Exhibit 10.3


English
translation of Icelandic document


 


Loan Agreement


(Loan in foreign currency)


 


 


Between


 


 


Vetrargarðurinn ehf.


as Borrower


 


and


 


Íslandsbanki hf.


as Lender


 

















 


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

  	
   

  



 


2

















 


Íslandsbanki
hf., State Reg. No. 550500-3530, Kirkjusandur 2, 155 Reykjavík, hereinafter
referred to as the Lender, and Vetrargarðurinn, State Reg. No. 581201-2490,
Sturlugata 8 ehf., Reykjavík, hereinafter referred to as the Borrower, enter
into the following


 


Loan Agreement


 


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


 


USD 17,500,000.- seventeen million five hundred thousand
00/100 US dollars


 


on
the terms described herein.


 


1.              Amount of Loan and Disbursement


 


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


 


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


 


In the event that the Borrower has not sent a written disbursement
application before 17 March 2004 the loan offer of the Lender shall lapse
without notice and without warning, provided that the Lender has not given
written confirmation to the contrary. 
In the event that the obligation of the Lender lapses pursuant to the
above, the Borrower shall pay the Lender all costs incurred by the Lender as a
result of this Agreement.


 


The Lender shall dispose of the loan directly for the full discharge of
a long-term loan to the Borrower from the Lender dated 13 March 2002, initially
amounting to USD 6.62 million, with the remaining balance for general use in
the 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 1
March 2009.


 


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


 


In the event that the payment date of instalments and/or interest does
not fall on a banking day, the payment date shall be transposed to the banking
day immediately following, unless such day is in the following month, in which
case the payment date shall be transposed to the immediately preceding banking
day.


 


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


 


Repayment and/or mortgaging relating to
mortgage ratio:


 


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


 


3

















 


	
  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 payment
dates, without payment of a separate prepayment premium, provided that the
above ratios are maintained; alternatively, the Borrower may provide as
security, in the form of cash, an amount corresponding to the amount of
prepayment required to maintain the above ratios.


 


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


 


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


 


The place of payment is with the Lender.


 


3.              Interest, Interest Adjustments and Payment of Interest


 


(a)                                                                  The loan
shall carry an interest rate equivalent to 3-month
LIBOR rates as determined for the US dollar at any time, plus a
margin of 3.0% - three-point-zero percent. LIBOR
(London Inter Bank Offered Rate) interest refers to interest on the London
Interbank Market as posted at 11 a.m., local time, in London on the Reuter BBA
screen.


 


(b)                                                                 In the
event of default by the Borrower in respect of a debt pursuant to this Loan
Agreement, the Borrower shall pay penalty interest corresponding to the base
interest rate plus the margin referred to in item (a) above, plus the added
default margin of 6.0% - six-point-zero
percent of the due amount or called-in amount from the due date to
the date of payment.


 


(c)                                                                  In the
event of default by the Borrower on the loan pursuant to this Agreement, the
Lender may, furthermore, convert the loan into Icelandic krónur based on the
posted selling rate of the Lender for the currencies of which the loan is
composed 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 base
default interest rate posted by the Central Bank of Iceland at each time with
default 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 of
payment. The Lender shall notify the Borrower of the date of the intended
conversion of the debt with a minimum advance notice of one week. Once the loan
has been converted into Icelandic krónur it may not be converted back into the
original currency without the written approval of the Borrower.


 


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


 


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


 


4

















 


Interest shall be paid every three months, with the first payment on 1
June 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 interest
payment date 1 March 2009. No
later than 30 days prior to the said interest payment date, the Lender shall
notify the Borrower of the applicable margin as of that interest payment date.
If the Lender’s decision on the interest margin is unacceptable to the
Borrower, the Borrower may pay the loan, including accrued interest and costs,
in full, on the review date of the interest without payment of a separate
prepayment fee, provided that he has informed the Lender of such intention with
one week’s notice.


 


4.              Cost


 


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


 


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


 


5.              Insurance


 


A General Bond previously issued by the Borrower to the Lender, dated 28
February 2002, initially secured by a third-rank mortgage (currently a
second-rank mortgage) on the property Sturlugata 8, Reykjavík, amounting to ISK
800,000,000 and USD 7,280,000, secured the debts of that Loan Agreement and the
bonds to be paid up with the loan taken pursuant to this Agreement.


 


The Borrower undertakes to inscribe the General Bond so that instead of
securing the above debts, which will now be paid in full, the Bond will secure
all the debts and obligations of the Borrower under the present Loan
Agreement.  A separate statement shall
be issued to this effect to be officially registered.


 


By their signature of this Loan Agreement, and as surety for the prompt
and full payment of the loan, deCODE genetics Inc., Delaware, USA, and Íslensk
erfðagreining 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 all
interest and costs of any kind. The guarantee shall remain in effect regardless
of whether a payment deferral is granted on one or more occasion, until such
time as the loan is fully discharged.


 


6.              Conditions for Disbursement


 


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


 


1.               The Articles of
Association of the Borrower and Guarantors.


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


3.               Decision
of the Board of Directors of Íslensk erfðagreining ehf. and deCODE genetics
Inc. concerning absolute guarantees pursuant to Article 5 of this Agreement or
power of attorney to sign the loan documents.


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


5.               An
inscription on the General Bond pursuant to Article 5, officially registered
without comment.


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


7.               Written disbursement
instructions.


 


5

















 


7.              Specific Warrants of the Borrower


 


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


a)              All the necessary
decisions taken on the part of the Borrower in order to establish a binding
agreement have been made in a lawful manner;


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


c)              The Agreement does
not violate the Articles of Association of the Borrower or any agreement that
the Borrower has entered into with a third party or parent company or
subsidiary;


d)             The Borrower is not
engaged in any litigation or disputes that could have a substantial negative
impact on his financial standing or ability to fulfil his obligations under the
provisions hereof;


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


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


g)             The information
contained in the Agreement, or provided by the Borrower in connection with its
content, is adequate and materially correct, and


h)             The accounts of the
Borrower are in compliance with the law and generally accepted accounting
standards.


 


The above information from the Borrower shall be regarded as repeated on
the due dates of the interest and / or instalments unless specifically stated
otherwise 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 imposed
on the Agreement or payments pursuant to the Agreement at no cost to the
Lender.


 


9.              Specific Covenants


 


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


 


(i)                                                Notice of
default: The Borrower
and the Guarantors undertake to notify the Lender in writing without delay if
it comes to their attention that an event of default has taken place.


(ii)                                             Annual Accounts and Interim Statements: The
Borrower and the Guarantors undertake to send to the Lender an audited Annual
Statement as well as reviewed semi-annual statements no later than four months
following the close of the accounting period. 
The Annual Accounts shall be audited and prepared in accordance with
statutory 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 Agreement
without the prior approval of the Lender.


(iv)                                         Ban on mergers or demergers: The
Borrower undertakes not to merge with another company or companies or to divide
the company into two or more independent companies without the approval of the
Lender.


(v)                                            Insurances: The Borrower
undertakes to insure the mortgaged property for its real worth for the entire
term of the Agreement.


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


(vii)                                      Disposal of insurance compensation, notification
requirement:  The Borrower
undertakes to inform the Lender immediately if circumstances arise where the
Borrower is, or may be, entitled to insurance compensation owing to damage of
the mortgaged property if the damage is valued in excess of ISK
10,000,000.-  Furthermore, the Borrower
undertakes not to dispose of such payments except in consultation with and with
the approval of the Lender.


(viii)                               Delivered Declarations: The Borrower warrants that declarations delivered in
connection with the conclusion of this Agreement are correct. The Lender is
entitled to request confirmation that such information is correct at any time
during the term of effect of the Agreement.


 


6

















 


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


 


10.       Events of Default – Remedies


 


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


 


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


(ii)                                                          The
Borrower repeatedly fails to pay at the correct time and in the correct
currency;


(iii)                                                       A debt or
commitment 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 the
debt, unless such default arises from a reasonable protest on the part of the
Borrower to such a claim and a proper defence is maintained;


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


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


(vi)                                                      The
Borrower’s or the Guarantor’s assets are subjected to attachment, a request is
submitted for the enforced auction of their assets, they petition for a
moratorium on debts, they seek formal or informal composition agreements with
their creditors on the cancellation of debts or a request is made for the
subjection of their estates to bankruptcy proceedings;


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


(viii)                                                Any
information from the Borrower or the Guarantor and/or the obligations
undertaken by the Borrower or the Guarantor under this Agreement prove to have
been so substantially false, inadequate or misleading when they were submitted
to the Lender that it would probably have affected the Lender’s willingness to
grant the loan.


 


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


 


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


 


11.       Notices


 


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


 


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


 


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


 


Íslensk erfðagreining, Attn. Chief Financial Officer, Sturlugata 8, 101
Reykjavík. 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 full
responsibility that such notices are received by the intended recipient. The
Borrower will notify the Lender promptly of any change in his address,
telephone number, e-mail address or other comparable information.


 


7

















 


12.       Force Majeure


 


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


 


13.       Further Provisions


 


Headings in this Agreement are solely for convenience and have no
substantive significance for this Agreement.


 


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


 


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


 


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


 


In witness whereof, the parties have signed this Agreement in the
presence 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.

  



 


8

















 


ANNEX 1 – LOAN DISBURSEMENT APPLICATION


 


 


Íslandsbanki

Corporate Finance
Kirkjusandur
2
155
Reykjavík


 


 


[Place], [Date]


 


Subject:  Request for
disbursement of loan.


 


With
reference to Article 1 of the Agreement between [the Borrower] and Íslandsbanki
hf., dated [date] concerning a loan in the amount of [currency] [amount]-, a request
is hereby submitted, in accordance with the concluding provisions of Article 1
of 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,


 


9

















 


ANNEX 2 – FOREIGN CURRENCY ACCOUNTS


 


Foreign currency accounts for the payment of loans

when paying in foreign currency


 


Íslandsbanki
hf.

State Reg. No. 550500-3530
Kirkjusandur
2
155
Reykjavík


 


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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