**Exhibit10.1**

**INCENTIVESTOCK OPTION**

              ,Optionee:

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

ThisOption is granted under, and is subject to, the provisions of the Corporation’s2006 Equity Incentive Plan, as amended from time to time (the “Plan”), which isincorporated herein by reference, and shall be exercisable only on thefollowing terms and conditions:

Thedetails of your option are as follows:

**1.****                                      Definitions.**

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

**(b)****                      *“Board”*** means the Board of Directors of theCorporation.

**(c)****                      “*Code*” means** the Internal Revenue Code of 1986, asamended.

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

**(e)****                      “*Disability*”**shallhave the meaning given such term in a person’s employment, consulting or otheragreement with the Corporation or, in the absence thereof, in any disability insurancepolicy maintained by the Corporation or a Subsidiary employing or contractingwith such person, or in the absence thereof, as defined in Section 22(e)(3) ofthe Code.

**(f)****                        *“Employee”*** means any common law employee of theCorporation or a Subsidiary, including any individual employed through anagreement between the Corporation or a Subsidiary and a professional employerorganization; *provided*, *however*,that the term “Employee” does not include any individual who renders servicespursuant to a written arrangement that expressly provides that the individualis not eligible for participation in the Plan, regardless if such

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

**(g)****                    **“***Fair Market Value***” means, as of anydate:

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

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

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

(iv)                              Inconnection with determining the Fair Market Value on any relevant day, theAdministrator may use any source deemed reliable; and its determination shallbe 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 statementon Form S-8 may be used for the exercise of this Option.

**(i)****                       **“***Incentive Stock Option***” means astock option intended to satisfy the requirements of CodeSection 422(b).

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

**(k)****                   ** “***Retirement***” means the termination ofa person’s employment with or service as a Non-Employee Director of theCorporation or a Subsidiary following the first day of the month coincidentwith 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 subsidiarycorporation, as defined in Code Section 424(f), that is a subsidiary ofthe 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’semployment, consulting or other agreement with the Corporation, or in theabsence thereof:

(i)                                     grossor habitual failure to perform the person’s assigned duties that is notcorrected 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 ofnolo contendere with regard to a crime, involving moral turpitude ordishonesty, (B) illegal drug use or alcohol abuse on Corporation premises or ata Corporation sponsored event, (C) conduct by you which in the good faith andreasonable 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 theperson and the Corporation.

**2.****                                      TotalNumber 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.****                                      ExercisePrice and Method of Payment.**

**(a)****                                  ExercisePrice.**  The per share exercise priceof this Option is$              .

**(b)****                                  Methodof Payment.**  Payment of the exerciseprice per share is due in full upon exercise of all or any part of thisOption.  You may elect, to the extentpermitted by applicable statutes and regulations, and unless the Administratorotherwise provides prior to exercise, to make payment of the exercise priceunder one of the following alternatives:

(i)                                     Incash******at the time of exercise; or

(ii)                                  Bytendering shares of the Corporation’s CommonStock owned by you with a Fair Market Value equal to the aggregate exerciseprice;  *provided*,*however*, that Common Stockacquired pursuant to the exercise of an Incentive Stock Option may not be tenderedas payment unless the holding period requirements of CodeSection 422(a)(1) have been satisfied, and Common Stock not acquiredpursuant to the exercise of an Incentive Stock Option may not be tendered aspayment unless it has been held, beneficially and of record, for at least sixmonths (or such longer time as may be required by applicable securities law oraccounting principles to avoid adverse consequences to the Corporation, aSubsidiary, or you); or

(iii)                               Bydelivery of a combination of the methods of payment permitted by subparagraphs4(b)(i) and4(b)(ii) above as the Administrator may approve; or

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

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

**5.****                                      WholeShares.**  This Option may not beexercised for any number of shares which would require the issuance of anythingother than whole shares.

**6.****                                      SecuritiesLaw Compliance.**  Notwithstandinganything to the contrary contained herein, this Option may not be exercisedunless the shares issuable upon exercise of this Option are then registeredunder the Act or, if such shares are not then so registered, the Corporationhas determined that such exercise and issuance would be exempt from theregistration requirements of the Act.

**7.****                                      Term.**  The term of this Option commences on the datehereof 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 forthherein.  In no event may this Option beexercised on or after the Expiration Date.

**8.****                                      Exercise.**

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

**(b)**                                  Byexercising this Option, you agree that:

**(i)**                                     as a precondition to the completion of any exerciseof this Option, the Corporation may require you to enter an arrangementproviding for the payment by you to the Corporation of any tax withholdingobligation of the Corporation arising by reason of: (A) the exercise of thisOption; (B) the lapse of any substantial risk of forfeiture to which the sharesare subject at the time of exercise; or (C) the disposition of shares acquiredupon such exercise; and

(ii)                                  atthe request of the Corporation, you will execute and become a party to anyvoting agreement then in effect between the Corporation and any of its commonstockholders.

**(c)****                                 **Exceptas provided in this Section 8(c), this Option may be exercised only during thecontinuance of your employment or service with the Corporation or aSubsidiary.  The foregoing notwithstanding,in the event of your termination of employment or service, this Option shalllapse at the earlier of the Expiration Date or, unless otherwise determined bythe Administrator:

(i)**                                    **inthe case of an Employee or Non-Employee Director,****threemonths from the date of such termination of employment or service due toRetirement or by the Corporation or a Subsidiary other than Termination forCause;

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

(iii)                               oneyear from the date of such termination of employment or service due toDisability;

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

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

**9.****                                      Transferability.**Except as provided in the following sentence, this Option is not transferableother than by will or by the laws of descent and distribution and shall beexercisable 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 oneor more members of your Immediate Family (including a trust, partnership, orlimited liability company or other entity for your benefit and/or the benefitof one or more of such family members to the extent that a registrationstatement on Form S-8 may be used for the exercise of this Option by suchentity); *provided* that the transferee shallremain subject to all terms and conditions applicable to this Option prior toits transfer.

**10.****                               OptionNot 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 theemploy of the Corporation, or of the Corporation to continue your employmentwith the Corporation; or (ii) obligate the Corporation or any Subsidiary of theCorporation, or their respective stockholders, boards of directors, officers oremployees to continue any relationship which you might have as an Employee ofthe Corporation or Subsidiary.

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

**12.****                               Gender.**  Whenever the context requires, words denotinggender 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: VestingSchedule

Form of ExerciseNotice

deCODE genetics,Inc. 2006 Equity Incentive Plan

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**ScheduleA**

**VestingSchedule**

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The undersigned:

(a)                                           Acknowledgesreceipt of the foregoing Option and the attachments referenced therein andunderstands that all rights and liabilities with respect to this Option are setforth in the Option; and

(b)                                          Acknowledgesthat as of the date of grant of this Option, it sets forth the entireunderstanding between the undersigned optionee and the Corporation and itsSubsidiaries regarding the acquisition of stock in the Corporation andsupersedes all prior oral and written agreements on that subject with theexception of (i) the options previously granted and delivered to theundersigned under stock option plans of the Corporation, and (ii) the followingagreements only:
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| OTHER    |       |
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NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
|  | Date of  Exercise: |   |
|--|--------------------|--------|

 

TO:                            deCODEgenetics, Inc

This constitutesnotice under my stock option agreement that I elect to purchase the number ofshares 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 requirepursuant 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 themanner designated by you) of your tax withholding obligation, if any, relatingto the exercise of this Option.

Very truly yours,

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