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                                                                    EXHIBIT 10.7

                             NOVELLUS SYSTEMS, INC.
                            2001 STOCK INCENTIVE PLAN

        1. Purposes of the Plan. The purposes of this Stock Incentive Plan are
to attract and retain the best available personnel, to provide additional
incentive to Employees, Directors and Consultants and to promote the success of
the Company's business.

        2. Definitions. As used herein, the following definitions shall apply:

                (a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan.

                (b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act.

                (c) "Applicable Laws" means the legal requirements relating to
the administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.

                (d) "Award" means the grant of an Option, Restricted Stock or
other right or benefit under the Plan.

                (e) "Award Agreement" means the written agreement evidencing the
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.

                (f) "Board" means the Board of Directors of the Company.

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

                (h) "Committee" means any committee appointed by the Board to
administer the Plan.

                (i) "Common Stock" means the common stock of the Company.

                (j) "Company" means Novellus Systems, Inc., a California
corporation.

                (k) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's capacity as
a Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.

                (l) "Continuous Service" means that the provision of services to
the Company or a Related Entity in any capacity of Employee, Director or
Consultant, is not interrupted or terminated. Continuous Service shall not be
considered interrupted in the case of (i) any



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approved leave of absence, (ii) transfers among the Company, any Related Entity,
or any successor, in any capacity of Employee, Director or Consultant, or (iii)
any change in status as long as the individual remains in the service of the
Company or a Related Entity in any capacity of Employee, Director or Consultant
(except as otherwise provided in the Award Agreement). An approved leave of
absence shall include sick leave, military leave, or any other authorized
personal leave. For purposes of each Incentive Stock Option granted under the
Plan, if such leave exceeds ninety (90) days, and reemployment upon expiration
of such leave is not guaranteed by statute or contract, then the Incentive Stock
Option shall be treated as a Nonstatutory Stock Option on the day three (3)
months and one (1) day following the expiration of such ninety (90) day period.

                (m) "Corporate Transaction" means any of the following
transactions:

                        (i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;

                        (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations);

                        (iii) approval by the Company's shareholders of any plan
or proposal for the complete liquidation or dissolution of the Company; or

                        (iv) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger.

                (n) "Covered Employee" means an Employee who is a "covered
employee" under Section 162(m)(3) of the Code.

                (o) "Director" means a member of the Board or the board of
directors of any Related Entity.

                (p) "Disability" means a Grantee would qualify for benefit
payments under the long-term disability policy of the Company or the Related
Entity to which the Grantee provides services regardless of whether the Grantee
is covered by such policy. If the Company or the Related Entity to which the
Grantee provides service does not have a long-term disability plan in place,
"Disability" means that a Grantee is permanently unable to carry out the
responsibilities and functions of the position held by the Grantee by reason of
any medically determinable physical or mental impairment. A Grantee will not be
considered to have incurred a Disability unless he or she furnishes proof of
such impairment sufficient to satisfy the Administrator in its discretion.

               (q) "Employee" means any person, including an Officer or
Director, who is an employee of the Company or any Related Entity. The payment
of a director's fee by the Company or a Related Entity shall not be sufficient
to constitute "employment" by the Company.



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                (r) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                (s) "Fair Market Value" means, that as of any date, the value of
Common Stock shall be the closing price for a Share for the market trading day
on such date (or, if no closing price was reported on that date, on the last
trading date on which a closing price was reported) on the stock exchange
determined by the Administrator to be the primary market for the Common Stock or
the Nasdaq National Market, whichever is applicable, or if the Common Stock is
not traded on any exchange or national market system, the average of the closing
bid and ask prices of a Share on the Nasdaq Small Cap Market on such date (or,
if no closing prices were reported on that date, on the last trading date on
which closing prices were reported), in each case, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable.

                (t) "Grantee" means an Employee, Director or Consultant who
receives an Award pursuant to an Award Agreement under the Plan.

                (u) "Immediate Family" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Grantee's household (other than a tenant or employee), a trust in which these
persons have more than fifty percent (50%) of the beneficial interest, a
foundation in which these persons (or the Grantee) control the management of
assets, and any other entity in which these persons (or the Grantee) own more
than fifty percent (50%) of the voting interests.

                (v) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

                (w) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

                (x) "Officer" means a person who is an officer of the Company or
a Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.

                (y) "Option" means an option to purchase Shares pursuant to an
Award Agreement granted under the Plan.

                (z) "Outside Director" means a Director who is not an Employee.

                (aa) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

                (bb) "Performance - Based Compensation" means compensation
qualifying as "performance-based compensation" under Section 162(m) of the Code.

                (cc) "Plan" means this 2001 Stock Incentive Plan.



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                (dd) "Related Entity" means any Parent, Subsidiary and any
business, corporation, partnership, limited liability company or other entity in
which the Company, a Parent or a Subsidiary holds a substantial ownership
interest, directly or indirectly.

                (ee) "Related Entity Disposition" means the sale, distribution
or other disposition by the Company, a Parent or a Subsidiary of all or
substantially all of the interests of the Company, a Parent or a Subsidiary in
any Related Entity effected by a sale, merger or consolidation or other
transaction involving that Related Entity or the sale of all or substantially
all of the assets of that Related Entity, other than any Related Entity
Disposition to the Company, a Parent or a Subsidiary.

                (ff) "Restricted Stock" means Shares issued under the Plan to
the Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.

                (gg) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor thereto.

                (hh) "Share" means a share of the Common Stock.

                (ii) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.

        3. Stock Subject to the Plan.

                (a) Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards (including
Incentive Stock Options) is 6,360,000 Shares. Notwithstanding the foregoing and
subject to the provisions of Section 10 below, the maximum number of Shares
which may be issued pursuant to all Awards of Restricted Stock is ten percent
(10%) of the aggregate number of Shares which may be issued pursuant to all
Awards under the Plan. The Shares to be issued pursuant to Awards may be
authorized, but unissued, or reacquired Common Stock.

                (b) Any Shares covered by an Award (or portion of an Award)
which is forfeited or canceled, expires or is settled in cash, shall be deemed
not to have been issued for purposes of determining the maximum aggregate number
of Shares which may be issued under the Plan. Shares that actually have been
issued under the Plan pursuant to an Award shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if
unvested Shares are forfeited, or repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.

        4. Administration of the Plan.

                (a) Plan Administrator.

                        (i) Administration with Respect to Directors and
Officers. With respect to grants of Awards to Directors or Employees who are
also Officers or Directors of the



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Company, the Plan shall be administered by (A) the Board or (B) a Committee
designated by the Board, which Committee shall be constituted in such a manner
as to satisfy the Applicable Laws and to permit such grants and related
transactions under the Plan to be exempt from Section 16(b) of the Exchange Act
in accordance with Rule 16b-3. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.

                        (ii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Awards to Employees or Consultants
who are neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. The Board may authorize one or
more Officers to grant such Awards and may limit such authority as the Board
determines from time to time.

                        (iii) Administration With Respect to Covered Employees.
Notwithstanding the foregoing, grants of Awards to any Covered Employee intended
to qualify as Performance-Based Compensation shall be made only by a Committee
(or subcommittee of a Committee) which is comprised solely of two (2) or more
Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to Covered
Employees, references to the "Administrator" or to a "Committee" shall be deemed
to be references to such Committee or subcommittee.

                        (iv) Administration Errors. In the event an Award is
granted in a manner inconsistent with the provisions of this subsection (a),
such Award shall be presumptively valid as of its grant date to the extent
permitted by the Applicable Laws.

                (b) Powers of the Administrator. Subject to Applicable Laws and
the provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the Board, the
Administrator shall have the authority, in its discretion:

                        (i) to select the Employees, Directors (excluding
Outside Directors) and Consultants to whom Awards may be granted from time to
time hereunder;

                        (ii) to determine whether and to what extent Awards are
granted hereunder;

                        (iii) to determine the number of Shares or the amount of
other consideration to be covered by each Award granted hereunder;

                        (iv) to approve forms of Award Agreements for use under
the Plan;

                        (v) to determine the terms and conditions of any Award
granted hereunder;

                        (vi) to amend the terms of any outstanding Award granted
under the Plan, provided that any amendment that would adversely affect the
Grantee's rights under an



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outstanding Award shall not be made without the Grantee's written consent and
the reduction of the exercise price of any Option awarded under the Plan shall
be subject to shareholder approval;

                        (vii) to construe and interpret the terms of the Plan
and Awards granted pursuant to the Plan, including without limitation, any
notice of Award or Award Agreement, granted pursuant to the Plan;

                        (viii) to establish additional terms, conditions, rules
or procedures to accommodate the rules or laws of applicable foreign
jurisdictions and to afford Grantees favorable treatment under such laws;
provided, however, that no Award shall be granted under any such additional
terms, conditions, rules or procedures with terms or conditions which are
inconsistent with the provisions of the Plan; and

                        (ix) to take such other action, not inconsistent with
the terms of the Plan, as the Administrator deems appropriate.

        5. Eligibility. Awards other than Incentive Stock Options may be granted
to Employees, Directors and Consultants; provided, however that Outside
Directors shall only be eligible to receive Options pursuant to the provisions
of Section 6(e), Non-Discretionary Automatic Awards to Outside Directors.
Incentive Stock Options may be granted only to Employees of the Company, a
Parent or a Subsidiary. An Employee, Director or Consultant who has been granted
an Award may, if otherwise eligible, be granted additional Awards. Awards may be
granted to such Employees, Directors or Consultants who are residing in foreign
jurisdictions as the Administrator may determine from time to time.

        6. Terms and Conditions of Awards.

                (a) Type of Awards. The Administrator is authorized under the
Plan to award any type of arrangement to an Employee, Director or Consultant
that is not inconsistent with the provisions of the Plan and that by its terms
involves or might involve the issuance of Shares and Options with a fixed or
variable price related to the Fair Market Value of the Shares and with an
exercise or conversion privilege related to the passage of time, the occurrence
of one or more events, or the satisfaction of performance criteria or other
conditions. Such Awards may include Options and sales or bonuses of Restricted
Stock and may be awarded in any combination or alternative.

                (b) Designation of Award. Each Award shall be designated in the
Award Agreement. In the case of an Option, the Option shall be designated as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by a Grantee during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options, to the extent of the Shares covered thereby in excess of
the foregoing limitation, shall be treated as Nonstatutory Stock Options. For
this purpose, Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the date the Option with respect to such Shares is granted.



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                (c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in Share price, earnings per Share, total shareholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.

                (d) Acquisitions and Other Transactions. The Administrator may
issue Awards under the Plan in settlement, assumption or substitution for,
outstanding awards or obligations to grant future awards in connection with the
Company or a Related Entity acquiring another entity, an interest in another
entity or an additional interest in a Related Entity whether by merger, stock
purchase, asset purchase or other form of transaction.

                (e) Non-Discretionary Automatic Awards to Outside Directors. On
the day immediately following the annual meeting of shareholders of the Company
held in 2002 and each annual meeting thereafter, each Outside Director shall be
automatically granted an Option to purchase 10,000 Shares (as adjusted in
accordance with Section 10 hereof), provided that at the date of grant of each
Option such Director is an Outside Director; and provided, further, that
sufficient Shares are available under the Plan for the grant of such Option. No
person shall have any discretion to select which Outside Directors shall be
granted Options or to determine the number of Shares to be covered by such
Options; provided, however, that nothing in this Plan shall be construed to
prevent an Outside Director from declining to receive an Option under this Plan.
The terms of Options granted under this Section 6(e) shall be as follows:

                        (i) the term of the Option shall be five (5) years;

                        (ii) the exercise price per Share shall be one hundred
percent (100%) of the Fair Market Value on the date of grant of the Option;

                        (iii) the Option shall be exercisable upon grant.

                (f) Individual Option Limit. The maximum number of Shares with
respect to which Options may be granted to any Grantee in any fiscal year of the
Company shall be 600,000 Shares. In connection with a Grantee's commencement of
Continuous Service, a Grantee may be granted Options for up to an additional
1,200,000 Shares which shall not count against the limit set forth in the
previous sentence. The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization pursuant to
Section 10, below. To the extent required by Section 162(m) of the Code or the
regulations thereunder, in applying the foregoing limitations with respect to a
Grantee, if any Option is canceled, the canceled Option shall continue to count
against the maximum number of Shares with respect to which Options may be
granted to the Grantee. For this purpose, the repricing of an Option shall be
treated as



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the cancellation of the existing Option and the grant of a new Option (if
approved by shareholders).

                (g) Term of Award. The term of each Award shall be the term
stated in the Award Agreement, provided, however, that the term of any Award
shall be no more than ten (10) years from the date of grant thereof. However, in
the case of an Incentive Stock Option granted to a Grantee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Incentive Stock Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Award Agreement.

                (h) Transferability of Awards. Incentive Stock Options may not
be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's Incentive
Stock Option in the event of the Grantee's death on a beneficiary designation
form provided by the Administrator. Other Awards may be transferred by gift or
through a domestic relations order to members of the Grantee's Immediate Family
to the extent provided in the Award Agreement or in the manner and to the extent
determined by the Administrator.

                (i) Time of Granting Awards. The date of grant of an Award shall
for all purposes be the date on which the Administrator makes the determination
to grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.

        7. Award Exercise or Purchase Price, Consideration and Taxes.

                (a) Exercise or Purchase Price. The exercise or purchase price,
if any, for an Award shall be as follows:

                        (i) In the case of an Incentive Stock Option granted to
an Employee who, at the time of the grant of such Incentive Stock Option owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be not less than one hundred ten percent (110%) of the Fair
Market Value per Share on the date of grant.

                        (ii) In cases other than the case described in the
preceding paragraph, the per Share exercise price of an Option shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the date
of grant.

                        (iii) In the case of a Restricted Stock grant, such
price, if any, shall be determined by the Administrator.

                        (iv) Notwithstanding the foregoing provisions of this
Section 7(a), in the case of an Award issued pursuant to Section 6(d), above,
the exercise or purchase price for the Award shall be determined in accordance
with the principles of Section 424(a) of the Code.



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                (b) Consideration. Subject to Applicable Laws, the consideration
to be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
issued under the Plan the following:

                        (i) cash;

                        (ii) check;

                        (iii) surrender of Shares or delivery of a properly
executed form of attestation of ownership of Shares as the Administrator may
require (including withholding of Shares otherwise deliverable upon exercise of
the Award) which have a Fair Market Value on the date of surrender or
attestation equal to the aggregate exercise price of the Shares as to which said
Award shall be exercised (but only to the extent that such exercise of the Award
would not result in an accounting compensation charge with respect to the Shares
used to pay the exercise price unless otherwise determined by the
Administrator);

                        (iv) with respect to Options, payment through a
broker-dealer sale and remittance procedure pursuant to which the Grantee (A)
shall provide written instructions to a Company designated brokerage firm to
effect the immediate sale of some or all of the purchased Shares and remit to
the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
Shares and (B) shall provide written directives to the Company to deliver the
certificates for the purchased Shares directly to such brokerage firm in order
to complete the sale transaction; or

                        (v) any combination of the foregoing methods of payment.

                (c) Taxes. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award, the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.

        8. Exercise of Award.

                (a) Procedure for Exercise; Rights as a Shareholder.

                        (i) Any Award granted hereunder shall be exercisable at
such times and under such conditions as determined by the Administrator under
the terms of the Plan and specified in the Award Agreement.

                        (ii) An Award shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Award by the person entitled to exercise the Award and full
payment for the Shares with respect to which the



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Award is exercised, including, to the extent selected, use of the broker-dealer
sale and remittance procedure to pay the purchase price as provided in Section
7(b)(v). Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to Shares subject
to an Award, notwithstanding the exercise of an Option or other Award. The
Company shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Award. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in the Award Agreement or Section 10, below.

                (b) Exercise of Award Following Termination of Continuous
Service.

                        (i) An Award may not be exercised after the termination
date of such Award set forth in the Award Agreement and may be exercised
following the termination of a Grantee's Continuous Service only to the extent
provided in the Award Agreement.

                        (ii) Where the Award Agreement permits a Grantee to
exercise an Award following the termination of the Grantee's Continuous Service
for a specified period, the Award shall terminate to the extent not exercised on
the last day of the specified period or the last day of the original term of the
Award, whichever occurs first.

                        (iii) Any Award designated as an Incentive Stock Option
to the extent not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Service shall convert automatically to a Nonstatutory Stock Option and
thereafter shall be exercisable as such to the extent exercisable by its terms
for the period specified in the Award Agreement.

        9. Conditions Upon Issuance of Shares.

                (a) Shares shall not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of such
Shares pursuant thereto shall comply with all Applicable Laws, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

                (b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.

        10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Options
may be granted to any Grantee in any fiscal year of the Company, the number of
Shares granted to Outside Directors under Section 6(e), the total number of
Shares with respect to which Restricted Stock can be granted under the Plan, as
well as any other terms that the Administrator



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determines require adjustment shall be proportionately adjusted for (i) any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Shares, or similar event affecting the Shares, (ii) any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company, or (iii) as the Administrator may determine in its
discretion, any other transaction with respect to Common Stock to which Section
424(a) of the Code applies or any similar transaction; provided, however that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Administrator and its determination shall be final, binding and
conclusive. Except as the Administrator determines, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason hereof shall be made
with respect to, the number or price of Shares subject to an Award.

        11. Corporate Transactions and Related Entity Dispositions. Except as
may be provided in an Award Agreement:

                (a) The Administrator shall have the authority, exercisable
either in advance of any actual or anticipated Corporate Transaction or Related
Entity Disposition or at the time of an actual Corporate Transaction or Related
Entity Disposition and exercisable at the time of the grant of an Award under
the Plan or any time while an Award remains outstanding, to provide for the full
or partial automatic vesting and exercisability of one or more outstanding
unvested Awards under the Plan and the full or partial release from restrictions
on transfer and repurchase or forfeiture rights of such Awards in connection
with a Corporate Transaction or Related Entity Disposition, on such terms and
conditions as the Administrator may specify. The Administrator also shall have
the authority to condition any such Award vesting and exercisability or release
from such limitations upon the subsequent termination of the Continuous Service
of the Grantee within a specified period following the effective date of the
Corporate Transaction or Related Entity Disposition. The Administrator may
provide that any Awards so vested or released from such limitations in
connection with a Related Entity Disposition, shall remain fully exercisable
until the expiration or sooner termination of the Award. Effective upon the
consummation of a Corporate Transaction, all outstanding Awards under the Plan
shall terminate unless assumed by the successor company or its parent.

                (e) The portion of any Incentive Stock Option accelerated under
this Section 11 in connection with a Corporate Transaction or Related Entity
Disposition shall remain exercisable as an Incentive Stock Option under the Code
only to the extent the $100,000 dollar limitation of Section 422(d) of the Code
is not exceeded. To the extent such dollar limitation is exceeded, the
accelerated excess portion of such Option shall be exercisable as a Nonstatutory
Stock Option.

        12. Effective Date and Term of Plan. The Plan shall become effective
upon the earlier to occur of its adoption by the Board or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 17, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.

        13. Amendment, Suspension or Termination of the Plan.



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                (a) The Board may at any time amend, suspend or terminate the
Plan; provided, however, that no such amendment shall be made without the
approval of the Company's shareholders to the extent such approval is required
by Applicable Laws, or if such amendment would:

                        (i) expand the classes of persons to whom Awards may be
issued under Section 5 of the Plan;

                        (ii) increase the number of Shares authorized for
issuance under Section 3(a) of the Plan excluding such increases pursuant to
Section 10 of the Plan;

                        (iii) increase the number of Shares with respect to
which Options may be granted to any Grantee under Section 6(f) of the Plan
excluding such increases pursuant to Section 10 of the Plan;

                        (iv) increase the percentage of Shares available for
Awards of Restricted Stock under Section 3(a) of the Plan;

                        (v) permit unrestricted Shares to be granted other than
in lieu of cash payments under other incentive plans and programs of the Company
and its Related Entities excluding any such incentive plan or program that is a
"Retirement Plan" or "Welfare Plan" under the Employee Retirement Income
Security Act of 1974, as amended;

                        (vi) allow the creation of additional types of Awards;

                        (vii) permit decreasing the exercise price of any Option
outstanding under the Plan; or

                        (viii) change any of the provisions of this Section
13(a).

                (b) The Administrator may amend the terms of any outstanding
Award, prospectively or retroactively, but no such amendment (i) shall cause
Performance-Based Compensation to cease to qualify as Performance-Based
Compensation, (ii) impair the rights of any Grantee without the Grantee's
consent except such an amendment made to cause the Plan or Award to qualify for
any exemption provided by Rule 16b-3 or (iii) modify the terms of any Award in a
manner inconsistent with the provisions of the Plan. Subject to the above
provisions, the Board shall have authority to amend the Plan to take into
account changes in Applicable Laws and accounting rules as well as other
developments, and to grant Awards which qualify for beneficial treatment under
such rules without shareholder approval.

                (c) No Award may be granted during any suspension of the Plan or
after termination of the Plan.

                (d) Any amendment, suspension or termination of the Plan
(including termination of the Plan under Section 12, above) shall not affect
Awards already granted, and such Awards shall remain in full force and effect as
if the Plan had not been amended, suspended or terminated, unless mutually
agreed otherwise between the Grantee and the Administrator, which agreement must
be in writing and signed by the Grantee and the Company.



                                       12
<PAGE>   13

        14. Reservation of Shares.

                (a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.

                (b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

        15. No Effect on Terms of Employment/Consulting Relationship. The Plan
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's Continuous Service at any time,
with or without cause.

        16. No Effect on Retirement and Other Benefit Plans. Except as
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The Plan
is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.

        17. Shareholder Approval. The grant of Incentive Stock Options under the
Plan shall be subject to approval by the shareholders of the Company within
twelve (12) months before or after the date the Plan is adopted excluding
Incentive Stock Options issued in substitution for outstanding Incentive Stock
Options pursuant to Section 424(a) of the Code. Such shareholder approval shall
be obtained in the degree and manner required under Applicable Laws. The
Administrator may grant Incentive Stock Options under the Plan prior to approval
by the shareholders, but until such approval is obtained, no such Incentive
Stock Option shall be exercisable. In the event that shareholder approval is not
obtained within the twelve (12) month period provided above, all Incentive Stock
Options previously granted under the Plan shall be exercisable as Nonstatutory
Stock Options.



                                       13
<PAGE>   14


                NOVELLUS SYSTEMS, INC. 2001 STOCK INCENTIVE PLAN

                          NOTICE OF STOCK OPTION AWARD
                          ----------------------------
<TABLE>
<S>                                        <C>
     Grantee's Name and Address:
                                             ___________________________________

                                             ___________________________________

                                             ___________________________________
</TABLE>

     You have been granted an option to purchase shares of Common Stock,
subject to the terms and conditions of this Notice of Stock Option Award (the
"Notice"), the Novellus Systems, Inc. 2001 Stock Incentive Plan, as amended from
time to time (the "Plan") and the Stock Option Award Agreement (the "Option
Agreement") attached hereto, as follows. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings in this Notice.

<TABLE>
<S>                                        <C>
     Award Number                           ____________________________________

     Date of Award                          ____________________________________

     Vesting Commencement Date              ____________________________________

     Exercise Price per Share               $___________________________________

     Total Number of Shares subject
     to the Option                          ____________________________________

     Total Exercise Price                   $___________________________________

     Type of Option:                        ____ Incentive Stock Option

                                            ____ Non-Qualified Stock Option

     Expiration Date:                       ____________________________________

     Post-Termination Exercise Period:      Three (3) Months
</TABLE>




Vesting Schedule:

     Subject to Grantee's Continuous Service and other limitations set forth in
this Notice, the Plan and the Option Agreement, the Option may be exercised, in
whole or in part, in accordance with the following schedule:

     25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest on each monthly anniversary of the Vesting Commencement Date thereafter.

     During any authorized leave of absence, the vesting of the Option as
provided in this schedule shall cease after the leave of absence exceeds a
period of ninety (90) days. Vesting of the Option shall resume upon the
Grantee's termination of the leave of absence and return to service to the
Company or a Related Entity.

                                       1
<PAGE>   15



     In the event of the Grantee's change in status from Employee to
Consultant or from an Employee whose customary employment is 20 hours or more
per week to an Employee whose customary employment is fewer than 20 hours per
week, vesting of the Option shall continue only to the extent determined by the
Administrator as of such change in status.

     IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice
and agree that the Option is to be governed by the terms and conditions of this
Notice, the Plan, and the Option Agreement.

                                   Novellus Systems, Inc.,
                                   a California corporation

                                   By: _________________________________

                                   Title: ______________________________


THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE OPTION SHALL
VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE GRANTEE'S CONTINUOUS SERVICE (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES
HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS
NOTICE, THE OPTION AGREEMENT, OR THE PLAN SHALL CONFER UPON THE GRANTEE ANY
RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF GRANTEE'S CONTINUOUS
SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE'S RIGHT OR THE RIGHT
OF THE GRANTEE'S EMPLOYER TO TERMINATE GRANTEE'S CONTINUOUS SERVICE, WITH OR
WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS
THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY,
GRANTEE'S STATUS IS AT WILL.

     The Grantee acknowledges receipt of a copy of the Plan and the Option
Agreement, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts the Option subject to all of the terms
and provisions hereof and thereof. The Grantee has reviewed this Notice, the
Plan, and the Option Agreement in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Notice, and fully
understands all provisions of this Notice, the Plan and the Option Agreement.
The Grantee hereby agrees that all disputes arising out of or relating to this
Notice, the Plan and the Option Agreement shall be resolved in accordance with
Section 13 of the Option Agreement. The Grantee further agrees to notify the
Company upon any change in the residence address indicated in this Notice.

<TABLE>
<S>                                  <C>
Dated: ______________________        Signed: ___________________________________
                                                          Grantee
</TABLE>


                                       2

<PAGE>   16

                                                      AWARD NUMBER:  ___________


                NOVELLUS SYSTEMS, INC. 2001 STOCK INCENTIVE PLAN

                          STOCK OPTION AWARD AGREEMENT
                          ----------------------------

     1. Grant of Option. Novellus Systems, Inc., a California corporation (the
"Company"), hereby grants to the Grantee (the "Grantee") named in the Notice of
Stock Option Award (the "Notice"), an option (the "Option") to purchase the
Total Number of Shares of Common Stock subject to the Option (the "Shares") set
forth in the Notice, at the Exercise Price per Share set forth in the Notice
(the "Exercise Price") subject to the terms and provisions of the Notice, this
Stock Option Award Agreement (the "Option Agreement") and the Company's 2001
Stock Incentive Plan, as amended from time to time (the "Plan"), which are
incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Option
Agreement.

     If designated in the Notice as an Incentive Stock Option, the Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Code. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of Shares subject to Options designated as Incentive
Stock Options which become exercisable for the first time by the Grantee during
any calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options, to the extent of the Shares covered
thereby in excess of the foregoing limitation, shall be treated as Non-Qualified
Stock Options. For this purpose, Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the date the Option with respect to such
Shares is awarded.

     2. Exercise of Option.

          (a) Right to Exercise. The Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice and with the
applicable provisions of the Plan and this Option Agreement. The Option shall be
subject to the provisions of Section 11 of the Plan relating to the
exercisability or termination of the Option in the event of a Corporate
Transaction, Change in Control or Related Entity Disposition. The Grantee shall
be subject to reasonable limitations on the number of requested exercises during
any monthly or weekly period as determined by the Administrator. In no event
shall the Company issue fractional Shares.

          (b)  Method of Exercise. The Option shall be exercisable only by
delivery of an Exercise Notice (attached as Exhibit A) which shall state the
election to exercise the Option, the whole number of Shares in respect of which
the Option is being exercised, such other representations and agreements as to
the holder's investment intent with respect to such Shares and such other
provisions as may be required by the Administrator. The Exercise Notice shall be
signed by the Grantee and shall be delivered in person, by certified mail, or by
such other method as determined from time to time by the Administrator to the
Company accompanied by payment of the Exercise Price. The Option shall be deemed
to be exercised upon receipt by the Company

                                       1
<PAGE>   17

of such written notice accompanied by the Exercise Price, which, to the extent
selected, shall be deemed to be satisfied by use of the broker-dealer sale and
remittance procedure to pay the Exercise Price provided in Section 3(d), below.

          (c)  Taxes. No Shares will be delivered to the Grantee or other person
pursuant to the exercise of the Option until the Grantee or other person has
made arrangements acceptable to the Administrator for the satisfaction of
applicable income tax, employment tax, and social security tax withholding
obligations, including, without limitation, obligations incident to the receipt
of Shares or the disqualifying disposition of Shares received on exercise of an
Incentive Stock Option. Upon exercise of the Option, the Company or the
Grantee's employer may offset or withhold (from any amount owed by the Company
or the Grantee's employer to the Grantee) or collect from the Grantee or other
person an amount sufficient to satisfy such tax obligations and/or the
employer's withholding obligations.

     3. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Grantee;
provided, however, that such exercise method does not then violate any
Applicable Law:

          (a) cash;

          (b) check;

          (c)  surrender of Shares or delivery of a properly executed form of
attestation of ownership of Shares as the Administrator may require (including
withholding of Shares otherwise deliverable upon exercise of the Option) which
have a Fair Market Value on the date of surrender or attestation equal to the
aggregate Exercise Price of the Shares as to which the Option is being exercised
(but only to the extent that such exercise of the Option would not result in an
accounting compensation charge with respect to the Shares used to pay the
exercise price);

          (d)  payment through a broker-dealer sale and remittance procedure
pursuant to which the Grantee (i) shall provide written instructions to a
Company designated brokerage firm to effect the immediate sale of some or all of
the purchased Shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased Shares and (ii) shall provide written
directives to the Company to deliver the certificates for the purchased Shares
directly to such brokerage firm in order to complete the sale transaction.

     4.   Restrictions on Exercise. The Option may not be exercised if the
issuance of the Shares subject to the Option upon such exercise would constitute
a violation of any Applicable Laws. In addition, the Option, if an Incentive
Stock Option, may not be exercised until such time as the Plan has been approved
by the stockholders of the Company.

     5.   Termination or Change of Continuous Service. In the event the
Grantee's Continuous Service terminates, the Grantee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise the Option during the Post-Termination Exercise Period. In no event
shall the Option be exercised later than the Expiration Date set forth

                                       2
<PAGE>   18


in the Notice. In the event of the Grantee's change in status from Employee,
Director or Consultant to any other status of Employee, Director or Consultant,
the Option shall remain in effect and, except to the extent otherwise determined
by the Administrator, continue to vest; provided, however, that with respect to
any Incentive Stock Option that shall remain in effect after a change in status
from Employee to Director or Consultant, such Incentive Stock Option shall cease
to be treated as an Incentive Stock Option and shall be treated as a
Non-Qualified Stock Option on the day three (3) months and one (1) day following
such change in status. Except as provided in Sections 6 and 7 below, to the
extent that the Grantee is not entitled to exercise the Option on the
Termination Date, or if the Grantee does not exercise the Option within the
Post-Termination Exercise Period, the Option shall terminate.

     6. Disability of Grantee. In the event the Grantee's Continuous Service
terminates as a result of his or her Disability, the Grantee may, but only
within twelve (12) months from the Termination Date (and in no event later than
the Expiration Date), exercise the Option to the extent he or she was otherwise
entitled to exercise it on the Termination Date; provided, however, that if such
Disability is not a "disability" as such term is defined in Section 22(e)(3) of
the Code and the Option is an Incentive Stock Option, such Incentive Stock
Option shall cease to be treated as an Incentive Stock Option and shall be
treated as a Non-Qualified Stock Option on the day three (3) months and one (1)
day following the Termination Date. To the extent that the Grantee is not
entitled to exercise the Option on the Termination Date, or if the Grantee does
not exercise the Option to the extent so entitled within the time specified
herein, the Option shall terminate.

     7. Death of Grantee. In the event of the termination of the Grantee's
Continuous Service as a result of his or her death, or in the event of the
Grantee's death during the Post-Termination Exercise Period or during the twelve
(12) month period following the Grantee's termination of Continuous Service as a
result of his or her Disability, the Grantee's estate, or a person who acquired
the right to exercise the Option by bequest or inheritance, may exercise the
Option, but only to the extent the Grantee could exercise the Option at the date
of termination, within twelve (12) months from the date of death (but in no
event later than the Expiration Date). To the extent that the Grantee is not
entitled to exercise the Option on the date of death, or if the Option is not
exercised to the extent so entitled within the time specified herein, the Option
shall terminate.

     8. Transferability of Option. The Option, if an Incentive Stock Option,
may not be transferred in any manner other than by will or by the laws of
descent and distribution and may be exercised during the lifetime of the Grantee
only by the Grantee; provided, however, that the Grantee may designate a
beneficiary of the Grantee's Incentive Stock Option in the event of the
Grantee's death on a beneficiary designation form provided by the Administrator.
The Option, if a Non-Qualified Stock Option may be transferred to any person by
will and by the laws of descent and distribution. Non-Qualified Stock Options
also may be transferred during the lifetime of the Grantee by gift and pursuant
to a domestic relations order to members of the Grantee's Immediate Family to
the extent and in the manner determined by the Administrator. The terms of the
Option shall be binding upon the executors, administrators, heirs, successors
and transferees of the Grantee.


                                       3
<PAGE>   19

     9. Term of Option. The Option may be exercised no later than the
Expiration Date set forth in the Notice or such earlier date as otherwise
provided herein.

     10. Tax Consequences. Set forth below is a brief summary as of the date of
this Option Agreement of some of the federal tax consequences of exercise of the
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE GRANTEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

          (a) Exercise of Incentive Stock Option. If the Option qualifies as an
Incentive Stock Option, there will be no regular federal income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as income for purposes of the alternative minimum tax for federal tax
purposes and may subject the Grantee to the alternative minimum tax in the year
of exercise.

          (b) Exercise of Incentive Stock Option Following Disability. If the
Grantee's Continuous Service terminates as a result of Disability that is not
total and permanent disability as defined in Section 22(e)(3) of the Code, to
the extent permitted on the date of termination, the Grantee must exercise an
Incentive Stock Option within three (3) months of such termination for the
Incentive Stock Option to be qualified as an Incentive Stock Option.

          (c) Exercise of Non-Qualified Stock Option. On exercise of a
Non-Qualified Stock Option, the Grantee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If the Grantee is an Employee or a former Employee, the Company
will be required to withhold from the Grantee's compensation or collect from the
Grantee and pay to the applicable taxing authorities an amount in cash equal to
a percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if such withholding amounts
are not delivered at the time of exercise.

          (d) Disposition of Shares. In the case of a Non-Qualified Stock
Option, if Shares are held for more than one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes and subject to tax at a maximum rate of 20%. In the case of
an Incentive Stock Option, if Shares transferred pursuant to the Option are held
for more than one year after receipt of the Shares and are disposed more than
two years after the Date of Award, any gain realized on disposition of the
Shares also will be treated as capital gain for federal income tax purposes and
subject to the same tax rates and holding periods that apply to Shares acquired
upon exercise of a Non-Qualified Stock Option. If Shares purchased under an
Incentive Stock Option are disposed of prior to the expiration of such one-year
or two-year periods, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (i) the Fair Market
Value of the Shares on the date of exercise, or (ii) the sale price of the
Shares.


                                       4
<PAGE>   20

     11. Entire Agreement: Governing Law. The Notice, the Plan and this Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Grantee with respect to the subject matter
hereof, and may not be modified adversely to the Grantee's interest except by
means of a writing signed by the Company and the Grantee. Nothing in the Notice,
the Plan and this Option Agreement (except as expressly provided therein) is
intended to confer any rights or remedies on any persons other than the parties.
The Notice, the Plan and this Option Agreement are to be construed in accordance
with and governed by the internal laws of the State of California (as permitted
by Section 1646.5 of the California Civil Code, or any similar successor
provision) without giving effect to any choice of law rule that would cause the
application of the laws of any jurisdiction other than the internal laws of the
State of California to the rights and duties of the parties. Should any
provision of the Notice, the Plan or this Option Agreement be determined by a
court of law to be illegal or unenforceable, such provision shall be enforced to
the fullest extent allowed by law and the other provisions shall nevertheless
remain effective and shall remain enforceable.

     12. Headings. The captions used in the Notice and this Option Agreement
are inserted for convenience and shall not be deemed a part of the Option for
construction or interpretation.

     13. Dispute Resolution The provisions of this Section 13 shall be the
exclusive means of resolving disputes arising out of or relating to the Notice,
the Plan and this Option Agreement. The Company, the Grantee, and the Grantee's
assignees pursuant to Section 8 (the "parties") shall attempt in good faith to
resolve any disputes arising out of or relating to the Notice, the Plan and this
Option Agreement by negotiation between individuals who have authority to settle
the controversy. Negotiations shall be commenced by either party by notice of a
written statement of the party's position and the name and title of the
individual who will represent the party. Within thirty (30) days of the written
notification, the parties shall meet at a mutually acceptable time and place,
and thereafter as often as they reasonably deem necessary, to resolve the
dispute. If the dispute has not been resolved by negotiation, the parties agree
that any suit, action, or proceeding arising out of or relating to the Notice,
the Plan or this Option Agreement shall be brought in the United States District
Court for the Northern District of California (or should such court lack
jurisdiction to hear such action, suit or proceeding, in a California state
court in the County of Santa Clara) and that the parties shall submit to the
jurisdiction of such court. The parties irrevocably waive, to the fullest extent
permitted by law, any objection the party may have to the laying of venue for
any such suit, action or proceeding brought in such court. THE PARTIES ALSO
EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH
SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 13
shall for any reason be held invalid or unenforceable, it is the specific intent
of the parties that such provisions shall be modified to the minimum extent
necessary to make it or its application valid and enforceable.

     14. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail (if the parties are within
the United States) or upon deposit for delivery by an internationally recognized
express mail courier service (for international delivery of notice),

                                       5
<PAGE>   21


with postage and fees prepaid, addressed to the other party at its address as
shown beneath its signature in the Notice, or to such other address as such
party may designate in writing from time to time to the other party.



                                       6
<PAGE>   22


                                    EXHIBIT A
                                    ---------

                NOVELLUS SYSTEMS, INC. 2001 STOCK INCENTIVE PLAN

                                 EXERCISE NOTICE
                                ----------------
Novellus Systems, Inc.
4000 North First Street
San Jose, CA  95134

Attention: Secretary

     1.   Exercise of Option. Effective as of today, ______________, ___ the
undersigned (the "Grantee") hereby elects to exercise the Grantee's option to
purchase ___________ shares of the Common Stock (the "Shares") of Novellus
Systems, Inc. (the "Company") under and pursuant to the Company's 2001 Stock
Incentive Plan, as amended from time to time (the "Plan") and the [ ] Incentive
[ ] Non-Qualified Stock Option Award Agreement (the "Option Agreement") and
Notice of Stock Option Award (the "Notice") dated ______________, ________.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Exercise Notice.

     2.   Representations of the Grantee. The Grantee acknowledges that the
Grantee has received, read and understood the Notice, the Plan, and the Option
Agreement and agrees to abide by and be bound by their terms and conditions.

     3.   Rights as Stockholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Shares, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 10 of the Plan.

     4.   Delivery of Payment. The Grantee herewith delivers to the Company the
full Exercise Price for the Shares, which, to the extent selected, shall be
deemed to be satisfied by use of the broker-dealer sale and remittance procedure
to pay the Exercise Price provided in Section 3(d) of the Option Agreement.

     5. Tax Consultation. The Grantee understands that the Grantee may suffer
adverse tax consequences as a result of the Grantee's purchase or disposition of
the Shares. The Grantee represents that the Grantee has consulted with any tax
consultants the Grantee deems advisable in connection with the purchase or
disposition of the Shares and that the Grantee is not relying on the Company for
any tax advice


                                       1
<PAGE>   23


     6. Taxes. The Grantee agrees to satisfy all applicable federal, state and
local income and employment tax withholding obligations and herewith delivers to
the Company the full amount of such obligations or has made arrangements
acceptable to the Company to satisfy such obligations. In the case of an
Incentive Stock Option, the Grantee also agrees, as partial consideration for
the designation of the Option as an Incentive Stock Option, to notify the
Company in writing within thirty (30) days of any disposition of any shares
acquired by exercise of the Option if such disposition occurs within two (2)
years from the Date of Award or within one (1) year from the date the Shares
were transferred to the Grantee. If the Company is required to satisfy any
federal, state or local income or employment tax withholding obligations as a
result of such an early disposition, the Grantee agrees to satisfy the amount of
such withholding in a manner that the Administrator prescribes.

     7. Successors and Assigns. The Company may assign any of its rights under
this Exercise Notice to single or multiple assignees, and this agreement shall
inure to the benefit of the successors and assigns of the Company. This Exercise
Notice shall be binding upon the Grantee and his or her heirs, executors,
administrators, successors and assigns.

     8. Headings. The captions used in this Exercise Notice are inserted for
convenience and shall not be deemed a part of this agreement for construction or
interpretation.

     9. Dispute Resolution. The provisions of Section 13 of the Option
Agreement shall be the exclusive means of resolving disputes arising out of or
relating to this Exercise Notice.

     10. Governing Law; Severability. This Exercise Notice is to be construed
in accordance with and governed by the internal laws of the State of California
(as permitted by Section 1646.5 of the California Civil Code, or any similar
successor provision) without giving effect to any choice of law rule that would
cause the application of the laws of any jurisdiction other than the internal
laws of the State of California to the rights and duties of the parties. Should
any provision of this Exercise Notice be determined by a court of law to be
illegal or unenforceable, such provision shall be enforced to the fullest extent
allowed by law and the other provisions shall nevertheless remain effective and
shall remain enforceable.

     11. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, (if the parties are within
the United States) or upon deposit for delivery by an internationally recognized
express mail courier service (for international delivery of notice) with postage
and fees prepaid, addressed to the other party at its address as shown below
beneath its signature, or to such other address as such party may designate in
writing from time to time to the other party.

     12. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this agreement.

     13. Entire Agreement. The Notice, the Plan, and the Option Agreement are
incorporated herein by reference, and together with this Exercise Notice
constitute the entire

                                       2

<PAGE>   24
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and the
Grantee with respect to the subject matter hereof, and may not be modified
adversely to the Grantee's interest except by means of a writing signed by the
Company and the Grantee. Nothing in the Notice, the Plan, the Option Agreement
and this Exercise Notice (except as expressly provided therein) is intended to
confer any rights or remedies on any persons other than the parties.

<TABLE>
<S>                                         <C>
Submitted by:                                Accepted by:

GRANTEE:                                     NOVELLUS SYSTEMS, INC.

                                             By:
                                                --------------------------------
                                             Title:
-----------------------------------                -----------------------------
            (Signature)
Address:                                     Address:

                                            4000 North First Street
-----------------------------------         San Jose, CA  95134
-----------------------------------
</TABLE>

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