Exhibit
10.1


INCENTIVE
STOCK OPTION


              ,
Optionee:


On               ,
deCODE genetics, Inc., a Delaware corporation (the “Corporation”), granted to
you, the optionee named above, an option to purchase shares of the common stock
of the Corporation (“Common Stock”). 
This Option is intended to qualify as an Incentive Sock Option (as
hereinafter defined).  The grant
hereunder is intended to comply with the provisions of the United States Securities
Act of 1933, as amended (the “Act”) and the regulations promulgated thereunder
by the United States Securities and Exchange Commission.


This
Option is granted under, and is subject to, the provisions of the Corporation’s
2006 Equity Incentive Plan, as amended from time to time (the “Plan”), which is
incorporated herein by reference, and shall be exercisable only on the
following terms and conditions:


The
details of your option are as follows:


1.                                      Definitions.


(a)                      “Administrator”   means the Board or a committee of the Board
to which the Board delegates the administration of the Plan as provided herein.


(b)                       “Board” means the Board of Directors of the
Corporation.


(c)                      “Code” means the Internal Revenue Code of 1986, as
amended.


(d)                      “Consultant” means a natural person who, or an employee
of any entity that, has contracted directly with the Corporation or a
Subsidiary to provide bona fide services to the Corporation or a Subsidiary not
in connection with the offer or sale of securities in a capital-raising
transaction, but who is not an Employee or a Non-Employee Director who is paid
only for providing services as a member of the Board.


(e)                      “Disability” shall
have the meaning given such term in a person’s employment, consulting or other
agreement with the Corporation or, in the absence thereof, in any disability insurance
policy maintained by the Corporation or a Subsidiary employing or contracting
with such person, or in the absence thereof, as defined in Section 22(e)(3) of
the Code.


(f)                        “Employee” means any common law employee of the
Corporation or a Subsidiary, including any individual employed through an
agreement between the Corporation or a Subsidiary and a professional employer
organization; provided, however,
that the term “Employee” does not include any individual who renders services
pursuant to a written arrangement that expressly provides that the individual
is not eligible for participation in the Plan, regardless if such













individual is later determined by the Internal Revenue
Service or a court of law to be a common law employee.


(g)                     “Fair Market Value” means, as of any
date:


(i)                                     If
the Common Stock is listed on an established stock exchange or exchanges
(including the Nasdaq Stock Market), the Fair Market Value shall be deemed to
be the closing price of the Common Stock on such stock exchange or exchanges on
the day before such date.  If no sale of
Common Stock has been made on any stock exchange on that day, the Fair Market
Value shall be deemed to be such closing price for the next preceding day on
which a sale occurred.


(ii)                                  If
the Common Stock is not listed on an established stock exchange (including the
Nasdaq Stock Market), the Fair Market Value shall be the mean between the
closing dealer “bid” and “asked” prices for the Common Stock for the day before
such date, and if no “bid” and “asked” prices are quoted for the day before
such date, the Fair Market Value shall be determined by reference to such
prices on the next preceding day on which such prices were quoted.


(iii)                               In the event that the
Common Stock is not traded on an established stock exchange (including the
Nadsaq Stock Market) and no closing dealer “bid” and “asked” prices are
available on the day before such date, then, subject to the conditions and
limitations of Code Section 409A, and the guidance promulgated thereunder,
the Fair Market Value will be the price established by the Administrator in
good faith.


(iv)                              In
connection with determining the Fair Market Value on any relevant day, the
Administrator may use any source deemed reliable; and its determination shall
be final and binding on all affected persons, absent clear error.


(h)                     “Immediate family” means a person’s spouse, parents,
children, stepchildren, adoptive relationships, sisters, brothers,
grandchildren and any other family member as to whom a registration statement
on Form S-8 may be used for the exercise of this Option.


(i)                        “Incentive Stock Option” means a
stock option intended to satisfy the requirements of Code

Section 422(b).


(j)                        “Non-Employee Director” means a member of the Board or of
the board of directors of a Subsidiary  who is not an
Employee.


(k)                     “Retirement” means the termination of
a person’s employment with or service as a Non-Employee Director of the
Corporation or a Subsidiary following the first day of the month coincident
with or next following such person’s (i) attainment of age  65,
and (ii) completion of five (5) years service, in the case of an Employee,
or three (3) years of service, in the case of a Non-Employee Director.


(l)                        “Subsidiary” means a subsidiary
corporation, as defined in Code Section 424(f), that is a subsidiary of
the Corporation.



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(m)                  “Termination or Dismissal For Cause”
shall have the meaning ascribed to such term or a similar term in a person’s
employment, consulting or other agreement with the Corporation, or in the
absence thereof:


(i)                                     gross
or habitual failure to perform the person’s assigned duties that is not
corrected within fifteen (15) days of written notice to such person thereof; or


(ii)                                  misconduct,
including, but not limited to: (A) conviction of a crime, or entry of a plea of
nolo contendere with regard to a crime, involving moral turpitude or
dishonesty, (B) illegal drug use or alcohol abuse on Corporation premises or at
a Corporation sponsored event, (C) conduct by you which in the good faith and
reasonable determination of the Board demonstrates gross unfitness to serve,
(D) participation in a fraud or act of dishonesty against the Corporation, or
(E) intentional, material violation by the person of any contract between the
person and the Corporation.


2.                                      Total
Number of Shares Subject to this Option. 
The total number of shares of Common Stock subject to this Option is               (              ).


3.                                      Vesting.  Subject to the limitations contained herein,
this Option will vest (become exercisable) as set forth on Schedule A.


4.                                      Exercise
Price and Method of Payment.


(a)                                  Exercise
Price.  The per share exercise price
of this Option is
$              .


(b)                                  Method
of Payment.  Payment of the exercise
price per share is due in full upon exercise of all or any part of this
Option.  You may elect, to the extent
permitted by applicable statutes and regulations, and unless the Administrator
otherwise provides prior to exercise, to make payment of the exercise price
under one of the following alternatives:


(i)                                     In
cash  at the time of exercise; or


(ii)                                  By
tendering shares of the Corporation’s Common
Stock owned by you with a Fair Market Value equal to the aggregate exercise
price;  provided,
however, that Common Stock
acquired pursuant to the exercise of an Incentive Stock Option may not be tendered
as payment unless the holding period requirements of Code
Section 422(a)(1) have been satisfied, and Common Stock not acquired
pursuant to the exercise of an Incentive Stock Option may not be tendered as
payment unless it has been held, beneficially and of record, for at least six
months (or such longer time as may be required by applicable securities law or
accounting principles to avoid adverse consequences to the Corporation, a
Subsidiary, or you); or


(iii)                               By
delivery of a combination of the methods of payment permitted by subparagraphs
4(b)(i) and

4(b)(ii) above as the Administrator may approve; or


(iv)                              By
irrevocably authorizing a third party to sell shares of the



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Corporation’s Common Stock (or a sufficient portion of the
shares) acquired upon the exercise of this Option and to remit to the
Corporation a sufficient portion of the sales proceeds to pay the entire
exercise price and any tax withholding required as a result of such exercise.


5.                                      Whole
Shares.  This Option may not be
exercised for any number of shares which would require the issuance of anything
other than whole shares.


6.                                      Securities
Law Compliance.  Notwithstanding
anything to the contrary contained herein, this Option may not be exercised
unless the shares issuable upon exercise of this Option are then registered
under the Act or, if such shares are not then so registered, the Corporation
has determined that such exercise and issuance would be exempt from the
registration requirements of the Act.


7.                                      Term.  The term of this Option commences on the date
hereof as set forth below, the date of grant, and expires on the tenth (10th) anniversary of such date
(the “Expiration Date”), unless this Option expires sooner as set forth
herein.  In no event may this Option be
exercised on or after the Expiration Date.


8.                                      Exercise.


(a)                                  You
may exercise this Option, to the extent specified above, by delivering an
exercise notice (in a form then designated by the Corporation) together with
the exercise price to the Corporation in person, by certified mail, together
with such additional documents as the Corporation may then require for purposes
of compliance with any applicable law, rule or regulation.


(b)                                  By
exercising this Option, you agree that:


(i)                                     as a precondition to the completion of any exercise
of this Option, the Corporation may require you to enter an arrangement
providing for the payment by you to the Corporation of any tax withholding
obligation of the Corporation arising by reason of: (A) the exercise of this
Option; (B) the lapse of any substantial risk of forfeiture to which the shares
are subject at the time of exercise; or (C) the disposition of shares acquired
upon such exercise; and


(ii)                                  at
the request of the Corporation, you will execute and become a party to any
voting agreement then in effect between the Corporation and any of its common
stockholders.


(c)                                  Except
as provided in this Section 8(c), this Option may be exercised only during the
continuance of your employment or service with the Corporation or a
Subsidiary.  The foregoing notwithstanding,
in the event of your termination of employment or service, this Option shall
lapse at the earlier of the Expiration Date or, unless otherwise determined by
the Administrator:


(i)                                     in
the case of an Employee or Non-Employee Director,  three
months from the date of such termination of employment or service due to
Retirement or by the Corporation or a Subsidiary other than Termination for
Cause;



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(ii)                                  eighteen
(18) months from the date of such termination of employment or service due to
death;


(iii)                               one
year from the date of such termination of employment or service due to
Disability;


(iv)                              three
months from the date of such termination of employment or service due to your
Termination or Dismissal For Cause or by you at your election;


(v)                                 immediately
at any time following the date of such termination of employment or service if
you disparage the Corporation or violate the terms of any non-competition or
other agreement then in effect between you and the Corporation.


9.                                      Transferability.
Except as provided in the following sentence, this Option is not transferable
other than by will or by the laws of descent and distribution and shall be
exercisable during your lifetime only by you. 
The foregoing notwithstanding, with the prior approval of the Administrator,
you may transfer this Option for no consideration to or for the benefit of one
or more members of your Immediate Family (including a trust, partnership, or
limited liability company or other entity for your benefit and/or the benefit
of one or more of such family members to the extent that a registration
statement on Form S-8 may be used for the exercise of this Option by such
entity); provided that the transferee shall
remain subject to all terms and conditions applicable to this Option prior to
its transfer.


10.                               Option
Not A Service Or Employment Contract. 
This Option is neither a service nor an employment contract.  Nothing in this Option shall be deemed to:
(i) create in any way whatsoever any obligation on your part to continue in the
employ of the Corporation, or of the Corporation to continue your employment
with the Corporation; or (ii) obligate the Corporation or any Subsidiary of the
Corporation, or their respective stockholders, boards of directors, officers or
employees to continue any relationship which you might have as an Employee of
the Corporation or Subsidiary.


11.                               Notices.  Any notices provided for in this Option shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Corporation to you, five (5) days after
deposit in the mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Corporation.


12.                               Gender.  Whenever the context requires, words denoting
gender in this Option shall include the masculine, feminine and neuter.


*****



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  Dated: 

  	
   

  	
  , 2006

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  deCODE genetics, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Kári Stefánsson,
  President

  



 


 


ATTACHMENTS:


Schedule A: Vesting
Schedule


Form of Exercise
Notice


deCODE genetics,
Inc. 2006 Equity Incentive Plan



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Schedule
A


Vesting
Schedule



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The undersigned:


(a)                                           Acknowledges
receipt of the foregoing Option and the attachments referenced therein and
understands that all rights and liabilities with respect to this Option are set
forth in the Option; and


(b)                                          Acknowledges
that as of the date of grant of this Option, it sets forth the entire
understanding between the undersigned optionee and the Corporation and its
Subsidiaries regarding the acquisition of stock in the Corporation and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the
undersigned under stock option plans of the Corporation, and (ii) the following
agreements only:


	
  NONE

  	
   

  	
   

  	
   

  
	
   

  	
  (Initial)

  	
   

  
	
   

  	
   

  
	
  OTHER

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
						



 



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NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION


	
  

  	
  Date of
  Exercise:

  	
   

  



 


TO:                            deCODE
genetics, Inc


This constitutes
notice under my stock option agreement that I elect to purchase the number of
shares for the price set forth below.




	
  Stock option agreement
  dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of shares
  as to which option is hereby exercised:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Certificates to
  be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total exercise
  price:

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Cash payment
  delivered herewith: 

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Stock power and
  certificates for shares of Common Stock as
  permitted by stock option agreement attached hereto 

  	
  Yes o
  

  	
  No o
  

  
	
   

  	
   

  	
   

  
	
  Copy of
  irrevocable instructions delivered to a third party as permitted by stock option agreement attached hereto 

  	
  Yes o
  

  	
  No o
  

  






 


By this exercise,
I agree (i) to provide such additional documents as you may require
pursuant to the terms of the deCODE genetics, Inc. 2006 Equity Incentive Plan,
as amended, and (ii) to provide for the payment by me to you (in the
manner designated by you) of your tax withholding obligation, if any, relating
to the exercise of this Option.


Very truly yours,



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