Subsidiaries. 
Each Grantor expressly agrees that its obligations arising hereunder shall
not be affected or diminished by the addition or release of any other Grantor
hereunder, nor by any election of the Secured Party not to cause any Subsidiary
of Borrower to become an additional Grantor hereunder.  This Agreement shall be fully effective as to
any Grantor that is or becomes a party hereto regardless of whether any other
Person becomes or fails to become or ceases to be a Grantor hereunder.


 


SECTION 24.                                             Release of Collateral.


 


The
Secured Party agrees to release from Collateral as soon as practicable all assets and Subsidiary stock
that may be transferred pursuant to a Permitted Transaction or an Asset Sale
(each as defined in the Loan Agreement), subject to the application of Net
Asset Sale Proceeds therefrom as provided in Section 2.02(b) of the
Loan Agreement unless agreed in writing by the Secured Party and the applicable
Grantor or Borrower if such Grantor is other than Borrower to be otherwise
applied or held as cash Collateral.  At
the request of the applicable Grantors or Borrower, the Secured Party shall as
soon as practicable authorize, execute and deliver all documents reasonably
necessary to effectuate any such release, including without limitation, UCC-3
partial releases.


 


12

















 


SECTION 25.                                             Icelandic Law and
Government Power and Action.


 


The
Secured Party and Grantors hereby acknowledge that, with respect to the equity
interest of the Iceland Subsidiaries and any assets located within Iceland or
subject to control by the government of Iceland, in each case which constitute
Collateral, the grant of a security interest therein and the rights of the
Secured Party with respect thereto are qualified by applicable Icelandic law
and the sovereign power and governmental action by the government of Iceland,
notwithstanding any provision hereof or of the Loan Agreement, the Guaranty or
any provision of any United States of America federal or state law to the
contrary.


 


[Remainder of page intentionally left
blank]


 


13

















 


IN
WITNESS WHEREOF,
Grantors and the Secured Party have caused this Agreement to be duly executed
and delivered by their respective officers thereunto duly authorized as of the
date first written above.


 


	
   

  	
  deCODE
  genetics, Inc., as Borrower and a Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  KARI STEFANSSON

  
	
   

  	
   

  	
   

  	
  Name:  

  	
  Kari
  Stefansson

  
	
   

  	
   

  	
   

  	
  Title:
  

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice
  Address:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sturlugata
  8

  
	
   

  	
   

  	
  IS-101
  Rekjavik

  
	
   

  	
   

  	
  Iceland

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Íslensk
  erfðagreining ehf., as a Grantor

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  KARI STEFANSSON

  
	
   

  	
   

  	
   

  	
  Name:
  Kari Stefansson

  
	
   

  	
   

  	
   

  	
  Title:
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice
  Address:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sturlugata
  8

  
	
   

  	
   

  	
  IS-101
  Rekjavik

  
	
   

  	
   

  	
  Iceland

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MediChem
  Life Sciences, Inc., as a Grantor

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  KARI STEFANSSON

  
	
   

  	
   

  	
   

  	
  Name:
  Kari Stefansson

  
	
   

  	
   

  	
   

  	
  Title:
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice
  Address:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sturlugata
  8

  
	
   

  	
   

  	
  IS-101
  Rekjavik

  
	
   

  	
   

  	
  Iceland

  
						



 


Debtor-in-Possession
Security Agreement


 

















 


	
   

  	
  ThermoGen, Inc., as a
  Grantor

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  KARI STEFANSSON

  
	
   

  	
   

  	
   

  	
  Name:
  Kari Stefansson

  
	
   

  	
   

  	
   

  	
  Title:
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice
  Address:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sturlugata
  8

  
	
   

  	
   

  	
  IS-101
  Rekjavik

  
	
   

  	
   

  	
  Iceland

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  deCODE
  Chemistry, Inc., as a Grantor

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  KARI STEFANSSON

  
	
   

  	
   

  	
   

  	
  Name:
  Kari Stefansson

  
	
   

  	
   

  	
   

  	
  Title:
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sturlugata
  8

  
	
   

  	
   

  	
  IS-101
  Rekjavik

  
	
   

  	
   

  	
  Iceland

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MediChem
  Management, Inc., as a Grantor

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  KARI STEFANSSON

  
	
   

  	
   

  	
   

  	
  Name:
  Kari Stefansson

  
	
   

  	
   

  	
   

  	
  Title:
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice
  Address:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sturlugata
  8

  
	
   

  	
   

  	
  IS-101
  Rekjavik

  
	
   

  	
   

  	
  Iceland

  



 


Debtor-in-Possession
Security Agreement


 

















 


	
   

  	
  UVS—Urður,
  Verðandi, Skuld ehf., as a Grantor

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  KARI STEFANSSON

  
	
   

  	
   

  	
   

  	
  Name:
  Kari Stefansson

  
	
   

  	
   

  	
   

  	
  Title:
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice
  Address:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sturlugata
  8

  
	
   

  	
   

  	
  IS-101
  Rekjavik

  
	
   

  	
   

  	
  Iceland

  



 


Debtor-in-Possession
Security Agreement


 

















 


	
   

  	
  SAGA
  INVESTMENTS LLC, a Delaware limited liability company, as the
  Secured Party

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  ROBERT NELSEN

  
	
   

  	
   

  	
   

  	
  Name:
  Robert Nelsen

  
	
   

  	
   

  	
   

  	
  Title:
  Manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice
  Address:

  
	
   

  	
   

  	
  c/o
  O’Melveny & Myers LLP

  
	
   

  	
   

  	
  2765 Sand Hill Road

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Menlo Park, California
  94025

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Sam Zucker

  



 


Debtor-in-Possession Security Agreement


 

















 


SCHEDULE 1


TO


SECURITY AGREEMENT


 


Type and Jurisdiction of Organization


 


	
  Name
  of Grantor

  	
   

  	
  Type of

  Organization

  	
   

  	
  Jurisdiction

  of Organization

  	
   

  	
  Organization

  Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  deCODE
  genetics, Inc.

  	
   

  	
  corporation

  	
   

  	
  Delaware

  	
   

  	
  2648992

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MediChem
  Life Sciences, Inc.

  	
   

  	
  corporation

  	
   

  	
  Delaware

  	
   

  	
  3238127

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  deCODE
  biostructures, Inc.

  	
   

  	
  corporation

  	
   

  	
  Washington

  	
   

  	
  601 769 371

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ThermoGen, Inc.

  	
   

  	
  corporation

  	
   

  	
  Illinois

  	
   

  	
  5529-596-4

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Emerald
  BioSystems, Inc.

  	
   

  	
  corporation

  	
   

  	
  Delaware

  	
   

  	
  3869289

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  deCODE
  Chemistry, Inc.

  	
   

  	
  corporation

  	
   

  	
  Illinois

  	
   

  	
  6025-649-7

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MediChem
  Management, Inc.

  	
   

  	
  corporation

  	
   

  	
  Delaware

  	
   

  	
  3323696

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UVS—Urður, Verðandi,
  Skuld ehf.

  	
   

  	
  corporation

  	
   

  	
  Iceland

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Íslensk erfðagreining ehf.

  	
   

  	
  corporation

  	
   

  	
  Iceland

  	
   

  	
   

  



 

















 


SCHEDULE 2


TO


SECURITY AGREEMENT


 


Other Names


 


	
  Name
  of Grantor

  	
   

  	
  Other Names

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 

















 


SCHEDULE 3


TO


SECURITY AGREEMENT


 


Pledged Equity


 


	
  Equity Issuer

  	
   

  	
  Class

  of

  Equity

  	
   

  	
  Equity

  Certificate Nos.

  	
   

  	
  Par

  Value

  	
   

  	
  Amount of

  Equity Interests

  	
   

  	
  Percentage of

  Outstanding

  Equity Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MediChem Life Sciences, Inc.

  	
   

  	
  Common

  	
   

  	
  R-01

  	
   

  	
  $

  	
  0.01

  	
   

  	
  100
  shares

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  deCODE Biostructures, Inc.

  	
   

  	
  Common

  	
   

  	
  R-01

  	
   

  	
  NPV

  	
   

  	
  100
  shares

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ThermoGen, Inc.

  	
   

  	
  Class A
  Common

  	
   

  	
  R-01

  	
   

  	
  NPV

  	
   

  	
  100
  shares

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Emerald BioSystems, Inc.

  	
   

  	
  Common

  	
   

  	
  1

  	
   

  	
  $

  	
  .001

  	
   

  	
  1,000
  shares

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  deCODE Chemistry, Inc.

  	
   

  	
  Common

  	
   

  	
  R-01

  	
   

  	
  NPV

  	
   

  	
  100
  shares

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MediChem Management, Inc.

  	
   

  	
  Common

  	
   

  	
  R-01

  	
   

  	
  $

  	
  0.01

  	
   

  	
  100
  shares

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Íslensk erfðagreining ehf.

  	
   

  	
  Common

  	
   

  	
  Share
  ledger entry, resolution Dec. 13. 2006

  	
   

  	
  ISK
  

  	
  1

  	
   

  	
  ISK
  1,320,000,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UVS—Urður, Verðandi, Skuld ehf.

  	
   

  	
  Common

  	
   

  	
  Share
  ledger entry, resolution March, 2, 2006

  	
   

  	
  ISK

  	
  1

  	
   

  	
  ISK 2,884,200

  	
   

  	
  100

  	
  %

  
														



 

















 


SCHEDULE 4


TO


SECURITY AGREEMENT


 


Commercial Tort Claims


 


NONE