<PAGE>
                                                                   Exhibit 10.46



[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION.
THESE PORTIONS HAVE BEEN MARKED WITH THE CLAUSE "CONFIDENTIAL TREATMENT
REQUESTED" AND/OR TWO ASTERISKS ENCLOSED IN BRACKETS (i.e., [**]). THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]

                           RESEARCH COLLABORATION AND

                             CROSS-LICENSE AGREEMENT

                                      AMONG

                             F.HOFFMANN-LA ROCHE LTD

                                       AND

                             HOFFMANN-LA ROCHE INC.

                                       AND

                              deCODE GENETICS, EHF.

                        Effective as of February 1, 2002
<PAGE>
THIS RESEARCH COLLABORATION AND CROSS-LICENSE AGREEMENT ("Agreement") effective
as of February 1, 2002 ("Effective Date") is by and among Hoffmann-La Roche
Inc., a corporation duly organized and existing under the laws of the state of
New Jersey and having offices at 340 Kingsland Street, Nutley, New Jersey 07110
("Roche-Nutley") and F.Hoffmann-La Roche Ltd, a corporation duly organized and
existing under the laws of Switzerland and having offices at Grenzacherstrasse
124, CH-4070 Basel, Switzerland ("Roche-Basel"), and deCODE genetics, ehf.
(Islensk erfoagreining ehf.), a limited liability company duly organized and
existing under the laws of Iceland, having offices at Lynghalsi 1, IS-110
Reykjavik, Iceland ("deCODE").

PRELIMINARY STATEMENTS

A. deCODE has expertise in conducting research in the field of human genetics
and genomics, and wishes to establish an operation for pharmaceutical product
development.

B. Roche-Nutley and Roche-Basel (collectively "Roche") has expertise in drug
discovery, and in developing, manufacturing and marketing pharmaceutical
products.

C. The Parties wish to conduct collaborative research and development activities
for the purpose of discovery and development of certain pharmaceutical products.

D. The Parties recognize the importance of making the results of research into
the genetics of human diseases publicly available. They also recognize the
interest of participants in genetic studies of human disease to have the results
of such studies made publicly available. deCODE and Roche do, however, consider
it the most important interest of the participants to have the results of
genetic studies turned into methods to prevent, treat and/or diagnose diseases.


                                     - 1 -
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NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements of the Parties contained in this Agreement, the Parties
agree as follows:

1. DEFINITIONS

"Active Alliance Disease" shall mean a human disease for which the Steering
Committee is allocating FTE's pursuant to Section 7.3. Exhibit A lists the four
(4) Active Alliance Diseases as of the Effective Date (the initial Active
Alliance Diseases).

"Affiliate" with respect to any Party, shall mean (a) an organization at least
fifty percent (50%) of which is owned and/or controlled directly or indirectly,
by stock ownership or otherwise, by a Party, (b) an organization which directly
or indirectly owns and/or controls a Party, by stock ownership or otherwise; or
(c) an organization, the majority of which is directly owned or indirectly
common to the majority ownership of a Party. Genentech, Inc., 460 Point San
Bruno Boulevard, South San Francisco, California shall not be an Affiliate of
Roche unless Roche, in its sole discretion, notifies deCODE that Genentech shall
so be considered an Affiliate.

"Alliance Disease" shall mean an Active Alliance Disease or a Successful
Alliance Disease.

"Alliance Disease Compound" shall mean, with respect to an Alliance Disease, a
pharmaceutically active agent that is a protein, small molecule or an antibody
(excluding Antisense Agents and Gene Therapy Agents), for which a Party or its
sublicensees used a Gene, or another member of the Biological Pathway of which
such Gene is a member, to discover Utility of such pharmaceutically active agent
related to such Alliance Disease, such discovery occurring at any time
commencing on the Effective Date and ending seven (7) years after the Effective
Date.

"Alliance Disease Compound Type 1" shall mean, with respect to an Alliance
Disease, an Alliance Disease Compound with respect to which [**].


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"Alliance Disease Compound Type 2" shall mean, with respect to an Alliance
Disease, an Alliance Disease Compound that (i) is not an Alliance Disease
Compound Type 1 and (ii) [**].

"Alliance Disease Compound Type 3" shall mean, with respect to an Alliance
Disease, an Alliance Disease Compound that is other than an Alliance Disease
Compound Type 1 or Alliance Disease Compound Type 2.

"Alliance Disease Efforts" shall mean, for each Alliance Disease, reasonable
commercial efforts directed to the discovery, development and commercialization
of at least one Alliance Disease Product having Utility for such Alliance
Disease. For a given Alliance Disease Product, reasonable commercial efforts
shall be consistent with sound and reasonable business practices and judgment,
comparable to efforts exerted by Roche for its own products of a like kind and
at a like stage of development and having similar potential, taking into account
scientific, business and marketing considerations.

"Alliance Disease Know-How" shall mean any and all Technical Information,
including any invention, that is developed or conceived and reduced to practice
solely by a Party, or jointly by both Parties, as a result of an Alliance
Disease Program; provided, however, that any Technical Information that is


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developed or conceived and reduced to practice as a result of an Alliance
Disease Program solely by one or more Representatives of deCODE and relating to
generalized methods for conducting genomics research and characterizing the
function of genes or any raw data useful in generalized genomics research tools
shall be considered deCODE Generalized Technology but not Alliance Disease
Know-How.

"Alliance Disease Product" shall mean any pharmaceutical product (excluding all
diagnostic applications) that comprises, in whole or as a component thereof, as
its pharmaceutically active agent, an Alliance Disease Compound.

"Alliance Disease Program" shall mean the collaboration between the Parties
hereunder, conducted during the Program Term and related to an Active Alliance
Disease.

"Alliance Patent" shall mean any Patent claiming an Invention.

"Antisense Agent" shall mean any pharmaceutically active agent which (a) binds
nucleic acids as they exist in a cell, and (b) consists of nucleic acid or a
functional analog, derivative or homolog thereof, and (c) is complementary to a
segment of DNA of a given Gene, or such Gene's transcribed RNA or a gene that
encodes another member of the Biological Pathway of which the product of such
Gene is a member, and (d) upon delivery by any means, compensates, either
completely or partially, for the genetic defect that underlies the disease, the
pathogenesis of which is affected by the Gene, and (e) is conceived and reduced
to practice at any time commencing on the Effective Date and ending seven (7)
years after the Effective Date.

"Biological Materials" shall mean any and all tissue samples, plasma samples and
cell lines provided by deCODE to Roche under this Agreement.

"Biological Pathway" shall have that meaning as determined by a Decision, made
as necessary for the purposes of this Agreement and consistent with the criteria
set forth in Section 8.2(p).


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"Clinical Candidate" shall mean, with respect to a Deselected Disease that was
once an Alliance Disease, a Deselected Disease Compound that, as reflected in a
Decision and Minutes, in the conduct of its past Alliance Disease Program was
the subject of (1) formal toxicology in more than one non-human animal species,
(2) absorption, distribution, metabolism and excretion testing in at least one
non-human animal species, and (3) a scale-up strategy for synthesis.

"COGS" shall mean the manufacturing cost of a given Alliance Disease Product
sold or transferred by Roche, its Affiliates or sublicensees, calculated in
accordance with international accounting standards consistently applied by such
party. COGS shall include, without limitation, direct labor and materials, a
reasonable allocation of indirect labor, facilities expense (including utilities
and depreciation over the expected life of the buildings and equipment),
administration cost, costs associated with process development, and initial
non-commercialized batches for regulatory approval.

"Combination Product" shall mean (a) an Alliance Disease Product containing both
(i) at least one pharmaceutically active agent that is an Alliance Disease
Compound and (ii) one or more pharmaceutically active agents that are not an
Alliance Disease Compound or (b) a Deselected Disease Product containing both
(i) at least one pharmaceutically active agent that is a Deselected Disease
Compound and (ii) one or more pharmaceutically active agents that are not a
Deselected Disease Compound.

"Confidential Information" shall mean any and all Technical Information that is
(i) disclosed by one Party ("Disclosing Party") to the other Party ("Receiving
Party") pursuant to this Agreement, the 1998 Agreement, as amended, or the
Secrecy Agreement between the Parties dated September 5, 1997, and which at the
time of disclosure is clearly marked as "Confidential," but not Technical
Information which is orally or visually disclosed to a Receiving Party unless
such oral or visual disclosure is described or summarized in a writing, marked
as "Confidential" and provided to the Receiving Party within forty-five (45)
days after such oral or visual disclosure, or (ii) Alliance Disease Know-How.


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"Cover" or "Covered" shall mean, for a given activity, that the performance of
such activity would infringe a claim of a patent or patent application (if that
claim were to issue in a patent) in the absence of rights under such patent, as
determined on a country-by-country basis.

"Decision" shall mean a decision pursuant to Section 8.4 and shall be effective
as of the date the Minutes reflecting the decision are finalized as provided in
Section 8.5.

"deCODE Generalized Technology" shall mean any Technical Information relating to
generalized methods for conducting genomics research and characterizing the
function of genes or any raw data useful in generalized genomics research tools
which at any time owned or controlled by deCODE or its Affiliates (provided
deCODE or its Affiliates have the right to license or otherwise make available
such Technical Information to Roche).

"deCODE Know-How" shall mean any Technical Information, excluding deCODE
Generalized Technology, owned or controlled by deCODE or its Affiliates prior to
the Effective Date or during the Program Term (provided deCODE or its Affiliates
have the right to license or otherwise make available such Technical Information
to Roche) and which is necessary or useful for Roche to fulfill its obligations
and exploit its rights under this Agreement, including any Technical Information
which deCODE or its Affiliates own jointly with Roche or its Affiliates.

"deCODE Patents" shall mean any Patents, excluding Patents claiming deCODE
Generalized Technology, owned or controlled by deCODE or its Affiliates prior to
the Effective Date or during the term of the Agreement (provided deCODE or its
Affiliates have the right to license or otherwise make available such Patents to
Roche), including any such Patents which deCODE or its Affiliates own jointly
with Roche or its Affiliates.

"Deselected Disease" shall mean (i) a human disease that is not an Alliance
Disease or a Pool Disease, or (ii) a disease which was an Alliance Disease and
for which the Steering Committee has ceased to allocate FTE's under


                                     - 6 -
<PAGE>
Section 7.3, but which is not a Successful Alliance Disease. Exhibit B lists the
initial Deselected Diseases.

"Deselected Disease Compound" shall mean, with respect to a Deselected Disease,
a pharmaceutically active agent that is a protein, small molecule or an antibody
(including, without limitation, Anti-sense Agents and Gene Therapy Agents), for
which a Party or its sublicensees used a Gene, or another member of the
Biological Pathway of which such Gene is a member, to discover Utility of such
pharmaceutically active agent related to such Deselected Disease, such discovery
occurring at any time commencing on the Effective Date and ending seven (7)
years after the Effective Date.

"Deselected Disease Compound Type 1" shall mean, with respect to a Deselected
Disease, a Deselected Disease Compound [**].

"Deselected Disease Compound Type 2" shall mean, with respect to a Deselected
Disease, a Deselected Disease Compound that (i) is not a Deselected Disease
Compound Type 1 and (ii) [**].


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"Deselected Disease Compound Type 3" shall mean, with respect to a Deselected
Disease, a Deselected Disease Compound that (i) is not a Deselected Disease
Compound Type 1 or Deselected Disease Compound Type 2 and (ii) [**].

"Deselected Disease Product" shall mean any pharmaceutical product (excluding
all diagnostic applications) that comprises, in whole or as a component thereof,
as its pharmaceutically active agent, (1) an Antisense Agent, (2) a Gene Therapy
Agent or (3) a Deselected Disease Compound.

"Designated Disease" shall mean an Alliance Disease for which Roche provides to
deCODE a Designated Disease Notice under Section 3.1(a)(ii).

"EIH" shall mean, for a given Alliance Disease Compound, the entry in the
conduct of an Alliance Disease Program of the first volunteer into a Phase I
Clinical Study for the Alliance Disease Compound.

"Europe" shall mean the United Kingdom, France, Germany, Italy and Spain.

Executive Officers" shall mean the Chief Executive Officer of deCODE, or such
other similar position designated by deCODE from time to time, and the Global
Head of Pharma at Roche, or such similar position designated by Roche from time
to time, collectively.

"FDA" shall mean the USA Food and Drug Administration, or the successor thereto,
or any corresponding foreign registration or regulatory authority.

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"First Commercial Sale" shall have the following meanings:

      (a) with respect to an Alliance Disease Product:

      in a country of the Territory, the first commercial sale to a Third Party
by Roche, its Affiliates or sublicensees, as the case may be, of the Alliance
Disease Product in the country, after obtaining Registration for the Alliance
Disease Product in the given country or, if for a country where no Registration
for the Alliance Disease Product is required, the date of first commercial sale
of such Alliance Disease Product by Roche, its Affiliate or sublicensees to a
Third Party in the country. "First Commercial Sale" shall not mean the sale of
an Alliance Disease Product for use in a clinical trial or for compassionate
use.

      (b) with respect to a Deselected Disease Product:

      in a country of the Territory, the first commercial sale to a Third Party
by deCODE, its Affiliates or sublicensees, as the case may be, of the Deselected
Disease Product in the country, after obtaining Registration for the Deselected
Disease Product in the given country or, if for a country where no Registration
for the Deselected Disease Product is required, the date of first commercial
sale of such Deselected Disease Product by deCODE, its Affiliate or sublicensees
to a Third Party in the country. "First Commercial Sale" shall not mean the sale
of a Deselected Disease Product for use in a clinical trial or for compassionate
use.

"FTE" shall mean a Representative of deCODE carrying out a full time equivalent
scientific person year of scientific work on or in direct connection with this
Agreement. Scientific work on or in direct connection with an Alliance Disease
Program includes, but is not limited to, experimental laboratory work, recording
and writing of results, reviewing literature and references, holding scientific
discussions, managing and leading scientific staff and carrying out project
management duties.


                                     - 9 -
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"FTE Rate" shall mean [**] dollars ($[**]) per FTE. The FTE Rate shall include
all personnel, equipment, reagents and all other expenses including support
staff and overhead for or associated with an FTE.

"Gene" shall mean a gene that is the subject of activities by either Party in
the course of a Research Plan wherein the purpose of the activities is to be
able to use the gene, or another member of the Biological Pathway of which such
gene is a member, to discover a Utility for pharmaceutically active agents.

"Gene Therapy Agent" shall mean any pharmaceutically active agent which (a)
consists of nucleic acid or a functional analog, derivative or homolog thereof
that encodes (i) a Gene or a part thereof or (ii) a gene or part thereof that
encodes another member of a Biological Pathway of which the product of a Gene is
a member, and (b) upon delivery by any means, compensates, either completely or
partially, for the genetic defect that underlies the disease the pathogenesis of
which is affected by the Gene, and (c) is conceived and reduced to practice at
any time commencing on the Effective Date and ending seven (7) years after the
Effective Date.

"IND Filing" shall mean an Investigational New Drug application, as described in
21 CFR 312, as it may be amended from time to time, conducted or sponsored by
Roche, its Affiliates or sublicensees, for initiating a Phase I Clinical Study
in the USA, or any similar regulatory filing or notice given in connection with
a study conducted or sponsored by or on behalf of Roche or its Affiliate or
sublicensee regarding an Alliance Disease Product in a Major Country other than
the USA.

"Invention" shall mean Technical Information which is conceived or reduced to
practice by one or more Representatives of a Party or jointly by Representatives
of the Parties in the course of a Research Plan.

"Joint Inventions" shall mean an Invention conceived or reduced to practice
jointly by Representatives of the Parties.

"Major Country" shall mean the USA, Europe or Japan.


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"Minutes" shall mean the final minutes of a Steering Committee meeting, as
finalized under Section 8.5.

"NDA" shall mean a New Drug Application or a Biologics License Application, as
the case may be, for an Alliance Disease Product, filed by or on behalf of
Roche, its Affiliates or sublicensees, with the FDA in the USA or any
corresponding foreign application, registration or certification in Europe
(either in the EU using the centralized process or in one of the countries
comprising Europe under a decentralized process) or Japan.

"NDA Filing" shall mean, for a given NDA for a given Alliance Disease Product, a
communication from the FDA that the NDA for such disease product has been
accepted for review by the FDA in the USA, Europe or Japan, as the case may be.

"Net Sales" and the related term "Adjusted Gross Sales" shall have the following
meanings:

      (a) as to Roche:

            (i) "Adjusted Gross Sales" shall mean, with respect to any Alliance
Disease Product, the amount of gross sales invoiced by Roche, its Affiliates or
sublicensees to Third Parties for such Alliance Disease Product, commencing with
the First Commercial Sale of such Alliance Disease Product, less deductions for
the following items which are customarily included in the invoiced amounts and
do not exceed reasonable and customary amounts in the country in which such sale
occurred: (1) returns (including withdrawals and recalls), (2) rebates (price
reductions including Medicaid and similar types of rebates, e.g. chargebacks),
(3) volume (quantity) discounts granted at the time of invoicing, and (4) sales
taxes and other taxes directly linked and included in the gross sales amount.
Adjusted Gross Sales shall also include the amount or fair market value of all
other consideration received by Roche, its Affiliates or sublicensees with
respect to


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Alliance Disease Products, whether such consideration is in cash, payment in
kind, exchange or another form.

            (ii) "Net Sales" shall mean the amount calculated by subtracting
from the Adjusted Gross Sales a lump sum deduction of [**] percent ([**]%) of
Adjusted Gross Sales for those sales related deductions that are not accounted
for on a product-by-product basis (e.g. outward freights, postage,
transportation insurance, packing materials for dispatch of goods, custom
duties, discounts granted later than at the time of invoicing, cash discounts
and other direct expenses).

      (b) as to deCODE:

            (i) "Adjusted Gross Sales" shall mean, with respect to any
Deselected Disease Product, the amount of gross sales invoiced by deCODE or its
Affiliates to Third Parties for such Deselected Disease Product, commencing with
the First Commercial Sale of such Deselected Disease Product, less deductions
for the following items which are customarily included in the invoiced amounts
and do not exceed reasonable and customary amounts in the country in which such
sale occurred: (1) returns (including withdrawals and recalls), (2) rebates
(price reductions including Medicaid and similar types of rebates, e.g.
chargebacks), (3) volume (quantity) discounts granted at the time of invoicing,
and (4) sales taxes and other taxes directly linked and included in the gross
sales amount. Adjusted


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Gross Sales shall also include the amount or fair market value of all other
consideration received by deCODE or its Affiliates with respect to Deselected
Disease Products, whether such consideration is in cash, payment in kind,
exchange or another form.

            (ii) "Net Sales" shall mean the amount calculated by subtracting
from the Adjusted Gross Sales a lump sum deduction of [**] percent ([**]%) of
Adjusted Gross Sales for those sales related deductions that are not accounted
for on a product-by-product basis (e.g. outward freights, postage,
transportation insurance, packing materials for dispatch of goods, custom
duties, discounts granted later than at the time of invoicing, cash discounts
and other direct expenses).

      (c) For a Combination Product that is an Alliance Disease Product, the
Parties shall meet approximately one (1) year prior to the commercial launch of
such Combination Product to negotiate in good faith and agree to an appropriate
adjustment to Net Sales to reflect the relative significance of each Alliance
Disease Compound contained in the Combination Product. If, after good faith
negotiations (not to exceed ninety (90) days, which can be extended by mutual
agreement), the Parties can not agree to an appropriate adjustment, Net Sales
shall be equal to Net Sales of the Combination Product multiplied by a fraction,
the numerator of which is the reasonable fair market value of the Alliance
Disease Compound(s) and the denominator of which is the reasonable fair market
value of all pharmaceutically active agents contained in the Combination
Product. In such event, Roche shall in good faith make a determination of the
respective fair market values of the Alliance Disease Compound(s) and all other
pharmaceutically active agents contained in such Combination Product, and shall
provide deCODE with data to support such determination. deCODE shall have the
right to review such determination and supporting data, and to notify Roche if
it disagrees with such determination.

      (d) For a Combination Product that is a Deselected Disease Product, the
Parties shall meet approximately one (1) year prior to the commercial launch of
such Combination Product to negotiate in good faith


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and agree to an appropriate adjustment to Net Sales to reflect the relative
significance of each Deselected Disease Compound contained in the Combination
Product. If, after good faith negotiations (not to exceed ninety (90) days,
which can be extended by mutual agreement), the Parties can not agree to an
appropriate adjustment, Net Sales shall be equal to Net Sales of the Combination
Product multiplied by a fraction, the numerator of which is the reasonable fair
market value of the Deselected Disease Compound(s) and the denominator of which
is the reasonable fair market value of all pharmaceutically active agents
contained in the Combination Product. In such event, deCODE shall in good faith
make a determination of the respective fair market values of the Deselected
Disease Compound(s) and all other pharmaceutically active agents contained in
such Combination Product, and shall provide Roche with data to support such
determination. Roche shall have the right to review such determination and
supporting data, and to notify deCODE if it disagrees with such determination.

"Participants" shall mean those persons who enroll to participate in harvesting
programs or such other studies being conducted as part of an Alliance Disease
Program.

"Party" shall mean deCODE or Roche and, when used in the plural, shall mean
deCODE and Roche.

"Patents" shall mean all patents and patent applications throughout the
Territory, and any extensions, renewals, continuations, continuations-in-part,
divisions, patents-of-addition, reissues, reexaminations, registrations, patents
of confirmation, patents of importation, and Supplementary Protection
Certificates and foreign counterparts thereof.

"Phase I Clinical Study" shall mean the first phase of human clinical trials,
conducted or sponsored by or on behalf of Roche or its Affiliate or sublicensee
in the USA, required by the FDA to determine the metabolism and pharmacological
actions of an Alliance Disease Product in humans, the side effects associated
with increasing doses of the product, and if possible,


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to gain early evidence of effectiveness of the Alliance Disease Product, as
described in 21 CFR 312, as it may be amended from time to time.

"Pool Disease" shall mean human diseases that are identified as Pool Diseases
from time to time in accordance with Section 7.1 (b).

"Program Term" shall mean the period commencing on February 1, 2002 and ending
February 1, 2005, unless earlier terminated or extended as provided in this
Agreement.

"Registration" shall mean, for a given country and a given Alliance Disease
Product or Deselected Disease Product, ("Registration Product"), an official
approval, resulting from an NDA Filing, which is required by the government or
health authority of the given country for the Registration Product to be offered
for sale in such country, including authorizations as may be required for the
production, importation, pricing, reimbursement and sale of such Registration
Product in such country, and for subsequent regulatory filings for line
extensions and/or additional indications of such Registration Product.

"Representative of a Party" shall mean an employee of a Party or any other
person who is contractually required to assign or grant exclusive rights in and
to Technical Information to a Party.

"Research Plan" shall mean, for each Active Alliance Disease, a reasonably
detailed description of (i) the goals and objectives of the Alliance Disease
Program for the Active Alliance Disease, and (ii) the responsibilities,
including without limitation scientific work assigned to, and to be conducted
by, each Party in the conduct of the Alliance Disease Program for the Active
Alliance Disease, as approved by the Steering Committee.

"Roche Know-How" shall mean any Technical Information, owned or controlled by
Roche or its Affiliates prior to the Effective Date or during the Program Term
(provided Roche or its Affiliates have the right to license or otherwise make
available such Technical Information to deCODE) and which is necessary or useful
for deCODE to fulfill its obligations and exploit its rights


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under this Agreement, including any Technical Information which Roche or its
Affiliates own jointly with deCODE or its Affiliates.

"Roche Patents" shall mean any Patents owned or controlled by Roche or its
Affiliates prior to the Effective Date or during the term of the Agreement
(provided Roche or its Affiliates have the right to license or otherwise make
available such Patents to deCODE), including any such Patents which Roche or its
Affiliates own jointly with deCODE or its Affiliates. Roche and its Affiliates
do not have the right to license or otherwise make available to deCODE certain
Patents to the extent they relate to PCR technology, including as represented by
the patent portfolio at the Effective Date of Roche or its Affiliate, Roche
Molecular Systems Inc.

"Royalty Term" shall mean:

      (a) As to Roche, for a given Alliance Disease Product in a given country
in the Territory, a period of time commencing on the First Commercial Sale of
the given Alliance Disease Product in the given country and ending on the later
of: (i) ten (10) years from the date of the First Commercial Sale of such
Alliance Disease Product in such country or (ii) the last date on which the
making, having made, using, offering for sale, selling or importing of the
Alliance Disease Product in the given country by Roche, its Affiliates or
sublicensees is Covered by a Valid Claim of a deCODE Patent or an Alliance
Patent.

      (b) As to deCODE, for a given Deselected Disease Product in a given
country in the Territory, a period of time commencing on the First Commercial
Sale of the given Deselected Disease Product in the given country and ending on
the later of: (i) ten (10) years from the date of the First Commercial Sale of
such Deselected Disease Product in such country or (ii) the last date on which
the making, having made, using, offering for sale, selling or importing of the
Deselected Disease Product in the given country by deCODE, its Affiliates or
sublicensees is Covered by a Valid Claim of a Roche Patent or an Alliance
Patent.


                                     - 16 -
<PAGE>
      (c) If, in a country in the Territory, the above definition of Royalty
Term is unenforceable, then for such country, Royalty Term shall mean the
longest term as may be enforceable under the applicable laws of such country,
provided that in no event shall the Royalty Term in such country exceed the
maximum term above.

"Steering Committee" shall mean that body organized and acting pursuant to
Article 8.

"Sublicensing Income" shall mean all monetary consideration (for example,
up-front payments, royalties, milestones and the like) received by deCODE or its
Affiliate from a Third Party licensees with respect to a given Deselected
Disease Product, but excluding (i) any amounts received from Third Party
licensees to reimburse deCODE for research and development expenses of deCODE
which deCODE can reasonably document and (ii) any consideration received for the
issuance of securities at the fair market value for such securities.

"Subject Diseases" shall mean the following eleven (11) human diseases:
[**],[**],[**],[**],[**],[**],[**], osteoporosis, bipolar depression, obesity
and [**].

"Successful Alliance Disease" shall mean an Alliance Disease for which Roche
provides a Success Notice under Section 3.1(a)(i) or which is deemed a
Successful Alliance Disease under Section 3.1(a)(iii).

"Target Assessment" shall mean a Decision, as reflected in a Minutes, that in
the conduct of an Alliance Disease Program for an Alliance Disease, the function
of a Gene, or another member of the Biological Pathway of which such Gene is a
member, is demonstrated as being capable of being modulated through interaction
with a pharmaceutically active agent in a manner that reasonably correlates to
treatment, cure and/or prevention of such Alliance Disease.


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<PAGE>
"Technical Information" shall mean information, data or know-how (whether
patentable or unpatentable), including without limitation, ideas, concepts,
formulas, manufacture, methods, procedures, designs, compositions of matter,
plans, applications, specifications, drawings, techniques, materials (including
without limitation biological materials such as tissue samples, plasma samples,
cell lines, RNA, DNA, DNA fragments, organisms, proteins, polypeptides,
plasmids, vectors and the like), compounds, samples, inventions, discoveries,
and the like, as well as improvements related thereto.

"Territory" shall mean the entire world.

"Third Party" shall mean any party other than a Party or an Affiliate of a
Party.

"USA" shall mean the United States of America.

"Utility" shall mean pharmacological or biological activity that reasonably
correlates to treatment, cure and/or prevention of a human disease (excluding
all diagnostic applications).

"Valid Claim" shall mean (i) a claim of any issued and unexpired Patent that has
not been disclaimed, revoked or held unpatentable, invalid or unenforceable by
final decision of a court or other governmental agency of competent
jurisdiction, which decision is unappealable or unappealed within the time
allowed for appeal, and which is otherwise enforceable, or (ii) a claim of a
patent application that is a Patent that has not been on file in a given country
with the applicable patent office for more than five (5) years from the earliest
date from which the patent application claims priority in the given country.

2. GRANT OF RIGHTS

      2.1 Commercial License to Roche. Subject to the terms and conditions of
this Agreement, deCODE grants to Roche (i) the sole and exclusive right and
license, under deCODE Patents and deCODE Know-How,


                                     - 18 -
<PAGE>
with the right to sublicense to Third Parties and/or Affiliates of Roche, to
make, have made, use, offer for sale, sell and import Alliance Disease Products
in the Territory, and (ii) the non-exclusive right and license to use deCODE
Generalized Technology, with the right to sublicense to Third Parties and/or
Affiliates, to make, have made, use, offer for sale, sell and import Alliance
Disease Products in the Territory.

      Roche shall advise deCODE of all sublicenses granted to Third Parties
under this Section 2.1. If Roche grants a sublicense, all of the terms and
conditions of this Agreement shall apply to the sublicensee to the same extent
as they apply to Roche for all purposes. Roche guarantees and assumes
responsibility for the performance of all obligations so imposed on such
sublicensee by reason of operation of any such sublicense.

      2.2 Research License to Roche. Subject to the terms and conditions of this
Agreement, deCODE grants to Roche a fully paid-up, non-royalty bearing
non-exclusive right and license, without the right to grant sublicenses (except
to Affiliates of Roche), (i) under deCODE Patents and (ii) to use deCODE
Know-How and deCODE Generalized Technology, for the sole and exclusive purpose
of enabling Roche to fulfill its obligations under the Alliance Disease
Programs.

      2.3 Commercial License to deCODE. Subject to the terms and conditions of
this Agreement, Roche grants to deCODE the sole and exclusive right and license,
under Roche Patents and Roche Know-How, with the right to sublicense to Third
Parties and/or Affiliates of deCODE, to make, have made, use, offer for sale,
sell and import Deselected Disease Products in the Territory.

      deCODE shall advise Roche of all sublicensees granted to Third Parties
under this Section 2.3. If deCODE grants a sublicense, all of the terms and
conditions of this Agreement shall apply to the sublicensee to the same extent
as they apply to deCODE for all purposes. deCODE guarantees and assumes
responsibility for the performance of all obligations so imposed on such
sublicensee by reason of operation of any such sublicense.


                                     - 19 -
<PAGE>
      2.4 Research License to deCODE. Subject to the terms and conditions of
this Agreement, Roche grants to deCODE a fully paid-up, non-royalty bearing
non-exclusive right and license, without the right to grant sublicenses (except
to Affiliates of deCODE), (i) under Roche Patents and (ii) to use Roche
Know-How, for the sole and exclusive purposes of enabling deCODE (a) to fulfill
its obligations under the Alliance Disease Programs, and (b) to conduct research
and development relating to the Pool Diseases.

      2.5 Commercial Rights to Compounds. Notwithstanding any provision in this
Agreement to the contrary, if a Party or its sublicensee, uses a Gene or another
member of the Biological Pathway of which such Gene is a member, to discover
Utility of a pharmaceutically active agent at any time commencing on the
Effective Date and ending seven (7) years after the Effective Date related to:
(a) an Alliance Disease prior to the discovery of Utility of such agent related
to a Deselected Disease and such agent is a protein, small molecule or an
antibody (excluding Antisense Agents and Gene Therapy Agents), then such agent
shall be deemed for all purposes to be an Alliance Disease Compound, or,
alternatively, (b) a Deselected Disease prior to the discovery of Utility of
such agent related to an Alliance Disease and such agent is a protein, small
molecule or an antibody (including, without limitation, Antisense Agents and
Gene Therapy Agents), then such agent shall be deemed for all purposes to be a
Deselected Disease Compound.

3. DILIGENCE

      3.1 Diligence Obligations.

            (a) Alliance Disease Efforts.

                  (i)   Success Notice. For each Alliance Disease, prior to the
                        end of the Program Term, Roche shall have the right to
                        provide to deCODE written notice of Roche's intention,
                        independently or with a Third Party, to continue to seek
                        to


                                     - 20 -
<PAGE>
                        discover, develop and/or commercialize at least one
                        related Alliance Disease Product having Utility for such
                        Alliance Disease ("Success Notice"). For each such
                        Alliance Disease, after providing such notice Roche
                        shall have the obligation to use Alliance Disease
                        Efforts.

                  (ii)  Designated Disease Notice. For each Alliance Disease
                        other than those for which Roche has provided a Success
                        Notice under Section 3.1(a)(i), within sixty (60) days
                        after the end of the Program Term, Roche may provide to
                        deCODE a written notice of Roche's intention not to
                        continue to seek to discover, develop and/or
                        commercialize at least one related Alliance Disease
                        Product having Utility for such Alliance Disease
                        ("Designated Disease Notice"). Upon issuance of such a
                        notice, the designated Alliance Disease shall be deemed
                        to be a Designated Disease and the Parties rights and
                        obligations shall be governed by Section 3.2 below.

                  (iii) Successful Alliance Disease. To the extent that Roche
                        has not issued either a Success Notice or a Designated
                        Disease Notice, any non-designated Alliance Diseases
                        shall be deemed to be Successful Alliance Diseases and
                        Roche shall have an obligation to use Alliance Disease
                        Efforts with respect to such Alliance Diseases.

            (b) Measurement of Alliance Disease Efforts. For a given Alliance
Disease for which Roche has an Alliance Disease Efforts obligation, prior to the
first Registration of an Alliance Disease Product having Utility for such
Alliance Disease in any Major Country, Roche's exercise of Alliance Disease
Efforts is to be determined by judging Roche's efforts taken


                                     - 21 -
<PAGE>
as a whole in the Major Countries. For a given Alliance Disease for which Roche
has an Alliance Disease Efforts obligation, after the first Registration of an
Alliance Disease Product having Utility for such Alliance Disease in any Major
Country, Roche's exercise of Alliance Disease Efforts is to be determined by
judging Roche's efforts taken on a Major Country-by-Major Country basis.

            (c) Deselected Disease Efforts. deCODE shall not be under any
diligence obligation whatsoever with respect to the discovery, development or
commercialization of any Deselected Disease Products. deCODE shall have the
right, but not the obligation, to independently or with a Third Party to seek to
discover, develop and/or commercialize Deselected Disease Products having
Utility for Designated Diseases.

            3.2 Designated Diseases.

            (a) Negotiation. For a given Designated Disease, for a period
commencing on the date Roche provides a Designated Disease Notice and ending one
year after such date ("Negotiation Period"), the Parties shall enter into good
faith negotiations regarding finding a mutually acceptable way to
collaboratively progress discovery, development and/or commercialization of a
product for the Designated Disease.

            (b) deCODE's Right to Pursue Designated Diseases. For a given
Designated Disease, notwithstanding any negotiations taking place pursuant to
Section 3.2(a), commencing on the date Roche provides a Designated Disease
Notice, as to both Parties, the rights and licenses granted pursuant to Section
2.3 with respect to Deselected Diseases shall also apply to such Designated
Disease as if it were a Deselected Disease.

            (c) Failure of deCODE to Pursue Designated Diseases. If by the end
of the Negotiation Period, (i) deCODE (independently or with an Affiliate and/or
a Third Party) has not in good faith sought to discover, develop and/or
commercialize a Deselected Disease Product for such Designated Disease, and (ii)
the Parties fail to reach agreement on essential terms for a


                                     - 22 -
<PAGE>
mutually acceptable way to collaboratively progress discover, develop and/or
commercialization of a product for the Designated Disease, then:

                  (i)   The sole and exclusive rights granted to deCODE under
                        Section 3.2(b) shall terminate;

                  (ii)  As to Roche, the rights and licenses granted pursuant to
                        Section 2.1 with respect to Alliance Diseases shall also
                        apply to such Designated Disease as if it were an
                        Alliance Disease, but on a non-exclusive basis; and

                  (iii) As to deCODE, the rights and licenses granted pursuant
                        to Section 2.3 with respect to Deselected Diseases shall
                        also apply to such Designated Disease as if it were a
                        Deselected Disease, but on a non-exclusive basis.

      3.3 Judging Efforts. For a given Alliance Disease for which Roche has an
obligation to perform Alliance Disease Efforts, prior to the first Registration
in any Major Country of an Alliance Disease Product having Utility for such
disease, if deCODE, (the "Complaining Party") reasonably believes that Roche
(the "Responsible Party") is not using such efforts, the Complaining Party may
provide the Responsible Party written notice specifying the reasons it believes
that the Responsible Party, at the time, is not using such efforts with respect
to such disease. Upon receipt of such notice, the Responsible Party shall have a
period of ninety (90) days (an "Evidence Period") to present evidence to the
Complaining Party that it, its Affiliate or sublicensee are using Alliance
Disease Efforts, as applicable, with respect to such disease. If the Responsible
Party presents evidence acceptable to the Complaining Party that the Responsible
Party, its Affiliate or sublicensee is using Alliance Disease Efforts, as
applicable, with respect to such disease, the Complaining Party's notice shall
be deemed withdrawn and of no effect. Should there be a dispute as to whether
the Responsible Party has, within the Evidence Period, presented evidence
reasonably acceptable to demonstrate that the Responsible Party, its Affiliate
or sublicensee is using Alliance Disease Efforts, as applicable, with respect to
such disease, the


                                     - 23 -
<PAGE>
Parties shall conduct good faith discussions directed toward resolution of the
dispute. If the Parties do not resolve the dispute after good faith discussions
have been conducted for a period of thirty (30) days following the Evidence
Period, the Parties shall submit such dispute for resolution in accordance with
Section 17.13. If it is agreed by the Parties, or if it is resolved in
accordance with Section 17.13, that the Responsible Party, within the Evidence
Period, has not presented evidence reasonably acceptable to demonstrate that the
Responsible Party, its Affiliate or sublicensee is using Alliance Disease
Efforts, as applicable, with respect to such disease, then the Complaining Party
shall be entitled to proceed under of Section 3.4 of this Agreement.

      3.4 Effect of Failure of Efforts. If it is agreed by the Parties, or if it
is resolved in accordance with Section 17.13, that the Responsible Party, within
the Evidence Period provided for in Section 3.3, has not presented evidence
reasonably acceptable to demonstrate that the Responsible Party, its Affiliate
or sublicensee is using Alliance Disease Efforts, with respect to a disease, the
Complaining Party shall be entitled, without prejudice to any of the Complaining
Party's other rights conferred on the Complaining Party by this Agreement, and
in addition to any other remedies available to it by law or in equity, and
without affecting or altering the Responsible Party's other rights and
obligations under this Agreement, to give a written notice terminating any
rights licensed by the Complaining Party to the Responsible Party under this
Agreement for all Alliance Disease Products having Utility for such Alliance
Disease. The effective date of any such termination shall be the date that the
Responsible Party receives such notice. After the effective date of termination,
in no event shall the Responsible Party, its Affiliates or sublicensees make,
have made, use, offer for sale, sell or import any Alliance Disease Products, as
applicable, having Registration for treating or preventing such Alliance
Disease. In addition, at the Complaining Party's request, within sixty (60) days
after the effective date of such termination: (1) the Responsible Party shall
transmit to the Complaining Party all reports, information and data in the
possession or control of the Responsible Party, its Affiliates or its
sublicensees relating to Alliance Disease Products having utility for such
Alliance Disease, (2) the Responsible Party shall assign, and shall cause its
Affiliates and sublicensees to assign, to the Complaining Party all regulatory


                                     - 24 -
<PAGE>
filings and Registrations in the possession or control of the Responsible Party,
its Affiliates or its sublicensees; in each case, as would enable the
Complaining Party to carry on the development and/or marketing of Alliance
Disease Products having for Utility for such Alliance Disease, in the Territory,
and (3) the Responsible Party hereby grants to the Complaining Party the right
to use the Roche Patents and Roche Know-How in the Territory solely to the
extent necessary to allow the Complaining Party to carry on the development
and/or marketing of Alliance Disease Products having Utility for such Alliance
Disease.

4. CONSIDERATION

      4.1 Development Payments and Royalties to deCODE. Subject to Section
10.2(c), Roche shall pay Development Payments and royalties as set forth in
Exhibit C. No payments or royalties shall be due from Roche to deCODE with
respect to any Alliance Disease Products other than as set forth in Exhibit C.

      4.2 Royalties to Roche.

      (i) Subject to Section 10.2(c), for a given Deselected Disease Product
that comprises, in whole or as a component thereof, as its pharmaceutically
active agent, an Antisense Agent, or a Gene Therapy Agent, during the Royalty
Term for the Deselected Disease Product, deCODE shall pay to Roche a royalty of
[**] percent ([**]%) on Net Sales of the given deCODE Product, on a
country-by-country basis.

      (ii) Subject to Section 10.2(c), for a given Deselected Disease Product
that comprises, in whole or as a component thereof, as its pharmaceutically
active agent, a Deselected Disease Compound, during the Royalty Term for such
Deselected Disease Product, deCODE shall pay to Roche a royalty on Net Sales of
such Deselected Disease Product, on a country-by-country basis, as set forth in
Table 1:


                                     - 25 -
<PAGE>
TABLE 1

<TABLE>
<CAPTION>
DESELECTED DISEASE PRODUCT                                 PERCENTAGE NET SALES
<S>                                                        <C>
[**]                                                               [**]%
[**]                                                               [**]%
[**]                                                               [**]%
</TABLE>

      For a given Deselected Disease Product, during the Royalty Term for the
Deselected Disease Product, deCODE shall pay to Roche a percentage of the
Sublicensing Income received by deCODE or its Affiliate from its sublicensees
with respect to the given Deselected Disease Product, as set forth in Table 2:

TABLE 2

<TABLE>
<CAPTION>
                                                                PERCENTAGE OF
DESELECTED DISEASE PRODUCT                                  SUBLICENSING INCOME
<S>                                                         <C>
[**]                                                               [**]%
[**]                                                               [**]%
[**]                                                               [**]%
</TABLE>

      Except as expressly set forth in this Section 4.2, no payments or
royalties shall be due from deCODE to Roche with respect to any Deselected
Disease or any products arising therefrom.

5. ROYALTY ADJUSTMENTS.

      5.1 Royalty Reductions.

                  (a) No Valid Claim. The royalties otherwise due under Article
4 shall be reduced, on a country-by-country basis, by [**] percent ([**]%) (i)
with respect to a given Alliance Disease Product in a given country if the
making, having made, using, offering for sale, selling or importing of the
Alliance Disease Product is not Covered by a Valid Claim of a deCODE Patent in
such country and (ii) with respect to a given Deselected Disease Product in a
given country if the making, having made, using, offering for sale, selling or
importing of the Deselected Disease Product is not Covered by a Valid Claim of a
Roche Patent in such country.

                  (b) Generic Competition. The royalties otherwise due under
Article 4 shall be reduced, on a country-by-country basis, by [**]


                                     - 26 -
<PAGE>
percent ([**]%) with respect to a given Alliance Disease Product in a given
country if, in such country, in any Reporting Period, one or more Third Parties
markets a product ("Alliance Third Party Product") having as a pharmaceutically
active ingredient the same Alliance Disease Compound as the Alliance Disease
Product, or its salt or ester, where the sale of such Alliance Third Party
Product is not claimed by a Valid Claim of an issued deCODE Patent or Roche
Patent in such country, and (2) the Alliance Third Party Product(s), in
aggregate, have at least [**] ([**]%) of the aggregate unit volume of sales for
such Alliance Disease Product in such country, as measured by IMS published data
or such other index as the Parties may agree upon.

      The royalties otherwise due under Article 4 shall be reduced, on a
country-by-country basis, by [**] percent ([**]%) with respect to a given
Deselected Disease Product in a given country if, in such country, in any
Reporting Period, one or more Third Parties markets a product ("Deselected Third
Party Product") having as a pharmaceutically active ingredient the same
Deselected Disease Compound as the Deselected Disease Product, or its salt or
ester, where the sale of such Deselected Third Party Product is not claimed by a
Valid Claim of an issued deCODE Patent or Roche Patent in such country, and (2)
the Deselected Third Party Product(s), in aggregate, have at least [**] ([**]%)
of the aggregate unit volume of sales for such Deselected Disease Product in
such country, as measured by IMS published data or such other index as the
Parties may agree upon.

            (c) Third Party Royalties. If, for a given Alliance Disease Product
or Deselected Disease Product in a given country, a Party believes that the
making, having made, using, offering for sale, selling or importing the given
Alliance Disease Product or Deselected Disease Product would represent a
significant risk of infringement of a Third Party Patent, the Party shall notify
the other Party in writing, and the Parties will in good faith discuss the need
to obtain a license from the Third Party ("Third Party License"). If the Parties
fail to agree as to the need for such Third Party License, the Parties will
submit the matter to patent counsel acceptable to both Parties for


                                     - 27 -
<PAGE>
a legal opinion about the need to obtain such Third Party License. The Parties
will equally share the costs associated with such legal action.

            If the Parties agree on the need for the Third Party License, or if
patent counsel provides reasons as to why the making, having made, offering for
sale, selling or importing of the given Alliance Disease Product or Deselected
Disease Product in the given country would represent a significant risk of
infringement of the Third Party Patent, then (i) the royalties otherwise due to
deCODE under Article 4 shall be reduced by [**] percent ([**]%) of the royalties
and payments paid by Roche or its Affiliate to such Third Party under the Third
Party License and (ii) the royalties otherwise due to Roche under Article 4
shall be reduced by [**] percent ([**]%) of the royalties and payments paid by
deCODE or its Affiliate to such Third Party under the Third Party License.

            Notwithstanding the above, (i) for a given Alliance Disease Product,
in no event shall such reduction apply to a Third Party License from a Third
Party where the Third Party License results from a collaboration having as its
subject the Alliance Disease Product and (ii) for a given Deselected Disease
Product, in no event shall such reduction apply to a Third Party License from a
Third Party where the Third Party License results from a collaboration having as
its subject the Deselected Disease Product.

            (d) Limit. Notwithstanding anything to the contrary, the royalties
due under Article 4 may not be reduced for any Reporting Period on account of
any reductions provided for in this Section 5.1 by an amount which would reduce
the amount of royalties otherwise due to a Party under Article 4 by more than
[**] percent ([**]%). Any amount of reductions in royalties which exceed the
foregoing limits for a given Reporting Period may be applied in subsequent
Reporting Periods, subject again to the foregoing limitations. The limitations
to the royalty reductions provided in this Section 5.1 shall not apply against
additional credits or reductions or deductions under any other Sections of this
Agreement.


                                     - 28 -
<PAGE>
      5.2 Sales Among Affiliates/Sublicensees. The obligation to pay royalties
under Article 4 is imposed only once with respect to the same unit of Alliance
Disease Product and Deselected Disease Product, regardless of the number of
Patents pertaining thereto. There shall be no obligation to pay royalties under
Article 4 on sales of Alliance Disease Product among Roche and its Affiliates
and its sublicensees, but in such instances the obligation to pay royalties
shall arise only upon the sale by Roche, its Affiliates or its sublicensees to
Third Parties. There shall be no obligation to pay royalties under Article 4 on
sales of Deselected Disease Product among deCODE and its Affiliates and its
sublicensees, but in such instances the obligation to pay royalties shall arise
only upon the sale by deCODE or its Affiliates to Third Parties.

      5.3 Supply Obligation. During the Royalty Term, Alliance Disease Products
and Deselected Disease Products shall be supplied in quantities necessary for or
as required by the persons who are both citizens and residents of Iceland at no
charge.

      5.4 Barred Royalties. If the royalties set out in this Agreement, after
giving effect to all reductions and credits to such royalties allowable under
this Agreement, are higher than the maximum royalties permitted by the law or
regulations of a given country, the royalty payable for such country shall be
equal to the maximum permitted under such law or regulations.

6. ROYALTY PAYMENTS AND REPORTS.

      6.1 Payment. Except as otherwise provided in this Agreement, all royalties
due hereunder and the amount of Sublicensing Income due hereunder shall be
calculated quarterly as of March 31, June 30, September 30 and December 31 (each
as being the last day of a calendar quarter) and shall be paid by within sixty
(60) days after the end of each calendar quarter for which Net Sales underlying
such royalties or for which Sublicensing Income are calculated. Each such
payment shall be accompanied by a statement, Product-by-Product and
country-by-country, of the amount of Net


                                     - 29 -
<PAGE>
Sales, the amount of royalties due on such Net Sales, or the amount of
Sublicensing Income due, as the case may be.

      6.2 Mode of Payment. Each Party shall make all payments required under
this Agreement as directed by the other Party from time to time in United States
Dollars or such other currency as the Parties may mutually agree.

      (a) For Roche and its Affiliates. For Roche and its Affiliates, whenever
for the purpose of calculating royalty conversion from any foreign currency
shall be required, such conversion shall be made as follows: when calculating
the Adjusted Gross Sales, the amount of such sales in foreign currencies shall
be converted into Swiss Francs as computed in the central Roche's Swiss Francs
Sales Statistics for the countries concerned, using the average monthly rate of
exchange at the time for such currencies as retrieved from the Reuters System;
and when calculating the royalties on Net Sales, such conversion shall be at the
average rate of the Swiss Franc to the Dollar, as retrieved from the Reuters
System for the applicable calendar quarter.

      (b) For a Sublicensee of Roche in a Country. For a sublicensee of Roche,
whenever for the purpose of calculating royalty conversion from any foreign
currency shall be required, such conversion shall be made as follows: when
calculating the Adjusted Gross Sales, the amount of such sales shall be reported
by the sublicensee to Roche within thirty (30) days from the end the calendar
quarter, after having converted each applicable monthly sales in foreign
currency into the Dollar using the average rates of exchange published in The
Wall Street Journal (or some other source agreed upon in writing by the Parties
for the country) for each respective month of the applicable calendar quarter.

      (c) For deCODE and its Affiliates. For deCODE and its Affiliates, whenever
for the purpose of calculating royalty conversion from any foreign currency
shall be required, such conversion shall be made as follows: when calculating
the Adjusted Gross Sales and Net Sales, the amount of such sales in foreign
currencies shall be converted into Dollars, as computed for the


                                     - 30 -
<PAGE>
country concerned using the average monthly rate of exchange listed in The Wall
Street Journal (or some other source agreed upon in writing by the Parties for
the country) for each applicable month of the applicable calendar quarter.

      (d) For a Sublicensee of deCODE in a Country. For a sublicensee of deCODE,
the Sublicensing Income shall be calculated by conversion of such amount from
the currency in which it was paid to deCODE into Dollars as computed for the
country concerned using the average monthly rate of exchange listed in The Wall
Street Journal (or some other source agreed upon in writing by the Parties for
the country) for each applicable month of the applicable calendar quarter.

      6.3 Records Retention. Roche shall keep, and require its Affiliates and
sublicensees to keep, full, true and accurate books of account in accordance
with generally accepted accounting principles, consistently applied ("Roche
Books of Account") containing all particulars that may be necessary for the
purpose of calculating all royalties payable to deCODE under this Agreement for
a period of three (3) calendar years after the end of the calendar year in which
such sales occurred. Such Roche Books of Account shall be kept at the principal
place of business of Roche, its Affiliates or its sublicensees, as the case may
be.

deCODE shall keep, and require its Affiliates and sublicensees to keep, full,
true and accurate books of account in accordance with generally accepted
accounting principles, consistently applied ("deCODE Books of Account")
containing all particulars that may be necessary for the purpose of calculating
all royalties and Sublicensing Income payable to Roche under this Agreement for
a period of three (3) calendar years after the end of the calendar year in which
such sales occurred. Such deCODE Books of Account shall be kept at the principal
place of business of deCODE, its Affiliates or its sublicensees, as the case may
be.

      6.4 Audit Request. A Party ("Auditing Party") or its authorized
independent public accountant has the right to engage, at the Auditing Party's


                                     - 31 -
<PAGE>
expense, the other Party's ("Audited Party") independent public accountant to
perform, on behalf of the Auditing Party or its independent public accountant,
an audit, conducted in accordance with generally accepted auditing standards in
the USA, of such Books of Account of the Audited Party, its Affiliates and
sublicensees that are deemed necessary by the Audited Party's independent public
accountants to report on Adjusted Gross Sales, Net Sales and Sublicensing Income
of the Alliance Disease Products or Deselected Disease Products, as the case may
be, for the period or periods requested by the Auditing Party. Results of any
such examination shall be made available to both Parties. The Auditing Party or
its authorized independent public accountant shall have the right to review the
reports prepared by the Audited Party's independent public accountant and make
inquiries of the Audited Party's independent public accountant regarding such
reports.

      Such audit shall not be performed more frequently than once per calendar
year nor more frequently than once with respect to Books of Account covering any
specific period of time, upon at least thirty (30) working days' prior written
notice, and shall be conducted during regular business hours in such a manner as
to not unnecessarily interfere with the Audited Party's normal business
activities.

      All Books of Account referred to under this Section shall be used only for
the purpose of verifying royalty statements or compliance with this Agreement
and shall be treated by the Auditing Party as Confidential Information
hereunder.

      The failure of the Auditing Party to request verification of any royalty
calculation during the period when Books of Account have to be retained shall be
considered acceptance of the accuracy of such reporting.

      In the event that such audit shall indicate that in any calendar year the
royalties which should have been paid by the Audited Party are greater than
those which were actually paid by the Audited Party, then the Audited Party
shall promptly pay the underpaid amount to the Auditing Party and, if the
royalties which should have been paid by the Audited Party are at least five


                                     - 32 -
<PAGE>
percent (5%) greater than those which were actually paid by the Audited Party,
then the Audited Party shall also reimburse the Auditing Party for the
reasonable cost of such audit. In the event that such audit shall indicate that
in any calendar year the royalties which were actually paid by the Audited Party
are greater than those which should have been paid, then, at the Audited Party's
option, the Auditing Party shall promptly reimburse to the Audited Party the
overpaid amount or the Audited Party shall deduct the overpaid amount from the
next royalty payment to be paid the Auditing Party.

      6.5 Taxes. All amounts owing to a Party specified in this Agreement shall
be paid by the owing Party net of all applicable taxes, fees, and other charges
excluding only taxes on the owing Party's income. In particular, any tax
required to be withheld by the owing Party under the laws of any country for the
account of the owed Party ("Withholding Taxes"), shall be promptly paid by the
owing Party for and on behalf of the owed Party to the appropriate governmental
authority, and the owing Party shall furnish the owed Party with proof of
payment of such tax. Any such tax actually paid on the owed Party's behalf shall
be deducted from royalty payments due the owed Party. The owing Party will
reasonably assist the owed Party in minimizing the Withholding Taxes applicable
to any payment made by the owing Party and in claiming tax refund at the owed
Party's request.

      6.6 Blocked Currency. In each country where the local currency is blocked
by applicable law and cannot be removed from such country, royalties accrued in
that country shall be paid in such country in local currency by deposit in a
local bank designated by the Party entitled to such payment.

      6.7 Interest on Late Payments. Any payment under this Agreement that is
not paid on or before the date such payment is due shall bear interest, to the
extent permitted by applicable law, at the rate of one-month London Interbank
Offered Rate (=LIBOR) as reported on page BBA Reuters at 11:00 a.m. London time
on the day such payment is due, plus two percent (2%), calculated for the number
of days such a payment is overdue.


                                     - 33 -
<PAGE>
      6.8 Mechanism for Adjustment to Royalties. For the first calendar quarter
of each calendar year during the term of this Agreement, a Party ("Paying
Party") shall be entitled to deduct from the royalties owed to the other Party
for that quarter any reductions, deductions or credits on royalties allowed
under this Agreement during the previous calendar year provided the Paying Party
did not otherwise previously take such reductions or credits. In the event that
any reductions, deductions or credits otherwise allowable to the Paying Party in
the last calendar year during the term of the Agreement have not been fully
utilized by the Paying Party upon the expiration of this Agreement, then the
other Party shall reimburse the Paying Party for the allowable amount.

7. ALLIANCE RESEARCH PROGRAM

      7.1 Diseases.

            (a) Alliance Diseases. Roche shall designate four (4) Subject
Diseases to become the initial Active Alliance Diseases. The initial Alliance
Diseases are set forth in Exhibit A. During the Program Term there shall be at
all times no more than four (4) Active Alliance Diseases. The parties recognize
the possibility that after February 1, 2004 there may be no Active Alliance
Diseases, in which case the Program Term shall end. Each Active Alliance Disease
shall be the subject of a separate and independent Research Plan.

            In the event Roche gives deCODE written notice of its desire to
increase the number of Active Alliance Diseases beyond four (4), the Parties
shall enter into good faith negotiations regarding the terms and conditions upon
which any such additional Active Alliance Diseases shall be added to this
Agreement.

            If at any time, deCODE identifies a Third Party as a potential
partner for any Alliance Disease or otherwise wishes to independently develop
Technical Information necessary or useful to make, have made, use, offer for
sale, sell or import Alliance Disease Products, then deCODE may request that
Roche elect to have such Alliance Disease become a Deselected


                                     - 34 -
<PAGE>
Disease, which Roche may decline at its sole discretion and for any reason
whatsoever.

            (b) Pool Diseases. Roche shall designate [**] Subject Diseases to
become the initial Pool Diseases. The initial Pool Diseases are set forth in
Exhibit A. During the period commencing on February 1, 2002 and ending February
1, 2003 there shall be at all times up to [**] Pool Diseases as selected by
Roche. During the period commencing on February 1, 2003 and ending February 1,
2004 there shall be at all times up to [**] Pool Diseases as selected by Roche.
After February 1, 2004, there shall be [**] Pool Diseases. In the event deCODE
wishes to obtain a Third Party licensee for a Pool Disease prior to such disease
becoming a Deselected Disease, deCODE shall provide to Roche written notice of
such intention. Roche will have thirty (30) days from such notice to determine
whether it is interested in selecting such Pool Disease to become an Active
Alliance Disease, provided that Roche may not have more than four (4) Active
Alliances Diseases at any one time (which means that Roche may need to designate
an existing Active Alliance Disease as a Successful Disease, a Pool Disease or a
Deselected Disease to make room to move a Pool Disease to an Active Alliance
Disease). If Roche does so, then the Joint Steering Committee will develop a
Research Plan for, and reallocate FTE's to support such, new Alliance Research
Program. If Roche does not do so, deCODE shall promptly make to Roche a one-time
[**] Dollar payment. Upon Roche's receipt of such payment, such Pool Disease
shall become a Deselected Disease and, with respect to such disease, the Parties
shall have all of the rights and obligations as set forth for Deselected
Diseases.

            (c) Deselected Diseases. As set forth on Exhibit B, Roche has
designated three (3) Subject Diseases to be initial Deselected Diseases.

      On or about December 1, 2002, Roche shall designate a sufficient number of
Subject Diseases to become Deselected Diseases such that for the period from
February 1, 2003 until February 1, 2004 no more than [**]Subject Diseases are
either Alliance Diseases or Pool Diseases. On or about


                                     - 35 -
<PAGE>
December 1, 2003, Roche shall designate a sufficient number of Subject Diseases
to become Deselected Diseases such that for the period from February 1, 2004
until the end of the Alliance Disease Program Term no more than [**] Subject
Diseases are Alliance Diseases.

            (d) Research Plans. The Steering Committee will discuss and prepare
the first Research Plan for each initial Active Alliance Disease, on or prior to
thirty (30) days after the Effective Date. Before the end of the first Research
Plan for a given Active Alliance Disease, the Steering Committee will formulate
a proposed updated Research Plan for the remainder of the Program Term. Each
iteration of the Research Plan for a given Active Alliance Disease shall be
signed and dated by a representative of each Party on the Steering Committee.
Each Research Plan may be amended from time to time upon Steering Committee
approval. Any such amendment shall be signed and dated by a representative of
each Party on the Steering Committee.

      The Parties shall conduct, at their cost except as otherwise provided
herein, those activities that are assigned in each Research Plan for each Active
Alliance Disease. The Steering Committee shall oversee the activities of each
Party in the conduct of each Research Plan.

      7.2 Switching and Adding Diseases

            (a) Selecting New Alliance Diseases. If at any time during the
Program Term there are less than [**], and if desired by Roche, then (i) Roche
may select a Pool Disease to become an Active Alliance Disease or (ii) Roche may
request in writing that the Parties discuss the selection of a disease other
than a Pool Disease to be an Active Alliance Disease. In the event that Roche
selects a Pool Disease or the Parties agree to include a disease other than a
Pool Disease as an Active Alliance Disease, such disease shall be deemed an
Active Alliance Disease. The Steering Committee shall, within sixty (60) days
thereafter, discuss, prepare and finalize a Research Plan for the new Active
Alliance Disease. The Parties shall, within thirty (30) days of finalization by
the Steering Committee of such Research Plan, commence


                                     - 36 -
<PAGE>
activities for the new Active Alliance Disease as described in the Research
Plan. Nothing in this Section 7.2(a) shall obligate deCODE to agree to include
any disease other than a Pool Disease as an Active Alliance Disease.

      Roche shall select for new Active Alliance Diseases based on the following
priority: Roche shall select new Active Alliance Diseases first from the Pool
Diseases, second from diseases other than Pool Diseases actively pursued by
deCODE provided deCODE has the right to license or otherwise make available such
disease to Roche, which selection shall be subject to the consent of deCODE, and
third from diseases not actively pursued by deCODE provided deCODE has the right
to license or otherwise make available such disease to Roche, which selection
shall be subject to the consent of deCODE.

            (b) Adding New Pool Diseases. If at any time during the first year
of the Program Term there are less than [**] Pool Diseases or during the second
year of the Program Term there are less than [**] Pool Diseases, then Roche may
request in writing that an Active Alliance Disease become a Pool Disease or that
the Parties discuss the selection of a new disease to become a Pool Disease. In
the event that Roche requests an Active Alliance Disease be a Pool Disease or
the Parties agree to include a new disease as a Pool Disease, such disease shall
be deemed a Pool Disease. Nothing in this Section 7.2(b) shall obligate deCODE
to agree to include any new disease as a Pool Disease.

            (c) Making an Alliance Disease or Pool Disease a Deselected Disease.
Roche may, for any reason and at any time during the Program Term, designate an
Alliance Disease or Pool Disease to be a Deselected Disease by giving deCODE
written notice of such designation ("Deselection Notice"). In such event the
date that such human disease becomes a Deselected Disease shall be the date
Roche provides such Deselection Notice. In addition, at deCODE's request, within
sixty (60) days after the date of such designation, Roche shall transmit to
deCODE all reports, information and data in the possession or control of Roche
or its


                                     - 37 -
<PAGE>
Affiliate for such designated Disease generated or developed as a result of the
associated Alliance Disease Program.

      7.3 deCODE Support. During the Alliance Disease Program Term, deCODE shall
allocate such FTE's and supplies, at the FTE Rate, as decided by the Steering
Committee in the Research Plans.

      The Parties acknowledge that deCODE's utilization of FTE's and supplies of
deCODE during the course of the Alliance Disease Programs may fluctuate during
the Program Term and that deCODE's obligation to allocate FTE's and supplies to
a given Alliance Disease as provided by the Steering Committee, and satisfaction
of such obligation, will be based on such allocation calculated over the course
of a given year of the Program Term.

      7.4 Funding by Roche.

      Roche shall pay deCODE the following amounts, which shall be due and
payable as follows:

      (1)   [**] dollars (USD $[**]), due on February 1, 2002 and payable within
            thirty (30) days after receipt by Roche of an invoice for such sum;

      (2)   [**] dollars (USD $[**]), due on May 1, 2002 and payable within
            thirty (30) days after receipt by Roche of an invoice for such sum;

      (3)   [**] dollars (USD $[**]), due on August 1, 2002 and payable within
            thirty (30) days after receipt by Roche of an invoice for such sum;

      (4)   [**] dollars (USD $[**]), due on November 1, 2002 and payable within
            thirty (30) days after receipt by Roche of an invoice for such sum;

      (5)   [**] dollars (USD $[**]), due on February 1, 2003 and payable within
            thirty (30) days after receipt by Roche of an invoice for such sum;


                                     - 38 -
<PAGE>
      (6)   [**] dollars (USD $[**]), due on May 1, 2003 and payable within
            thirty (30) days after receipt by Roche of an invoice for such sum;

      (7)   [**] dollars (USD $[**]), due on August 1, 2003 and payable within
            thirty (30) days after receipt by Roche of an invoice for such sum;

      (8)   [**] dollars (USD $[**]), due on November 1, 2003 and payable within
            thirty (30) days after receipt by Roche of an invoice for such sum;

      (9)   [**] dollars (USD $[**]) for each Alliance Disease Program in effect
            on February 1, 2004, due on February 1, 2004 and payable within
            thirty (30) days after receipt by Roche of an invoice for such sum;

      (10)  [**] dollars (USD $[**]) for each Alliance Disease Program in effect
            on May 1, 2004, due on May 1, 2004 and payable within thirty (30)
            days after receipt by Roche of an invoice for such sum;

      (11)  [**] dollars (USD $[**]) for each Alliance Disease Program in effect
            on August 1, 2004, due on August 1, 2004 and payable within thirty
            (30) days after receipt by Roche of an invoice for such sum; and

      (12)  [**] dollars (USD $[**]) for each Alliance Disease Program in effect
            on November 1, 2004, due on


                                     - 39 -
<PAGE>
            November 1, 2004 and payable within thirty (30) days after receipt
            by Roche of an invoice for such sum.

Payments for additional years when an Alliance Disease Program is in effect are
to be decided by the Parties if such situation arises.

            (b) Use of Funds. deCODE will use funding provided under this
Section of the Agreement only in support of the Alliance Disease Programs.
deCODE will not use any Third Party funding in direct support of the Alliance
Disease Programs. The use of any Third Party funding by deCODE in indirect
support of the Alliance Disease Programs shall not adversely impact Roche's
rights and licenses under this Agreement.

            (c) Other Expenses. Except as provided in this Section, each Party
shall be responsible for its own costs and expenses related to the Alliance
Disease Programs.

            (d) Method of Payment. Payments under this Section from Roche to
deCODE shall be made by Roche to deCODE by wire transfer as instructed to Roche
in writing by deCODE.

      7.5 Roche Review Right.

            (a) Within thirty (30) days following the end of each quarter of the
Program Term, deCODE shall prepare and submit to Roche a statement setting forth
for each Alliance Disease the number of deCODE scientists who actually worked on
such Alliance Disease during the previous quarter and the portion of a full time
equivalent scientific person year of scientific work on or in direct connection
with the Alliance Disease that each such deCODE scientist worked on such
Alliance Disease.

            (b) deCODE shall keep full, true and accurate books of account
containing all information necessary to determine the correctness of the number
of deCODE scientists who actually worked on any Alliance Disease during any
period of the Program Term, and the portion of an FTE of scientific


                                     - 40 -
<PAGE>
work on or in direct connection with the Alliance Disease that each such deCODE
scientist worked on any such Alliance Disease, and the total cost of such work
based on the FTE Rate. Such books of account shall be kept at deCODE 's
principal place of business. Not more than once per contract year during the
Program Term, Roche or its authorized independent public accountant shall have
the right to engage deCODE's independent public accountant, at reasonable times
and upon reasonable notice, to examine on deCODE's premises, such records of
deCODE. Results of any such examination shall be made available to both Parties.
Roche shall bear the cost of such audit, unless such audit indicates an
overstatement of (i) the number of FTE's that worked on any Alliance Disease or
(ii) the portion of a full time equivalent scientific person year of scientific
work on or in direct connection with the Alliance Disease that each such deCODE
scientist worked on any such Alliance Disease, by five percent (5%) or more, in
which event deCODE shall bear the costs of such audit.

7.6 Conduct. Each Party shall for each Alliance Disease:

            (i) conduct activities for such Alliance Disease as described in the
Research Plan for such Alliance Disease;

            (ii) use reasonable diligence to (1) perform the activities assigned
to such Party under the Research Plan for such Alliance Disease and (2) complete
such activities on a timely basis;

            (iii) conduct such Research Plan in good scientific manner, and in
compliance in all material respects with all requirements of applicable laws,
rules and regulations, and all other requirements of any applicable good
laboratory practices to attempt to achieve its objectives efficiently and
expeditiously;

            (iv) no later than fourteen (14) days prior to each Steering
Committee meeting during the Program Term, furnish the other Party with written
reports summarizing (1) all scientific work performed by such Party and (2)
Program Know-How developed by such Party (including without


                                     - 41 -
<PAGE>
limitation a summary of Inventions and results and data generated) in the
conduct of the Alliance Disease Programs, each to the extent not already
summarized in a prior report;

            (v) as requested by the Steering Committee for a given Alliance
Disease, furnish to the other Party a detailed written report relating to (1)
all scientific work performed by such Party and (2) Program Know-How developed
by such Party (including without limitation a summary of Inventions and results
and data generated), in the conduct of the Alliance Disease Program for such
Alliance Disease;

            (vi) promptly disclose Inventions to the other Party; and

            (vii) during the Program Term, allow Representatives of the other
Party, during normal business hours and with reasonable frequency, to visit the
offices and laboratories of such Party, and consult informally, during such
visits or by telephone, with such Party's Representatives performing scientific
work on or in direct connection with Alliance Diseases; provided, however, that
(1) such Representatives of the other Party are under an agreement binding such
Representatives to protect Confidential Information to at least the same extent
or greater as is required of such other Party under this Agreement and (2) the
Party allowing any such visit approves in writing prior to such visit the other
Party's Representatives, which approval shall not be unreasonably withheld. Any
such visit shall not unreasonably interrupt the operations of the Party that is
visited.

7.7 Records.

      (a) During the Program Term and for each Alliance Disease, deCODE and
Roche each shall maintain records in sufficient detail and in such good
scientific manner as to, in all material aspects, completely and accurately
reflect all scientific work performed and results achieved (including all
Inventions and results and data generated). Such records shall be maintained in
separate, bound laboratory notebooks for each Alliance


                                     - 42 -
<PAGE>
Disease. The Parties shall maintain such records in a form required under all
applicable laws and regulations of the Major Countries.

      (b) During the Program Term and for each Alliance Disease, deCODE and
Roche each shall have the right, during normal business hours and upon
reasonable notice, and subject to such reasonable procedures as the other Party
may require, to inspect all such records of the other Party relating to the
Alliance Disease Program for a given Alliance Disease. deCODE and Roche each
shall maintain such records of the other Party contained therein as Confidential
Information in accordance with this Agreement and shall not use such records
except to the extent otherwise permitted by this Agreement.

      7.8 Alliance Disease Research Term.

      (a) Program Term. The Parties shall conduct the Alliance Disease Programs
during the Program Term. The Alliance Disease Program shall terminate prior to
February 1, 2005 upon the mutual agreement of the Parties, or as otherwise
specifically provided in this Agreement.

      (b) Extension of Program Term.The Program Term may be extended beyond
February 1, 2005 for further renewable periods of one (1) year upon mutual
agreement of the Parties. In the event that a Party wishes such an extension, it
shall so notify the other Party in writing no later than six (6) months prior to
expiration of the Program Term. The amount of funding to be provided by Roche
during such extension shall remain unchanged. Such extensions shall be deemed to
be included in the Program Term for all purposes under this Agreement. Nothing
in this Section 7.8(b) shall obligate either Party to agree to any such
extension.

8. STEERING COMMITTEE

      8.1 Members. The Parties shall establish a Steering Committee that shall
consist of six (6) members, three (3) members from each Party. The initial
members of the Steering Committee are set forth on Exhibit D.


                                     - 43 -
<PAGE>
During the Program Term, two (2) members from each Party must be both (i) a
member of senior management and (ii) a scientist. Members of the Steering
Committee may be represented at any meeting by a designee appointed by such
member for such meeting. The chairperson during the initial contract year of the
Program Term shall selected by deCODE. Thereafter, during the term of this
Agreement, the chairperson of the Steering Committee for a given contract year
shall be selected within thirty (30) days of the beginning of such given
contract year on an alternating basis between the Parties, and shall serve as
chairperson during such given contract year. The secretary during the initial
contract year of the Program Term shall be selected by Roche. Thereafter, during
the term of this Agreement, the secretary of the Steering Committee for a given
contract year shall be selected within thirty (30) days of the beginning of such
given contract year on an alternating basis between the Parties, and shall serve
as secretary during such given contract year. Each Party shall be free to change
its members, on prior written notice to the other Party. Each Party may, in its
discretion, invite non-Committee Representatives of such Party, provided that
each Party approves the other Party's invitee(s) in advance.

      8.2 Responsibilities. The Steering Committee shall:

            (a)   oversee the activities of each Party in the conduct of each
                  Research Plan;

            (b)   oversee the exchange of Technical Information by the Parties
                  in the conduct of the Alliance Disease Programs.

            (c)   discuss and prepare the first Research Plans for each Active
                  Alliance Disease and updates thereof, as provided herein, and
                  sign and date the same;

            (d)   decide upon approval of proposed amendments or modifications
                  to any Research Plan, and sign and date the same;

            (e)   discuss, prepare and finalize a Research Plan for any new
                  Active Alliance Disease;


                                     - 44 -
<PAGE>
            (f)   during the Program Term, decide upon the allocation of FTE's
                  and supplies to the Alliance Disease Programs;

            (g)   for a given Active Alliance Disease, review written reports
                  furnished under Section 7.6(iv) detailing all scientific work
                  performed and Program Know-How developed in the conduct of the
                  Alliance Disease Programs;

            (h)   decide, for a given disease, whether a given Gene prior to the
                  Effective Date or in the conduct of an Alliance Disease
                  Program for such disease, was confirmed to play a role in the
                  pathogenesis of such disease;

            (i)   determine Target Assessment of Genes from time to time;

            (j)   decide which Alliance Disease Compounds, in the conduct of an
                  Alliance Disease Program, are to be subjected to (1) formal
                  toxicology in more than one non-human animal species, (2)
                  absorption, distribution, metabolism and excretion testing in
                  at least one non-human animal species, and (3) a scale-up
                  strategy for synthesis;

            (k)   decide if there is a need for plasma samples to be provided by
                  deCODE to Roche and, if so, the number of plasma samples
                  reasonably required for the Alliance Disease Programs;

            (l)   from time to time, if necessary, adjust the fee for plasma
                  samples to reflect the actual cost and expenses incurred by
                  deCODE in connection with providing such plasma samples to
                  Roche;


            (m)   decide if there may be a scientific need for cell lines and/or
                  tissue samples for each Alliance Disease Program and, if so,
                  determine from time to time the number of cell lines and/or
                  tissue samples reasonably required for each Alliance Disease
                  Program, which shall


                                     - 45 -
<PAGE>
                  not be more than from ten (10) Participants with a given
                  Alliance Disease and ten (10) Participants acting as control
                  subjects with respect to the given Alliance Disease;

            (n)   if cell lines and/or tissue samples are determined to be
                  required for an Alliance Disease Program by the Steering
                  Committee, determine the amount Roche shall reimburse to
                  deCODE for each such cell line and/or tissue sample provided
                  to Roche, which amount shall equal all reasonable
                  out-of-pocket costs and expenses actually incurred by deCODE
                  in connection with providing such cell lines and tissue
                  samples to Roche;

            (o)   monitor (but not oversee or approve any aspect of) the
                  progress of research regarding Pool Diseases; and

            (p)   as and when necessary for the purposes of this Agreement,
                  decide whether a gene is another member of a Biological
                  Pathway of which a Gene is a member, based on documented
                  evidence that work on that gene was derived from the discovery
                  of the Gene.

      8.3 Meetings. During the Program Term and until one (1) year after the end
of the Program Term the Steering Committee shall meet at least once every
contract quarter, and more frequently as the Parties deem appropriate, on such
dates, places and at such times as the Parties shall agree. Thereafter, during
the term of this Agreement, the Steering Committee shall meet on an as needed
basis on such dates, places and at such times as the Parties shall agree. The
meetings shall alternate between the offices of the Parties unless the Parties
otherwise agree. The Steering Committee may convene or be polled or consulted
from time to time by means of telecommunications, video conference or
correspondence, as deemed necessary or appropriate; provided, however, that the
Steering Committee meet in person at least once every contract quarter during
the Program Term and until one (1) year after the end of the Program Term.


                                     - 46 -
<PAGE>
      8.4 Decisions.

            (a) The Steering Committee may decide on any subject matter that is
subject to the Steering Committee decision-making authority. All decisions of
the Steering Committee shall be made by consensus of the members (or their
designees) present at any meeting. Such consensus shall require that at least
two (2) members of each Party are present at such meeting.

            (b) In the event that consensus cannot be reached by the Steering
Committee after good faith discussions with respect to a matter that is subject
to its decision-making authority, then the matter shall be referred for further
review and resolution by the Executive Officers. The Executive Officers of each
Party shall use reasonable efforts to resolve the matter within thirty (30) days
after the matter is referred to them. If the Executive Officer cannot resolve
the matter within thirty (30) days, then: (i) if the matter pertains to
relations with Participants, or research sites, consultants, investigators or
vendors in Iceland, or any governmental authority in Iceland, the matter shall
be decided by the Executive Officer of deCODE in good faith, giving appropriate
consideration to the reasonable business and scientific concerns of Roche; and
(ii) if the matter does not relate to Sections 8.2 (c), (d), (e), (f), (h), (i),
(k), (l) and/or (p) (the "Sensitive Matters"), the matter shall be decided by
the Executive Officer of Roche in good faith, giving appropriate and due
consideration to the reasonable business and scientific concerns of deCODE.

            (c) If any dispute regarding any Sensitive Matter is not resolved by
the Executive Officers (or their designees) within thirty (30) business days
after an issue is referred to them, or such longer period as the Executive
Officers (or their respective designees) may collectively agree, then any Party
shall have the right to refer such dispute regarding such Sensitive Matter to an
Expert for expedited arbitration as set forth in subparagraphs (i) through (iii)
below.

            (i)   Upon written request by either Party to the other Party, the
                  Parties shall promptly negotiate in good


                                     - 47 -
<PAGE>
                  faith to appoint a mutually acceptable disinterested,
                  conflict-free individual not affiliated with any Party, with
                  scientific, technical and regulatory experience with respect
                  to the development of products that share many of the same
                  characteristics of Alliance Disease Products necessary to
                  resolve such dispute regarding a Sensitive Matter (an
                  "Expert"). If the Parties are not able to agree within five
                  (5) business days after the receipt by a Party of the written
                  request in the immediately preceding sentence, the American
                  Arbitration Association shall be responsible for selecting an
                  Expert within ten (10) business days of being approached by a
                  Party. The fees and costs of the Expert and the American
                  Arbitration Association, if applicable, shall be shared
                  equally by the Parties.

            (ii)  Within five (5) business days after the designation of the
                  Expert, the Parties shall each simultaneously submit to the
                  Expert and one another a written statement of their respective
                  positions on such disagreement. Each Party shall have fifteen
                  (15) business days from receipt of any other Party's
                  submission to submit to the Expert and the other Party a
                  written response thereto, which shall include any scientific
                  and technical information in support thereof. The Expert shall
                  have the right to meet with the Parties, either alone or
                  together, as necessary to make a determination.

            (iii) No later than thirty (30) business days after the designation
                  of the Expert, the Expert shall make a determination by
                  selecting the resolution proposed by one of the Parties that
                  the Expert deems as a whole to be the most fair and reasonable
                  to the Parties in light of the totality of the circumstances.
                  The Expert shall provide


                                     - 48 -
<PAGE>
                  the Parties with a written statement setting forth the basis
                  of the determination in connection therewith. The decision of
                  the Expert shall be final and conclusive.

            (d) No decision, either by the Steering Committee, an Executive
Officer or an Expert, on any matter that is subject to the Steering Committee's
decision-making authority, may have the effect of materially increasing the
economic burdens or responsibilities of a Party under this Agreement without the
prior written approval of such Party.

      8.5 Minutes. Promptly after each Steering Committee meeting, the secretary
of the Steering Committee shall prepare and distribute to the chairperson draft
minutes of the meeting, which shall provide a description in reasonable detail
of the discussions had at the meeting and a list of actions, decision or
determinations approved by the Steering Committee and a list of issues to be
resolved by the Executive Officers. The chairperson may then comment on the
draft minutes. The secretary shall discuss with the chairperson any comments of
the chairperson and circulate a final draft of the minutes to all members of the
Steering Committee within ten (10) days of the meeting. The members of the
Steering Committee shall then have ten (10) days after circulation of the final
draft minutes to provide their comments thereon to the secretary of the Steering
Committee. If a member of the Steering Committee does not comment to the
secretary on the draft minutes within the ten (10) day period after circulation,
said member is deemed to have agreed to the final draft minutes. Upon the
expiration of the ten (10) day period after circulation, the secretary and the
chairperson of the Steering Committee shall have an additional seven (7) days to
discuss the other members' comments and finalize the minutes. The secretary and
chairperson shall each sign the final minutes. The signature of the chairperson
and the secretary on the final minutes shall indicate each Party's assent to the
minutes. With the sole exception of specific items of the meeting minutes to
which the chairperson and the secretary cannot agree and which are escalated as
provided below, final minutes of all Steering Committee meetings shall be
finalized no later than twenty seven (27) days after the meeting to which the
minutes pertain. If at any time during the preparation


                                     - 49 -
<PAGE>
and finalization of the Steering Committee meeting minutes the secretary and the
chairperson of the committee do not agree on any issue with respect to the
minutes, this issue shall be resolved by the escalation process provided in
Section 9.4(b). The decision resulting from the escalation process shall be
recorded by the secretary of the Steering Committee in an amended finalized
minutes for said meeting. All other issues in the minutes which are not subject
to such escalation shall be finalized within the above-mention twenty seven (27)
days.

      8.6 Expenses. Each Party shall be responsible for all travel and related
costs and expenses for its members and non-Committee invitees to attend meetings
of, and otherwise participate on, the Steering Committee.

9. MATERIAL TRANSFER

9.1 Plasma Samples. deCODE shall (i) harvest plasma samples from Participants
and (ii) preserve such harvested plasma samples. The Steering Committee shall
determine if there is a scientific need for plasma samples to be provided by
deCODE to ROCHE and, if so, the number of plasma samples reasonably required
from each Alliance Disease Program. If the Steering Committee determines that
there is a scientific need for plasma samples to be provided by deCODE to ROCHE,
deCODE shall provide to Roche one five milliliter (5 ml) sample of
Citrate-plasma and one five milliliter (5 ml) sample of EDTA-plasma from such
number of Participants as the Steering Committee determines is reasonably
required for the Alliance Disease Program. Upon receipt of both one five
milliliter (5 ml) sample of Citrate-plasma and one five milliliter (5 ml) sample
of EDTA-plasma from a Participant, Roche shall pay deCODE a fee of fifty dollars
($50) within thirty (30) days after receipt of an invoice from deCODE. Such fee
shall be subject to adjustment from time to time by the Steering Committee to
reflect the actual costs and expenses incurred by deCODE in connection with
providing such plasma samples.

9.2 Cell Lines and Tissue Samples. If the Steering Committee determines that
there may be a scientific need for cell lines and/or tissue samples for any
Alliance Disease Program, deCODE shall use reasonable efforts to harvest


                                     - 50 -
<PAGE>
and preserve both cell lines and/or tissue samples from ten (10) Participants
with such Alliance Disease and ten (10) Participants acting as control subjects
with respect to such Alliance Disease. At the request of the Steering Committee,
deCODE shall provide Roche, as they become available, with cell lines and/or
tissue samples from such number of Participants with such Alliance Disease and
such number of Participants acting as control subjects with respect to such
Alliance Disease as requested by the Steering Committee. Roche shall reimburse
deCODE for cell lines and/or tissue samples provided by deCODE to Roche, at the
fee therefor determined by the Steering Committee, within thirty (30) days after
receipt by Roche of an invoice from deCODE.

9.3 Biological Materials Transfer.

      (a) For any Biological Material, deCODE shall provide Roche with all
related deCODE Know-How and shall inform Roche of any hazards or precautions
which need to be taken with respect to the Biological Material that deCODE is
aware of, or becomes aware of, during the term of this Agreement. deCODE shall
properly label, package, and transport the Biological Material in accordance
with all applicable laws and regulations and as reasonably requested by Roche.
Nothing herein shall be construed as giving Roche any title or ownership to any
Biological Materials. Roche may not use any Biological Material except in the
conduct of an Alliance Disease Program without the prior written consent of
deCODE. Roche shall not supply any Biological Material to any Third Party, other
than Collaborators, without the prior written consent of deCODE. In no event
shall Roche use any Biological Materials to harvest DNA. Upon deCODE's written
request during the Program Term or one (1) year thereafter, Roche shall destroy
all unused Biological Materials.

      (b) THE BIOLOGICAL MATERIALS ARE PROVIDED "AS IS" AND WITHOUT ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR
ANY WARRANTY THAT THE USE OF THE BIOLOGICAL


                                     - 51 -
<PAGE>
MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF
ANY THIRD PARTY.

10. OWNERSHIP; PATENTS.

10.1 Ownership.

      (a) Technical Information. Except as otherwise provided in this Agreement,
this Agreement does not grant either Party any rights in or to Technical
Information, or any Patents related thereto, owned or controlled by the other
Party.

      (b) Inventions. deCODE shall solely own deCODE Inventions and resulting
Patents. Roche shall solely own Roche Inventions and resulting Patents. The
Parties shall jointly own Joint Inventions and resulting Patents. The
determination of inventorship shall be made in accordance with the patent laws
of the relevant countries of the Territory.

10.2 Patent Filing, Maintenance and Prosecution Regarding Inventions.

      (a) Disclosure. As soon as a Party concludes that an Invention has been
made, it shall promptly inform the Steering Committee, and provide a summary of
the Invention. Should a Party be faced with a possible loss of rights in a Major
Country, such communication may take place promptly after filing a priority
patent application for the Invention.

      (b) Filing.

            (i) deCODE Inventions and Roche Inventions. For deCODE Inventions
and Roche Inventions, the Party owning the Invention shall have the first right
of election to prepare and file a priority patent application for the Invention,
at its own cost. Should the Party owning the Invention elect not to prepare
and/or file any such patent application, it shall (i) provide the other Party
with written notice as soon as reasonably possible after making such election
but in any event no later than sixty (60) days before the other Party


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<PAGE>
would be faced with a possible loss of rights in a Major Country, (ii) give the
other Party the right, at the other Party's election and sole expense, to
prepare and file the priority application, and (iii) offer reasonable assistance
to the other Party in connection with such preparation and filing at no cost to
the other Party except for reimbursement of reasonable out-of-pocket expenses
incurred by the Party owning the Invention in rendering such assistance.

            The filing Party shall perform corresponding foreign filings at its
own cost, after having discussed the countries for foreign filings with the
non-filing Party within nine (9) months after the priority filing. Should the
Parties not agree on the countries for foreign filings, either Party will have
the right to file the subject of the priority application in the name of both
Parties in any country of its own choice at its own cost in any country where
the Parties do not agree as to filing.

            (ii) Joint Inventions. For Joint Inventions, the Parties shall
consult and agree upon (i) which Party shall have the first right of election to
prepare and file a priority patent application for the Joint Invention, in the
name of both Parties, and (ii) sharing of costs.

            The Party having the first right of election may elect to prepare
and file any such patent application at its own cost. Notwithstanding anything
to the contrary, if the Parties agreed to share costs, the non-filing Party
shall reimburse the filing Party in an amount equal to one-half of the
reasonable out-of-pocket expenses incurred by the filing Party in preparing and
filing such patent application, within thirty (30) days after receipt of an
itemized invoice from the filing Party.

            Should the Party having the first right of election elect not to
prepare and/or file any such patent application, it shall (i) provide the other
Party with written notice as soon as reasonably possible after making such
election but in any event no later than sixty (60) days before the other Party
would be faced with a possible loss of rights in a Major Country, (ii) give the
other Party the right, at the other Party's election and sole expense, to
prepare and file the priority application in the name of both Parties, and (iii)


                                     - 53 -
<PAGE>
offer reasonable assistance to the other Party in connection with such
preparation and filing at no cost to the other Party except for reimbursement of
reasonable out-of-pocket expenses incurred by the Party owning the Invention in
rendering such assistance.

            The filing Party shall perform corresponding foreign filings, at its
own cost and in the name of both Parties, after having discussed the countries
for foreign filings with the non-filing Party within nine (9) months after the
priority filing. Notwithstanding anything to the contrary, for corresponding
foreign filings filed in agreed upon countries, if the Parties agreed to share
costs, the non-filing Party shall reimburse the filing Party in an amount equal
to one-half of the reasonable out-of-pocket expenses incurred by the filing
Party in preparing and filing such corresponding foreign filings, within thirty
(30) days after receipt of an itemized invoice from the filing Party. Should the
Parties not agree on the countries for foreign filings, either Party will have
the right to file the subject of the priority application in the name of both
Parties in any country of its own choice at its own cost in any country where
the Parties do not agree as to filing.

      (c) Prosecution and Maintenance.

            (i) deCODE Inventions and Roche Inventions. The filing Party shall
prosecute and reasonably maintain applications filed under Section 10.2(b)(i)
and patents resulting therefrom at its own expense. On request of the filing
Party, the non-filing Party will cooperate in all reasonable ways in connection
with the prosecution and maintenance of such applications and patents resulting
therefrom, at the expense of the filing Party for all out-of-pocket expenses
incurred by the non-filing Party as a result of such cooperation. Upon written
request, the filing Party shall inform the non-filing Party of the issuance of
such patent application, initiation of an appeal of a rejection of such patent
application, or initiation of an interference involving or an opposition to any
such patent application or patent resulting therefrom. The filing Party shall
provide the non-filing Party, upon the non-filing Party's written request, with
copies of substantive communications to and from patent offices regarding such
patent applications and patents resulting therefrom in


                                     - 54 -
<PAGE>
sufficient time before the due date for response in order to give the non-filing
Party an opportunity to comment on the content thereof.

            Should the filing Party no longer wish to prosecute and/or maintain
any such patent application or patent resulting therefrom, the filing Party
shall (i) provide the non-filing Party with written notice of its wish no later
than sixty (60) days before the patent or patent application would otherwise
become abandoned, (ii) give the non-filing Party the right, at the non-filing
Party's election and sole expense (subject to the credit set forth below), to
prosecute and/or maintain such patent or patent application, and (iii) offer
reasonable assistance to the non-filing Party in connection with such
prosecution and/or maintenance at no cost to the non-filing Party except for
reimbursement of the filing Party's reasonable out-of-pocket expenses incurred
by the filing Party in rendering such assistance. The non-filing Party shall be
entitled to recoup one hundred percent (100%) of such Party's documented
reasonable out-of-pocket expenses incurred to prosecute and/or maintain such
patents and/or patent applications by taking a credit against any royalty
payment otherwise due, as shown on the Net Sales statement provided under
Section 6.1, up to a maximum credit, when combined with the credit provided
pursuant to Section 10.2(c)(ii), in any given calendar quarter equal to
twenty-five percent (25%) of such royalty payments otherwise due, until such
amount has been fully credited.

            (ii) Joint Inventions. The filing Party shall prosecute and
reasonably maintain applications filed under Section 10.2(b)(ii) and patents
resulting therefrom.

            For a given patent application filed under Section 10.2(b)(ii),
should the non-filing Party have had an obligation under Section 10.2(b)(ii) to
reimburse the filing Party in an amount equal to one-half of the reasonable
out-of-pocket expenses incurred by the filing Party in preparing and filing such
patent application, then the non-filing Party shall reimburse the filing Party
in an amount equal to one-half of the reasonable out-of-pocket expenses incurred
by the filing Party in prosecuting and maintaining such application and patents
resulting therefrom, within thirty (30) days after receipt of an


                                     - 55 -
<PAGE>
itemized invoice from the filing Party. For a given patent application filed
under Section 10.2(b)(ii), should the non-filing Party have had no obligation
under Section 10.2(b)(ii) to reimburse the filing Party in an amount equal to
one-half of the reasonable out-of-pocket expenses incurred by the filing Party
in preparing and filing such patent application, then the filing Party shall
prosecute and reasonably maintain such application and patents resulting
therefrom at its own cost.

            On request of the filing Party, the non-filing Party will cooperate
in all reasonable ways in connection with the prosecution and maintenance of
such applications and patents resulting therefrom, at the expense of the filing
Party for all out-of-pocket expenses incurred by the non-filing Party as a
result of such cooperation. Upon written request, the filing Party shall inform
the non-filing Party of the issuance of such patent application, initiation of
an appeal of a rejection of such patent application, or initiation of an
interference involving or an opposition to any such patent application or patent
resulting therefrom. The filing Party shall provide the non-filing Party, upon
the non-filing Party's written request, with copies of substantive
communications to and from patent offices regarding such patent applications and
patents resulting therefrom in sufficient time before the due date for response
in order to give the non-filing Party an opportunity to comment on the content
thereof.

            Should the filing Party no longer wish to prosecute and/or maintain
any such patent application or patent resulting therefrom, the filing Party
shall (i) provide the non-filing Party with written notice of its wish no later
than sixty (60) days before the patent or patent application would otherwise
become abandoned, (ii) give the non-filing Party the right, at the non-filing
Party's election and sole expense (subject to the credit set forth below), to
prosecute and/or maintain such patent or patent application, and (iii) offer
reasonable assistance to the non-filing Party in connection with such
prosecution and/or maintenance at no cost to the non-filing Party except for
reimbursement of the filing Party's reasonable out-of-pocket expenses incurred
by the filing Party in rendering such assistance. The non-filing Party shall be
entitled to recoup the percentage of such Party's documented reasonable
out-of-pocket expenses incurred to prosecute and/or maintain


                                     - 56 -
<PAGE>
such patents and/or patent applications as the filing Party had agreed was its
share of costs relating thereto pursuant to the first paragraph of Section
10.2(b)(ii). Such amount shall be recouped by the non-filing Party by taking a
credit against any royalty payment otherwise due, as shown on the Net Sales
statement provided under Section 6.1, up to a maximum credit, when combined with
the credit provided pursuant to Section 10.2(c)(i), in any given calendar
quarter equal to twenty-five percent (25%) of such royalty payments otherwise
due, until such amount has been fully credited.

11. PATENT ENFORCEMENT AND INFRINGEMENT.

11.1 Patent Enforcement.

      (a) Notice. Each Party shall promptly provide written notice to the other
Party during the term of this Agreement of any (i) known infringement or
suspected infringement of a Alliance Research Program Patent, (ii) institution
by a Third Party of a proceeding for the purpose of revoking or holding
unpatentable, invalid or unenforceable a claim of a Alliance Research Program
Patent, or (iii) unauthorized use or misappropriation of any Alliance Research
Program Know-How by a Third Party of which it becomes aware.

      (b) Responsible Party. For Alliance Research Program Patents and Alliance
Research Program Know-How solely owned by a Party, the Party owning such Patent
or such Know-How shall have the first right of election to (i) initiate an
infringement suit or (ii) take such appropriate action as is reasonably required
to defend against such potential revoking or holding unpatentable, invalid or
unenforceable a claim of such Patent, or (iii) take such other appropriate
action as is required to restrain or otherwise prevent such known or suspected
infringement or unauthorized use or misappropriation ("Responsible Party"). For
Alliance Research Program Patents and Alliance Research Program Know-How jointly
owned by the Parties, within thirty (30) days after written notice under Section
11.1(a), the Parties shall consult and agree upon which Party shall be the
Responsible Party.


                                     - 57 -
<PAGE>
      (c) Initiation of Suit or Action. Within a period of one hundred and
twenty (120) days after the Responsible Party provides or receives written
notice under Section 11.1(a), the Responsible Party, in its sole discretion,
shall decide whether or not to (i) initiate an infringement suit, (ii) take such
appropriate action as is reasonably required to defend against such potential
revoking or holding unpatentable, invalid or unenforceable a claim of a Alliance
Research Program Patent, or (iii) take such other appropriate action as is
reasonably required to restrain or otherwise prevent such known or suspected
infringement or unauthorized use or misappropriation ("Suit or Action",
collectively).

      If, within the one hundred and twenty (120) day period, the Responsible
Party advises the other Party of a decision to initiate a Suit or Action, the
Responsible Party, at its own cost, shall promptly initiate such Suit or Action
and provide written notice to the other Party of such initiation.

      In the event that the Responsible Party does not advise the other Party
within the one hundred and twenty (120) day period a decision to initiate such
Suit or Action, or if the Responsible Party advises the other Party within the
one hundred and twenty (120) day period a decision not to initiate such Suit or
Action, the other Party shall thereafter have the right, at its own cost, to
initiate such Suit or Action.

      The Party initiating the Suit or Action ("Initiating Party") shall provide
written notice to the Responsible Party of such initiation. The Initiating Party
shall keep the other Party informed of the status of any such Suit or Action
and, upon the other Party's written request, shall provide the other Party with
copies of all substantive documents filed in, and all substantive communications
relating to such Suit or Action. If necessary, the other Party shall join as a
party to the Suit or Action but shall be under no obligation to participate
except to the extent such participation is required as the result of being named
party to the suit or proceeding. At the Initiating Party's written request, the
other Party shall offer reasonable assistance to the Initiating Party at no
charge except for reimbursement of reasonable out-of-pocket expenses incurred by
the other Party in rendering such assistance.


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<PAGE>
Reasonable assistance shall include, without limitation, the execution of such
legal papers as are reasonably necessary for the prosecution, settlement or
compromise of such Suit or Action.

      Each party shall have the right to be represented in any such Suit or
Action by counsel of its own choice at its own expense.

      (d) Recovery. Any recovery obtained by any Party as a result of any Suit
or Action shall be applied first to reimburse each Party for all costs and
expenses related to such Suit or Action, and if after such reimbursement any
funds shall remain from such recovery, such remaining funds shall be allocated
80% to the Party instituting such Suit or Action, and 20% to the other Party,
but in no event shall the other Party be entitled to receive more than the
amount such other Party would have received if the infringing Third Party's
sales were deemed to be Net Sales under this Agreement.

      (e) Settlement. Neither Party shall settle or compromise any such Suit or
Action in a manner which would restrict the scope or enforceability of any
Alliance Research Program Patent or Alliance Research Program Know-How jointly
owned by the Parties without the prior written consent of the other Party, which
consent shall not be unreasonably withheld.

11.2 Notice of Certification. Notwithstanding anything to the contrary in
Section 11.1, for a Alliance Research Program Patent claiming the making, having
made, using, offering for sale, selling or importing of a Deselected Disease
Product, should either Party receive a certification from a Third Party under
the Drug Price Competition and Patent Term Restoration Act of 1984 (Public Law
98-417), as amended, or its comparable law in a country other than the USA, then
such Party shall immediately give written notice to the other Party of such
certification. The Responsible Party shall have twenty-one (21) days from the
date such Party received the certification to initiate suit. In the event the
twenty-one (21) day period expires without the Responsible Party having
initiated a suit, the other Party shall have the right, but not the obligation,
to immediately bring suit against the Third Party that


                                     - 59 -
<PAGE>
filed the certification. If either Party initiates a suit within the forty-five
(45) day period, it will immediately notify the other Party.

11.3 Infringement Actions by Third Parties. Each Party shall promptly notify the
other Party in the event that a Third Party at any time provides written notice
to, or commences an action, suit or proceeding against such Party or such
Party's Affiliates or sublicensees accusing infringement of patent rights or
unauthorized use or misappropriation of its technology owned or controlled by
such Third Party, based on an assertion or claim arising out of (i) Roche's, its
Affiliate's or its sublicensees making, having made, using, offering for sale,
selling or importing Alliance Disease Products in the Territory, including,
without limitation, making, having made, or using of Alliance Research Program
Know-How by Roche, its Affiliates or its Collaborators to research and/or
develop Alliance Disease Products; (ii) deCODE's, its Affiliate's or its
sublicensees making, having made, using, offering for sale, selling or importing
Deselected Disease Products in the Territory, including, without limitation, the
making, having made, or using of Alliance Research Program Know-How, by deCODE,
its Affiliates or its Collaborators to research and/or develop Deselected
Disease Products; (iii) either Party's fulfilling its obligations under this
Agreement. The accused Party shall defend, settle or compromise such action,
suit or proceeding at its own discretion and at its own cost; provided, however,
that at the accused Party's written request, the other Party shall offer
reasonable assistance to the accused Party at no charge except for reimbursement
of reasonable out-of-pocket expenses incurred by the other Party in rendering
such assistance. Reasonable assistance shall include, without limitation, the
execution of such legal papers as are reasonably necessary for the defense,
settlement or compromise of such action, suit or proceeding. Each party shall
have the right to be represented in any such action, suit or proceeding by
counsel of its own choice at its own expense.

12. INDEMNIFICATION.

12.1 Research Activities. Each Party agrees to indemnify, defend and hold the
other Party, its Affiliates and its sublicensees, if any, and their respective


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<PAGE>
directors, officers, employees and agents, harmless from and against any and all
liabilities, damages, losses, or reasonable costs and expenses (including the
reasonable fees of attorneys and other professionals) (collectively "Claims")
arising out of the activities of the indemnifying Party in the conduct of the
Drug Discovery Research Program, except to the extent such Claims arose out of
or resulted from the negligence, recklessness or wrongful intentional acts or
omissions of the other Party, its Affiliates, or its sublicensees, if any, and
their respective directors, officers, employees and agents.

12.2 Product Liability. deCODE shall indemnify, defend and hold Roche, its
Affiliates and their respective directors, officers, employees and agents,
harmless from and against any and all Claims arising out of the manufacture,
use, distribution or sale of any Deselected Disease Product by deCODE, its
Affiliates or its sublicensees due to any negligence, recklessness or wrongful
intentional acts or omissions by, or strict liability of, deCODE, its Affiliates
or its sublicensees, if any, and their respective directors, officers, employees
and agents, except, in each case, to the extent such Claims are due to the
negligence, recklessness or wrongful intentional acts or omissions of Roche or
its Affiliates or their respective directors, officers, employees and agents.

Roche shall indemnify, defend and hold deCODE, its Affiliates and their
respective directors, officers, employees and agents, harmless from and against
any and all Claims arising out of the manufacture, use, distribution or sale of
any Alliance Disease Product by Roche, its Affiliates or its sublicensees due to
any negligence, recklessness or wrongful intentional acts or omissions by, or
strict liability of, Roche, its Affiliates or its sublicensees, if any, and
their respective directors, officers, employees and agents, except, in each
case, to the extent such Claims are due to the negligence, recklessness or
wrongful intentional acts or omissions of deCODE or its Affiliates or their
respective directors, officers, employees and agents.

12.3 Notice. In the event that either Party is seeking indemnification under
Section 12.1 or 12.2, such Party shall inform the indemnifying Party of a Claim
as soon as reasonably practicable after it receives notice of the Claim, shall


                                     - 61 -
<PAGE>
permit the indemnifying Party to assume direction and control, at its expense,
of the defense of the Claim (including the sole right to settle the claim at the
sole discretion of the indemnifying Party, provided that such settlement does
not impose any material financial obligation on the indemnified Party), and
shall cooperate as requested (at the expense of the indemnifying Party) in the
defense of the Claim. The indemnified Party may, at its option and expense, be
represented in the defense of the Claim by counsel of its own choice.

13. PUBLICATION; NON-DISCLOSURE.

13.1 Publication.

      (a) Manuscript. Both Parties recognize that each may wish to publish the
results of their scientific work relating to the Research Programs. However,
both Parties also recognize the importance of acquiring patent protection and of
maintaining Confidential Information as proprietary. Consequently, subject to
any applicable laws or regulations obligating either Party to do otherwise, any
proposed publication or oral presentation by either Party shall comply with this
Section 13.1. At least ninety (90) days before a manuscript is to be submitted
to a publisher, the publishing Party will provide the chairperson and secretary
of the Steering Committee with a copy of the manuscript. If the publishing Party
wishes to make an oral presentation, it will provide the other Party ("Reviewing
Party") with a copy of the abstract (if one is submitted) at least forty (40)
days before it is to be submitted. The publishing Party will also provide to the
Reviewing Party a copy of the text of the presentation, including all slides,
posters, and any other visual aids, at least forty (40) days before the
presentation is made.

      (b) Review of Manuscript. The Reviewing Party in good faith will review
the manuscript, abstract, text or any other material provided under Section
13.1(a) ("Proposed Publication") to determine whether the Proposed Publication
(i) contains an Invention for which the Reviewing Party desires patent
protection or (ii) could reasonably be expected to have a material adverse
effect on the commercial value of any Confidential Information that the
Reviewing Party reasonably wishes to have remain proprietary. The


                                     - 62 -
<PAGE>
Reviewing Party will notify (each, a "Withdrawal Notice") the publishing Party
within thirty (30) days of receipt of the Proposed Publication if the Reviewing
Party, in good faith, determines that the Proposed Publication (i) contains an
Invention for which the Reviewing Party desires patent protection or (ii) could
reasonably be expected to have a material adverse effect on the commercial value
of any Confidential Information that the Reviewing Party reasonably wishes to
have remain proprietary.

      (c) Delay or Withdrawal. If the Reviewing Party provides a Withdrawal
Notice that the Proposed Publication (i) contains an Invention for which the
Reviewing Party desires patent protection, the publishing Party shall delay its
publication or presentation for a period of ninety (90) days from the date of
such Withdrawal Notice, extendible upon mutual agreement, to allow for the
filing of a priority patent application claiming the Invention. If the Reviewing
Party provides a Withdrawal Notice that the Proposed Publication could
reasonably be expected to have a material adverse effect on the commercial value
of any Confidential Information that the Reviewing Party reasonably wishes to
have remain proprietary, the Reviewing Party shall recommend changes it
reasonably believes necessary to preserve the Confidential Information as
proprietary. If the Proposed Publication contains Confidential Information that
was disclosed by the Reviewing Party to the publishing Party under this
Agreement, the publishing Party shall incorporate such recommended changes. For
all other Confidential Information, the Parties will consult in good faith and
agree on mutually acceptable modifications to the Proposed Publication to avoid
disclosure of such Confidential Information.

13.2 Non-Disclosure and Non-use; Exceptions. During the term of this Agreement
and for five (5) years thereafter, a Receiving Party shall (i) treat
Confidential Information provided by a Disclosing Party under this Agreement as
it would treat its own Confidential Information of a similar nature and take all
reasonable precautions not to disclose such Confidential Information to third
parties except Affiliates or potential sublicensees who agree to be bound by the
same terms and conditions as found in this Section 13, without the Disclosing
Party's prior written authorization and (ii) not use such Confidential


                                     - 63 -
<PAGE>
Information for other than fulfilling its obligations under this Agreement. The
provisions of this Section 13.2 shall not apply to such Confidential Information
which the Receiving Party can demonstrate by competent written proof:

      (a) was known or used by the Receiving Party or its Affiliates prior to
the date of disclosure to the Receiving Party or its Affiliates by the
Disclosing Party; or

      (b) either before or after the date of the disclosure to the Receiving
Party or its Affiliates, is lawfully disclosed to the Receiving Party or its
Affiliates by a third party rightfully in possession of such Confidential
Information and not under an obligation of confidentiality to the Disclosing
Party with respect to such Confidential Information; or

      (c) either before or after the date of the disclosure to the Receiving
Party or its Affiliates, becomes published or generally known to the public
through no fault or omission on the part of the Receiving Party or its
Affiliates, but such inapplicability applies only after such Confidential
Information is published or becomes generally known; or

      (d) is independently developed by the Receiving Party or its Affiliates
without reference to or reliance upon Confidential Information of the Disclosing
Party or its Affiliates; or

      (e) is required to be disclosed by the Receiving Party, its Affiliates or
its sublicensees to comply with applicable laws, to defend or prosecute
litigation or to comply with governmental regulations; provided, however, the
Receiving Party, its Affiliate or sublicensee provides prior written notice of
such disclosure to the Disclosing Party or its Affiliates and, to the extent
practicable, takes reasonable and lawful actions to avoid and/or minimize the
degree of such disclosure.

13.3 Authorized Disclosure. The provisions of Section 13.2 shall not prevent
either Party from (i) preparing, filing, prosecuting, defending or maintaining
patent applications or patents related to an Invention or a


                                     - 64 -
<PAGE>
Product, or (ii) disclosing Confidential Information to persons working on
behalf of the Receiving Party (provided such persons agree to maintain the
confidential nature of such Confidential Information to the same extent as if
they were a Party to this Agreement) or to governmental agencies, to the extent
the Receiving Party reasonably believes it is required or desirable to secure
government approval for the development or marketing of a Product, (iii) upon
imminent Registration of a Alliance Disease Product or Deselected Disease
Product, as the case may be, in a country, disclosing Confidential Information
to the extent reasonably necessary to promote the use and sale of such Alliance
Disease Product or Deselected Disease Product in such country, or (iv)
disclosing Confidential Information under confidentiality obligations no less
restrictive than those contained within this Agreement to an Affiliate of a
Party or a Third Party with whom such Party has made contact as authorized under
this Agreement.

13.4 Injunctive Relief. The Parties acknowledge that monetary damages alone may
not adequately compensate the Disclosing Party in the event of a breach by the
Receiving Party of this Section 13, and that, in addition to all other remedies
available to the Disclosing Party at law or in equity, it may be entitled to
injunctive relief for the enforcement of its rights under this Section 13 and to
an accounting of profits made during the period of any breach of the Receiving
Party's obligations under this Section 13.

13.5 Third Parties. Unless otherwise agreed to in writing, each Party shall
require all Third Parties, including consultants, subcontractors, sublicensees
or agents involved in fulfilling its obligations under this Agreement, to be
bound by the same terms and conditions as found in this Section 13.

14. TERM; TERMINATION.

14.1 Term; Expiration.

      (a) As to Roche, this Agreement shall commence as of the Effective Date
and, unless sooner terminated as provided hereunder, shall expire in each
country upon the expiration of the Royalty Term with respect to


                                     - 65 -
<PAGE>
each Alliance Disease Product in such country. Following expiration of the term
of this Agreement with respect to an Alliance Disease Product in a country in
the Territory, Roche shall have the fully-paid, royalty-free, perpetual right
and license to continue to make, have made, use, offer for sale, sell and import
such Alliance Disease Product in such country.

      (b) As to deCODE, this Agreement shall commence as of the Effective Date
and, unless sooner terminated as provided hereunder, shall expire in each
country upon the expiration of the Royalty Term with respect to each Deselected
Disease Product in such country. Following expiration of the term of this
Agreement with respect to a Deselected Disease Product in a country in the
Territory, deCODE shall have the fully-paid, royalty-free, perpetual right and
license to continue to make, have made, use, offer for sale, sell and import
such Deselected Disease Product in such country.


                                     - 66 -
<PAGE>
      14.2 Termination Without Cause

      Commencing at the end of the Research Term, at any time during the term of
this Agreement, deCODE may, for any reason, without affecting any other
obligations under this Agreement, terminate all rights and licenses from Roche
to deCODE under this Agreement for a given Deselected Disease Product by giving
six (6) months prior notice to Roche. The effective date of such termination
shall be the date six (6) months after deCODE provides such written notice to
Roche. After the effective date of such termination, in no event shall deCODE,
its Affiliates or its sublicensees make, have made, use, offer for sale, sell or
import such Deselected Disease Product in any country. In addition, at Roche's
request, within sixty (60) days after the date of such termination, (1) deCODE
shall transmit to Roche all reports, information and data in the possession or
control of deCODE, its Affiliates or its sublicensees relating to such
Deselected Disease Product (provided deCODE has the right to make available such
information to Roche), and (2) deCODE shall assign, and shall cause its
Affiliates and sublicensees to assign, to Roche all regulatory filings and
Registrations in the possession or control of deCODE, its Affiliates or its
sublicensees; in each case, as would enable Roche to carry on the development
and/or marketing of such Deselected Disease Product in the Territory.

      Commencing at the end of the Research Term, at any time during the term of
this Agreement, Roche may, for any reason, without affecting any other
obligations under this Agreement, terminate all rights and licenses from deCODE
to Roche under this Agreement for a given Alliance Disease Product by giving six
(6) months prior notice to Roche. The effective date of such termination shall
be the date six (6) months after Roche provides such written notice to deCODE.
After the effective date of such termination, in no event shall Roche, its
Affiliates or its sublicensees make, have made, use, offer for sale, sell or
import such Alliance Disease Product in any country. In addition, at deCODE's
request, within sixty (60) days after the date of such termination, (1) Roche
shall transmit to deCODE all reports, information and data in the possession or
control of Roche, its Affiliates or its sublicensees relating to such Alliance
Disease Product (provided Roche has the right to make


                                     - 67 -
<PAGE>
available such information to deCODE), and (2) Roche shall assign, and shall
cause its Affiliates and sublicensees to assign, to deCODE all regulatory
filings and Registrations in the possession or control of Roche, its Affiliates
or its sublicensees; in each case, as would enable deCODE to carry on the
development and/or marketing of such Alliance Disease Product in the Territory.

14.3 Breach.

      (a) Procedure.

            (i) Except as provided in Section 3.4 with respect to Alliance
Disease Efforts, failure by a Party ("Breaching Party") to comply with any of
its material obligations contained in this Agreement, shall entitle the other
Party ("Non-breaching Party") to give to the Breaching Party written notice
("Default Notice") specifying the nature of the default and specifically stating
that the Non-breaching Party intends to terminate this Agreement in the event
the Breaching Party should fail to cure the default.

            (ii) The Breaching Party shall have a period ("Cure Period") of
thirty (30) days after a Default Notice to cure such default in the case of a
payment default, and ninety (90) days after a Default Notice in the case of all
other defaults. Such ninety (90) day period shall be extended to end one hundred
and twenty (120) days after a Default Notice, or otherwise as the Parties may
agree, if the Breaching Party within sixty (60) days after such Default Notice
in good faith commences and diligently continue actions to cure such default.

            (iii) If, after a Cure Period, the Breaching Party does not cure the
relevant default, the Non-breaching Party shall be entitled, without prejudice
to any of its other rights conferred on it by this Agreement, and in addition to
any other remedies available to it by law or in equity, to give a written notice
terminating this Agreement in its entirety or in part.


                                     - 68 -
<PAGE>
            (iv) The effective date of any such termination shall be the date
that the Breaching Party receives such notice pursuant to the preceding clause.

      (b) Effect of Such Breach.

            (i) If the Non-breaching Party terminates this Agreement in its
entirety, after the effective date of termination, in no event shall the
Breaching Party, its Affiliates or sublicensees make, have made, use, offer for
sale, sell or import any Deselected Disease Product.

            (ii) If the Breaching Party is deCODE and Roche, without affecting
or altering deCODE's other obligations under this Agreement, terminates all
rights licensed by Roche to deCODE under this Agreement in whole (in which event
Roche shall be entitled to continue to exercise the rights granted to it under
this Agreement), then after the effective date of such termination in no event
shall deCODE, its Affiliates or sublicensees make, have made, use, offer for
sale, sell or import any Deselected Disease Product. In addition, at Roche's
request, within sixty (60) days after the effective date of such termination:
(1) deCODE shall transmit to Roche all reports, information and data in the
possession or control of deCODE, its Affiliates or its sublicensees relating to
Deselected Disease Products (provided that deCODE has the right to make
available such information to Roche), and (2) at Roche's request, deCODE shall
assign, and shall cause its Affiliates and sublicensees to assign, to Roche all
regulatory filings and Registrations in the possession or control of deCODE, its
Affiliates or its sublicensees; in each case, as would enable Roche to carry on
the development and/or marketing of Deselected Disease Products in the
Territory.

            (iii) If the Breaching Party is Roche and deCODE, without affecting
or altering Roche's other obligations under this Agreement, terminates all
rights licensed by deCODE to Roche under this Agreement in whole (in which event
deCODE shall be entitled to continue to exercise the rights granted to it under
this Agreement), then after the effective date of such termination in no event
shall Roche, its Affiliates or sublicensees make, have


                                     - 69 -
<PAGE>
made, use, offer for sale, sell or import any Alliance Disease Product. In
addition, at deCODE's request, within sixty (60) days after the effective date
of such termination: (1) Roche shall transmit to deCODE all reports, information
and data in the possession or control of Roche, its Affiliates or its
sublicensees relating to Alliance Disease Products (provided that Roche has the
right to make available such information to deCODE), and (2) at deCODE's
request, Roche shall assign, and shall cause its Affiliates and sublicensees to
assign, to deCODE all regulatory filings and Registrations in the possession or
control of Roche, its Affiliates or its sublicensees; in each case, as would
enable deCODE to carry on the development and/or marketing of Alliance Disease
Products in the Territory.

14.4 Obligations. In no event shall a termination under Article 14 release a
Party or its Affiliates or sublicensees from any obligation to make payments or
to pay royalties or a percentage of Sublicensing Income to the other Party under
this Agreement that accrued prior to the effective date of termination.

14.5 Termination of Sublicenses. Upon any termination under Article 14, all
sublicenses granted by either deCODE or Roche under this Agreement with respect
to the respective rights and licenses being terminated shall terminate
simultaneously.

14.6 Surviving Obligations. Termination, relinquishment or expiration of this
Agreement for any reason shall be without prejudice to any rights that shall
have accrued to the benefit of any Party prior to such termination,
relinquishment or expiration. Such termination, relinquishment or expiration
shall not relieve any Party from obligations which are expressly indicated to
survive termination or expiration of this Agreement. All obligations which are
not expressly indicated to survive termination or expiration of this Agreement
shall terminate upon the termination or expiration of this Agreement. The
respective rights and obligations of the Parties hereto contained in Sections
6.3 to 6.7 (inclusive), 7.7, 10, 12, 13.2 to 13.5 (inclusive), 14 and 17 shall
survive the expiration or earlier termination of this Agreement.


                                     - 70 -
<PAGE>
14.7 No Waiver. The right of a Party to terminate under Article 14 shall not be
affected in any way by a waiver or failure to take action with respect to any
previous default. An election of remedy by a Party for a material breach of this
Agreement under this Article 14 on one occasion shall not constitute a waiver as
to any other remedy that may be available to such Party under this Article 13 as
to any material breach on another occasion.

14.8 Dispute. And any dispute concerning whether a Party is in default under the
terms of this Agreement shall be referred for resolution in accordance with
Section 17.13. The effectiveness of any notice given pursuant to this Section
shall be tolled during and until such resolution of such dispute.

15. REPRESENTATIONS AND WARRANTIES.

15.1 Representations and Warranties of Both Parties. Each Party represents and
warrants to the other Party that, as of the last date on which a party becomes a
signatory to this Agreement:

      (a) such Party is duly organized and validly existing under the laws of
the state or country of its incorporation and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof;
and

      (b) such Party has taken all corporate action necessary to authorize the
execution and delivery of this Agreement and the fulfilling of its obligations
under this Agreement; and

      (c) such Party is not aware of any impediment which would inhibit its
ability to fulfill the terms and conditions imposed on it by this Agreement; and

      (d) such Party has disclosed all material information in its possession or
control requested by the other Party relating to the subject matter of this
Agreement and other material information in its possession or


                                     - 71 -
<PAGE>
control, which, in its reasonable opinion, would be material to the other Party
entering into this Agreement, and to its knowledge such information does not
contain any untrue statement of material fact or omit to state a material fact;
and

      (e) such Party, without having conducted a formal investigation, is not
aware of any patent rights or other proprietary rights of any Third Party which
might be infringed by either Party carrying out its obligations under this
Agreement; and

      (f) such Party has the right to grant the other Party the rights and
licenses hereby granted under this Agreement.

15.2 Representations of deCODE. deCODE represents and warrants to Roche that:

      (a) As of the last date on which a party becomes a signatory to this
Agreement, there are no patents or patent applications that deCODE owns or
controls in the Territory which could preclude Roche from exercising its rights
or carrying out its obligations under this Agreement and which deCODE does not
have the right to license or otherwise make available to Roche; and

      (b) all Participants have signed, or will have signed before becoming a
Participant, an informed consent form, the contents of which deCODE and Roche
mutually agreed upon.

16. FORCE MAJEURE. Neither Party shall be held liable or responsible to the
other Party nor be deemed to be in default under or in breach of any provision
of this Agreement for failure or delay in fulfilling or performing any
obligation of this Agreement when such failure or delay is due to force majeure,
and without the fault or negligence of the Party so failing or delaying. For
purposes of this Agreement, force majeure is defined as causes beyond the
control of the Party, including, without limitation, acts of God; acts,
regulations, or laws of any government; war; civil commotion; destruction of
production facilities or materials by fire, flood, earthquake, explosion or
storm;


                                     - 72 -
<PAGE>
labor disturbances; epidemic; and failure of pubic utilities or common carriers.
In such event Roche or deCODE, as the case may be, shall immediately notify the
other Party of such inability and of the period for which such inability is
expected to continue. The Party giving such notice shall thereupon be excused
from such of its obligations under this Agreement as it is thereby disabled from
performing for so long as it is so disabled and the thirty (30) days thereafter.
The disabled Party shall also give notice immediately upon the termination of
the force majeure. To the extent possible, each Party shall use reasonable
efforts to minimize the duration of any force majeure.

17. MISCELLANEOUS.

17.1 Relationship of Parties. Nothing in this Agreement is intended or shall be
deemed to constitute a partnership, agency, employer-employee or joint venture
relationship between the Parties. Each Party's performance under this Agreement
is that of a separate entity.

17.2 Assignment. Neither Party shall be entitled to assign its rights hereunder
without the express written consent of the other Party hereto, except that both
Roche and deCODE may otherwise assign their respective rights and transfer their
respective duties hereunder to any assignee of all or substantially all of their
respective businesses (or that portion thereof to which this Agreement relates)
or in the event of their respective merger or consolidation or similar
transaction. No assignment and transfer shall be valid or effective unless and
until the assignee/transferee shall agree in writing to be bound by the
provisions of this Agreement. Notwithstanding anything to the contrary, during
the Collaborative Research Term, in no event shall deCODE be entitled to assign
its rights hereunder without the express written consent of Roche.
Notwithstanding anything to the contrary, without notice to the other Party,
either Party may at any time and for any reason assign all or certain rights and
obligations to its Affiliates who agree to be bound by the terms and conditions
of this Agreement; provided that such Party shall remain liable for all
obligations assigned to its Affiliates.


                                     - 73 -
<PAGE>
17.3 Disclaimer of Warranties. THE PARTIES EXPRESSLY DISCLAIM ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS,
UNLESS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT.

17.4 Further Actions. Each Party agrees to execute, acknowledge and deliver such
further instruments, and to do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.

17.5 Notice. Any notice or request required or permitted to be given under or in
connection with this Agreement shall be deemed to have been sufficiently given
if in writing and personally delivered or sent by certified mail (return receipt
requested), or overnight express courier service (signature required), prepaid,
to the Party for which such notice is intended, at the address set forth for
such Party below:

      (a)   In the case of Roche, to:

            F.Hoffmann-La Roche Ltd
            Grenzacherstrasse 124
            CH-4070 Basel
            Switzerland
            Attention: Corporate Law

            and to:
            Hoffmann-La Roche Inc.
            340 Kingsland Street
            Nutley, New Jersey 07110
            Attention:  Corporate Secretary

      (b)   In the case of deCODE, to:

            deCODE genetics, ehf.
            Lynghalsi 1
            IS-110 Reykjavik
            ICELAND
            Attention: President


                                     - 74 -
<PAGE>
or to such other address for such Party as it shall have specified by like
notice to the other Party, provided that notices of a change of address shall be
effective only upon receipt thereof. If delivered personally, the date of
delivery shall be deemed to be the date on which such notice or request was
given, unless otherwise set forth in this Agreement. If sent by overnight
express courier service, the date of delivery shall be deemed to be the next
business day after such notice or request was deposited with such service,
unless otherwise set forth in this Agreement. If sent by certified mail, the
date of delivery shall be deemed to be the third business day after such notice
or request was deposited with the U.S. Postal Service, or the foreign equivalent
thereto, unless otherwise set forth in this Agreement.

17.6 Use of Name. Except as otherwise provided herein, neither Party shall have
any right, express or implied, to use in any manner the name or other
designation of the other Party or any other trade name or trademark of the other
Party for any purpose, without the prior written consent of the other Party.

17.7 Public Announcements.

      (a) Disclosure of Agreement and Press Release. Except as required by law
(including, without limitation, disclosure requirements of the U.S. Securities
and Exchange Commission, Nasdaq or any other stock exchange on which securities
issued by deCODE are traded) and as permitted by Section 13.1, neither Party
shall make any public announcement concerning this Agreement, the 1998
Agreement, Series C Preferred Stock and Warrant Purchase Agreement between Roche
Finance Ltd and deCODE entered into prior to or contemporaneously with the 1998
Agreement, or the subject matter hereof or thereof, without the prior written
consent of the other Party, which shall not be unreasonably withheld. It shall
not be unreasonable for a Party to withhold consent with respect to any public
announcement containing any Confidential Information of such Party or the
financial terms of this Agreement. In the event of a required public
announcement, the Party making such announcement shall provide the other Party
with a copy of the proposed text prior to such announcement sufficiently in
advance of the


                                     - 75 -
<PAGE>
scheduled release of such announcement to afford such other Party a reasonable
opportunity to review and comment upon the proposed text, which comment shall be
incorporated unless prohibited by law, as determined by counsel to the Party
required to make such public announcements.

      (b) Exceptions. Nothing in Section 13 or Section 17.7 shall prevent deCODE
in connection with efforts to secure financing at any time during the term of
this Agreement, from issuing statements as to achievements made or the status of
the work being done by the Parties under this Agreement ("Statements"), so long
as such Statements do not jeopardize the ability to obtain patent protection on
Inventions or disclose Confidential Information; provided (except in the case of
a public offering) the recipients of such Statements agree in writing to
maintain such Statements in confidence.

      Nothing in Section 13 or Section 17.7 shall prevent deCODE from issuing
Statements necessary to comply with applicable law (including the disclosure
requirements of the U.S. Securities and Exchange Commission, Nasdaq or any other
stock exchange on which securities issued by deCODE are traded); provided that
deCODE shall provide Roche with a copy of the proposed text of such Statements
sufficiently in advance of the scheduled release thereof to afford Roche a
reasonable opportunity to review and comment upon the proposed text and discuss
any disagreements thereon.

17.8 Waiver. A waiver by either Party of any of the terms and conditions of this
Agreement in any instance shall not be deemed or construed to be a waiver of
such term or condition for the future, or of any subsequent breach hereof. All
rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be in limitation of any
other remedy, right, undertaking, obligation or agreement of either Party.

17.9 Compliance with Law. Nothing in this Agreement shall be deemed to permit a
Party to export, reexport or otherwise transfer any Technical Information or
Product under this Agreement without compliance with applicable laws.


                                     - 76 -
<PAGE>
17.10 Severability. When possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.

17.11 Amendment. No amendment, modification or supplement of any provisions of
this Agreement shall be valid or effective unless made in writing and signed by
a duly authorized officer of each Party.

17.12 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware.

17.13 Arbitration.

      (a) Escalation. In the event the Parties are unable to resolve any
dispute, controversy or claim arising out of this Agreement, or the breach,
termination or invalidity thereof ("Dispute"), the Parties shall refer such
Dispute for further review and resolution to the Executive Officers of each
Party. The Executive Officers of each Party shall use reasonable efforts to
resolve the matter within thirty (30) days after the matter is referred to them.
Any dispute regarding any Sensitive Matter shall be resolved in accordance with
Section 8.4(c).

      (b) Binding Arbitration. If the Executive Officers cannot resolve the
Dispute within thirty (30) days, then such Dispute shall be settled by final and
binding arbitration pursuant to the then current commercial arbitration rules of
the American Arbitration Association ("AAA") as provided below:

            (i) The Arbitration Tribunal shall consist of three (3) arbitrators.
Each Party shall nominate in the request for arbitration and the answer thereto
one (1) arbitrator and the two (2) arbitrators so named will then jointly
appoint the third arbitrator as chairman of the Arbitration Tribunal.


                                     - 77 -
<PAGE>
If one Party fails to nominate its arbitrator or, if the Party's arbitrators
cannot agree on the person to be named as chairman within sixty (60) days, the
AAA shall make the necessary appointments of arbitrator or chairman.

            (ii) The place of arbitration shall be in New York, New York and the
arbitration proceedings shall be held in English.

            (iii) The award of the Arbitration Tribunal shall be final and
judgment upon such an award may be entered in any competent court or application
may be made to any competent court for juridical acceptance of such an award and
order of enforcement.

      (c) Injunctive Relief. Section 17.13(b) shall not prohibit a Party from
seeking injunctive relief from a court of competent jurisdiction in the event of
a breach or prospective breach of this Agreement by the other Party which would
cause irreparable harm to the first Party.

17.14 Entire Agreement. This Agreement, together with the Exhibits, which are
attached hereto and made a part hereof, sets forth the entire agreement and
understanding between the Parties as to the subject matter hereof and merges all
prior discussions, negotiations and agreements between them related to the
subject matter hereof, and neither of the Parties shall be bound by any
conditions, definitions, warranties, understandings or representations with
respect to such subject matter other than as provided herein or as duly set
forth on or subsequent to the date hereof in writing and signed by a proper and
duly authorized officer or representative of the Party to be bound thereby.

17.15 Parties in Interest and Bankruptcy.

      (a) All the terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the Parties hereto and their
respective permitted successors and assigns under Section 17.2.

      (b) Notwithstanding anything to the contrary, in the event that either
Party shall become insolvent, shall make an assignment to the benefit of


                                     - 78 -
<PAGE>
creditors, or shall have a petition in bankruptcy filed for or against it
(which, in the case of an involuntary petition, is not dismissed or stayed
within sixty (60) days after such petition is filed) ("Bankrupt Party"), the
other Party shall have the right to terminate this entire Agreement immediately
upon written notice of such termination and the provisions of Section 14, as the
case may be, shall apply. All rights and licenses granted by the Bankrupt Party
under this Agreement are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of Title 11, US Code (the "Bankruptcy Code"), licenses of rights
to "intellectual property" as defined under Section 101(60) of the Bankruptcy
Code. Unless the other Party elects to terminate this Agreement under this
Section 17.15(b), the Parties agree that the other Party, as a licensee of such
rights under this Agreement, shall retain and may fully exercise all of its
rights and elections under the Bankruptcy Code, subject to the continued
fulfillment of its obligations under this Agreement.

17.16 Descriptive Headings. The descriptive headings of this Agreement are for
convenience only, and shall be of no force or effect in construing or
interpreting any of the provisions of this Agreement.

17.17 Counterparts. This Agreement may be executed simultaneously in any number
of counterparts, any one of which need not contain the signature of more than
one Party but all such counterparts taken together shall constitute one and the
same agreement.

17.18 Interpretation. All defined terms used in this Agreement shall have the
meaning assigned to such term under this Agreement whether used in the singular
or plural.

                                      * * *


                                     - 79 -
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be
executed by its duly authorized representative as of the Effective Date.

                                                         F.HOFFMANN-LA ROCHE LTD

                                              By:   /s/ N. Sheail
                                                 _____________________________

                                              Name:  N. SHEAIL
                                                   _____________________________

                                              Title: GLOBAL LICENSING DIRECTOR
                                                    ____________________________


                                                          HOFFMANN-LA ROCHE INC.

                                              By:   /s/ Lee E. Babiss
                                                  ______________________________

                                              Name:  Lee E. Babiss
                                                   _____________________________

                                              Title: Vice President, Preclinical
                                                    ____________________________

                                                     Research & Development
                                                    ____________________________

                                                           deCODE GENETICS, EHF.

                                              By:    /s/ Kari Stefansson
                                                 _______________________________

                                              Name:   Kari Stefansson
                                                   _____________________________

                                              Title:  President & CEO
                                                    ____________________________


                                     - 80 -
<PAGE>
                                    Exhibit A

Active Alliance Diseases

[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]

Pool Diseases

[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]

On or before February 28, 2002, the Parties shall reach agreement as to the
initial designation of four Active Alliance Diseases and four Pool Diseases and
shall memorialize such agreement in a definitive signed restatement of this
Exhibit A that omits this paragraph. If no such agreement has been reached by
such date, this Exhibit A shall be deemed to be restated as listing all eight
diseases set forth above as Pool Diseases.


                                     - 81 -
<PAGE>
                                    Exhibit B

Deselected Diseases

osteoporosis
bipolar depression
obesity


                                     - 82 -
<PAGE>
Exhibit C A. Type of Alliance Disease Product:

      1.    Contains an Alliance Disease Compound Type [**]:

      Development Payments:

<TABLE>
<CAPTION>
      Event                                           Payment (USD mio.)
      -----                                           -------
<S>                                                   <C>
      Commencement of Phase III                       [**]
      NDA Filing for Major Country                    [**]
      First Commercial Sale in USA                    [**]
      First Commercial Sale in Europe                 [**]
      First Commercial Sale in Japan                  [**]
</TABLE>

      Royalties:

      For a given Alliance Disease Product for a given calendar year during the
      Royalty Term for the Alliance Disease Product, Roche shall pay deCODE a
      royalty on Net Sales, on a country-by-country basis, as follows:

                                     TABLE 3

<TABLE>
<CAPTION>
      Worldwide Annual Net Sales (in billions USD)         Royalty Rate as a Percentage Net Sales
<S>                                                        <C>
        [**] to Less than or equal to [**]                                    [**]%
      Greater than [**] to Less than or equal to [**]                         [**]%
      Greater than [**] to Less than or equal to [**]                         [**]%
      Greater than [**]                                                       [**]%
</TABLE>

      Notwithstanding the above, if the COGS of the Alliance Disease Product
      exceeds [**] percent ([**]%) of the total worldwide Net Sales of the
      Alliance Disease Product, the total royalty due to deCODE under Table 3
      shall be reduced by an amount equal to one half of the difference between
      the COGS and [**] percent ([**]%) of the total worldwide Net Sales of the
      Alliance Disease Product, but in no event


                                     - 83 -
<PAGE>
      shall the total royalty due to deCODE be reduced to less than [**] percent
      ([**]%) as a result of such reduction.

      2.    Contains a Alliance Disease Compound Type [**]:

      Development Payments:

<TABLE>
<CAPTION>
      Event                                                Payment (USD mio.)
<S>                                                        <C>
      IND Filing for Major Country                         [**]
      NDA Filing for Major Country                         [**]
      First Commercial Sale in USA                         [**]
      First Commercial Sale in Europe                      [**]
      First Commercial Sale in Japan                       [**]
</TABLE>

      Royalties:

      [**]% of Net Sales during the Royalty Term for the Alliance Disease
      Product

      3.    Contains a Alliance Disease Compound Type [**]:

      Development Payments:

<TABLE>
<CAPTION>
      Event                                                Payment (USD mio.)
<S>                                                        <C>
      IND Filing for Major Country                         [**]
      NDA Filing for Major Country                         [**]
      First Commercial Sale in USA                         [**]
      First Commercial Sale in Europe                      [**]
      First Commercial Sale in Japan                       [**]
</TABLE>

      Royalties:

      [**]% of Net Sales during the Royalty Term for the Alliance Disease
      Product


                                     - 84 -
<PAGE>
B. Development Payment Limitations:

For a given Alliance Disease Product, Roche will make each of the Development
Payments only once, for the first occurrence of an Event for the Alliance
Disease Product, independent of the number of occurrences of the Event for the
Alliance Disease Product.

In the event that clinical development by Roche, its Affiliates or sublicensees
of any Alliance Disease Product for an Alliance Disease (an "Original Product")
terminates and, at or after the time of such termination, another Alliance
Disease Product becomes engaged in clinical development by Roche, its Affiliates
or sublicensees for the same Alliance Disease (a "Replacement Product"), then
Roche shall be entitled to a credit against development payments due with
respect to the Replacement Product in an amount equal to all development
payments actually paid with respect to the Original Product prior to termination
of development thereof.


                                     - 85 -
<PAGE>
                                    EXHIBIT D

                           STEERING COMMITTEE MEMBERS

Roche:

1.
2.
3.

deCODE:

1.
2.
3.


                                     - 86 -
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                   Page
<S>                                                                                <C>
1.   DEFINITIONS.................................................................    2
2.   GRANT OF RIGHTS.............................................................   18
   2.1    Commercial License to Roche............................................   18
   2.2    Research License to Roche..............................................   19
   2.3    Commercial License to deCODE...........................................   19
   2.4    Research License to deCODE.............................................   20
   2.5    Commercial Rights to Compounds.........................................   20
3.   DILIGENCE...................................................................   20
   3.1    Diligence Obligations..................................................   20
   3.2    Designated Diseases....................................................   22
   3.3    Judging Efforts........................................................   23
   3.4    Effect of Failure of Efforts...........................................   24
4.   CONSIDERATION...............................................................   25
   4.1    Development Payments and Royalties to deCODE...........................   25
   4.2    Royalties to Roche.....................................................   25
5.   ROYALTY ADJUSTMENTS.........................................................   26
   5.1    Royalty Reductions.....................................................   26
   5.2    Sales Among Affiliates/Sublicensees....................................   29
   5.3    Supply Obligation......................................................   29
   5.4    Barred Royalties.......................................................   29
6.   ROYALTY PAYMENTS AND REPORTS................................................   29
   6.1    Payment................................................................   29
   6.2    Mode of Payment........................................................   30
   6.3    Records Retention......................................................   31
   6.4    Audit Request..........................................................   31
   6.5    Taxes..................................................................   33
   6.6    Blocked Currency.......................................................   33
   6.7    Interest on Late Payments..............................................   33
   6.8    Mechanism for Adjustment to Royalties..................................   34
7.   ALLIANCE RESEARCH PROGRAM...................................................   34
   7.1    Diseases...............................................................   34
   7.2    Switching and Adding Diseases..........................................   36
   7.3    deCODE Support.........................................................   38
   7.4    Funding by Roche.......................................................   38
   7.5    Roche Review Right.....................................................   40
   7.6    Conduct................................................................   41
   7.7    Records................................................................   42
   7.8    Alliance Disease Research Term.........................................   43
8.   STEERING COMMITTEE..........................................................   43
   8.1    Members................................................................   43
   8.2    Responsibilities.......................................................   44
   8.3    Meetings...............................................................   46
   8.4    Decisions..............................................................   47
</TABLE>
<PAGE>
<TABLE>
<S>                                                                                 <C>
   8.5    Minutes................................................................   49
   8.6    Expenses...............................................................   50
9.   MATERIAL TRANSFER...........................................................   50
   9.1    Plasma Samples.........................................................   50
   9.2    Cell Lines and Tissue Samples..........................................   50
   9.3    Biological Materials Transfer..........................................   51
10.  OWNERSHIP; PATENTS..........................................................   52
   10.1   Ownership..............................................................   52
   10.2   Patent Filing, Maintenance and Prosecution Regarding Inventions........   52
11.  PATENT ENFORCEMENT AND INFRINGEMENT.........................................   57
   11.1   Patent Enforcement.....................................................   57
   11.2   Notice of Certification................................................   59
   11.3   Infringement Actions by Third Parties..................................   60
   12.    INDEMNIFICATION........................................................   60
   12.1   Research Activities....................................................   60
   12.2   Product Liability......................................................   61
   12.3   Notice.................................................................   61
13.  PUBLICATION; NON-DISCLOSURE.................................................   62
   13.1   Publication............................................................   62
   13.2   Non-Disclosure and Non-use; Exceptions.................................   63
   13.3   Authorized Disclosure..................................................   64
   13.4   Injunctive Relief......................................................   65
   13.5   Third Parties..........................................................   65
14.  TERM; TERMINATION...........................................................   65
   14.1   Term; Expiration.......................................................   65
   14.2   Termination Without Cause..............................................   67
   14.3   Breach.................................................................   68
   14.4   Obligations............................................................   70
   14.5   Termination of Sublicenses.............................................   70
   14.6   Surviving Obligations..................................................   70
   14.7   No Waiver..............................................................   71
   14.8   Dispute................................................................   71
15.  REPRESENTATIONS AND WARRANTIES..............................................   71
   15.1   Representations and Warranties of Both Parties.........................   71
   15.2   Representations of deCODE..............................................   72
16.  FORCE MAJEURE...............................................................   72
17.  MISCELLANEOUS...............................................................   73
   17.1   Relationship of Parties................................................   73
   17.2   Assignment.............................................................   73
   17.3   Disclaimer of Warranties...............................................   74
   17.4   Further Actions........................................................   74
   17.5   Notice.................................................................   74
   17.6   Use of Name............................................................   75
   17.7   Public Announcements...................................................   75
   17.8   Waiver.................................................................   76
   17.9   Compliance with Law....................................................   76
  17.10   Severability...........................................................   77
  17.11   Amendment..............................................................   77
  17.12   Governing Law..........................................................   77
  17.13   Arbitration............................................................   77
  17.14   Entire Agreement.......................................................   78
  17.15   Parties in Interest and Bankruptcy.....................................   78
  17.16   Descriptive Headings...................................................   79
  17.17   Counterparts...........................................................   79
  17.18   Interpretation.........................................................   79
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