**Exhibit 10.3**

Englishtranslation of Icelandic document

*** ***

***Loan Agreement***

(Loan in foreign currency)

 

 

***Between***

 

 

***Vetrargarðurinn ehf.***

*as Borrower*

 

and

 

***Íslandsbanki hf.***

*as Lender*

 

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**Table of contents**

 
| **1.**  | **AMOUNT OF LOAN AND DISBURSEMENT**                               |   |
|---------|-------------------------------------------------------------------|--------|
|    |                                                              |   |
| **2.**  | **REPAYMENT**                                                     |   |
|    |                                                              |   |
| **3.**  | **INTEREST, INTEREST ADJUSTMENTS AND PAYMENT  OF INTEREST**       |   |
|    |                                                              |   |
| **4.**  | **COST**                                                          |   |
|    |                                                              |   |
| **5.**  | **INSURANCE**                                                     |   |
|    |                                                              |   |
| **6.**  | **CONDITIONS FOR DISBURSEMENT**                                   |   |
|    |                                                              |   |
| **7.**  | **SPECIFIC WARRANTS OF THE BORROWER**                             |   |
|    |                                                              |   |
| **8.**  | **PAYMENT OF TAXES RELATING TO THE CONCLUSION  OF THE AGREEMENT** |   |
|    |                                                              |   |
| **9.**  | **SPECIFIC COVENANTS**                                            |   |
|    |                                                              |   |
| **10.** | **EVENTS OF DEFAULT – REMEDIES**                             |   |
|    |                                                              |   |
| **11.** | **NOTICES**                                                       |   |
|    |                                                              |   |
| **12.** | **FORCE MAJEURE**                                                 |   |
|    |                                                              |   |
| **13.** | **FURTHER PROVISIONS**                                            |   |
|    |                                                              |   |
|    | ANNEX 1 – LOAN DISBURSEMENT APPLICATION                      |   |
|    | ANNEX 2 - FOREIGN CURRENCY ACCOUNTS                               |   |

 

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Íslandsbankihf., State Reg. No. 550500-3530, Kirkjusandur 2, 155 Reykjavík, hereinafterreferred to as the Lender, and Vetrargarðurinn, State Reg. No. 581201-2490,Sturlugata 8 ehf., Reykjavík, hereinafter referred to as the Borrower, enterinto the following

 

**Loan Agreement**

 

on aloan for a term of 9 years in the amount of up to

 

**USD 17,500,000.- seventeen million five hundred thousand00/100 US dollars**

 

onthe terms described herein.

 

# **1.**              Amount of Loan and Disbursement

 

The Borrower undertakes to borrow, and the Lender undertakes to lend theagreed amount. The loan is available for disbursement as of the signature ofthis Agreement until 19 March 2004.  Theloan shall be disbursed to the Borrower in a single payment.

 

The Borrower shall send to the Lender a disbursement application with atleast 2 working days’ notice specifying the account number in which the loanshall be deposited.  A disbursementapplication form is attached to this Agreement as Annex 1.

 

In the event that the Borrower has not sent a written disbursementapplication before 17 March 2004 the loan offer of the Lender shall lapsewithout notice and without warning, provided that the Lender has not givenwritten confirmation to the contrary. In the event that the obligation of the Lender lapses pursuant to theabove, the Borrower shall pay the Lender all costs incurred by the Lender as aresult of this Agreement.

 

The Lender shall dispose of the loan directly for the full discharge ofa long-term loan to the Borrower from the Lender dated 13 March 2002, initiallyamounting to USD 6.62 million, with the remaining balance for general use inthe operation of the Company.

 

# **2.**              Repayment

 

The Borrower undertakes to repay the loan in 20 quarterly instalments,the first instalment being due for payment on **1March 2009.**

 

The loan shall be repaid into the foreign currency account of theLender, identified in Annex 2.

 

In the event that the payment date of instalments and/or interest doesnot fall on a banking day, the payment date shall be transposed to the bankingday immediately following, unless such day is in the following month, in whichcase the payment date shall be transposed to the immediately preceding bankingday.

 

Annually, as of the interest payment date on **1 March 2006,** the Borrower may pay the loan in full subject topayment of a prepayment premium of 1% for each remaining year of the term ofthe loan, as current at any time.  Inany case, such prepayment premium shall never exceed 6%. No later than 10working days prior to the interest payment date, the Borrower shall notify theLender of a proposed prepayment of the loan.

 

Repayment and/or mortgaging relating tomortgage ratio:

 

On each due date during the term of the loan the Borrower shall ensurethat the mortgage ratio (calculated as the balance of the bond issued by theBorrower on 3 January 2002 in the initial amount of ISK 1,400 million, inaddition to the balance pursuant to a loan agreement dated 21 December betweenSturlugata ehf. (currently the Borrower “Vetrargarðurinn ehf.”) and the Lenderin the initial amount USD 4.0 million, as well as the loan pursuant to thisAgreement, divided by the market value of the property Sturlugata 8, Reykjavík)is less than or equal to the ratio shown in the following table:

 

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| From the  signing of this Loan Agreement until December 2004 |   | >75 | % |
|--------------------------------------------------------------|--------|--------|---|
| From  December 2004                                          |   | >70 | % |
| From  December 2005                                          |   | >65 | % |
| From  December 2006 to the close of the loan term            |   | >60 | % |

 

The Borrower may, at his own option, prepay the loan on interest paymentdates, without payment of a separate prepayment premium, provided that theabove ratios are maintained; alternatively, the Borrower may provide assecurity, in the form of cash, an amount corresponding to the amount ofprepayment required to maintain the above ratios.

 

During the term of the loan, the Borrower is entitled to request on twooccasions an independent assessment of the market value of the property atSturlugata 8, Reykjavík.  The Borrowershall bear the expense of such assessment. The property shall be assessed by two real estate agencies, Kjöreignehf. and Eignamiðlunin ehf., and the market value for the purposes of thisAgreement shall be the average of the assessment of both real estateagencies.  If either or both of theabove real estate agencies cease their operation during the term of theAgreement the Borrower and the Lender shall jointly decide which accreditedreal estate agent shall replace them.  The Lender and the Borrower agree that the market value ofSturlugata 8 on the signature of this Agreement is the assessed market value ofthe property in November 2001, amounting to ISK 3,200 million, adjusted fromtime to time pursuant to the consumer price index on the basis of the 2001November base index (217.7 points), corresponding, on the signature of thisAgreement, to ISK 3,371 million, unless this is changed following anindependent assessment pursuant to the above.

 

A banking day is a business day when banks are open in Reykjavík andLondon.

 

The place of payment is with the Lender.

 

# **3.**              Interest, Interest Adjustments and Payment of Interest

 

(a)                                                                  The loanshall carry an interest rate equivalent to **3-monthLIBOR rates** as determined for the US dollar at any time, plus amargin of **3.0% - three-point-zero percent.**LIBOR(London Inter Bank Offered Rate) interest refers to interest on the LondonInterbank Market as posted at 11 a.m., local time, in London on the Reuter BBAscreen.

 

(b)                                                                 In theevent of default by the Borrower in respect of a debt pursuant to this LoanAgreement, the Borrower shall pay penalty interest corresponding to the baseinterest rate plus the margin referred to in item (a) above, plus the addeddefault margin of **6.0% - six-point-zeropercent** of the due amount or called-in amount from the due date tothe date of payment.

 

(c)                                                                  In theevent of default by the Borrower on the loan pursuant to this Agreement, theLender may, furthermore, convert the loan into Icelandic krónur based on theposted selling rate of the Lender for the currencies of which the loan iscomposed at the close of the date of calling in.  In place of interest and default margin pursuant to item (b)above, the default interest shall in such an event be paid based on the basedefault interest rate posted by the Central Bank of Iceland at each time withdefault margins pursuant to Paragraph 1 of Article 6 of the Interest Act No.38/2001, on the due or called-in amount from the due date to the date ofpayment. The Lender shall notify the Borrower of the date of the intendedconversion of the debt with a minimum advance notice of one week. Once the loanhas been converted into Icelandic krónur it may not be converted back into theoriginal currency without the written approval of the Borrower.

 

Interest is calculated from the date of disbursement of the loan. Theinterest shall be calculated so that on an annual basis the actual number ofdays is used to multiply and then divided by 360.

 

The interest is determined in advance for three months at a time, twoworking days prior to the beginning of the next interest period.****The first interest period may be longer orshorter, as it begins on the date of the disbursement of the loan and ends on 1June 2004.

 

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Interest shall be paid every three months, with the first payment on 1June 2004.

 

Unpaid default interest shall accrue to the principal every 12 months,for the first time 12 months after the first date of default.

 

The Lender may adjust the interest margin unilaterally on the interestpayment date **1 March 2009**. Nolater than 30 days prior to the said interest payment date, the Lender shallnotify the Borrower of the applicable margin as of that interest payment date.If the Lender’s decision on the interest margin is unacceptable to theBorrower, the Borrower may pay the loan, including accrued interest and costs,in full, on the review date of the interest without payment of a separateprepayment fee, provided that he has informed the Lender of such intention withone week’s notice.

 

# **4.**              Cost

 

The Borrower shall pay a facility fee amounting to **2%**of the total loan amount, to be deductedon the disbursement of the loan.

 

The Borrower undertakes to pay any collection costs arising from eachinterest and/or instalment payment pursuant to the tariff of the Lender ascurrent at any time as well as any costs which may arise from collectionmeasures taken as a result of his default, at no cost to the Lender.  In addition, the Borrower shall pay the costof individual services of the Lender pursuant to the tariff of the Lender, ascurrent at any time, such as costs resulting from transfers and the cost ofdelivering payments to the Lender.

 

# **5.**              Insurance

 

A General Bond previously issued by the Borrower to the Lender, dated 28February 2002, initially secured by a third-rank mortgage (currently asecond-rank mortgage) on the property Sturlugata 8, Reykjavík, amounting to ISK800,000,000 and USD 7,280,000, secured the debts of that Loan Agreement and thebonds to be paid up with the loan taken pursuant to this Agreement.

 

The Borrower undertakes to inscribe the General Bond so that instead ofsecuring the above debts, which will now be paid in full, the Bond will secureall the debts and obligations of the Borrower under the present LoanAgreement.  A separate statement shallbe issued to this effect to be officially registered.

 

By their signature of this Loan Agreement, and as surety for the promptand full payment of the loan, deCODE genetics Inc., Delaware, USA, and Íslenskerfðagreining ehf., State Reg. No. 691295-3549, Sturlugata 8, Reykjavík,undertake to guarantee the loan, jointly and severally, as absolute guarantors.The guarantee covers the payment of the amount of the loan including allinterest and costs of any kind. The guarantee shall remain in effect regardlessof whether a payment deferral is granted on one or more occasion, until suchtime as the loan is fully discharged.

 

# **6.**              Conditions for Disbursement

 

The Borrower’s delivery of the following documents to the Lender, of thecontent and in a form acceptable to the Lender, is a prerequisite for thedisbursement of the loan pursuant to this Agreement:

 

1.               The Articles ofAssociation of the Borrower and Guarantors.

2.               Decision of the Boardof Directors of the Borrower concerning the borrowing and mortgaging or a powerof attorney from the Board for the borrowing and mortgaging.

3.               Decisionof the Board of Directors of Íslensk erfðagreining ehf. and deCODE geneticsInc. concerning absolute guarantees pursuant to Article 5 of this Agreement orpower of attorney to sign the loan documents.

4.               Certification thatthe Borrower has purchased insurance for the mortgaged property.

5.               Aninscription on the General Bond pursuant to Article 5, officially registeredwithout comment.

6.               “Secretary’sCertificate” from deCODE genetics, Inc. to the effect that the guarantee ofdeCODE genetics Inc is provided on the authority of the Board of Directors andis binding for the Company.

7.               Written disbursementinstructions.

 

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# **7.**              Specific Warrants of the Borrower

 

By his signature on this Loan Agreement the Borrower warrants to theLender that:

a)              All the necessarydecisions taken on the part of the Borrower in order to establish a bindingagreement have been made in a lawful manner;

b)             The Agreement issigned on behalf of the Borrower by parties legally entitled to do so and acontract has been established which is binding for the Borrower in every respect;

c)              The Agreement doesnot violate the Articles of Association of the Borrower or any agreement thatthe Borrower has entered into with a third party or parent company orsubsidiary;

d)             The Borrower is notengaged in any litigation or disputes that could have a substantial negativeimpact on his financial standing or ability to fulfil his obligations under theprovisions hereof;

e)              None of the events ofdefault described in Article 10 are present;

f)                He has provided theLender with all the information necessary to assess his financial standing;

g)             The informationcontained in the Agreement, or provided by the Borrower in connection with itscontent, is adequate and materially correct, and

h)             The accounts of theBorrower are in compliance with the law and generally accepted accountingstandards.

 

The above information from the Borrower shall be regarded as repeated onthe due dates of the interest and / or instalments unless specifically statedotherwise by the Borrower.

 

# **8.**              Payment of Taxes Relating to the Conclusion of the Agreement

 

The Borrower shall pay all public levies or taxes which may be imposedon the Agreement or payments pursuant to the Agreement at no cost to theLender.

 

# **9.**              Specific Covenants

 

The Borrower and the Guarantors undertake to observe the following termsuntil the debt pursuant to the Agreement is fully discharged:

 

(i)                                                ***Notice ofdefault:*** The Borrowerand the Guarantors undertake to notify the Lender in writing without delay ifit comes to their attention that an event of default has taken place.

(ii)                                             ***Annual Accounts and Interim Statements:***TheBorrower and the Guarantors undertake to send to the Lender an audited AnnualStatement as well as reviewed semi-annual statements no later than four monthsfollowing the close of the accounting period. The Annual Accounts shall be audited and prepared in accordance withstatutory law and accepted accounting standards.

(iii)                                          ***Sale of mortgaged property:***  The Borrower and Íslensk erfðagreining ehf.undertake not to sell the property pledged as security for this Agreementwithout the prior approval of the Lender.

(iv)                                         ***Ban on mergers or demergers:***TheBorrower undertakes not to merge with another company or companies or to dividethe company into two or more independent companies without the approval of theLender.

(v)                                            ***Insurances:*** The Borrowerundertakes to insure the mortgaged property for its real worth for the entireterm of the Agreement.

(vi)                                         ***Restrictions on changing the operation or object of theBorrower:***The Borrower undertakes not to change his operationsin such a way as to require amendment of the Company’s object in its Articlesof Association.

(vii)                                      ***Disposal of insurance compensation, notificationrequirement:***  The Borrowerundertakes to inform the Lender immediately if circumstances arise where theBorrower is, or may be, entitled to insurance compensation owing to damage ofthe mortgaged property if the damage is valued in excess of ISK10,000,000.-  Furthermore, the Borrowerundertakes not to dispose of such payments except in consultation with and withthe approval of the Lender.

*(viii)**                              ****Delivered Declarations****:*The Borrower warrants that declarations delivered inconnection with the conclusion of this Agreement are correct. The Lender isentitled to request confirmation that such information is correct at any timeduring the term of effect of the Agreement.

 

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(ix)                                           ***Disposal of the loan:*****The Borrower undertakes to dispose of the loan for thepurpose that it was intended.

 

# **10.**       Events of Default – Remedies

# ** **

The following shall constitute events of default on the part of theBorrower under this Agreement:

 

(i)                                                             TheBorrower fails to pay on the correct due date or in the correct currency, andsuch default continues for longer than 14 days from the due date;

(ii)                                                          TheBorrower repeatedly fails to pay at the correct time and in the correctcurrency;

(iii)                                                       A debt orcommitment of the Borrower or the Guarantor, extraneous to this Agreement,amounting to over USD 1,000,000, or an equivalent amount in any other currency,is defaulted on in such a way that it gives rise to the right to call in thedebt, unless such default arises from a reasonable protest on the part of theBorrower to such a claim and a proper defence is maintained;

(iv)                                                      The Borrowerviolates Article 9 concerning the insurance of the mortgaged property (v) andthe Borrower and/or Íslensk erfðagreining as Guarantor violate the provisionsof Article 9 concerning the sale of the mortgaged property (iii);

(v)                                                         TheBorrower violates any provisions of Article 9 other than those referred to inArticle 9 (v) and such violation continues for longer than 15 days after theLender has sent the Borrower a request for remedy;

(vi)                                                      TheBorrower’s or the Guarantor’s assets are subjected to attachment, a request issubmitted for the enforced auction of their assets, they petition for amoratorium on debts, they seek formal or informal composition agreements withtheir creditors on the cancellation of debts or a request is made for thesubjection of their estates to bankruptcy proceedings;

(vii)                                                   A requestis made for the dissolution of the Borrower’s company or the Guarantor’scompany;

(viii)                                                Anyinformation from the Borrower or the Guarantor and/or the obligationsundertaken by the Borrower or the Guarantor under this Agreement prove to havebeen so substantially false, inadequate or misleading when they were submittedto the Lender that it would probably have affected the Lender’s willingness togrant the loan.

 

In the event of default, as defined in thisArticle, the lender may, without notice or warning, call in the entire balanceof the loan together with accrued interest and other payments due from theBorrower pursuant to this Agreement. The Borrower shall pay default interest onthe due or called-in amount pursuant to Article 3 of the Agreement.

 

When the loan is due in accordance with theabove, the Lender is entitled, without further notice, to seek enforcement ofhis claims in the security provided by the Borrower to the Lender. The Lenderis free to decide, at his sole discretion, whether to seek enforcement of allthe security placed or any part of the security, and, if the latter, in whatorder.

 

# **11.**       Notices

 

All notices sent by the parties to one another pursuant to thisAgreement shall be sent as specified below:

 

Íslandsbanki, Attn. Corporate Finance Division, Kirkjusandur 2, 155Reykjavík.  Fax. + 354 580-5120.

 

Vetrargarðurinn ehf., Attn. Board of Directors, Sturlugata 8, 101Reykjavík. Fax. +354 570-1981

 

Íslensk erfðagreining, Attn. Chief Financial Officer, Sturlugata 8, 101Reykjavík. Fax. + 354 570-1981.

 

deCODE genetics Inc., Attn. CEO, Sturlugata 8, 101 Reykjavík. . Fax. +354 570-1981.

 

Notices may be sent by fax, provided that the sender takes fullresponsibility that such notices are received by the intended recipient. TheBorrower will notify the Lender promptly of any change in his address,telephone number, e-mail address or other comparable information.

 

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# **12.**       Force Majeure

 

In the event of a substantial change in the business terms of the Lenderresulting from events for which the Lender cannot be held responsible, andwhich do not relate to his financial standing and credit rating, all otherthings being equal, e.g. changes in loan markets, government decisions, war,nuclear accidents or incidents that can be classified as events of forcemajeure, with the result that the Lender is unable to obtain overseas loancapital for the financing of this Agreement on similar terms as thoseanticipated on its negotiation, the Lender may, following prior notification tothe Borrower, call in the balance of the loan with 60 days’ notice.  The Lender is not responsible for anypotential losses incurred by the Borrower in connection with such a calling inof the balance.

 

# **13.**       Further Provisions

 

Headings in this Agreement are solely for convenience and have nosubstantive significance for this Agreement.

 

This Agreement is subject to the law of the Republic of Iceland. Anylegal proceedings in respect of this Agreement shall be conducted before theDistrict Court of Reykjavík.

 

The Lender may assign all or any of its rights and obligationshereunder, in full or in part, to other financial institutions.

 

This Agreement is concluded in 10 numbered pages and in two copies, oneto be held each party.

 

In witness whereof, the parties have signed this Agreement in thepresence of witnesses to the correct date and signature.

 

 

Reykjavík, 12 March 2004

 
| For  the Board of Vetrargarðurinn ehf. |   | For  Íslandsbanki hf. |
|---------------------------------------------|--------|----------------------------|

 

 

In acceptance of the above in the capacity of

Guarantors:

 
| For  Íslensk erfðagreining ehf. |   | For deCODE genetics, Inc. |
|-------------------------------------------|--------|---------------------------|

 

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## ***ANNEX 1*** – LOAN DISBURSEMENT APPLICATION

 

 

ÍslandsbankiCorporate FinanceKirkjusandur2155Reykjavík

 

 

[Place], [Date]

 

**Subject:  Request fordisbursement of loan.**

 

Withreference to Article 1 of the Agreement between [the Borrower] and Íslandsbankihf., dated [date] concerning a loan in the amount of [currency] [amount]-, a requestis hereby submitted, in accordance with the concluding provisions of Article 1of the Agreement, for the loan to be disbursed as follows:

 

**Loan [or part of loan] in [currency]:**

 
| Payment  date:              |   | [                        | ] |
|-----------------------------|--------|--------------------------|---|
| Recipient  of Disbursement: |   | [Name,  Id. No., Address | ] |
| Account  No.                |   | [                        | ] |
| Receiving  Bank             |   | [                        | ] |
| Explanation                 |   | [if  appropriate         | ] |

 

 

Respectfully,

 

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## ***ANNEX 2*** – FOREIGN CURRENCY ACCOUNTS

 

**Foreign currency accounts for the payment of loanswhen paying in foreign currency**

 

Íslandsbankihf.State Reg. No. 550500-3530Kirkjusandur2155Reykjavík

 

##### **Domestic USD account**

 
| **Branch** |   | **Acct. type No.** |   | **Number** |   | **Currency** |
|------------|--------|--------------------|--------|------------|--------|--------------|
|       |   |               |   |       |   |         |
| **500**    |   | **38**             |   | **119160** |   | USD          |

 

###### **Overseas USD account**

 
| **Currency** |   | **Bank**                        |   | **SWIFT code** |   | **Account number** |
|--------------|--------|---------------------------------|--------|----------------|--------|--------------------|
|         |   |                            |   |           |   |               |
| USD          |   | Chase  Manhattan Bank, New York |   | CHASU33        |   | 544-7-21738        |

 

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