Document:

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                                                                    EXHIBIT 10.1

                              OFFICER'S CERTIFICATE

         I, the undersigned, do hereby certify and represent that:

         1.  I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.

         2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.1 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair and
accurate English translation of a document prepared in the Icelandic language.

         IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.

                        By:      /s/  Hannes T. Smarason
                                 --------------------------

                        Name:   Hannes T. Smarason
                        Title:  Senior Vice President and Chief Business Officer

<PAGE>   2

         Date                 Ref.
                              -------------              -------------

Dr. __________, physician
______________ Hospital

                                       I.

PERMIT PURSUANT TO PARAGRAPH 3 OF ARTICLE 4, PARAGRAPH 2 OF ARTICLE 5 AND
PARAGRAPH 3 OF ARTICLE 6 OF ACT NO. 121/1989 ON THE REGISTRATION AND HANDLING OF
PERSONAL DATA

The Data Protection Commission has at its meeting today resolved to issue to you
a Permit to use personal data for research into the ______________________. The
Permit is subject to the terms described in Chapter II below.

                                       II.
                                      TERMS

It is revealed that you intend to assign a considerable part of the processing
of the personal data to Islensk erfdagreining ehf., particularly the part
involving work with genetic material. The transfer of personal data between you
(Permit Holder/Responsible Party) and IE (Processing Party) shall take place in
accordance with the work procedures described in Chapter III below. The Data
Protection Commission will, pursuant to an agreement between the Commission and
IE, appoint a person to supervise that the work is performed in accordance with
such terms, the expense of such supervision to be paid by IE.

The Data Protection Commission points out that the general principle is that the
same cipher should be used in all genetic research carried out in co-operation
with Islensk erfdagreining ehf. Accordingly, the same cipher will be used for
the encryption of data in this research, unless you request otherwise - however,
it should be emphasised that you are responsible for the anonymity of all data.

The objective of the conditions established by the Data Protection Commission is
to ensure the anonymity of participants in genetic research, by use of the
following guidelines:

1.   That research data will be preserved as clinical data in accordance with
     the current Act on Patients' Rights, the Physicians' Act and regulations on
     clinical records.

2.   That all research data at Islensk erfdagreining ehf. will be encrypted so
     that neither blood samples nor other personal data identified with names,
     identity numbers or other comparable personal identifiers are transferred
     to Islensk erfdagreining ehf.

3.   That linking between personal data on the premises of the Responsible Party
     and Processing Party takes place only with the use of a cipher.

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                                                      DATA PROTECTION COMMISSION
________________________________________________________________________________

4.   That the use of the cipher is restricted to the supervisors of the Data
     Protection Commission and in accordance with the terms described below.

5.   That the cipher is kept secure.

6.   That the cipher will never be used for the encryption/decryption of fewer
     identity numbers than twenty at each time.

7.   That data from the research of one disease, including biosamples, will not
     be used in the research of another disease, without the express written
     approval of the person recorded or a special authorisation from the Data
     Protection Commission.

                                      III.
                                 WORK PROCEDURES

All processing of personal data in relation to genetic research shall be
performed in accordance with the following work procedures:

1.   The Supervisor of the Data Protection Commission shall produce A CIPHER,
     which replaces the identity number with a Personal Number (PN), i.e. a
     code. Three copies may be preserved of the cipher, one by the Data
     Protection Commission, another by the Supervisor of the Data Protection
     Commission and the third in a safety deposit box at Islensk erfdagreining
     ehf. (IE). The copies to be kept by the Data Protection Commission and in
     the deposit box of IE shall be sealed by a public notary. The safety
     deposit box of IE shall be locked with two keys, one of which shall be
     delivered to the Data Protection Commission for custody. An inspection may
     be carried out at any time to ascertain whether any seals have been broken.

2.   Supervisors shall ENCRYPT THE GENEALOGICAL DATABASE (the Book of
     Icelanders) using the cipher. The database may be encrypted as soon as new
     updates of the Book of Icelanders are ready. An encrypted Book of
     Icelanders may neither be housed in the same computer nor on the same
     computer network as an unencrypted Book of Icelanders, except under the
     supervision of the Supervisor of the Data Protection Commission. In order
     to reduce the possibility of breaching the anonymity by comparing encrypted
     genealogical tables with genealogical tables containing identity numbers,
     IE shall classify individuals according to their age so that if there are
     few individuals registered as born in certain years, the registered year of
     birth is altered so that the minimum number of individuals within any age
     group is twenty.

3.  The Supervisor shall receive:

a.  Reykjavik Municipal Hospital's register of patients diagnosed with
     __________________.

b.  The National Hospital's register of patients diagnosed with
     __________________.

c.  The Akureyri District Hospital's register of patients diagnosed with
     __________________.

d.  The University of Iceland Institute of Pathology's register of received
     _______ samples; diagnosis: ________________________________.

e.  The State Social Security Institute's register of patients who have been
     prescribed medication against ________________________.

                                                                               2
<PAGE>   4
                                                      DATA PROTECTION COMMISSION
________________________________________________________________________________

As it is important that outside parties do not obtain information on the names
of patients, except with the express consent of the patient, the assumption is
made in this Permit that the individuals in question will be contacted and that
the willingness of each individual to participate in the research ascertained
before work with data on such patients begins. It is proposed that this will be
done by the same physician who has treated the person in question, or in the
name of an institution and with the approval of a senior physician in the event
that the patient's physician is deceased or for any other reason unavailable.

The Supervisor encrypts THESE NAME LISTS with the above cipher and delivers the
lists in encrypted form to IE. The Supervisor may, if he so chooses and the
Permit Holders agree, perform such encryption in co-operation with the Genetic
Research Service Centre (GRSC), a foundation domiciled at Noatun 17, Reykjavik.
No copies shall remain in the possession of the Supervisor.

4.   IE performs the LINKING OF THE ENCRYPTED LIST OF PATIENTS AND THE ENCRYPTED
     GENEALOGICAL DATABASE. Thus, an ENCRYPTED LIST OF PARTICIPANTS is created,
     i.e. a list of patients and relatives, and an encrypted genealogical table.

5.   The Supervisor receives from IE the encrypted list of participants,
     DECRYPTS it and prepares a list of the identity numbers and names of the
     participants. Then he decrypts the genealogical table in the same manner.
     The Supervisor may, if he so chooses and the Permit Holders agree, perform
     this decryption in co-operation with the Genetic Research Service Centre
     (GRSC), a foundation domiciled at Noatun 17, Reykjavik. The Supervisor
     delivers to you the list of identity numbers and the decrypted genealogical
     table. No copies may remain in the possession of the Supervisor.

6.   IE prints out and delivers to the Permit Holders STICK-ON LABELS for the
     labelling of blood samples, connection sheets and forms to be filled out
     for health information. Each label contains:

     - a three-letter code which is the set identifier

     - a number specifying the number of labels in the set

     - a label number (bar code)

     - the term of validity (month/year in numerals and as a bar code) The term
       of validity of labels shall be three months from the date of issue. There
       shall be no connection between label numbers and set labels. IE may,
       until three months have passed from the date of issue of the label
       number, preserve information on issued label numbers (label number
       register), the date of issue, the number of labels in each set and sample
       numbers, cf. Sub-Section 9.

7.   Participants are selected for a priority list for calling in (from families
     with two or more individuals who have been diagnosed with _________________
     ___________). You shall PRESENT THE RESEARCH PROJECT to potential
     participants and explain, among other things, issues regarding the handling
     and security of personal data, and ascertain their willingness to
     participate. The patient himself/herself shall, to the extent possible, be
     charged with the task of contacting his/her relatives. Those who are
     willing to participate shall sign a declaration of their informed consent.
     Such declarations of consent shall be in a form requiring the specific
     approval of the Data Protection Commission and the Science Ethics
     Committee.

                                                                               3
<PAGE>   5
                                                      DATA PROTECTION COMMISSION
________________________________________________________________________________

     You shall preserve all declarations of consent in a single file and treat
     them in accordance with current rules on the handling of clinical records.
     Measures shall be taken to ensure that patients have a copy of the granted
     declaration of consent. When this has been done, YOU SHALL COLLECT
     BIOSAMPLES AND CLINICAL DATA on the participants as follows:

     a.   On the arrival of the participant, a so-called CONNECTION SHEET is
          filled out. The sheet states the identity number and name of the
          participant, the date of arrival and the identifier of the research,
          i.e. the name of the disorder and the names of the Permit Holders. One
          label from a set is attached to the connection sheet.

     b.   Then BLOOD IS DRAWN from the participant, and tubes with blood samples
          labelled with labels from the same set of labels used to label the
          connection sheet. Other biosamples shall be labelled in the same
          manner.

     c.   When this has been done, THE PERMIT HOLDERS RECORD CLINICAL DATA
          regarding the participant on special forms. Other information than
          specified by the Permit Holder as necessary for his purposes in the
          research plan/declaration of consent may not be collected. The above
          forms shall be devoid of any personal identifiers, and identified
          using labels from the same set of labels as used in labelling the
          connection sheet and the blood sample.

     The Permit Holder may assign the work described in this Sub-Section to the
     Genetic Research Service Centre or individual employees working on the
     responsibility of the Centre, cf. Sub-Section 10.

     All collection of health data from other sources, e.g. from clinical
     records, is subject to the permission of the registered person if he/she is
     alive. Otherwise, the authorisation of the senior physician in question
     shall be obtained.

8.   The Supervisors shall supervise the transfer of DATA FROM CONNECTING SHEETS
     (INFORMATION ON IDENTITY NUMBERS AND LABEL NUMBERS) TO A SPECIAL REGISTER,
     encrypt identity numbers in the register and then deliver them to IE in a
     sealed envelope. When this transfer has been completed, the Supervisors
     shall keep the connection sheets for one month and then destroy them. No
     copies may remain with the Permit Holder or the Supervisor.

9.   Blood samples and forms with health data are sent to IE. On receipt of the
     data, IE RE-LABELS them and replaces label numbers with sample numbers. As
     soon as all labels of the label set in question have been received, or on
     expiry of the label number, the record in question shall be deleted from
     the Register of Label Numbers. IE shall recycle the label number as soon as
     possible. The Supervisor of the Data Protection Commission shall supervise
     the deletion of records from the Register of Label Numbers in accordance
     with the above instructions.

                                       IV.

You are RESPONSIBLE for ensuring the treatment of all personal data as clinical
records, pursuant to the current Act on Patients' Rights, the Physicians' Act
and government regulations on clinical records, that such data are not
transferred out of the country

                                                                               4
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                                                      DATA PROTECTION COMMISSION
________________________________________________________________________________

and that all handling of genetic research data is in accordance with the above
work procedures.

The validity of the said Permit is subject to the condition that the required
authorisation of the Science Ethics Committee has been granted for the research
in question.

The Data Protection Commission reserves the right to revoke this Permit or amend
certain terms at any time, if this is required in the interest of personal
protection, especially if it is discovered that the Responsible Parties include
staff of the Processing Party (IE), or if there are other such reasons which may
be regarded as invalidating the premises of the Permit. Concurrently with the
issue of this Permit, older permits of the Data Protection Commission relating
to the same project are cancelled.

                   On behalf of the Data Protection Commission

                          ----------------------------
                                Managing Director
Copies:
Svana Helen Bjornsdottir
Kolbeinsmyri 14
170 Seltjarnarnes

Islensk erfdagreining ehf.
Kari Stefansson
Lynghals 1
110 Reykjavik

                                                                               5<PAGE>   1
                                                                    EXHIBIT 10.2

                              DECODE GENETICS, INC.

                           1996 EQUITY INCENTIVE PLAN

                            ADOPTED AUGUST 21, 1996

                    APPROVED BY STOCKHOLDERS AUGUST 21, 1996

                        AS AMENDED THROUGH JULY 12, 1999

1.       PURPOSES.

         (A) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to purchase
restricted stock, all as defined below.

         (B) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Director of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

         (C) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
to be either (i) Options granted pursuant to Section 6 hereof, including
Incentive Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or
rights to purchase restricted stock granted pursuant to Section 7 hereof. All
Options shall be separately designated Incentive Stock Options or Nonstatutory
Stock Options at the time of grant, and in such form as issued pursuant to
Section 6, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option.

2.       DEFINITIONS.

         (A) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.

         (B) "BOARD" means the Board of Directors of the Company.

         (C) "CAUSE" means (a) gross or habitual failure to perform the assigned
duties of the employee's job, that is, performance failure not corrected within
thirty (30) days after written notice to the employee thereof or (b) misconduct,
including, but not limited to: (i) conviction of a crime, or entry of a plea of
nolo contendere with regard to a crime, involving moral turpitude or dishonesty,
(ii) illegal drug use or alcohol abuse on Company premises or at a Company
sponsored event, (iii)

<PAGE>   2

conduct by the employee which in the good faith and reasonable determination of
the Board demonstrates gross unfitness to serve, (iv) participation in a fraud
or act of dishonesty against the Company, or (v) intentional, material violation
by the employee of any contract between the employee and the Company or of any
statutory duty of the employee to the Company. Mental or physical disability
shall not constitute "Cause."

         (D)      "CODE" means the Internal Revenue Code of 1986, as amended.

         (E)      "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.

         (F)      "COMPANY" means deCODE genetics, Inc., a Delaware corporation.

         (G) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.

         (H) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the person's service with the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party's sole discretion, whether
Continuous Status as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company,
Affiliates or their successors.

         (I) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

         (J)      "DIRECTOR" means a member of the Board.

         (K)      "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

         (L)      "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         (M)      "FAIR MARKET VALUE" means the value of the common stock as
determined in good faith by the Board.

         (N)      "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.

                                       2
<PAGE>   3

         (O) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.

         (P) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404 (a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

         (Q)      "NONSTATUTORY  STOCK  OPTION"  means an Option not intended to
qualify as an Incentive Stock Option.

         (R)      "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

         (S)      "OPTION" means a stock option granted pursuant to the Plan.

         (T)      "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.

         (U)      "OPTIONEE" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

         (V)      "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of the Treasury regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in any
capacity other than as a Director, or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.

                                       3
<PAGE>   4

         (W)      "PLAN" means this 1996 Equity Incentive Plan.

         (X)      "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect with respect to the Company at the time
discretion is being exercised regarding the Plan.

         (Y)      "STOCK AWARD" means any right granted under the Plan,
including any Option, any stock bonus, and any right to purchase restricted
stock.

         (Z)      "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

3.       ADMINISTRATION.

         (A)      The Plan shall be administered by the Board unless and until
the Board delegates administration to a Committee, as provided in subsection
3(c).

         (B)      The Board  shall have the power,  subject  to, and  within the
limitations of, the express provisions of the Plan:

                  (1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, or a combination of the foregoing; the provisions of each Stock Award
granted (which need not be identical), including the time or times when a person
shall be permitted to receive stock pursuant to a Stock Award; and the number of
shares with respect to which a Stock Award shall be granted to each such person.

                  (2) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

                  (3) To amend the Plan or a Stock Award as provided in
Section 13.

                  (4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.

         (C)      The Board may delegate administration of the Plan to a
committee of the Board composed of not fewer than two (2) members (the
"Committee"), all of the members of which Committee may be, in the discretion of
the Board, Non-Employee Directors and/or Outside

                                       4
<PAGE>   5

Directors. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee of two
(2) or more Outside Directors any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or such a subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Additionally,
prior to the Listing Date, and notwithstanding anything to the contrary
contained herein, the Board may delegate administration of the Plan to a
committee of one or more members of the Board and the term "Committee" shall
apply to any person or persons to whom such authority has been delegated.
Notwithstanding anything in this Section 3 to the contrary, the Board or the
Committee may delegate to a committee of one or more members of the Board the
authority to grant Stock Awards to eligible persons who (1) are not then subject
to Section 16 of the Exchange Act and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.

4.       SHARES SUBJECT TO THE PLAN.

         (A)      Subject to the provisions of Section 12 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate Five Million (5,000,000) shares
of the Company's common stock. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan.

         (B)      The stock  subject to the Plan may be unissued  shares or
reacquired shares, bought on the market or otherwise.

5.       ELIGIBILITY.

         (A)      Incentive Stock Options may be granted only to Employees.
Stock Awards other than Incentive Stock Options may be granted only to
Employees, Directors or Consultants.

         (B)      No person shall be eligible for the grant of an Incentive
Stock Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates unless the exercise price of such Option is at least
one hundred ten percent (110%) of the Fair Market Value of such stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant.

         (C)      Subject to the provisions of Section 12 relating to
adjustments upon changes in stock, no person shall be eligible to be granted
Options covering more than one million (1,000,000) shares

                                       5
<PAGE>   6

of the Company's common stock in any calendar year. This subsection 5(c) shall
not apply prior to the Listing Date, and, following the Listing Date, shall not
apply until (i) the earliest of: (A) the first material modification of the Plan
(including any increase to the number of shares reserved for issuance under the
Plan in accordance with Section 4); (B) the issuance of all of the shares of
common stock reserved for issuance under the Plan; (C) the expiration of the
Plan; or (D) the first meeting of stockholders at which directors are to be
elected that occurs after the close of the third calendar year following the
calendar year in which occurred the first registration of an equity security
under section 12 of the Exchange Act; or (ii) such other date required by
Section 162(m) of the Code and the rules and regulations promulgated thereunder.

6.       OPTION PROVISIONS.

         Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

         (A)      TERM. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.

         (B)      PRICE. The exercise price of each Incentive Stock Option
shall be not less than one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option was granted. The exercise
price of each Nonstatutory Stock Option shall be determined by the Board.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price lower than that
set forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.

         (C)      CONSIDERATION. The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.

         In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

                                       6
<PAGE>   7

         (D) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
only be transferable by the Optionee upon such terms and conditions as are set
forth in the Option Agreement for such Nonstatutory Stock Option, as the Board
of the Committee shall determine in its discretion, except that each
Nonstatutory Stock Option may be transferred to the spouse, children, lineal
ancestors and lineal descendants of the Optionee (or to a trust created solely
for the benefit of the Optionee and the foregoing persons) or to an organization
except from taxation pursuant to Section 501(c)(3) of the Code or to which tax
deductible charitable contributions may be made under Section 170 of the Code
(excluding such organizations classified as private foundations under applicable
regulations and rulings). The person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.

         (E) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to tome or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.

         (F) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earliest of (i) the date three
(3) months after the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant or such longer or shorter period specified in
the Option Agreement), (ii) the time of such termination if such termination is
for "Cause" or if after such termination the Optionee provides services for or
acquires an ownership interest in any business which competes with the Company,
or (iii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.

                                       7
<PAGE>   8

         An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act of 1933, as amended (the "Act"), then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in the first paragraph of this subsection 6(f), or (ii) the expiration of
a period of three (3) months following the termination of the Optionee's
Continuous Status as an Employee, Director or Consultant during which the
exercise of the Option would not be in violation of such registration
requirements.

         (G) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.

         (H) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercise (to the extent the Optionee was entitled to exercise the
Option as of the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement ), or (ii) the expiration of the term
of such Option as set forth in the Option Agreement. If, at the time of death,
the Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.

                                       8
<PAGE>   9

         (I) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.

         (J) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this Subsection (j), such right of first
refusal shall otherwise comply with the provisions of the Bylaws of the Company.

         (K) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is an Incentive Stock Option and which is
grated to a 10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five
(5) years.

         Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100.000) annual limitation on exercisability of
Incentive Stock Options described in subsection 11(e) of the Plan and in
Section 422(d) of the Code. There shall be no Re-Load Options on a Re-Load
Option. Any such Re-Load Option shall be subject to the availability of
sufficient shares under subsection 4(a) and the limits on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.

                                       9
<PAGE>   10

7.       TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

         Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:

         (A) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement. Notwithstanding the
foregoing, the Board or the Committee may determine that eligible participants
in the Plan may be awarded stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.

         (B) TRANSFERABILITY. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable by the grantee only upon such terms and
conditions as are set forth in the applicable Stock Award Agreement, as the
Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains a subject to the terms of the
agreement.

         (C) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement, except that payment of the common stock's "par
value" (as defined in the Delaware General Corporation Law) shall not be made by
deferred payment, or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in its discretion. Notwithstanding the foregoing,
the Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a stock bonus agreement in consideration
for past services actually rendered to the Company or for its benefit.

         (D) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.

         (E) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.

                                       10
<PAGE>   11

8.       CANCELLATION AND RE-GRANT OF OPTIONS.

         (A) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of stock, but having an exercise price per share not
less than one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option or, in the case of a 10% stockholder (as described in
subsection 5(b)) receiving a new grant of any Incentive Stock Option, not less
than one hundred ten percent (110%) of the Fair Market Value per share of stock
on the new grant date. Notwithstanding the foregoing, the Board or the Committee
may grant an Option with an exercise price lower than that set forth above if
such Option is granted as part of a transaction to which section 424(a) of the
Code applies.

         (B) Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 8, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option; in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 8(b) shall be applicable only to the extent required by Section
162(m) of the Code.

9.       COVENANTS OF THE COMPANY.

         (A) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.

         (B) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the act, either the Plan, any Stock Award or any stock issued or issuable
pursuant to any such Stock Award. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Stock Awards unless and
until such authority is obtained.

10.      USE OF PROCEEDS FROM STOCK.

         Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.

                                       11
<PAGE>   12

11.      MISCELLANEOUS.

         (A) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will best.

         (B) Neither an Employee, Director or Consultant nor any person to whom
a Stock Award is transferred under subsection 6(d) shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such person has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.

         (C) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant or
other holder of Stock Awards any right to continue in the employ of the Company
or any Affiliate (or to continue acting as a Director or Consultant) or shall
affect the right of the Company or any Affiliate to terminate the employment of
any Employee with or without cause the right of the Company's Board of Directors
and/or the Company's stockholders to remove any Director as provided in the
Company's By-Laws and the provisions of the Delaware General Corporation Law, or
the right to terminate the relationship of any Consultant subject to the terms
of such Consultant's agreement with the Company or Affiliate.

         (D) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.

         (E) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d) or 7(b), as a condition of exercising or acquiring stock under
any Stock Award, (1) to give written assurances satisfactory to the Company as
to such person's knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters,
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Stock Award for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems

                                       12
<PAGE>   13

necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.

         (F) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as result of the exercise or acquisition of stock under the Stock Award; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.

12.      ADJUSTMENTS UPON CHANGES IN STOCK.

         (A) If any change is made in the stock subject to the Plan, or subject
to any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to award to any
person during any calendar year pursuant to subsection 5(c), and the outstanding
Stock Awards will be appropriately adjusted in the type(s) and number of
securities and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")

         (B) In the event of: (1) a dissolution, liquidation or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; then: (i) any surviving corporation or acquiring corporation
shall assume any Stock Awards outstanding under the Plan or shall substitute
similar stock awards (including an award to acquire the same consideration paid
to the stockholders in the transaction described in this subsection 12(b)) for
those outstanding under the Plan, or (ii) in the event any surviving corporation
or acquiring corporation refuses to assume such Stock Awards or to substitute
similar stock awards for those outstanding under the Plan, (A) with respect to
Stock Awards held by persons then performing services as Employees, Directors or
Consultants the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated prior to
such event and the Stock Awards terminated if not exercised (if applicable)
after such acceleration and at or prior to such event, and (B) with respect to
any other Stock Awards outstanding under the Plan, such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.

                                       13
<PAGE>   14

13.      AMENDMENT OF THE PLAN AND STOCK AWARDS.

         (A) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:

                  (I)      Increase the number of shares reserved for Stock
Awards under the Plan;

                  (II)     Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or

                  (III)     Modify the Plan in any other way if such
modification requires stockholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or to comply with the requirements of
Rule 16b-3.

         (B) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

         (C) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.

         (D) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.

         (E) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.

                                       14
<PAGE>   15

14.      TERMINATION OR SUSPENSION OF THE PLAN.

         (A) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on August 15, 2006, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

         (B) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the written consent of the person to whom the Stock Award was
granted.

15.      EFFECTIVE DATE OF PLAN.

         The Plan shall become effective as determined by the Board, but no
Stock Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board, and, if required, an appropriate permit has been issued by the
Commissioner of Corporations of the State of California.

                                       15

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