Document:

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                                                                    Exhibit 10.2

                                    EXHIBIT A

                         DELPHI CAPITAL AMANGEMENT, INC.

                       PENSION PLAN FOR ROBERT ROSENKRANZ

                                SECOND AMENDMENT

1.    Section 2.8 of the Plan is hereby amended in its entirety to read as
      follows: "Compensation - shall mean for any calendar year beginning on or
      about the Effective Date the aggregate of Rosenkranz's taxable income as
      reported on his Form W-2 from each Affiliated Company for that year plus
      amounts contributed for that year as a deferral under a cash or deferred
      arrangement described in section 401(k) of the Code or to a plan described
      in Section 125 of the Code, less any severance pay, tuition, auto expense
      or moving expense reimbursements or allowances and less any imputed
      taxable income resulting from Employer-provided group life insurance
      coverage which is included as taxable income on Form W-2."

2.    Section 3.1 of the Plan is hereby amended in its entirety to read as
      follows: "Retirement Benefit at Normal or Late Retirement Date.
      Rosenkranz's annual benefit on his Normal or Late Retirement Date, when
      paid in the Normal Annuity Form shall be in an amount equal to (A) plus
      (B), minus (C), all determined as of the date benefits commence:

      A.    .85% of Rosenkranz's Final Average Earnings which are not in excess
            of Social Security Covered compensation plus 2% of Rosenkranz's
            Final Average Earnings in excess of Social Security Covered
            Compensation, multiplied by Credited Service in (not to exceed 35
            years), plus
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      B.    1% of Rosenkranz's Final Average Earnings multiplied by Credited
            Service in excess of 35 years, minus

      C.    Rosenkranz's benefit, paid in the form of a straight life annuity
            for his life under the Reliance Standard Life Insurance Company
            Pension Plan."

      Notwithstanding the foregoing, if Rosenkranz retires on a Late Retirement
      Date, his benefit shall be the greater of the amount determined above as
      of his Late Retirement Date or the Actuarial Equivalent of the amount
      determined under the formula as of his Normal Retirement Date."

3.    This Second Amendment shall be effective immediately. IN WITNESS WHEREOF,
      the parties hereto have caused this Amendment to be executed and attested
      as of the 10th day of September, 2002.

                                                 DELPHI CAPITAL MANAGEMENT, INC.

      Attest:

      /s/  LINDA EIKE                            /s/  CHAD COULTER
      Secretary                                  Authorized Officer<PAGE>
EXHIBIT 10.1

[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 LICENSE AGREEMENT

                                    BETWEEN

                             DECODE GENETICS, INC.

                                      AND

                             DECODE GENETICS, EHF.

                                      AND

                               MERCK & CO., INC.
<PAGE>
                  RESEARCH COLLABORATION AND LICENSE AGREEMENT

      THIS RESEARCH COLLABORATION AND LICENSE AGREEMENT (this "Agreement"),
which shall be effective as of the date of last signature (the "Effective
Date"), is entered into by and between deCODE genetics, ehf. (Islensk
erfoagreining ehf.), a limited liability company duly organized and existing
under the laws of Iceland, having offices at Sturlugata 8, IS-101 Reykjavik,
Iceland ("deCODE"), deCODE genetics, Inc., a corporation organized under the
laws of the State of Delaware ("deCODE Parent") and Merck & Co., Inc., a
corporation organized under the laws of the State of New Jersey, having an
office located at One Merck Drive, Whitehouse Station, New Jersey 08889
("Merck").

                             PRELIMINARY STATEMENTS

      A.    deCODE has expertise in conducting research in the field of human
genetics and genomics.

      B.    Merck has certain expertise in drug discovery, and in developing,
manufacturing and marketing certain pharmaceutical products.

      C.    deCODE and Merck wish to conduct collaborative research and
development activities for the purpose of discovery and development of certain
pharmaceutical targets and to discover and develop products to treat Obesity (as
hereafter defined).

      NOW, THEREFORE, in consideration of the foregoing Preliminary Statements
and the mutual agreements and covenants set forth herein, the Parties hereby
agree as follows:

1.    DEFINITIONS.

      1.1   "Affiliate" shall mean (i) any corporation or business entity of
which fifty percent (50%) or more of the securities or other ownership interests
representing the equity, the voting stock or general partnership interest are
owned, controlled or held, directly or indirectly, by Merck or deCODE; or (ii)
any corporation or business entity which, directly or indirectly, owns, controls
or holds fifty percent (50%) (or the maximum ownership interest permitted by
law) or more of the securities or other ownership interests representing the
equity, the voting stock or, if applicable, the general partnership interest, of
Merck or deCODE.

      1.2   "CFR" shall mean the United States Code of Federal Regulations.

      1.3   "cGMP" shall mean current Good Manufacturing Practice as defined in
Parts 210 and 211 of Title 21 of the CFR, as may be amended from time to time,
or any successor thereto.

      1.4   "Calendar Quarter" shall mean the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 and
December 31.

      1.5   "Calendar Year" shall mean each successive period of twelve (12)
months commencing on January 1 and ending on December 31.

      1.6   [Confidential Treatment Requested]

      1.7   "Collaboration Date" shall mean October 1, 2002.

      1.8   "Collaboration Invention" shall mean any discoveries, Improvements,
processes, formulas, data, inventions, know-how and trade secrets, patentable or
otherwise, relating to the Disease that arise from the Research Program.

      1.9   "Collaboration Patents" shall mean any and all patents and patent
applications in the Territory (which for the purposes of this Agreement shall be
deemed to include certificates of invention and applications for certificates of
invention) that a Party or its Affiliates owns, controls or through license or
otherwise acquires rights during the term of this Agreement which claim, cover
or relate to Collaboration Inventions or are divisions, continuations,
continuations-in-part, reissues, renewals, extensions, supplementary protection
certificates, utility, models and the like of any such patents and patent
applications and foreign equivalents thereof.

      1.10  "Combination Product" shall mean a Product which includes one or
more active ingredients other than Compound in combination with Compound.

      1.11  "Compound" shall mean any and all chemical compounds including but
not limited to small molecules, proteins, anti-sense oligonucleotides and
antibodies and any compounds useful in gene therapy, the activity (whether for
the treatment of Obesity or other indications) for which it is being developed
was discovered or identified through the Research Program or thereafter based on
data obtained using a [**].
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      1.12  "deCODE Collaboration Patents" shall mean Collaboration Patents,
excluding Patents claiming deCODE Generalized Technology, that deCODE or its
Affiliates owns or controls during the term of this Agreement.

      1.13  "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 is 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 Merck).

      1.14  "deCODE Genomics Data" shall mean (a) deCODE's proprietary
genealogical and genotypic databases and such other databases as may be created,
developed or acquired by deCODE from time to time during the term of this
Agreement or as may be existing or have been created as of the Effective Date,
and (b) deCODE's proprietary inventions, processes and other assets directly
relating to the use, creation, maintenance, development, operation, access,
analysis, reporting, storage, protection, and/or transmission of such
proprietary databases, including proprietary methods, procedures and techniques,
procedure manuals, personal and scientific data, computer technical expertise
and software, in each case independently developed by or on behalf of deCODE and
such software useful for the analysis of the information included in such
databases.

      1.15  "deCODE Know-How" shall mean all secret, substantial and identified
information and materials, including, but not limited to, discoveries,
Improvements, processes, formulas, data, inventions, know-how and trade secrets,
patentable or otherwise, which during the term of this Agreement (i) are in
deCODE's possession or control, (ii) are not generally known and (iii) are
necessary or useful to Merck in connection with the Research Program or the
research, development, manufacture, marketing, use or sale of Compound [**] or
Product in the Territory excluding deCODE Generalized Technology and deCODE
Genomics Data.

      1.16  "deCODE Patents" shall mean Patents, that deCODE or its Affiliates
owns, controls or through license or otherwise acquires rights prior to the
Effective Date or during the term of this Agreement (provided deCODE or its
Affiliates have the right to license or otherwise make available such Patents to
Merck) and are necessary or useful to Merck in connection with the Research
Program or the research, development, manufacture, marketing, use or sale of
Compound [**] or Product in the Territory, excluding Patents claiming deCODE
Generalized Technology and/or deCODE Genomics Data.

      1.17  "deCODE Responsibilities" shall have the meaning assigned to such
term in Section 2.2.

      1.18  "Disease" means Obesity.

      1.19  "Disease Gene" shall mean [**]

      1.20  "Effective Date" shall mean the date of this Agreement first above
written.

      1.21  "FDA" shall mean the United States Food and Drug Administration.

      1.22  "First Commercial Sale" shall mean with respect to any Product [**],
the first sale for end use or consumption of such Product [**] in a country
after all required approvals, including marketing and pricing approvals, have
been granted by the governing health authority of such country.

      1.23  "Full Time Equivalent" or "FTE" shall mean the equivalent of a
full-time scientist's work time over a twelve-month period (including normal
vacations, sick days and holidays). The portion of an FTE year devoted by a
scientist to the Research Program shall be determined by dividing the number of
days during any twelve-month period devoted by such employee to the Research
Program by the total number of working days during such twelve-month period.

      1.24  "FTE Rate" shall mean [**] 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.

      1.25  "Gene Pathway" shall mean the molecular pathways both known and
unknown first linking a [**] to a Disease.

      1.26  "Improvement" shall mean any enhancement in the manufacture,
formulation, ingredients, preparation, presentation, means of delivery, dosage
or packaging of Compound or Product.

      1.27  "IND" shall mean any filing made with an appropriate Regulatory
Authority in the respective jurisdiction within the Territory for initiating
clinical trials in such jurisdiction with respect to the Product.
<PAGE>
      1.28  "Invention" shall mean any discoveries, Improvements, processes,
formulas, data, inventions, know-how and trade secrets, patentable or otherwise,
relating to the Disease excluding Collaboration Inventions.

      1.29  "Joint Know-How" shall have the meaning assigned to such term in
Section 7.1.3.3.

      1.30  "Joint Patent" shall have the meaning assigned to such term in
Section 7.1.3.3.

      1.31  "Licensed Technology" shall mean the Collaboration Patents, Patents,
deCODE Know-How, Merck Know-How, and Joint Know-How licensed under this
Agreement.

      1.32  "Major Market" shall mean any one of the following countries: United
States, Japan, the United Kingdom, France, Germany, Italy or Spain.

      1.33  "Marketing Approval" shall mean any and all approvals (including
price and reimbursement approvals), licenses, registrations, or authorizations
of the European Union or any country, federal, state or local regulatory agency,
department, bureau or other government entity that is necessary for the
manufacture, use, storage, import, transport and/or sale of a Product [**] for
human use in such jurisdiction and following which the Product [**] may be
legally sold in such jurisdiction.

      1.34  "Merck Collaboration Patents" shall mean Collaboration Patents owned
or controlled by Merck or its Affiliate Rosetta Inpharmatics, Inc. ("Rosetta")
during the term of this Agreement. Any patents on discoveries, improvements,
processes, formulas, data, inventions, know-how and trade secrets, relating to a
[**] that would otherwise be a Merck Collaboration Patent under the Agreement,
shall be Merck Patents.

      1.35  [**]

      1.36  "Merck Know-How" shall mean any Merck or Rosetta information and
materials, including but not limited to, discoveries, Improvements, processes,
formulas, data, inventions, know-how and trade secrets, patentable or otherwise,
which during the term of this Agreement are not generally known and which arise
out of the Research Program or are in Merck's opinion necessary or useful to
deCODE in the performance of its obligations under the Research Program.

      1.37  "Merck Patents" shall mean Patents owned or controlled by Merck or
Rosetta prior to the Effective Date or during the term of this Agreement
(provided Merck or Rosetta has the right to license or otherwise make available
such Patents to deCODE) and are necessary or useful to deCODE in connection with
the Research Program or the research, development, manufacture, marketing, use
of sale of Compound, Product [**] in the Territory.

      1.38  "NDA" shall mean a New Drug Application and all amendments and
supplements thereto filed with the FDA (as more fully defined in 21 CFR 314.5 et
seq.), or the equivalent application filed with any equivalent agency or
governmental authority outside the United States (including any supra-national
agency such as in the European Union) requiring such filing, including all
documents, data, and other information concerning a pharmaceutical product which
are necessary for gaining Regulatory Approval to market and sell such
pharmaceutical product.

      1.39  "Net Sales" shall mean the gross invoice price of Product [**] sold
by Merck, its Affiliates or sublicensees (which term does not include
distributors) to the first independent Third Party after deducting, if not
previously deducted, in the amount invoiced or received:

      (a) trade and quantity discounts;

      (b) returns, rebates and allowances;

      (c) chargebacks and other amounts paid on sale or dispensing of Product
      [**];

      (d) retroactive price reductions that are actually allowed or granted;

      (e) sales commissions paid to distributors and/or selling agents;

      (f) a fixed amount equal to [**] of the amount invoiced to cover bad debt,
      sales or excise taxes, early payment cash discounts, transportation and
      insurance charges and additional special transportation, custom duties,
      and other governmental charges; and

      (g) the standard inventory cost of devices or delivery systems used for
      dispensing or administering Product which accompany Product as it is sold.

With respect to Combination Product, Net Sales shall be calculated on the basis
of invoice price of the Combination Product multiplied by a fraction, the
numerator of which shall be the invoice price of Product containing Compound as
the sole active ingredient in the same strength and the denominator of which
shall
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be the sum of the numerator and the invoice prices of products containing each
other active ingredient as the sole active ingredient in the same strength as in
the Combination Product. Invoice price shall be determined in accordance with
Merck's regular accounting methods. In the event that representative products
for the above calculation are not available, Merck and deCODE will discuss an
appropriate method for calculating Net Sales for such Combination Product.

      1.40  "Obesity" shall mean [**]

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

      1.42  "Patents" shall mean any and all patents and patent applications in
the Territory (which for the purposes of this Agreement shall be deemed to
include certificates of invention and applications for certificates of
invention) that a Party or its Affiliates owns, controls or through license or
otherwise acquires rights prior to the Effective Date or during the term of this
Agreement which: (i) claim, cover or relate to a Compound, Product and/or [**];
or (ii) claim, cover or relate to Inventions; or (iii) are divisions,
continuations, continuations-in-part, reissues, renewals, extensions,
supplementary protection certificates, utility, models and the like of any such
patents and patent applications and foreign equivalents thereof.

      1.43  "Phase I Clinical Trial" shall mean a human clinical trial in any
country that is intended to initially evaluate the safety and/or pharmacological
effect of a Product in subjects or that would otherwise satisfy requirements of
21 CFR 312.21(a), or its foreign equivalent.

      1.44  "Phase II Clinical Trial" shall mean a human clinical trial in any
country that is intended to initially evaluate the effectiveness of a Product
for a particular indication or indications in patients with the disease or
indication under study or that would otherwise satisfy requirements of 21 CFR
312.21(b), or its foreign equivalent.

      1.45  "Phase III Clinical Trial" shall mean a pivotal human clinical trial
in any country the results of which could be used to establish safety and
efficacy of a Product as a basis for an application for Marketing Approval or
that would otherwise satisfy requirements of 21 CFR 312.21(c), or its foreign
equivalent.

      1.46  [**]

      1.47  "Product" or "Products" shall mean preparations in final form for
sale by prescription, over-the-counter or any other method which contain
Compound, including, without limitation, any Combination Product.

      1.48  "Proprietary Information" shall have the meaning assigned to such
term in Section 8.3.

      1.49  "Regulatory Authority" shall mean the authority(ies) in each
respective jurisdiction within the Territory with responsibility for granting
regulatory approval for the marketing and sale of the Product [**] in such
jurisdiction, and any successor(s) thereto.

      1.50  "Research Program" shall mean the collaborative research effort
between the Parties to discover and develop the Compound as set forth in Article
2 and Schedule 2.1.

      1.51  "Research Program Term" shall have the meaning set forth in Section
2.4.

      1.52  [**]

      1.53  "Steering Committee" shall have the meaning assigned to such term in
Section 3.1.

      1.54  "Technical Information" shall mean information, data or know-how
(whether patentable or unpatentable), including without limitation, formulas,
manufacturing 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.

      1.55  "Territory" shall mean all the countries of the world.

      1.56  [**]

      1.57  "Third Party" shall mean any person who or which is neither a Party
nor an Affiliate of a Party.

      1.58  "Third Party Claim" shall have the meaning assigned to such term in
Section 9.1.3.1.

      1.59  [**]
<PAGE>
      1.60  "Valid Patent Claim" means a claim of an issued and unexpired patent
included within the Patents, which has not been revoked or held unenforceable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal, and
which has not been disclaimed, denied or admitted to be invalid or unenforceable
through reissue or disclaimer or otherwise.

      1.61  [**]

2.    RESEARCH COLLABORATION AND PRODUCT DEVELOPMENT.

      2.1   Overall Program. The Parties shall collaborate in the field of
Obesity under the terms and conditions set forth in this Agreement and in
Research Program. The activities to be undertaken in the course of Research
Program are set forth in Schedule 2.1 (the "Research Plan") that may be amended
from time to time upon the mutual agreement of the Parties.

      2.2   deCODE Specific Responsibilities. Under the direction of the
Steering Committee pursuant to Article 3, deCODE shall make available scientific
and managerial personnel with sufficient expertise and experience necessary to
undertake the deCODE Responsibilities. In particular, deCODE shall devote to the
Research Program [**] FTEs per year during the Research Term, all of which shall
be funded by Merck according to Section 5.3 hereof.

      2.3   Merck Specific Responsibilities. Merck shall be responsible for
performing all development work and clinical trials necessary to obtain
Marketing Approvals for Products in those countries in the Territory which it in
its sole discretion believes is reasonable. deCODE acknowledges and agrees that
Merck may use its Affiliates or Third Parties to perform certain of its
obligations under this Agreement from time to time. Merck shall keep deCODE
advised of its activities under this Section 2.3.

      2.4   Research Program Term. Except as otherwise provided herein, the term
of the Research Program shall commence on the Collaboration Date and continue
for a period of three years (the "Research Program Term"). In the event that
[**] months after the Collaboration Date there has been no payment of a
milestone set forth in Section 5.4, then Merck may at its sole discretion
terminate the Research Program upon one (1) month notice prior to the second
(2nd) anniversary of the Collaboration Date. The Parties may extend the term of
the Research Program on a year-by-year basis, initially at least [**] days prior
to the three year anniversary of the commencement of the Research Program and,
thereafter, at least [**] days prior to the each subsequent anniversary. In the
event of [**], Merck shall have the right to extend the Research Program Term at
its own discretion for a period of up to three (3) years beyond the Research
Program Term subject to notice to deCODE within the later of sixty (60) days of
[**] or sixty (60) days before the end of the Research Program Term and subject
to payment of funding as set forth in Section 5.3. Upon any extension of the
term of Research Program, if desirable, Schedule 2.1 setting forth the Research
Program shall be amended in writing by mutual agreement. As used throughout the
Agreement any reference to Research Program Term shall include any extension
thereof.

      2.5   Exchange of Information. Upon execution of this Agreement, deCODE
shall disclose to Merck in English and in writing all deCODE Know-How not
previously disclosed. During the Research Program Term, deCODE shall also
promptly disclose to Merck in English and in writing on an ongoing basis all
deCODE Know-How. Merck shall promptly disclose to deCODE during the Research
Program Term all Merck Know-How. In the event of [**]

      2.6   Record Keeping. The Parties shall maintain records, in sufficient
detail and in good scientific manner, which shall be complete and accurate and
shall fully and properly reflect all work done and results achieved in the form
required under all applicable laws and regulations. Each Party shall have the
right, during normal business hours and upon reasonable notice, to inspect and
copy all such records. Each Party shall maintain such records and information
contained therein in confidence in accordance with Section 8 and shall not use
such records or information except to the extent otherwise permitted by this
Agreement.

      2.7   Access to Facilities and Personnel. The Parties shall allow
representatives of the other Party, upon reasonable notice and during normal
business hours, to visit such Party's facilities where the activities
contemplated by the Research Plan are being conducted, and consult, during such
visits and by telephone, with such Party's personnel performing such activities.

      2.8   Additional Services. The Parties agree to negotiate in good faith,
from time to time as when needed, regarding the extension of Research Program
and terms and conditions on which additional services that are not currently
contemplated by this Agreement might be provided by deCODE, including the
provision of high throughput screening, candidate selection and conducting Phase
I clinical trials on Products. [**]
<PAGE>
      2.9   [**]

3.    STEERING COMMITTEE.

      3.1   Members; Officers. The Parties shall establish a joint executive
committee (the "Steering Committee"), which shall consist of four (4) members,
two (2) members from each Party. The members of the Steering Committee are set
forth on Schedule 3.1. Each Party may replace any or all of its representatives
on the Steering Committee at any time upon written notice to the other Party in
accordance with Section 13.6 of this Agreement. Such representatives shall
include personnel of each Party that, individually or collectively, have
expertise in business and pharmaceutical drug development and/or the
identification and validation of disease susceptibility genes. Any member of the
Steering Committee may designate a substitute to attend and perform the
functions of that member at any meeting of the Steering Committee. Each Party
may, at its discretion, invite non-member representatives of such Party to
attend meetings of the Steering Committee. A chairperson and secretary of the
Steering Committee shall serve co-terminus one (1) year terms, commencing on the
Collaboration Date or an anniversary thereof, as the case may be. The right to
name the chairperson and the secretary of the Steering Committee shall alternate
between the Parties, and each chairperson shall be named no later than ten (10)
days after the commencement of his or her term. The initial chairperson shall be
selected by Merck, the initial secretary shall be selected by deCODE, and each
is designated on Schedule 3.1.

      3.2   Responsibilities. The Steering Committee shall perform the following
functions:

            3.2.1 Determine the overall strategy for the Research Program;

            3.2.2 Approve initial assignment of deCODE personnel to the Research
Program including but not limited to review of the complete resume or CV of such
individuals and as the need arises determine the removal or addition of deCODE
personnel to the Research Program;

            3.2.3 Formulate and adjust the Research Plan in Schedule 2.1 as
needed, including but not limited to allocation of personnel and other project
resources;

            3.2.4 Formulate and adjust Development Plans with respect to [**];

            3.2.5 Oversee progress of the Research Program and exchange of data
between the Parties;

            3.2.6 Determine if a [**];

            3.2.7 Appoint sub-committees of equal representation to fulfill any
of the enumerated tasks set forth in this Section 3.2.

            3.2.8 Track publication requests as set forth in Section 8.1; and

            3.2.9 Monitor, track and record the achievement and timing of
milestones in Section 5.4.

      3.3   Meetings. Meetings of the Steering Committee require the
participation of at least one member of the Steering Committee from each Party.
During the Research Program Term, the Steering Committee shall meet in person at
least once during every Calendar Year. From time to time, a Party may give the
other Party ten (10) business days notice of its desire to hold a meeting of the
Steering Committee. Unless otherwise agreed by the Parties, meetings of the
Steering Committee shall be held in person and shall alternate between the
offices of the Parties, or meet in such other place as agreed by the Parties.
Instead of meeting in person, the members of the Steering Committee may, for
purposes of holding a Steering Committee meeting, convene or be polled or
consulted from time to time by means of telecommunications, video conferences,
electronic mail or correspondence, as deemed necessary or appropriate by the
Parties.

      3.4   Decisions.

            3.4.1 The Steering Committee may make decisions with respect to any
subject matter that is subject to the Steering Committee's decision-making
authority by reaching a unanimous decision between the Parties. Each Party shall
have a single vote.

            3.4.2 If, with respect to a matter that is subject to the Steering
Committee's decision-making authority set forth in Section 3.2 above, the
Steering Committee cannot reach consensus, the matter shall be referred to (i)
the Chief Executive Officer of deCODE, or such other senior executive designated
by deCODE from time to time, and (ii) the Executive Vice President of Worldwide
Basic Research of Merck, or such other person holding a similar position
designated by Merck from time to time (such officers collectively, the
"Executive Officers"), for resolution. The Executive Officers shall use good
faith and reasonable efforts to resolve the matters referred to them.
<PAGE>
            3.4.3 Any disputes arising with respect to relations with patients
participating in the Research Program, research sites, consultants,
investigators or vendors all of which are in Iceland, or any governmental
authority in Iceland, the matter shall be decided by the Chief Executive Officer
of deCODE (or its designee), who shall give good faith consideration to the
comments of the Executive Officer of Merck (or their respective designees) in
resolving such matter; provided, however, that to the extent such disputes
materially affect the rights or obligations of the Parties under this Agreement,
deCODE shall consult with Merck and the Parties shall agree on a course of
action to lawfully avoid or minimize such effects upon the rights or obligations
of the Parties, to the extent practicable.

            3.4.4 Any disputes other than those described in Section 3.4.3 where
the Executive Officers cannot reach a mutually acceptable decision within thirty
(30) days after the matter was referred to them shall be decided by the
Executive Vice President of Research and Development of Merck; provided,
however, that to the extent such disputes materially affect the rights or
obligations of the Parties under this Agreement, Merck shall consult with deCODE
and the Parties shall agree on a course of action to lawfully avoid or minimize
such effects upon the rights or obligations of the Parties, to the extent
practicable.

            3.4.5 For all purposes under this Agreement, any decision made
pursuant to Section 3.4 shall be deemed to be the decision of the Steering
Committee.

      3.5   Minutes.

            3.5.1 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, definitive minutes of all Steering Committee
meetings shall be finalized no later than thirty (30) business days after the
meeting to which the minutes pertain, as follows:

                  3.5.1.1 Within ten (10) business days after each Steering
Committee meeting, the secretary shall prepare and distribute to all members of
the Steering Committee draft minutes of the meeting. Such minutes shall provide
a description, in reasonable detail, of the discussions at the meeting and a
list of any actions, decisions or determinations approved by the Steering
Committee and a list of any issues to be resolved by the Executive Officers.

                  3.5.1.2 The chairperson shall then have ten (10) business days
after receiving such draft minutes to collect comments thereon from the members
of its Party and provide them to the secretary.

                  3.5.1.3 Upon the expiration of such second ten (10) business
day period, the chairperson and the secretary of the Steering Committee shall
have an additional ten (10) business days to discuss each other's comments and
finalize the minutes. The secretary and chairperson shall each sign and date the
final minutes. The signature of the chairperson and the secretary upon the final
minutes shall indicate each Party's assent to the minutes.

            3.5.2 If at any time during the preparation and finalization of the
Steering Committee meeting minutes, the secretary and the chairperson do not
agree on any issue with respect to the minutes, such issue shall be resolved by
the decision making process as provided in Section 3.4. The decision resulting
from the decision making process shall be recorded by the secretary in amended
finalized minutes for said meeting. All other issues in the minutes that are not
subject to such escalation shall be finalized within a thirty (30) business day
period as provided in Section 3.5.1.

      3.6   Term. The Steering Committee shall exist for [**] months following
the termination or expiration of the Research Program Term.

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

4.    GRANT OF RIGHTS; RESEARCH; COMMERCIALIZATION.

      4.1   Licenses to deCODE by Merck.

            4.1.1 Grant of Merck IP. Subject to the terms and conditions of this
Agreement, Merck hereby grants to deCODE and its Affiliates a fully paid-up,
non-royalty bearing non-exclusive right and license, without the right to grant
sublicenses, (a) under Merck Patents, (b) under Merck Collaboration Patents, (c)
under Merck Know-How, and (d) under Joint Patents and Joint Know-How, for the
sole and exclusive purpose of enabling deCODE to fulfill its research
obligations under this Agreement.

            4.1.2 Rights to Rosetta Resolver. Concurrently with this Agreement
and in furtherance of the Research Program, the Parties are entering into a
separate agreement granting deCODE certain rights to Rosetta Resolver.
<PAGE>
      4.2   Licenses to Merck by deCODE.

            4.2.1 Grant of deCODE IP.

                  4.2.1.1 Exclusive License Subject to the terms and conditions
of this Agreement including rights to compensation set forth in Article 5,
deCODE hereby grants to Merck an exclusive right and license, with the right to
grant sublicenses, (a) under deCODE Patents, (b) under deCODE Collaboration
Patents, (c) under deCODE Know-How and (d) under Joint Patents and Joint
Know-How, to discover, develop, sell, offer to sell, use, make, have made, and
import Compounds, Products [**] in the Territory and to otherwise enable Merck
to fulfill its obligations and exercise its rights under the Agreement.

                  4.2.1.2 Non-Exclusive License. Subject to the terms and
conditions of this Agreement, deCODE hereby grants to Merck a non-exclusive
right and license to use deCODE Generalized Technology, to discover, develop,
sell, offer to sell, use, make, have made, and import Compounds, Products [**]
in the Territory and to otherwise enable Merck to fulfill its obligations and
exercise its rights under the Agreement.

            4.2.2 Rights to Clinical Genome Miner. Concurrently with this
Agreement and in furtherance of the Research Program, the Parties are entering
into a separate agreement granting Merck certain rights to Clinical Genome
Miner.

            4.2.3 Development and Commercialization. Merck shall use reasonable
efforts, consistent with the usual practice followed by Merck in pursuing the
commercialization and marketing of its other similar pharmaceutical products, at
its own expense, to develop and commercialize a Product on a commercially
reasonable basis in such countries in the Territory where in Merck's opinion it
is commercially viable to do so.

            4.2.4 Excused Performance. In addition to the provisions of Article
7 hereof, the obligation of Merck with respect to any Product under Section
4.2.3 are expressly conditioned upon the continuing absence of any adverse
condition or event relating to the safety or efficacy of the Product, and the
obligation of Merck to develop or market any such Product shall be delayed or
suspended so long as in Merck's opinion any such condition or event exists.

            4.2.5 Gene Exclusivity.

            4.2.5.1 [**]

            4.2.5.2 [**]

                  (a)   [**]

                  (b)   [**]

                  (c)   [**]

                  (d)   Provided that there has been [**] during the Research
Program Term and to the extent necessary and only beginning after the end of the
Research Program Term, deCODE shall have a non-exclusive right in the Joint
Patents and Joint Know-How to engage solely through its own efforts in any and
all research, development, testing and/or commercialization activities regarding
any product in the field of Obesity making use of [**] subject to its
obligations to (i) provide written notice to Merck of its intention to pursue
research and development activities using the [**], (ii) to first offer to Merck
an opportunity on commercially reasonable terms a license to develop and
commercialize any such product prior to offering such terms to a Third Party and
(iii) in the event the Parties do not enter into an agreement pursuant to
Section 4.2.5.2(d)(ii) to pay royalties to Merck in accordance with Section 5.5.

                  (e)   To the extent necessary and beginning [**]after the end
of the Research Program Term, deCODE shall have a non-exclusive right in the
Joint Patents and Joint Know-How to engage through its own efforts alone or in
collaboration with a Third Party in any and all research, development, testing
and/or commercialization activities regarding any product in the field of
Obesity making use of [**] subject to its obligations to (i) provide written
notice to Merck of its intention to pursue research and development activities
using [**] and (ii) to pay royalties to Merck in accordance with Section 5.5.

      4.3   Non-compete. The Parties acknowledge that each has unique
capabilities that it brings to the Research Program. [**]deCODE is currently
engaged in research activities in diseases outside the field of Obesity,
including, but not limited to the diseases named in Section 1.40(b)(i)-(iv) on
its own and/or in collaboration with a Third Party. For the avoidance of doubt
unless expressly stated herein, this Agreement shall not limit deCODE's ability
to conduct and commercialize such research activities outside the field of
Obesity.
<PAGE>
5.    RESEARCH FUNDING, MILESTONES AND ROYALTIES.

      5.1   Technology Access Fee. As consideration for the rights and license
granted herein by deCODE, Merck shall make a one-time payment of [**] within
thirty (30) days of the Collaboration Date of the Agreement and shall make [**]
beginning on the first anniversary of the Collaboration Date and on each
successive anniversary date ending after the such payment.

      5.2   [**].

      5.3   Funding of Research. As consideration to deCODE for the research and
development activities undertaken by deCODE pursuant to this Agreement:

            5.3.1 Merck shall pay to deCODE during the conduct of the Research
Program, for the FTEs set forth in Section 2.2, in advance on a quarterly basis
at the beginning of each Calendar Quarter, at the FTE Rate commencing upon the
Collaboration Date; and

            5.3.2 if Merck decides to develop a [**], Merck shall pay to deCODE
during the development of [**], in advance on a quarterly basis, at the
beginning of each Calendar Quarter, at the FTE Rate, commencing upon the
Steering Committee's approval of a research plan for such [**].

      5.4   Milestones. As further consideration to deCODE for the license and
other rights granted to Merck under this Agreement and the research and
development activities undertaken by deCODE under the Research Program pursuant
to this Agreement:

            5.4.1 Within thirty (30) days following successful completion of the
following research milestones reached by deCODE, Merck shall pay to deCODE:

                  5.4.1.1 [**]

                  5.4.1.2 [**]

            5.4.2 Within thirty (30) days following successful completion of the
following clinical milestones Merck shall pay to deCODE:

                  5.4.2.1 [**]

                  5.4.2.2 [**]

                  5.4.2.3 [**]

                  5.4.2.4 [**]

                  5.4.2.5 [**]

Each of the milestone payments described in this Section 5.4.2 shall be payable
only upon the initial achievement of each such milestone for the first Compound
having activity against a particular [**]. For avoidance of doubt, a Compound
having activity against more than one [**] shall not require additional
milestone payments under Section 5.4.2. All payments made to deCODE pursuant to
this Section 5.4.2 shall be non-refundable and shall not be creditable.

            5.4.3 Within thirty (30) days following successful completion of the
following development milestones with respect to [**], Merck shall pay to
deCODE:

                  5.4.3.1 [**]

                  5.4.3.2 [**]

Each of the milestone payments described in this Section 5.4.3 shall be payable
only upon the initial achievement of each such milestone for the first [**]using
a particular [**] or combinations thereof. All payments made to deCODE pursuant
to this Section 5.4.3 shall be non-refundable and shall not be creditable.

      5.5   Royalties on Product Sales. Subject to the terms and conditions of
this Agreement, Merck shall pay to deCODE royalties on a Product-by-Product and
a country-by-country basis in an amount equal to:

      (a) [**] of that portion of total annual Net Sales of Product by Merck or
      its sublicensees that is less than or equal to [**];

      (b) [**] of that portion of total annual Net Sales of Product by Merck or
      its sublicensees that is greater than [**].
<PAGE>
Royalties on each Product at the rate set forth above shall be effective as of
the date of First Commercial Sale of Product in a country and shall continue
until either (i) the expiration of the last applicable patent on such Product in
such country containing a Valid Patent Claim claiming the Compound and/or the
Product as a product per se or (ii) in those countries that do not have any
patents containing a Valid Patent Claim claiming the Compound and/or the Product
as a product per se, a royalty rate that is [**] of the applicable rate in
Sections 5.5(a) or (b) (subject first to any applicable reduction as provided
for in Section 5.10) for a period not to exceed seven (7) years from the date of
First Commercial Sale in such country, subject to the following conditions:

      (x) that only one (1) royalty shall be due with respect to the same unit
      of Product;

      (y) that no royalties shall be due upon the sale or other transfer among
      Merck, its Affiliates or sublicensees, but in such cases the royalty shall
      be due and calculated upon Merck's or its Affiliate's or its sublicensee's
      Net Sales to the first independent Third Party; and

      (z) no royalties shall accrue on the disposition of Product in reasonable
      quantities by Merck, its Affiliates or sublicenses as samples (promotion
      or otherwise) or as donations (for example, to non-profit institutions or
      government agencies for a non-commercial purpose).

      5.6   Royalty Payable Under Managed Pharmaceutical Contract. It is
understood by the Parties that Merck may sell Product(s) [**] to an independent
Third Party (such as a retailer or wholesaler) and may subsequently perform
services relating to Product(s) [**] and other products under a managed
pharmaceutical benefits contract or other similar contract. In such cases, it is
agreed by the Parties that Net Sales shall be based on the invoice price to an
independent retailer or wholesaler, as set forth in Section 1.39,
notwithstanding that Merck may receive compensation arising from the performance
of such services.

      5.7   Change in Sales Practices. The Parties acknowledge that during the
term of this Agreement, Merck's sales practices for the marketing and
distribution of Product [**] may change to the extent to which the calculation
of the payment for royalties on Net Sales may become impractical or even
impossible. In such event the Parties agree to meet and discuss in good faith
new ways of compensating deCODE to the extent currently contemplated under
Section 5.5.

      5.8   Royalties for Bulk Compound. In those cases where Merck sells bulk
Compound rather than Product in packaged form to an independent Third Party, the
royalty obligations of this Article 5 shall be applicable to the bulk Compound.

      5.9   Compulsory Licenses. If a compulsory license is granted to a Third
Party with respect to Product [**] in any country in the Territory with a
royalty rate lower than the royalty rate provided by Section 5.5, then the
royalty rate to be paid by Merck on Net Sales in that country under Section 5.5
shall be reduced to the rate paid by the compulsory licensee.

      5.10  Third Party Licenses. In the event that one or more patent licenses
from other Third Parties are required by Merck, its Affiliates and sublicensees
in order to develop, make, have made, use or sell Compound or Product [**]
(hereinafter "Third Party Patent Licenses"), [**] of any consideration actually
paid under such Third Party Patent Licenses by Merck, its Affiliates or
sublicensees, for sale of such Compound, Product [**] in a country for such
Calendar Quarter shall be creditable against the royalty payments due deCODE by
Merck with respect to the sale of such Products [**] in such country, provided
however that in no event shall the royalty rate payable to deCODE under Section
5.5 be reduced by more than [**].

      5.11  Royalties on [**]. Subject to the terms and conditions of this
Agreement, Merck shall pay to deCODE royalties on a [**]and a country-by-country
basis on the total annual Net Sales of a [**] exceeding [**] in an amount equal
to [**] of total annual Net Sales of [**] by Merck or its sublicensees. The
provisions of Sections 5.5 - 5.10 shall apply to royalties on Net Sales of [**].

      5.12  deCODE Royalties. To the extent that deCODE or its sublicensee
develops a Compound, Product [**] pursuant to the rights granted in Section
4.2.5, deCODE shall be obligated to pay Merck royalties on such sale in the
manner set forth in Section 5.5 above.

      5.13  Royalties and Milestones [**].

            5.13.1 [**]

            5.13.2 [**]

            5.13.3 [**]
<PAGE>
6.    PAYMENTS AND REPORTS.

      6.1   Payments. Beginning with the Calendar Quarter in which the First
Commercial Sale is made anywhere in the Territory and for each Calendar Quarter
thereafter, Merck shall submit a statement, Product-by-Product/[**] and
country-by-country for those Products [**] subject to a royalty obligation,
which shall set forth the amount of Net Sales during such quarter and the amount
of royalties due on such Net Sales. Each such statement shall be accompanied by
the payment due to deCODE and shall be submitted quarterly within sixty (60)
days after the end of each Calendar Quarter.

      6.2   Mode of Payment. Merck shall make all payments required under this
Agreement, net of any out-of-pocket transfer costs or fees, in U.S. Dollars.
Whenever conversion of payments from any foreign currency shall be required,
such conversion shall be at the rate of exchange and on the periodic schedule
used by Merck for its own financial reporting purposes at such time.

      6.3   Records Retention. Merck and its Affiliates and sublicensees shall
keep complete and accurate records pertaining to the sale of Products [**], for
a period of no less than two (2) Calendar Years after the year in which such
sales or costs occurred, and in sufficient detail to permit deCODE to confirm
the accuracy of the aggregate royalties provided by Merck hereunder. Upon the
expiration of twenty-four (24) months following the end of any year, the
calculation of royalties payable with respect to such year shall be binding and
conclusive upon deCODE, and Merck and its sublicensees shall be released from
any liability or accountability with respect to royalties for such year.

      6.4   Audit Request. During the term of this Agreement and for a period of
two (2) years thereafter, at the request and expense of deCODE, Merck and its
Affiliates and sublicensees shall permit an independent, certified public
accountant appointed by deCODE and reasonably acceptable to Merck, at reasonable
times and upon reasonable notice, to examine such records as may be necessary to
determine the correctness of any report or payment made for any year ending not
more than twenty-four (24) months prior to the date of such request. Results of
any such examination shall be made available to both Parties except that said
independent, certified public accountant shall verify to deCODE only the amounts
due to deCODE or such other information required to be provided to deCODE under
Section 6.1 and shall disclose no other information revealed in such audit.
deCODE shall treat all financial information subject to review under this
Section 6.4 or under any sublicense agreement in accordance with the
confidentiality provisions of this Agreement, and shall cause its accounting
firm to enter into an acceptable confidentiality agreement with Merck obligating
it to retain all such financial information in confidence pursuant to such
confidentiality agreement.

      6.5   Cost of Audit. deCODE shall bear the full cost of the performance of
any audit requested by deCODE except as hereinafter set forth. If, as a result
of any inspection of the books and records of Merck, its Affiliates or
sublicensees, it is shown that Merck's payments under this Agreement were less
than the amount which should have been paid, then Merck shall make all payments
required to be made to eliminate any discrepancy revealed by said inspection
within thirty (30) days after deCODE's demand therefor. Furthermore, if the
payments made or payable were at least [**] and less than [**] of the amount
that should have been paid during the period in question, Merck shall also
reimburse deCODE for the reasonable costs of such audit.

      6.6   Taxes. In the event that Merck is required to withhold any tax to
the tax or revenue authorities in any country in the Territory regarding any
payment to deCODE due to the laws of such country, such amount shall be deducted
from the payment to be made by Merck, and Merck shall promptly notify deCODE of
such withholding and, within a reasonable amount of time after making such
deduction, furnish deCODE with copies of any tax certificate or other
documentation evidencing such withholding. Each Party agrees to cooperate with
the other Party in claiming exemptions from such deductions or withholdings
under any agreement or treaty from time to time in effect.

      6.7   Equal Applicability. The Parties hereby agree that the provisions of
Sections 6.1 through 6.6 shall apply equally to deCODE's sale of Products [**]
pursuant to its rights under Section 4.2.5.

7.    OWNERSHIP; PATENTS.

      7.1   Ownership.

            7.1.1 deCODE shall retain all right, title and interest in and to
deCODE Generalized Technology, deCODE Genomics Data, deCODE Know-How, deCODE
Collaboration Patents and deCODE Patents, subject to the licenses granted to
Merck pursuant to Section 4.2.
<PAGE>
            7.1.2 Merck shall retain all right, title and interest in and to the
Merck Know-How, Merck Collaboration Patents and Merck Patents, subject to the
licenses granted to deCODE pursuant to Section 4.1.

            7.1.3 Subject to the licenses granted hereunder:

                  7.1.3.1 rights to Collaboration Inventions made solely by
employees and/or agents of deCODE shall belong to deCODE;

                  7.1.3.2 rights to Collaboration Inventions made solely by
employees and/or agents of Merck and/or Merck Affiliates shall belong to Merck;
and

                  7.1.3.3 rights to Collaboration Inventions which are made
jointly by employees and/or agents of deCODE and by employees and/or agents of
Merck and/or Merck Affiliates shall belong jointly to deCODE and to Merck
("Joint Patents" and "Joint Know-How") shall belong jointly to deCODE and to
Merck.

            7.1.4 Except as expressly set forth in this Agreement, the Parties
shall follow United States laws of inventorship, ownership, and patenting rights
including a Party's ability to exploit joint inventions without accounting to
each other.

      7.2   Patent Maintenance.

            7.2.1 deCODE agrees to file, prosecute and maintain in the
Territory, upon appropriate consultation with Merck, the Patents and
Collaboration Patents owned in whole or in part by deCODE and licensed to Merck
under this Agreement; provided, however, with respect to Joint Patents, Merck
shall have the first right to file patent applications for such Joint Patents.
With respect to deCODE Collaboration Patents, deCODE may elect not to file and
if so Merck shall have the right to file patent applications. In each case, the
filing Party shall give the non-filing Party an opportunity to review the text
of the application before filing, shall consult with the non-filing Party with
respect thereto, and shall supply the non-filing Party with a copy of the
application as filed, together with notice of its filing date and serial number.
Each Party shall keep the other advised of the status of the actual and
prospective patent filings and upon the request, provide advance copies of any
papers related to the filing, prosecution and maintenance of such patent
filings. With respect to all filings hereunder, the filing Party shall be
responsible for payment for all costs and expenses related to such filings.

            7.2.2 Each Party may select qualified independent patent counsel to
file and prosecute all patent applications for which it has responsibility
pursuant to Section 7.2.1. The Party making the filing shall provide copies to
the other Party of any filings made to, and written communications received
from, any patent office relating, in whole or in part, to the Patents and
Collaboration Patents.

            7.2.3 deCODE and Merck shall share all costs and expenses of filing,
prosecuting and maintaining Joint Patents.

            7.2.4 If either Party elects not to pay for: (i) the filing of a
patent application in any country in the Territory on any such Collaboration
Invention which the other Party reasonably believes is patentable, or (ii) the
further prosecution or maintenance of any such application in any country in the
Territory, or (iii) the filing of any divisional or continuing patent
application based on any such application in any country in the Territory, such
Party shall notify the other Party in a timely manner and the other Party may do
so at its own expense. In such event, such Collaboration Invention and
application in such country of the Territory shall be assigned by such Party to
the other Party, all of such assigning Party's rights in such Collaboration
Invention and application in such country in the Territory shall cease.

            7.2.5 Each Party agrees to cooperate with the other Party to execute
all lawful papers and instruments, to make all rightful oaths and declarations
and to provide consultation and assistance as may be necessary in the
preparation, prosecution, maintenance, and enforcement of all such patents.

      7.3   Patent Enforcement.

            7.3.1 If either Party learns of an infringement, unauthorized use,
misappropriation or ownership claim or threatened infringement or other such
claim (an "Infringement") by a Third Party with respect to Licensed Technology
within the Territory, such Party shall promptly notify the other Party and shall
provide such other Party with available evidence of such Infringement.

            7.3.2 Merck shall have the first right, but not the duty, to
institute patent infringement actions against Third Parties based on any
Licensed Technology in the Territory. If Merck does not secure actual cessation
of such Infringement or institute an infringement proceeding against an
offending Third Party within one hundred eighty (180) days of learning of such
Infringement, deCODE shall have the right, but not the duty, to institute such
an action with respect to any Infringement by such Third Party. The costs
<PAGE>
and expenses of any such action (including fees of attorneys and other
professionals) shall be borne by the Party instituting the action, or, if the
Parties elect to cooperate in instituting and maintaining such action, such
costs and expenses shall be borne by the Parties in such proportions as they may
agree in writing. Each Party shall execute all necessary and proper documents
and take such actions as shall be appropriate to allow the other Party to
institute and prosecute such infringement actions. Any award paid by Third
Parties as a result of such an infringement action (whether by way of settlement
or otherwise) shall be applied first to reimburse both Parties for one hundred
ten percent (110%) of all costs and expenses incurred by the Parties with
respect to such action on a pro rata basis and, if after such reimbursement any
funds shall remain from such award, Merck shall be entitled to retain same;
provided, however, that such remaining funds shall be deemed to constitute Net
Sales for purposes of this Agreement, and Merck shall be obligated to pay the
royalty due and owing under this Agreement with respect thereto.

            7.3.3 deCODE shall inform Merck of any certification regarding any
Patents and Collaboration Patents it has received pursuant to either 21 U.S.C.
Sections 355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or its successor
provisions or any similar provisions in a country in the Territory other than
the United States and shall provide Merck with a copy of such certification
within five (5) days of receipt. deCODE's and Merck's rights with respect to the
initiation and prosecution of any legal action as a result of such certification
or any recovery obtained as a result of such legal action shall be as defined in
Sections 7.3.2 hereof; provided, however, deCODE shall exercise its first right
to initiate and prosecute any action and shall inform Merck of such decision
within ten (10) days of receipt of the certification, after which time Merck
shall have the right to initiate and prosecute such action.

      7.4   Infringement Action by Third Parties. In the event of the
institution or threatened institution of any suit by a Third Party against Merck
for patent infringement involving the sale, distribution or marketing of any
Product [**] in the Territory, Merck shall promptly notify deCODE in writing of
such suit.

      7.5   Patent Term Restoration. The Parties hereto shall cooperate with
each other in obtaining patent term restoration or supplemental protection
certificates or their equivalents in any country in the Territory where
applicable to Patents and Collaboration Patents. In the event that elections
with respect to obtaining such patent term restoration are to be made, Merck
shall have the right to make the election and deCODE agrees to abide by such
election.

8     PUBLICATION; CONFIDENTIALITY.

      8.1   Notification. Both Parties recognize that each may wish to publish
the results of their work relating to the subject matter of this Agreement.
However, both Parties also recognize the importance of acquiring patent
protection. At least forty-five (45) days before a manuscript is to be submitted
to a publisher, the publishing Party will provide the Steering Committee with a
copy of the manuscript. If the publishing Party wishes to make an oral
presentation, it will provide the Steering Committee with a summary of such
presentation at least thirty (30) business days before such oral presentation
and, if an abstract is to be published, thirty (30) business days before such
abstract is to be submitted. Any manuscript, oral presentation, including any
question period, or abstract shall not include any Proprietary Information
unless both Parties otherwise mutually agree in writing in advance of such
publication or presentation.

      8.2   Review. The non-publishing Party ("reviewing Party") will review the
manuscript, abstract, text or any other material provided under Section 8.1 to
determine whether patentable subject matter is disclosed. The reviewing Party
will notify the publishing Party within thirty (30) days of receipt of the
proposed publication (or within five (5) business days in the case of abstracts)
if the reviewing Party, in good faith, determines that patentable subject matter
is or may be disclosed, or if the reviewing Party, in good faith, believes
Proprietary Information is or may be disclosed. If it is determined by the
reviewing Party that patent applications should be filed, the publishing Party
shall delay its publication or presentation for a period not to exceed ninety
(90) days from the reviewing Party's receipt of the proposed publication or
presentation to allow time for the filing of patent applications covering
patentable subject matter. In the event that the delay needed to complete the
filing of any necessary patent application will exceed the ninety (90) day
period, the reviewing Party will discuss the need for obtaining an extension of
the publication delay beyond the ninety (90)-day period. If it is determined in
good faith by the reviewing Party that Proprietary Information is being
disclosed, the Parties will consult in good faith to arrive at an agreement on
mutually acceptable modifications to the proposed publication or presentation to
avoid such disclosure.

      8.3   Confidentiality; Exceptions. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, during the term of this Agreement and for ten (10) years thereafter, the
receiving Party, its Affiliates, its licensees and its sublicensees shall, and
shall ensure that their
<PAGE>
respective employees, officers and directors shall, keep completely confidential
and not publish or otherwise disclose and not use for any purpose any
information furnished to it or them by the other Party, its Affiliates, its
licensees or its sublicensees or developed under or in connection with this
Agreement ("Proprietary Information"). The existence of this Agreement, its
included attachments and their contents are Proprietary Information of both
Parties. The obligations of confidentiality and non-use shall not apply to
information for which it can be established by the receiving Party by competent
proof that such information:

            (i)   was already known to the receiving Party, other than under an
                  obligation of confidentiality, at the time of disclosure by
                  the other Party; or

            (ii)  was generally available to the public or otherwise part of the
                  public domain at the time of its disclosure to the receiving
                  Party; or

            (iii) became generally available to the public or was otherwise part
                  of the public domain after its disclosure and other than
                  through any act or omission of the receiving Party in breach
                  of this Agreement; or

            (iv)  was disclosed to the receiving Party, other than under an
                  obligation of confidentiality, by a Third Party who had no
                  obligation to the disclosing Party not to disclose such
                  information to others; or

            (v)   is required to be submitted by the receiving Party to
                  governmental authorities to facilitate the issuance of any
                  necessary registrations or filings in connection with
                  developing the Product [**], provided that reasonable measures
                  shall be taken to assure confidential treatment of such
                  information.

Notwithstanding the obligations of confidentiality and prohibitions on use, it
shall not be a breach of a Party's obligations under this Section 8.3 to
disclose Proprietary Information:

            (i)   to Third Parties under confidentiality provisions at least as
                  stringent as those in this Agreement, for consulting,
                  manufacturing development, manufacturing, external testing,
                  marketing trials and to Third Parties who are sublicensees or
                  other development/marketing partners of the Parties with
                  respect to any of the subject matter of this Agreement; or

            (ii)  in compliance with applicable laws or regulations or order by
                  a court or other regulatory body having competent
                  jurisdiction; provided that if a Party is required to make any
                  such disclosure of the other Party's Proprietary Information
                  such Party will, except where impracticable for necessary
                  disclosures (for example, to physicians conducting studies or
                  to health authorities), give reasonable advance notice to the
                  other Party of such disclosure requirement and, except to the
                  extent inappropriate in the case of patent applications, will
                  assist the disclosing Party in its efforts to secure
                  confidential treatment of such Proprietary Information
                  required to be disclosed.

      8.4   Limitations on Use. Each Party shall use, and cause each of its
Affiliates, its licensees and its sublicensees to use, any Proprietary
Information obtained by such Party from the other Party, its Affiliates, its
licensees or its sublicensees, pursuant to this Agreement or otherwise, solely
in connection with the activities or transactions contemplated hereby.

      8.5   Remedies. Each Party shall be entitled to seek, in addition to any
other right or remedy it may have, at law or in equity, an injunction enjoining
or restraining the other Party, its Affiliates, its licensees and/or its
sublicensees from any violation or threatened violation of this Article 8.

9.    INDEMNIFICATION; INSURANCE; LIABILITY.

      9.1   Indemnification.

            9.1.1 Indemnification by Merck. Merck shall indemnify and hold
harmless deCODE, its Affiliates, any present or future parent or subsidiary of
them, and their respective officers, directors, employees, agents and Affiliates
(collectively in this Section 9.1 referred to as "deCODE") from and against any
and all losses, liabilities, damages, costs and expenses whatsoever, including,
but not limited to, reasonable counsel fees, actually incurred by deCODE in
defending against any litigation or any claim whatsoever by a Third Party and
any and all other reasonable expenses whatsoever incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any
claim, and any and all amounts reasonably paid in settlement of any claim or
litigation, any settlement payments (which shall first
<PAGE>
be subject to Merck's prior written consent, not to be unreasonably withheld)
(collectively in this section referred to as "deCODE Losses"), provided such
deCODE Losses arise solely out of (i) the breach of any representation,
warranty, or covenant of Merck under Article 10, (ii) the promotion, marketing,
distribution and sale, whether directly or through distributors, of the Products
[**], or (iii) the negligence, recklessness or wrongful intentional acts or
omissions of Merck, its Affiliates or its sublicensees, if any, or their
respective directors, officers, employees or agents, in connection with the
performance by Merck under this Agreement; and provided further, that this
obligation by Merck shall not apply in the event that such deCODE Losses are
attributable in any manner to any intentional act or gross negligence, willful
or otherwise, of deCODE.

            9.1.2 Indemnification by deCODE. deCODE shall indemnify and hold
harmless Merck, its Affiliates, any present or future parent or subsidiary of
them, and their respective officers, directors, employees, agents and Affiliates
(collectively in this Section 9.1.2 referred to as "Merck") from and against any
and all losses, liabilities, damages, costs and expenses whatsoever, including,
but not limited to, reasonable counsel fees, actually incurred by Merck in
defending against any litigation or any claim whatsoever by a Third Party and
any and all other reasonable expenses whatsoever incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any
claim, and any and all amounts reasonably paid in settlement of any claim or
litigation, any settlement payments (which shall first be subject to deCODE'
prior written consent, not to be unreasonably withheld) (collectively in this
section referred to as "Merck Losses"), provided such Merck Losses arise solely
out of (i) the breach of any representation, warranty, or covenant of deCODE
under Article 10, (ii) the promotion, marketing, distribution and sale, whether
directly or through distributors, of the Products [**] by deCODE or (iii) the
negligence, recklessness or wrongful intentional acts or omissions of deCODE,
its Affiliates or its sublicensees, if any, or their respective directors,
officers, employees or agents, in connection with the performance by deCODE
under this Agreement; and provided further, that this obligation by deCODE shall
not apply in the event that such Merck Losses are attributable in any manner to
any intentional act or gross negligence, willful or otherwise, of Merck.

            9.1.3 Notice Of Claim Of Indemnification - Third Party Claims

                  9.1.3.1 A Party (the "Indemnified Party") seeking
indemnification under this Agreement for a claim made against it by a Third
Party ("Third Party Claim") shall notify the other Party (the "Indemnifying
Party") in writing of the Third Party Claim within thirty (30) days after
receipt by the Indemnified Party of written notice of the Third Party Claim;
however, failure to give such notification shall not affect the indemnification
provided under this Agreement, except to the extent the Indemnifying Party shall
actually in a material manner have been prejudiced by the failure. Thereafter,
the Indemnified Party shall deliver to the Indemnifying Party, promptly after
the Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the Third
Party Claim.

                  9.1.3.2 The Indemnifying Party shall have the right, within
thirty (30) days after being so notified, to assume the defense of such Third
Party Claim with counsel reasonably satisfactory to the Indemnified Party. In
any such proceeding the defense of which the Indemnifying Party shall have so
assumed, the Indemnified Party shall have the right to participate therein and
retain its own counsel (without otherwise affecting the rights of the Parties
under Section 9.1) at its own expense unless (i) the Indemnified Party and the
Indemnifying Party shall have mutually agreed to the retention of such counsel,
(ii) the Indemnified Party shall have reasonably concluded that there may be one
or more legal defenses available to it which are different from or additional to
those available to the Indemnifying Party, or (iii) the named parties to any
such proceeding (including the impleaded parties) include both the Indemnifying
Party and the Indemnified Party, and representation of both Parties by the same
counsel would be inappropriate in the opinion of the Indemnified Party's counsel
due to actual or potential differing interests between them; in any such case,
one firm of attorneys separate from the Indemnifying Party's counsel may be
retained to represent the Indemnified Parties at the Indemnifying Party's
expense. Any settlement of such a Third Party Claim, the defense of which has
been assumed by the Indemnifying Party, shall not be entered into by the
Indemnifying Party without prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld.

                  9.1.3.3 With respect to all Third Party Claims, the
Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party in connection with any Third Party Claims and the defense or
compromise thereof. Such cooperation shall include the retention and (upon the
Indemnifying Party's request) the provision to the Indemnifying Party of records
and information reasonably relevant to the Third Party Claim, making employees
available on a mutually convenient basis to provide additional information, and
explanation of any material provided under this Agreement. If the Indemnifying
Party shall have assumed the defense of a Third Party Claim, the Indemnified
Party shall not, without first waiving the indemnity as to such claim, admit any
liability with respect to, or settle, compromise, or discharge, the Third
<PAGE>
Party Claim, without the Indemnifying Party's prior written consent; provided
that admissions of facts which a Party may reasonably be required to make shall
not be deemed to be admissions of liability.

            9.1.4 Cooperation. The Parties shall cooperate with each other with
respect to resolving any claim or liability with respect to which one Party is
obligated to indemnify the other Party under this Agreement, including, without
limitation, by taking reasonable efforts to mitigate or resolve any such claim
or liability.

      9.2   Insurance. Each Party shall maintain adequate insurance against
liability and other risks associated with its activities contemplated by this
Agreement, including but not limited to its clinical trials and its
indemnification obligations herein, in such amounts and on such terms as are
customary in the industry for the activities to be conducted by it under this
Agreement and shall name the other Party as an additional insured in such
insurance policy. Each Party shall furnish to the other Party evidence of such
insurance, upon request.

      9.3   Limitation on Liability. NOTWITHSTANDING ANYTHING ELSE IN THIS
AGREEMENT TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR
ANY OTHER PERSON OR ENTITY FOR ANY INDIRECT, SPECIAL PUNITIVE, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES, LOSS OF DATA, LOSS OF PROFITS, OR LOSS OF GOOD WILL (EVEN
IF SUCH PARTY, ITS AFFILIATES AND/OR AUTHORIZED REPRESENTATIVE(S) THEREOF HAVE
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES). TO THE EXTENT THE FOREGOING
LIMITATION OF LIABILITY IS PROHIBITED BY APPLICABLE LAW, EACH PARTY'S SOLE
OBLIGATION FOR SUCH AFOREMENTIONED DAMAGES TO THE OTHER PARTY SHALL BE LIMITED
TO [**].

10.   REPRESENTATIONS AND WARRANTIES

      10.1  Representations and Warranties of Both Parties. Each Party
represents and warrants to the other Party, as of the Effective Date, that:

            10.1.1 such Party is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation and has full
corporate power and authority to enter into this Agreement and to carry out the
provisions hereof;

            10.1.2 such Party is free to enter into this Agreement and in so
doing, such Party will not violate any other agreement to which it is a party;

            10.1.3 such Party has taken all corporate action necessary to
authorize the execution and delivery of this Agreement and the performance of
its obligations under this Agreement;

            10.1.4 no person or entity has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or valid claim
against or upon such Party for any commission, fee or other compensation as a
finder or broker because of any act or omission by such Party or any of its
agents; and

            10.1.5 such Party has not entered into any agreement with any Third
Party which is in conflict with the rights granted to the other Party pursuant
to this Agreement.

      10.2  Representations and Warranties of deCODE. deCODE represents and
warrants to Merck, as of the Effective Date, that:

            10.2.1 deCODE is the owner of, or has exclusive rights to, all of
the deCODE Patents in existence on the Effective Date, and has the exclusive
right to grant the licenses granted under this Agreement therefor;

            10.2.2 to deCODE's knowledge, deCODE has exclusive rights to all of
the deCODE Know-How in existence on the Effective Date and the exclusive right
to grant licenses with respect thereto;

            10.2.3 to deCODE's knowledge, Merck's fulfillment of its obligations
under this Agreement does not infringe upon or conflict with any patent or other
proprietary rights in the Territory of any Third Party,
<PAGE>
            10.2.4 there are no patents or patent applications that deCODE owns
or controls in the Territory which could preclude Merck 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 Merck, and;

            10.2.5 deCODE has obtained and will obtain informed consent from all
human subjects from whom samples used in the Research Program have been or will
be obtained according to the informed consent form agreed to between Merck and
deCODE.

      10.3  Representations and Warranties of Merck. Merck represents and
warrants to deCODE, as of the Effective Date, that:

            10.3.1 Merck or Rosetta is the owner of, or has exclusive rights to,
all of the Merck Patents in existence on the Effective Date, and has the
exclusive right to grant the licenses granted under this Agreement therefor;

            10.3.2 to Merck's knowledge, Merck or Rosetta has exclusive rights
to all of the Merck Know-How in existence on the Effective Date and the
exclusive right to grant licenses with respect thereto;

            10.3.3 to Merck's knowledge, deCODE's fulfillment of its obligations
under this Agreement does not infringe upon or conflict with any patent or other
proprietary rights in the Territory of any Third Party; and

            10.3.4 there are no patents or patent applications that Merck owns
or controls in the Territory which could preclude deCODE from exercising its
rights or carrying out its obligations under this Agreement and which Merck does
not have the right to license or otherwise make available to deCODE.

11.   TERM; TERMINATION.

      11.1  Term. This Agreement shall become effective as of the Effective Date
and, unless earlier terminated pursuant to the other provisions of this Article
11, shall expire upon the expiration of any and all payment obligations under
Article 5. Upon expiration of this Agreement due to expiration of all payment
obligations hereunder, licenses granted to Merck by deCODE pursuant to Section
4.2 shall become fully paid-up, perpetual licenses.

      11.2  Early Termination during the Research Program Term. In the event
that the Research Program has failed to achieve the goals set forth in the
Schedule 2.1, Merck shall have the option, in its sole discretion, to terminate
the Agreement on or after the second (2nd) anniversary of the Collaboration
Date, upon not less than thirty (30) days' prior written notice to deCODE.

      11.3  Termination by Merck. Notwithstanding anything contained herein to
the contrary, Merck shall have the right to terminate this Agreement at any time
in its sole discretion by giving ninety (90) days advance written notice to
deCODE.

      11.4  Termination for Cause. Either Party (the "Non-breaching Party") may,
without prejudice to any other remedies available to it at law or in equity,
terminate this Agreement in the event the other Party (the "Breaching Party")
shall have materially breached or defaulted in the performance of any of its
material obligations hereunder, and such default shall have continued for ninety
(90) days after written notice thereof was provided to the Breaching Party by
the Non-breaching Party (or, if such default cannot be cured within such ninety
(90) day period, if the breaching Party does not commence and diligently
continue good faith efforts to cure such default during such ninety (90) day
period and thereafter). Any such termination shall become effective
automatically at the end of such ninety (90) day period unless the Breaching
Party has cured any such breach or default prior to the expiration of such
ninety (90) day period (or, if such default cannot be cured within such ninety
(90) day period, if the Breaching Party has not commenced or diligently
continued good faith efforts to cure such default). In the event of a good faith
dispute with respect to the existence of a material breach, the ninety (90) day
cure period shall extend until such time as the dispute is resolved pursuant to
Section 13.14. The right of either Party to terminate this Agreement as provided
in this Section 11.4 shall not be affected in any way by such Party's waiver or
failure to take action with respect to any previous default.
<PAGE>
      11.5  Effect of Expiration or Termination.

            11.5.1 Effect of Termination during the Research Program Term. Upon
the termination of the Research Program Term pursuant to Sections 2.4 or 11.2,
deCODE's obligations as set forth in Section 2.2 shall cease and Merck's
obligations set forth in Sections 5.1 and 5.3 shall cease.

            11.5.2 Effect of Termination on License.

            (a) In the event Merck terminates this Agreement under Section 11.4,
Merck's licenses pursuant to Section 4.2 shall become fully paid-up, perpetual
licenses and deCODE shall, within thirty (30) days after such termination return
or cause to be returned to Merck all Products, Compounds[**], Know-How or other
substances or compositions delivered or provided by Merck, as well as any other
material provided by Merck in any medium. In the event that deCODE terminates
this Agreement under Section 11.4, Merck's licenses pursuant to Section 4.2
shall terminate as of such termination date and Merck shall, within thirty (30)
days after such termination, return or cause to be returned to deCODE all
Products, Compounds[**], Know-How or other substances or compositions delivered
or provided by deCODE, as well as any other material provided by deCODE in any
medium.

            (b) In the event Merck terminates this Agreement under Section 11.3,
the rights and obligations hereunder, including any payment obligations not due
and owing as of the termination date shall terminate; provided however, if
termination occurs prior to the end of the Research Program Term Merck shall
make all remaining payments due under Section 5.3 and provided further that
rights granted to deCODE by Merck pursuant to Section 4.2.5.2 shall not be
subject to termination under Section 11.3 and such rights and obligations
related thereto shall survive with respect to those [**] that deCODE has given
notice to Merck under Section 4.2.5.2 within ninety (90) days of receiving
notice of termination under Section 11.3. If Merck has paid a milestone payment
under Section 5.4.1 in respect to a [**], then Merck shall have the option to
retain the exclusive licenses granted with respect to such genes, provided that
Merck's obligations under Sections 2.3 and 4.2.3 and Article 5 shall survive the
termination of the Agreement. In any event Merck shall retain perpetual
non-exclusive rights in licenses granted under Section 4.2.

            (c) In the event this Agreement is terminated due to the rejection
of this Agreement by or on behalf of deCODE under Section 365 of the United
States Bankruptcy Code (the "Code") or similar legal provisions or procedures in
countries other than the United States, all licenses and rights to licenses
granted under or pursuant to this Agreement by deCODE to Merck are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the Code, licenses
of rights to "intellectual property" as defined under Section 101(35A) of the
Code. The Parties agree that Merck, as a licensee of such rights under this
Agreement, shall retain and may fully exercise all of its rights and elections
under the Code, and that upon commencement of a bankruptcy proceeding by or
against deCODE under the Code, Merck shall be entitled to a complete duplicate
of or complete access to (as Merck deems appropriate), any such intellectual
property and all embodiments of such intellectual property. Such intellectual
property and all embodiments thereof shall be promptly delivered to Merck (i)
upon any such commencement of a bankruptcy proceeding upon written request
therefore by Merck, unless deCODE elects to continue to perform all of its
obligations under this Agreement or (ii) if not delivered under (i) above, upon
the rejection of this Agreement by or on behalf of deCODE upon written request
therefore by Merck.

The foregoing is without prejudice to any rights Merck may have arising under
the Code or other applicable law.

            11.5.3 Effect of Termination. Expiration or termination of the
Agreement shall not relieve the Parties of any obligation accruing prior to such
expiration or termination, and the provisions of Article 8 shall survive the
expiration or termination of the Agreement and shall continue in effect for ten
(10) years. Any expiration or early termination of this Agreement shall be
without prejudice to the rights of either Party against the other accrued or
accruing under this Agreement prior to termination, including the obligation to
pay applicable royalties for Product(s), [**] Compound sold prior to such
termination.

      11.6  Surviving Obligations. All of the Parties' rights and obligations
under:

            Section 2.6 (Record Keeping),
<PAGE>
            Article 6 (Payments and Reports)

            Sections 7.1 (Intellectual Party Ownership) and 7.3 (Patent
            Enforcement)(solely with respect to actions commenced before the
            effective date of termination of this Agreement)

            Article 8 (Publication; Confidentiality)

            Article 9 (Indemnification; Insurance; Liability)

            Article 13 (Miscellaneous)

and any other provisions that by their nature should continue shall survive
termination, relinquishment or expiration of this Agreement.

12.   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; labor disturbances;
epidemic; and failure of public utilities or common carriers. In such event
deCODE or Merck, 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. To the
extent possible, each Party shall use reasonable efforts to minimize the
duration of any force majeure.

13.   MISCELLANEOUS.

      13.1  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. No Party shall incur any debts or make
any commitments for the other, except to the extent, if at all, specifically
provided herein.

      13.2  Assignment. Neither Party shall be entitled to assign its rights or
delegate its obligations hereunder without the express written consent of the
other Party hereto, except that (i) Merck may assign its rights and transfer its
duties hereunder to an Affiliate or to any assignee of all or substantially all
of its business (or that portion thereof to which this Agreement relates) or in
the event of Merck's merger, consolidation or involvement in a similar
transaction and (ii) deCODE may assign its rights and transfer its duties
hereunder to an Affiliate or to any assignee of all or substantially all of its
business (or that portion thereof to which this Agreement relates) or in the
event of deCODE's merger, consolidation or involvement in a similar transaction,
provided however, during the Research Program Term deCODE may not assign its
rights and obligations under the Agreement without Merck's written consent which
shall not be unreasonably withheld. It shall be reasonable for Merck to withhold
consent of an assignment to a company in the pharmaceutical business sector. No
assignment and transfer shall be valid or effective unless done in accordance
with this Section 13.2 and unless and until the assignee/transferee shall agree
in writing to be bound by the provisions of this Agreement.

      13.3  [**]

      13.4  Books and Records. Any books and records to be maintained under this
Agreement by a Party or its Affiliates or sublicensees shall be maintained in
accordance with United States generally accepted accounting principles,
consistently applied.

      13.5  Further Actions. Each Party shall execute, acknowledge and deliver
such further instruments, and do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
<PAGE>
      13.6  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), facsimile transmission (receipt verified), 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:

      In the case of deCODE and deCODE Parent, to:

            deCODE genetics, ehf.
            Sturlugata 8, IS-101
            Reykjavik, Iceland
            Attention:        President
            Facsimile No.: +354 570 1901

            With a copy to:

            deCODE genetics, ehf
            Sturlugata 8, IS 101
            Reykjavik, Iceland
            Attention:  Legal Department
            Facsimile No.: +354 570 1981

      In the case of Merck, to:

            Merck & Co., Inc.
            One Merck Drive
            P.O. Box 100
            Whitehouse Station, NJ  08889-0100
            Attention: Chief Licensing Officer
            Telephone: (908) 423-1000
            Facsimile: (908) 735-1202

            With a copy to:

            Merck & Co., Inc.
            One Merck Drive
            P.O. Box 100
            Whitehouse Station, NJ  08889-0100
            Attention: Corporate Secretary
            Telephone: (908) 423-1000
            Facsimile: (908) 735-1224

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 or by facsimile
transmission, the date of delivery shall be deemed to be the date on which such
notice or request was given. 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. If sent by certified mail, the date
of delivery shall be deemed to be the third (3rd) business day after such notice
or request was deposited with the U.S. Postal Service.

      13.7  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, trademark or logos of
the other Party for any purpose in connection with the performance of this
Agreement.

      13.8  Public Announcements; Required Disclosures. Neither Party shall make
any public announcement concerning this Agreement or the subject matter hereof
without the prior written consent of the other Party, which shall not be
unreasonably withheld, provided that it shall not be unreasonable for a Party to
withhold consent with respect to any public announcement containing any of such
Party's Proprietary Information. Nothing in this Agreement shall prevent either
Party from issuing statements that such Party determines to be 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 such Party are traded); provided, however, that, the
disclosing Party shall provide the other Party with a copy of the proposed text
of such statements sufficiently in advance of the scheduled release thereof to
<PAGE>
afford such other Party a reasonable opportunity to review and comment upon the
proposed text and the disclosing Party shall take all reasonable steps to limit
such disclosure solely to fulfill its legal obligations.

      13.9  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.

      13.10 Compliance with Law. Nothing in this Agreement shall be deemed to
permit a Party to export, reexport or otherwise transfer any Product [**] sold
under this Agreement without compliance with applicable laws.

      13.11 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.

      13.12 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.

      13.13 Governing Law; English Original Controlling. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without regard to conflicts of law principles, except for matters that affect
any United States patent application or patent, which shall be determined under
the patent laws of the United States of America. The English original of this
Agreement shall prevail over any translation hereof.

      13.14 Arbitration.

            13.14.1 The Parties shall negotiate in good faith and use reasonable
efforts to settle any dispute, controversy or claim arising from or related to
this Agreement or the breach thereof. If the Parties do not fully settle, and a
Party wishes to pursue the matter, each such dispute, controversy or claim that
is not an "Excluded Claim" shall be finally resolved by binding arbitration in
accordance with the Commercial Arbitration Rules and Supplementary Procedures
for Large Complex Disputes of the American Arbitration Association ("AAA"), and
judgment on the arbitration award may be entered in any court having
jurisdiction thereof. The place of arbitration of any dispute shall be Boston,
Massachusetts. The arbitration shall be conducted by a panel of three persons
experienced in the pharmaceutical business: within thirty (30) days after
initiation of arbitration, each Party shall select one person to act as
arbitrator and the two Party-selected arbitrators shall select a third
arbitrator within thirty (30) days of their appointment. If the arbitrators
selected by the Parties are unable or fail to agree upon the third arbitrator,
the third arbitrator shall be appointed by the AAA. As used in this Section
13.14.1, the term "Excluded Claim" shall mean a dispute, controversy or claim
that concerns (a) the validity or infringement of a patent, trademark or
copyright; or (b) any antitrust, anti-monopoly or competition law or regulation,
whether or not statutory.

            13.14.2 Each Party shall pay its own expenses of arbitration, and
the expenses of the arbitrators shall be equally shared unless the arbitrators
assess as part of their award all or any part of the arbitration expenses of one
Party (including reasonable attorneys' fees) against the other Party.

            13.14.3 This Section 13.14 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.

      13.15 Entire Agreement. This Agreement together with the schedules and
exhibits hereto set forth the entire agreement and understanding between the
Parties as to the subject matter hereof and merges all prior discussions and
negotiations between them, 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 expressly 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.

      13.16 Parties in Interest. All of 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.

      13.17 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.
<PAGE>
      13.18 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.
<PAGE>
      IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed by its duly authorized representative as of the day and year first
above written.

                                            deCODE genetics, ehf.

                                                /s/ Kari Stefansson
                                            By:_________________________________

                                               Name: Kari Stefansson

                                               Title: President & CEO

                                               Date: 23 September 2002

                                            deCODE genetics, Inc.

                                                /s/ Kari Stefansson
                                            By:_________________________________

                                               Name: Kari Stefansson

                                               Title: President & CEO

                                               Date: 23 September 2002

                                            Merck & Co., Inc.

                                                /s/ Raymond V. Gilmartin
                                            By:_________________________________

                                               Name: Raymond V. Gilmartin

                                               Title: Chairman, President & CEO

                                               Date: September 26, 2002
<PAGE>
                                  SCHEDULE 3.1

                   INITIAL MEMBERS OF THE STEERING COMMITTEE

      DECODE:

            [**]

            [**]

      MERCK:

            [**]

            [**]

      INITIAL CHAIRPERSON:

            TBD

      INITIAL SECRETARY:

            TBD
<PAGE>
                                  SCHEDULE 2.1

                                 RESEARCH PLAN

[**]

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