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Employment Agreement - deCODE genetics Ltd. and Einar Stefansson

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                            [deCODE genetics - LOGO]

                              EMPLOYMENT AGREEMENT

deCODE genetics Ltd. (Islensk erfoagreining ehf.), State Registration No.
691295-3549, of Lynghals 10, Reykjavik ("the employer"), on the one hand, and

         Einar Stefansson                                 190552-2769
-------------------------------                    ---------------------------
         (employee name)                             (identification number)

whose address is  Fjaroarasi 13, 110 Reykjavik  (" the employee") on the other

enter into the following employment agreement:

      1. FIELD OF WORK.

      The employee is hired to work for the employer as a Vice President of the
      Database Division of IE. In his work he will participate in the management
      of the company and will, as such, [influence] its strategic planning and

      The workplace is the employer's base of operations at Hlioarsmara 15,
      Kopavogur and/or Lynghals 1, Reykjavik. If the employer's base of
      operations in Reykjavik changes or their number increases, the work place
      of the employee may change accordingly.

      The employee will work under the supervision of the CEO.

      The employer reserves the right to make changes in the employee's projects
      or supervision if the employer deems this necessary.


      The employee began work for the employer on  1 September 2000

      Einar Stefansson (ES) and IE agree that IE may not terminate the
      Employment Agreement with ES for two years, counting from the first day of
      employment. At the end of said period the mutual notice period for
      termination shall be 6 months.
<PAGE>   3
      ES, on the other hand, may terminate this agreement with a 6 month notice
      period from the first day of his employment.


      The employee pledges to do the work he undertakes with a sense of duty and
      diligence. While working for the employer, the employee may not, unless
      with the employer's written consent, work at other jobs or participate in
      other employment that competes with the employer's operations, or that can
      conflict in some other way with the employee's work for the employer.

      It is agreed that ES shall continue to hold his position as professor at
      the University of Iceland, which is in part sponsored by IE in accordance
      with a special agreement on the said position between the University of
      Iceland and IE which agreement shall form an appendix to this Agreement.

      ES shall also be permitted to continue to work as a physician and on
      genetic research on eye diseases. To begin with ES may spend between half
      to one full day per week for the said work with no reduction of his wages
      from IE. This research relates to patients at the Centre for Eye Diseases
      on Oldugata 17.

      It is agreed that during his term of employment ES will act as a contact
      person between IE and the University of Iceland on behalf of IE.

      ES shall be authorised to hold lectures in his special field in Icelandic
      and foreign institutions and at conferences but shall ensure that the
      timing of such lectures does not interfere with his duties at the company.

      Upon termination of his employment, the employee has a duty to turn over
      all documents and identification papers in his custody that pertain to the


      The employee's fixed working hours are from 9 o'clock to 5 o'clock Monday
      through Friday, unless otherwise agreed. The employee shall also work
      other hours, if necessary, depending on to what extent the nature of his
      projects so require, unless urgent circumstances prevent his doing so. The
      days off are the holidays of the National Church, the First Day of Summer,
      1 May, 17 June and the first Monday in August.

      If an urgent necessity comes up, the employer can call the employee to
      work at any time outside normal working hours.

      During the period of employment, the employer and employee can agree on an
      arrangement of working hours other than the one above.

<PAGE>   4
      5. WAGES

      The employee's fixed monthly wages are ISK 1,000,000.- . Payment for work
      done outside regular working hours and for any kind of work-related tasks
      is included in the above monthly wages.

      Wages shall be paid monthly on the last working day of each month.

      The wages stated above are complete remuneration for the work done by the

      Wages and other wage terms shall be re-examined every year, taking into
      consideration general wage changes and work results.

      The rights of the employee to vacation and maternity leave will be
      according to law.

      In addition to the above fixed wage ES shall be paid a performance-linked
      wage bonus which shall be based on his performance in the job and the
      general performance of the company, according to a decision and strategic
      targets established by the Compensation Committee, which is a committee
      elected by the Board of Directors of deCODE genetics, Inc. The aim is that
      such wage supplement should be 20-40% of the fixed wages based on the
      above criteria.

      When the employee has earned a full right to vacation by working for the
      employer in the last vacation year, upon beginning his vacation or no
      later than 15 August each year, he shall receive a special lump-sum
      payment. This vacation supplement, based on full-time employment in the
      last vacation year, shall be ISK 8,400, or a proportional amount of this
      sum if part-time work or a shorter period of work is involved. Vacation
      pay is not paid for vacation supplements.

      The employee pays 4% of his total wages as a premium into a pension fund
      of his own choice, and the employer pays 6% of the same amount.


      When the employee has an accident at work, the employer pays for getting
      the employee home or to hospital and, for each instance, reimburses him
      for up to four weeks of normal, out-of-pocket medical expenses that
      district health insurance or Social Security does not pay.

      In each instance of an accident at work or a work-related illness caused
      on the job or by it, or occurring during transport to and from the
      workplace, the employer pays up to three months' wages according to the
      employee's wage scale in effect when the accident or illness occurs,
      provided that per diem paid for these days by the State Social Security
      Institute and/or the district health insurance is paid to the employer.
      The provisions of this paragraph do not prejudice any additional rights
      the employee may have under the law.

      Wage payments to the employee during absences due to illness shall be
      arranged the first year so that two days are paid for each month worked.
      When the employee has worked for the employer for one year or longer, wage
      payments during absences due to illness shall be arranged as follows:
      After one year, two months for every 12

<PAGE>   5
      months. After five years of work for the employer, four months for every
      12 months, and after 10 years working for the employer, six months for
      every 12 months.

      If an employee becomes ill and for this reason cannot go to work, he shall
      immediately notify his superior, who decides whether a health certificate
      shall be provided. The certificate shall be from a consulting physician if
      this is requested. The employer shall pay for the health certificate if
      the above conditions are met.

      After the first month at work a parent shall, without any deduction from
      wages, be entitled to spend a total of seven workdays of every 12-month
      period in ministering to his sick children under the age of 13, provided
      that other care cannot be procured.

      The employer is obligated to insure the employee against death and chronic
      or temporary disability caused be an accident while at work or while
      travelling a normal route between his home and the workplace.

      If, because of his work, the employee has accommodations away from his
      home, the accommodations replace his home, but the insurance also covers
      normal trips between his home and these accommodations.

      Compensation for death will be (as of 1 Jan. 1998):

      1. If the deceased was not married and is not survived by a child and has
         not been supporting an aged parent 67 years of age or older, ISK

      2. If the deceased was not married but is survived by a child (children)
         under 17 and/or has provably supported an aged parent or parents (aged
         67 or older), ISK 1,083,500.

      3. If the deceased was married, the compensation to the spouse is ISK

      4. If the deceased is survived by a child (adopted child, foster child)
         under 17 years of age, for each child ISK 284,800.

      5. Compensation is paid under only one of the sub-paragraphs, no. 1, 2
         or 3.

      In addition to sub-paragraphs 2 and 3, compensation can be paid under
      sub-paragraph 4.

      The beneficiaries of death compensation provisions are:

      1) Legal heirs.
      2) Relevant parties equally
      3) Surviving spouse.
      4) Relevant children, but paid to surviving spouse if he/she is one of the
         parents, or to an executor and/or trustee.

      Compensation for chronic disability is paid in proportion to the insurance
      amount of ISK 2,589,000 so that each degree of disability from 26% to 50%
      is counted double, and each degree of disability from 51% to 100% works

      For temporary disability, per diem of ISK 5,884 is paid per week four
      weeks after the accident occurred and until the injured person becomes
      able to work, although for no more than 48 weeks. ISK 785 per week are
      added to the per diem for each child under the age of 17 that the injured
      person is supporting.

<PAGE>   6
      The amounts of insurance will be reconsidered twice a year, 1 January and
      1 July, and increased in correspondence with changes in the cost-of-living

      The insurance goes into force as soon as the employee begins work and
      expires as soon as he stops working.

      The policy terms of the insurance shall be the general policy terms in
      force for wage earner job accident insurance at the Association of
      Icelandic Insurance Companies when this employment agreement is signed.

      If the employer becomes liable for damages in respect of the employee,
      accident compensation and per diem paid to the employee under provisions
      of this employment agreement shall be fully deductible from any damages
      that the employer may be made to pay. While the payment of wages
      continues, per diem is paid to the employer.


      The employee fills a job of responsibility and trust for the employer. He
      shall maintain the utmost confidentiality about whatever he has become
      aware of in his job regarding the employer and the employer's customers,
      and which can damage the interests of these parties. Due to the nature of
      his work, the employee is obligated to handle all information, documents
      and data to which he has access in his work with the utmost
      confidentiality. This confidentiality continues in force after termination
      of employment.

      The substance of this employment agreement, as well as any other
      agreements that the employer may enter into with the employee, are
      confidential. Particular emphasis is placed on the employee maintaining
      confidentiality with regard to wages and wage terms.

      While the employee works for the employer and for one (1) year thereafter,
      the employee shall not encourage any of the employer's employees to quit
      working for the employer.

      If the employee quits working for the employer, he obligates himself not
      to accept work either directly or indirectly at competing companies or
      other competing parties, or to start up or join such operations for at
      least two years after termination of employment.


      In parallel with the signing of this employment contract, the employer and
      employee enter into an agreement on proprietary information and
      inventions. That agreement is deemed a premise for and part of this
      employment agreement.

      All previous employment agreements, offers and memos on employment terms
      between the employee and the employer are declared void as of the date of
      effect of this agreement.

                               Reykjavik, 22 November 2000

<PAGE>   7
      Employee                               On behalf of DECODE GENETICS, INC.

      /s/ Einar Stefansson                   /s/ Kari Stefansson
      ------------------------               -----------------------

<PAGE>   8

Agreement between the University of Iceland and deCODE genetics, Inc on the work
undertaken by Professor Einar Stefansson, of 1 November 2000.