EXECUTION COPY

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement
(Agreement), entered into effective March 11, 2005, is between Novellus Systems, Inc., a
California corporation (the Company), and Richard S. Hill (Executive) (collectively, the
parties).

RECITALS

1.
Executive has been employed by the Company and is currently serving as the Chairman and Chief Executive
Officer.

2.           The
Company desires to continue to employ Executive and to assure itself of the continued services of
Executive for the term of this Agreement, and Executive desires to be employed by the Company for such period, upon the following
terms and conditions.

3.           The
Company and Employee entered into an Employment Agreement, dated as of October 1, 1998 (the
Original Employment Agreement), an Amendment to Employment Agreement dated December 17, 1999, and an Amendment
No. 2 to Employment Agreement dated January 14, 2004 (collectively, the Prior Employment
Agreements), and now desire to amend and restate in their entirety the Prior Employment Agreements with this Agreement.

AGREEMENT

ACCORDINGLY, the parties agree as follows:

1. Period of Employment

a. Basic Term.  The Company shall continue
to employ Executive to
render services to the Company in the position and with the duties and responsibilities described in Section 2 from the date of
this Agreement through December 31, 2006 (the Term Date), unless Executives
employment is terminated sooner in accordance with Section 4 below.

b. Renewal.  The term and provisions of
this Agreement shall
automatically extend for additional two-year periods if Executive remains employed on and after December 31 of each year during
the Basic Term of this Agreement, unless either party notifies the other in writing to the contrary
at least three (3) months prior to the applicable December 31 date that it, or he, does not want the term to so extend.
Renewal extends the Term Date.



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2. Position, Duties, Responsibilities

a. Position.  Executive is employed by the
Company to render
services to the Company in the position of Chairman and Chief Executive Officer and shall perform all services appropriate to that
position, as well as such other services as may reasonably be assigned by the Company.  Executive
shall devote his best efforts and full-time attention to the performance of his duties.  Executive shall report to the Board of
Directors of the Company.

b. Other Activities.  Except upon the prior
written consent of the
Company, Executive will not (i) accept any other employment, or (ii) engage, directly or indirectly, in any other business
activity (whether or not pursued for pecuniary advantage) that is or may be in conflict with, or
that might place Executive in a conflicting position to that of, the Company.  Notwithstanding the foregoing, while the Company does
not request Executives service on the boards of directors of other corporations, the Company
does not, in principle, object to such service where Executive would have no conflict of interest with duties owed to the Company.

c. Proprietary Information.
Proprietary Information is
all information and any idea in whatever form, tangible or intangible, pertaining in any manner to the business of the Company, or
any Affiliate, or its employees, clients, consultants, or business associates, which was produced by
any employee of the Company, or any Affiliate, in the course of his or her employment or otherwise produced or acquired by or on
behalf of the Company, or any Affiliate.  All Proprietary Information not generally known outside of the
Companys organization, and all Proprietary Information so known only through improper means, shall be deemed
Confidential Information.  Without limiting the foregoing definition, Proprietary and Confidential
Information shall include, but not be limited to:  (i) formulas, teaching and development techniques, processes, trade secrets,
computer programs, electronic codes, inventions, improvements, and research projects;
(ii) information about costs, profits, markets, sales, and lists of customers or clients; (iii) business, marketing, and
strategic plans; and (iv) employee personnel files and compensation information.  Executive
should consult any Company procedures instituted to identify and protect certain types of Confidential Information, which are
considered by the Company to be safeguards in addition to the protection provided by this Agreement.
Nothing contained in those procedures or in this Agreement is intended to limit the effect of the other.

d. General Restrictions on Use.  During the
time that he is
employed by the Company, Executive shall use Proprietary Information, and shall disclose Confidential Information, only for the
benefit of the Company and as is necessary to carry out his
responsibilities under this Agreement.  Following termination, Executive shall neither, directly or indirectly,
use any

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Proprietary Information nor disclose any Confidential Information, except as expressly and specifically authorized in
writing by the Company.  The publication of any Proprietary Information through literature or speeches must
be approved in advance in writing by the Company.

3. Compensation.  In consideration of the services to be rendered under this Agreement, Executive shall
be entitled to the following:

a. The Company shall pay Executive a base annual
salary of $840,000,
payable bi-weekly.  Executives salary will be reviewed from time to time in accordance with the Companys established
procedures for adjusting salaries for similarly situated employees.  Executive shall also be eligible to
participate in the Companys executive bonus plan, as already established by the Company, and as may be amended from time to
time in the Companys sole discretion.

b. Executive shall be eligible to participate in
the Companys
benefit plans, and to receive perquisites of employment, as established by the Company, and as may be amended from time to time in
the Companys sole discretion at least equal to those provided to other Company officers.

c. The Company shall have the right to deduct or
withhold from the
compensation due to Executive hereunder any and all sums required for federal income and social security taxes and all state or
local taxes now applicable or that may be enacted and become applicable in the future.

4. Termination of Employment

a. Termination By Death.  Executives
employment shall
terminate automatically upon the death of Executive.  The Company shall pay to Executives beneficiaries or estate, as
appropriate, any compensation then due and owing, and shall continue to pay Executives salary and
benefits, bi-weekly, through the second full month after Executives death.  As of the date of death, all stock options
available to Executive through the Term Date shall, in accordance with the terms of the Companys stock
option plan and Executives stock option agreements, be exercisable by the appropriate representative beneficiary of
Executives estate. Thereafter, all obligations of the Company under this Agreement shall cease.  Nothing
in this Section shall affect any entitlement of Executives heirs or designated beneficiaries to the benefits of any life
insurance plan or other applicable benefits. Upon Executive reaching the age of 55 and still
being employed by the Company, termination by death will automatically entitle Executives estate
to the retirement benefits of Section 4(e).

b.                 Termination By Disability.  If, in the
sole opinion of the
Company, Executive shall be prevented from properly performing his duties hereunder by reason of any physical or mental incapacity
for a period of more than one hundred eighty (180) days in the aggregate in any twelve-month period,
then, to the extent permitted by law, the Company may relieve Executive of his

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duties.  The Company shall pay to Executive all
compensation to which Executive is entitled up through the last day of the month in which the 180th day of
incapacity occurs, and thereafter, the Company shall continue to employ Executive at 66 2/3% of his base annual salary at the time
of disability and shall include Executive in the Companys health insurance benefit plans
beginning on the 181st day of his disability, such payment of salary and inclusion in Company health insurance benefits to continue
until Executive reaches age 65.  Any long term disability insurance payments received by Executive
shall be credited to the Companys obligation for such disability payments.  Executives rights to exercise stock options
shall be in accordance with the terms of the Companys stock option plan and Executives
stock option agreements.  Nothing in this Section shall affect Executives rights under any disability plan in which he is a
participant.

c.                 Termination By Company Not For Cause.
At any time, the Company
may terminate Executives employment with the Company for any reason by providing Executive ninety (90) days advance
written notice, provided that Executive shall, in addition to all compensation due and owing through
the last day actually worked, receive the following:

(i)    The greater of a severance
payment equal to two years
of Executives then current base salary, or his base salary through the Term Date per paragraph 1(a) above.  The severance
payment will be made in the form of salary continuation for two years (the Severance Period),
payable on the Companys normal payroll schedule.

(ii)   During the Severance Period,
Executive will continue
to receive annual bonus payments equal to 150 percent of his then current base annual salary, payable in any year in which any bonus
payments are made by the Company to any other employees.  During the Severance Period,
Executives annual bonus payments, if any, shall be payable when the Company makes annual bonus payments to any other similarly
situated employees.

(iii)  Payment of Executives
share of health insurance
premiums for Executive and his qualified dependents, in accordance with the Companys existing officer retirement health
benefit program, as evidenced bythe July 1993 Board of Directors Resolution Regarding
Officers Retirement, Medical and Dental Coverage without regard to age or length of service limitations therein.

(iv)   Executives stock
options shall continue to vest
during the Severance Period.  Executive shall not be required to exercise such options until three (3) years following the end of
the Severance Period during which three (3) year period he shall serve as a consultant to the Company
on terms agreeable to Executive and the Company.

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(v)    Executives restricted
stock shall immediately
vest on the date his termination becomes effective and, as a consequence, the Companys right to repurchase such restricted
stock shall immediately lapse on that date.

(vi)   The amount of any payment
provided for in this
Section 4.c. shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by
Executive as the result of employment by another employer during the Severance Period so long as Executive
does not violate the provisions of Section 5.d. below.

(vii)  The severance benefits
described in this
Section 4.c. shall be conditioned upon Executives continued observance of the obligations described in Section 5.d.
throughout the Severance Period.  Should Executive engage in or pursue any of the activities
described in Section 5.d. at any time during the Severance Period, all severance benefits described in this Section 4.c.
shall cease.

d.                 Termination By Company For Cause.  At
any time, and without
prior notice, the Company may terminate Executives employment for Cause (as defined below).  The Company shall pay Executive
all compensation then due and owing; thereafter, all of the Companys obligations under this
Agreement shall cease.  Termination for Cause shall mean termination of Executives employment because of
Executives (i) involvement in fraud, misappropriation or embezzlement related to the business or
property of the Company; (ii) conviction for, or guilty plea to, a felony; (iii) willful material breach of this
Agreement; (iv) willful and continued failure to substantially perform his duties under this Agreement,
provided, however, that if such Cause is reasonably curable, the Company shall not terminate Executives employment hereunder
unless the Company first gives notice of its intention to terminate and the grounds of such termination, and Executive has not within ninety
(90) days following receipt of this notice, cured such Cause.

e.                 By Executive Not for Cause.  At any
time, Executive may
terminate his employment with the Company for any reason, with or without cause, by providing the Company ninety (90) days
advance written notice.  The Company shall have the option, in its complete discretion, to make
termination of Executives employment effective at any time prior to the end of such notice period, provided the Company pays
Executive all compensation due and owing through the last day actually worked, plus an amount equal to
the base salary Executive would have earned through the balance of the above notice period.  Thereafter, all of the Companys
obligations under this Agreement shall cease, except as otherwise provided for in this Paragraph
4(e).  In the event Executive terminates his employment pursuant to this Paragraph 4(e), the Company shall pay for Executives
share of health insurance premiums for Executive and his qualified dependents, in accordance with the
Companys existing officer retirement health benefit program, as evidenced by the Companys July 1993

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Board of
Directors Resolution Regarding Officers Retirement, Medical and Dental Coverage, without
regard to age or length of service limitations therein.

If Executive has attained the age of 55 when his
employment with the Company terminates pursuant to this Paragraph 4(e), Executive shall be entitled
to additional retirement benefits as defined below, provided Executive agrees to and does refrain from further employment as an
executive and/or member of the board of directors of any company competing with the Company.  The
additional benefits are:

(i)


A payment equal to 24 times his highest base monthly salary paid during his employment; and


(ii)


An additional payment equal to the following multiples of the Executives highest base monthly salary paid during his
employment, determined with reference to Executives attained age on the date his employment terminates:
12 times at age 56; 24 times at age 57; 36 times at age 58 or older.  No payment shall be made under this subparagraph (ii) if
Executive has not attained age 56 on the date his employment with the Company terminates pursuant to this
Paragraph 4(e).


These payments may be made as a lump sum, or
distributed over two years, or in the form of a single-life or joint-and-survivor annuity, or any other
actuarially equivalent form that is approved by the Stock Option and Compensation Committee of the Companys Board of
Directors, as designated by Executive by the earlier of (i) 30 days following the execution of this Agreement or (ii) December 31, 2005.  The
foregoing notwithstanding, the parties agree that the Agreement is to be interpreted, and if
necessary amended, to avoid prepayment of taxes and incurring additional taxes; interest and penalties imposed as a result of
failure to comply with the requirements of the Internal Revenue Code, including Section 409A, and
applicable regulations.

The severance benefits described in this
Section 4.e. shall be conditioned upon Executives continued observance of the obligations
described in Section 5.d. throughout a two year period following his termination.  Should Executive engage in or pursue any of
the activities described in Section 5.d. at any time during two years following his termination,
all severance benefits described in this Section 4.e. shall cease.

f.                 By Executive for Good Reason.  Executive
may terminate, without
liability, his employment with the Company for Good Reason (as defined below), provided Executive gives the Company ninety (90)
days advance written notice of the reason for termination and his intent to terminate this
Agreement.  During this period, the Company shall have an opportunity to correct the condition constituting Good Reason.  If the
condition is remedied within this

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period, Executives notice to terminate shall be rescinded
automatically; if not remedied, termination of the Executives employment shall become effective upon expiration of the above
notice period.  In this event, the Company shall pay Executive all compensation due and owing through
the last day actually worked including any accrued but unused vacation.  The Company shall also have the option, in its complete
discretion, to make termination effective at any time prior to the end of the notice period, provided
that the Company pays Executive all compensation due and owing through the balance of the notice period (not to exceed ninety (90)
days).  Executive shall be entitled to exercise his right to terminate this Agreement for Good Reason
only if he gives the required notice not more than two years after the occurrence of the event that is the basis for the Good
Reason.  If Executive terminates his employment with the Company for Good Reason pursuant to the provisions
of this Section 4.f., Executive shall receive the severance benefits described in and pursuant to the terms of subparagraphs
4.c.(i)-(vii) above.

Termination shall be for Good Reason
if Executive voluntarily resigns following:  (i) a change in Executives position with the
Company which materially reduces Executives level of responsibility; (ii) a relocation of Executives principal
place of employment by more than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Company without Executives consent; (iii) a reduction in base compensation; (iv) a reduction in targeted bonus;
or (v) a reduction in bonus payments not permitted by this Employment Agreement.

If the Company has a Change in Control (as
defined below) and Executive accepts a position with the Company or its successor, as applicable, other
than Chairman and Chief Executive Officer, Executive will have the right to terminate his employment for Good Reason at any time
within the period starting on the date the Change in Control occurs and ending two years later.  In the
event Executive terminates his employment under the circumstances described in the preceding sentence, any unvested stock options,
restricted stock or similar awards held by Executive on the date of termination shall immediately vest
and become exercisable or released from any applicable restrictions on transfer or repurchase rights.  For this purpose,
Change in Control shall mean:

(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


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(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.


If any payment or benefit which Executive would
receive pursuant to a Change in Control from the Company or otherwise (Payment) would (i)
constitute a parachute payment within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
Code), and (ii) but for this sentence, be subject to the excise tax imposed by Section
4999 of the Code (the Excise Tax), then such Payment shall be reduced to an amount that results in no portion of the
Payment being subject to the Excise Tax.  If a reduction in payments or benefits constituting
parachute payments is necessary, such reduction shall occur in the following order unless Executive elects in writing a
different order (provided, however, that such election shall be subject to Company approval if made
on or after the date on which the event that triggers the Payment
occurs):  reduction in cash payments; cancellation of accelerated vesting of stock awards; reduction
in employee benefits.  In the event that acceleration of vesting of stock award compensation is to be reduced, such acceleration of
vesting shall be cancelled in the reverse order of the date of grant of Executives stock awards
unless Executive elects in writing a different order for cancellation.

5.
Termination Obligations

a.                 Return of Companys Property.
Executive hereby acknowledges and
agrees that all personal property, including, without limitation, all books, manuals, records, reports, notes, contracts, lists,
blueprints, and other documents, or materials, or copies thereof, and equipment furnished to or prepared
by Executive in the course of or incident to Executives employment, belong to the Company and shall be promptly returned to
the Company upon termination of Executives employment.

b.                 Representations and Warranties Survive
Termination of
Employment.  The representations and warranties contained herein, except Executives obligations under Section 2(b),
shall survive termination of Executives employment and expiration of this Agreement.

c.                 Cooperation in Pending Work.  Following
any termination of
Executives employment, Executive shall fully cooperate with the Company in all matters relating to the winding up of pending
work on behalf of the Company and the orderly transfer of work to other employees of the Company.
Executive shall also cooperate in the defense of any action brought by any third party against the Company that relates in any way
to Executives acts or omissions while employed by the Company.

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d.                 Noncompetition.  Executive acknowledges
and agrees that during
his employment with the Company, he has had access to confidential information and the activities forbidden by this subsection would
necessarily involve the improper use and disclosure of this confidential information.  To forestall
this use or disclosure, Executive agrees that during the Severance Period described in Section 4.c., Executive shall not,
directly or indirectly, (i) divert or attempt to divert from the Company (or any Affiliate) any
business of any kind in which it is engaged; (ii) employ or recommend for employment any person employed by the Company (of any
Affiliate); or (iii) engage in any business activity that is competitive with the Company (of
any Affiliate) in any state where the Company conducts its business, unless Executive can prove that any of the above actions was
done without the use of confidential information.  In addition to the above restrictions on noncompetitive activity, and
regardless of whether any use of confidential information is involved, Executive agrees that during the
Severance Period Executive shall not, directly or indirectly, (i) solicit any customer of the Company (or any Affiliate) known
to Executive (while he was employed by the Company) to have been a customer with respect to products
or services competitive with products or services offered by the Company; or (ii) solicit for employment any person employed by
the Company (or any Affiliate).

6.
Alternative Dispute Resolution

The Company and Executive mutually agree that any
controversy or claim arising out of or relating to this Agreement or the breach thereof, or any
other dispute between the parties, shall be submitted to mediation before a mutually agreeable mediator, which cost is to be borne
by the Company.  In the event mediation is unsuccessful in resolving the claim or controversy, such
claim or controversy shall be resolved by arbitration.  The claims covered by this Agreement (Arbitrable Claims)
include, but are not limited to, claims for wages or other compensation due; claims for breach of any
contract (including this Agreement) or covenant (express or implied); tort claims; claims for discrimination (including, but not
limited to, race, sex, religion, national origin, age, marital status, medical condition, or
disability); claims for benefits (except where an employee benefit or pension plan specifies that its claims procedure shall
culminate in an arbitration procedure different from this one), and claims for violation of any federal,
state, or other law, statute, regulation, or ordinance, except claims excluded in the following paragraph.  The parties hereby waive
any rights they may have to trial by jury in regard to Arbitrable Claims.

Claims Executive may have for Workers
Compensation or unemployment compensation benefits are not covered by this Agreement.  Also not covered is
either partys right to obtain provisional remedies or interim relief from a court of competent jurisdiction.

Arbitration under this Agreement shall be the
exclusive remedy for all Arbitrable Claims.  The Company and Executive agree that arbitration shall be
held in or

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near Santa Clara County, California, and shall be in accordance with the then current Employment Dispute Resolution Rules
of the American Arbitration Association, before an arbitrator licensed to practice law in the State
of California.  The arbitrator shall have authority to award or grant both legal, equitable, and declaratory relief.  Such
arbitration shall be final and binding on the parties.  The Federal Arbitration Act shall govern the
interpretation and enforcement of this section pertaining to Alternative Dispute Resolution.  The costs of the arbitrator shall be
borne by the Company.

This Agreement to mediate and arbitrate survives
termination of Executives employment.

7.
Notices

All notices or other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered
by hand or mailed, postage prepaid, by certified or registered mail, return receipt requested, and addressed to the Company:

Novellus Systems, Inc.
3970 North First Street
San Jose, CA 95134
Attn:  Corporate Secretary

with a copy to:

Morrison &
Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304-1018
Attn:  William D. Sherman, Esq.

and to Executive at:

Mr. Richard
Hill
Novellus Systems, Inc.
3970 North First StreetSan Jose, CA 95134

with a copy to:

Hillis Clark
Martin & Peterson, P.S
500 Galland Building
1221 Second Avenue
Seattle, WA 98101-2925
Attn:  John L. West, Esq.
206-623-1745

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Executive and the Company shall be obligated to
notify the other party of any change in address.  Notice of change of address shall be effective only
when made in accordance with this Section.

8.
Entire Agreement

This Agreement is intended to be the final,
complete, and exclusive statement of the terms of Executives employment by the Company.  Except for
any stock option agreements and any other agreements evidencing a loan or trust from the Company to Executive (including
but not limited to the two loan agreements between Executive and the Company dated
July 1, 1997 and July 31, 1997, and the agreement evidencing the creation of a trust for the benefit of
Executive dated May 26, 1994), this Agreement supersedes all other prior and contemporaneous agreements and
statements pertaining in any manner to the employment of Executive and it may not be contradicted by evidence of any prior or
contemporaneous statements or agreements.  To the extent that the practices, policies, or procedures of the
Company, now or in the future, apply to Executive and are inconsistent with the terms of this Agreement, the provisions of this
Agreement shall control.

9.
Amendments, Waivers

This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by Executive and by a duly authorized
representative of the Company other than Executive.  No failure to exercise and no delay in exercising any right, remedy, or power
under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, or power under this Agreement preclude any other or further exercise thereof, or the exercise of any other right,
remedy, or power provided herein or by law or in equity.

10.
Assignment; Successors and Assigns

Executive agrees that he will not assign, sell,
transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any rights or obligations under this Agreement, nor shall Executives rights be subject to encumbrance or the claims of
creditors.  Any purported assignment, transfer, or delegation shall be null and void.  Nothing in this
Agreement shall prevent the consolidation of the Company with, or its merger into, any other corporation, or the sale by the Company
of all or substantially all of its properties or assets, or the assignment by the Company of this
Agreement and the performance of its obligations hereunder to any successor in interest.  In the event of a change in ownership or
control of the Company, the terms of this Agreement will remain in effect and shall be binding upon
any successor in interest.  Notwithstanding and subject to the foregoing, this Agreement shall be binding upon and shall inure to
the benefit of the parties and their respective heirs, legal representatives,

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successors, and permitted
assigns, and shall not benefit any person or entity other than those enumerated above.

11.
Severability; Enforcement

If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be held by a court of competent
jurisdiction to be invalid, unenforceable, or void, the remainder
of this Agreement and such provisions as applied to other persons, places, and circumstances shall
remain in full force and effect.

12.
Governing Law

The validity, interpretation, enforceability, and
performance of this Agreement shall be governed by and construed in accordance with the law of the
State of California.

13.
Acknowledgment of Parties

The parties acknowledge (a) that they have
consulted with or have had the opportunity to consult with independent counsel of their own choice
concerning this Agreement, and (b) that they have read and understand the Agreement, are fully aware of its legal effect, and
have entered into it freely based on their own judgment and not on any representations or promises
other than those contained in this Agreement.

14.
Date of Agreement

The parties have duly executed this Agreement as
of the date first written above.

/s/ Richard S. HillRichard HillNOVELLUS SYSTEMS, INC.By:
    
    /s/ Kevin S. RoyalIts Vice President and ChiefFinancial Officer


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