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                                                                    Exhibit 10.1

                                  FIRST AMENDED

                          CHIPS AND TECHNOLOGIES, INC.

                       1988 NONQUALIFIED STOCK OPTION PLAN

                              FOR OUTSIDE DIRECTORS

                      (AS AMENDED THROUGH NOVEMBER 9, 1995)

      1. Purpose. The Chips and Technologies, Inc. 1988 Nonqualified Stock
Option Plan for Outside Directors (the "Prior Plan") was established effective
as of March 1, 1988 (the "Effective Date"), to create additional incentive for
the outside directors of Chips and Technologies, Inc. and any successor
corporation thereto (collectively referred to as the "Company"), to promote the
financial success and progress of the Company. The Prior Plan is amended and
restated as the First Amended Chips and Technologies, Inc. 1988 Nonqualified
Stock Option Plan for Outside Directors (the "Plan") effective upon approval of
the Company's stockholders (the "Amendment Effective Date").

      2. Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Board") and/or by a duly appointed committee of
the Board having such powers as shall be specified by the Board. Any subsequent
references to the Board shall also mean the committee if such committee has been
appointed. All questions of interpretation of the Plan or of any options granted
under the Plan (an "Option") shall be determined by the Board, and such
determinations shall be final and binding upon all persons having an interest in
the Plan and/or any Option. All Options shall be nonqualified stock options. Any
officer of the Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.

      3. Eligibility and Type of Option. The Options may be granted only to
directors of the Company who are not employees of the Company or any present
parent and/or subsidiary corporations of the Company. Options granted to
eligible directors of the Company ("Outside Directors") shall be nonqualified
stock options, that is, options which do not meet the requirements of section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). For
purposes of the Plan, a parent corporation and a subsidiary corporation shall be
as defined in sections 424(e) and 424(f) of the Code.

      4. Shares Subject to Option. Options shall be options for the purchase of
the authorized but unissued common stock of the Company (the "Stock") subject to
adjustment as provided in Paragraph 8 below. The maximum number of shares of
Stock which may be issued under the Plan shall be 550,000 shares. In the event
that any outstanding Option for any reason expires or is terminated and/or
shares subject to repurchase are repurchased by the

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Company, the shares of Stock allocable to the unexercised portion of such Option
may again be subjected to an Option.

      5. Time for Granting Options. All Options shall be granted, if at all,
within ten (10) years from the Effective Date.

      6. Terms, Conditions and Form of Options. Options granted pursuant to the
Plan shall be evidenced by written agreements ("Stock Option Agreements")
specifying the number of shares of Stock covered thereby, in substantially the
form attached hereto as Exhibit A and incorporated herein by reference (the
"Option Agreement"), except as set forth herein, and shall comply with and be
subject to the following terms and conditions:

         (a) Automatic Grant of Options.

             (i)   Each Outside Director shall be granted an Option for Twenty
Thousand (20,000) shares of Stock upon the later of the Effective Date or the
date said Outside Director is first elected to serve on the Board.

             (ii)  The Anniversary Date of an Outside Director who was elected
to the Board prior to the Effective Date shall be the date which is twelve (12)
months after the Effective Date, and successive anniversaries thereof. The
Anniversary Date of any Outside Director who is elected to the Board on or after
the Effective Date shall be the date which is twelve (12) months after such
election and successive anniversaries thereof. The Anniversary Date of a
director who is employed by the Company or a present parent and/or subsidiary
corporation of the Company and who subsequently terminates such employment while
remaining on the Board shall be the date following such termination of
employment.

             (iii) Each Outside Director shall be granted on the Amendment
Effective Date an additional Option for the Ten Thousand (10,000) shares of
Stock for each odd Anniversary Date of such Outside Director which occurred
subsequent to the later of the Effective Date or such Outside Director's
election to the Board and prior to the Amendment Effective Date. For example, an
Outside Director elected to the Board prior to the Effective Date would be
granted an Option for Thirty Thousand (30,000) shares of Stock computed as
follows:

  10,000 multiplied by 3 odd year Anniversary Dates (3-1-89, 3-1-91 and 3-1-93).

Vesting on each Ten Thousand (10,000) share Option granted pursuant to this
Paragraph 6(a)(iii) shall run from the odd Anniversary Date to which such grant
relates.

             (iv)  Each Outside Director shall be granted an additional Option
for Ten Thousand (10,000) shares of Stock upon every Anniversary Date occurring
on or after the Amendment Effective Date of said Outside Director's tenure as a
Director.

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             (v)    Each Outside Director shall be granted an additional Option
on the Amendment Effective Date and on every Anniversary Date thereafter on
which such Outside Director is a member of one or more Board Committees
("Committee Membership") for a number of shares of Stock determined as follows.
For each Committee Membership, the Outside Director shall be granted Two
Thousand Five Hundred (2,500) shares of Stock.

             (vi)   An Outside Director who is serving as Chairman of the Board
shall be granted an additional Option on the Amendment Effective Date and upon
every Anniversary Date thereafter on which the Outside Director is so serving as
Chairman of the Board for Five Thousand (5,000) shares of Stock.

             (vii)  Notwithstanding any other provision of the Plan, no Option
shall be granted to any individual who is no longer serving as an Outside
Director of the Company, Committee Member, or Chairman of the Board, as the case
may be, on an Anniversary Date which would otherwise be a date of grant.

             (viii) For purposes of determining the number of Option shares
under Paragraphs 6(a)(v) and (vi), only service while an Outside Director shall
be counted.

      (b) Option Price. The option price per share for an Option shall be the
fair market value, as determined by the closing price of the Company's common
stock on the National Association of Securities Dealers Automated Quotation
System (the "NASDAQ System") as reported in the Wall Street Journal on the date
of the granting of the Option. If the such date prior to the date of the
granting of the Option does not fall on a day on which the Company's Stock is
trading on the NASDAQ System or a national securities exchange, the date on
which the Option price per share shall be established shall be the last day on
which the Company's Stock was so traded prior to the date of the granting of the
Option. Notwithstanding the foregoing, an Option may be granted with an exercise
price lower than the minimum exercise price set forth above if such Option is
granted pursuant to an assumption or substitution for another option in a manner
qualifying with the provisions of section 424(a) of the Code.

      (c) Exercise Period of Options. Any Option granted hereunder shall be
exercisable for a term of ten (10) years.

      (d) Payment of Option Price. Payment of the option price for the number of
shares of Stock being purchased pursuant to any Option shall be made:

          (i)   in cash;

         (ii)   by check, or

        (iii)   by the assignment of the proceeds of a sale of some or all
of the shares being acquired upon the exercise of the Option (including, without
limitation, through

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an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System).

      7. Authority to Vary Terms. The Board shall have the authority from time
to time to vary the terms of the Option Agreement either in connection with the
grant of an individual Option or in connection with the authorization of a new
standard form or forms; provided, however, that the terms and conditions of such
revised or amended stock option agreements shall be in accordance with the terms
of the Plan.

      8. Effect of Change in Stock Subject to the Plan. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan and
to any outstanding Options and in the option price of any outstanding Options in
the event of a stock dividend, stock split, reverse stock split, combination,
reclassification, or like change in the capital structure of the Company.

      9. Ownership Change and Transfer of Control. For the purposes hereof, the
"Control Company" shall mean Chips and Technologies, Inc. An "Ownership Change"
shall be deemed to have occurred in the event of any of the following
occurrences with respect to the Control Company:

         (a) the direct or indirect sale or exchange by the stockholders of the
Control Company of all or substantially all of the stock of the Control Company;

         (b) a merger in which the Control Company is a party; or

         (c) the sale, exchange, or transfer of all or substantially all of the
Control Company's assets.

      A "Transfer of Control" shall mean an Ownership Change in which the
stockholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.

      In the event of a Transfer of Control, the Board, in its sole discretion,
shall either (i) provide that any unvested portion of the Option shall be
immediately exercisable and vested as of a date prior to the Transfer of
Control, as the Board so determines, or (ii) arrange with the surviving,
continuing, successor, or purchasing corporation, as the case may be, that such
corporation either assume the Company's rights and obligations under outstanding
stock option agreements or substitute options for such corporation's stock for
such outstanding options. Any Options which are neither exercised as of the date
of the Transfer of Control nor assumed by the surviving, continuing, successor,
or purchasing corporation, as the case may be, shall terminate effective as of
the date of the Transfer of Control.

      10. Options Non-Transferable. During the lifetime of the Optionee, an
Option shall be exercisable only by said Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution.



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      11. Termination or Amendment of Plan. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan at any time;
provided, however, that without the approval of the Company's stockholders,
there shall be (i) no increase in the total number of shares covered by the Plan
(except by operation of the provisions of Paragraph 8, above), and (ii) no
expansion in the class of persons eligible to receive nonqualified stock
options. Notwithstanding the foregoing, the Plan may not be amended more
frequently than once every six (6) months, other than to comport with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder. In any event, no amendment may adversely affect any then
outstanding Option or any unexercised portion thereof, without the consent of
the Optionee.

      IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing First Amended Chips and Technologies, Inc. 1988 Nonqualified
Stock Option Plan for Outside Directors was duly adopted by the Board of
Directors of the Company on the October 1, 1993, approved by a majority of the
stockholders of the Company on November 10, 1993, and as subsequently amended
through November 9, 1995.

                                                             Jeffery Anne Tatum,
                                                             Secretary



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                                   EXHIBIT A
                       NONQUALIFIED STOCK OPTION AGREEMENT
                              FOR OUTSIDE DIRECTORS

                                     Between
                          CHIPS AND TECHNOLOGIES, INC.

                                       and
                           [firstname] [lastname]

                          Grant Number [grantnumber]

      You have been granted an option under the First Amended Chips and
Technologies, Inc. 1988 Nonqualified Stock Option Plan for Outside Directors
(the "Plan"). This Agreement describes the terms and conditions of your option
(the "Agreement").

Number of Shares          Your option is for [shares] shares of the common 
                          stock of Chips and Technologies, Inc., a Delaware
                          corporation ("Chips"). Chips will make appropriate
                          adjustments in the number, option price, and class of
                          your shares if there is a stock dividend, stock split,
                          or like change in the capital structure of Chips. If a
                          majority of Chips' shares which are of the same class
                          as your shares are converted into the shares of
                          another corporation ("New Shares"), Chips may make
                          your option exercisable for New Shares but shall
                          adjust the number of shares and the exercise price for
                          the New Shares in a fair and equitable manner.

Option Price              You may purchase your option shares for [optionprice]
                          per share, which was the closing price of the common
                          stock of Chips on [grantdate].

Type of Option            This option is intended to be a nonqualified stock
                          option and will not be treated as an incentive stock
                          option as defined in section 422(b) of the Internal
                          Revenue Code of 1986, as amended (the "Code").

Grant Date                The "Grant Date" of your option is [grantdate].

Initial Vesting Date      The "Initial Vesting Date" of your option is
                          [period1vestdate], which is six (6) months from
                          the Grant Date. This is the date your option begins to
                          vest.


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Exercisability            You may exercise your option immediately in its
                          entirety on or after the Grant Date. However, if you
                          buy unvested option shares, they may not be sold or
                          otherwise transferred until they become vested. (See
                          Right to Repurchase below).

Term                      Your option will expire on [period1expiredate], the
                          "Expiration Date", which is ten (10) years from the
                          Grant Date, unless your service as a director of Chips
                          is terminated as explained below, or unless Chips is
                          involved in a "transfer of control" transaction as
                          explained below.

Vesting of Options        On the Initial Vesting Date, [period1sharesvesting] 
                          shares of the option will be vested (one-eighth (1/8)
                          of the option shares). Thereafter one-forty-eighth
                          (1/48) of the option shares will vest for each full
                          month of your continuous service as a director of
                          Chips from the Initial Vesting Date. Your option stops
                          vesting when your service as a director of Chips
                          terminates.

Your Right to Buy
Unvested Shares           You can buy shares that have not yet vested.
                          The number of shares you buy over and above your
                          vested shares are "unvested shares." They may not be
                          sold or otherwise be transferred until they become
                          vested.

Chips' Right to
Repurchase Your
Unvested Shares           If your service as a director of Chips terminates for
                          any reason, with or without cause while you are
                          holding unvested shares, or if you or your legal
                          representative attempts to sell, exchange, transfer,
                          pledge, or otherwise dispose of any unvested shares
                          (other than pursuant to an "ownership change", as
                          defined below), Chips may buy those unvested shares
                          back from you at the option price you originally paid
                          as adjusted to reflect changes in the number, exercise
                          price and class of the shares.

                          If Chips wishes to exercise its right to repurchase
                          your unvested shares, it must give you written notice
                          within sixty (60) days after the later of (i) the
                          termination of your service as a director or your
                          exercise of your option, if later, or (ii) the date
                          Chips received notice of the attempted disposition of
                          the shares by you or your legal representative.


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                          Chips must exercise its right to repurchase the
                          unvested shares, if at all, for all of the unvested
                          shares unless Chips and you otherwise agree. However,
                          Chips will not repurchase your unvested shares if you
                          transfer your unvested shares to your ancestors,
                          descendents, or spouse or to a trustee for their
                          benefit and the transferee agrees in writing (in a
                          form satisfactory to Chips) to take the shares subject
                          to Chips' right of repurchase.

                          In the event Chips is unable to exercise the right of
                          repurchase under the provisions of Section 160 of the
                          Delaware General Corporation Law, or the corresponding
                          provisions of other applicable law, Chips may assign
                          the right of repurchase to one or more persons
                          selected by Chips' Board of Directors (the
                          "Board").

Escrow for Unvested 
Shares                    To ensure that the unvested shares will be available
                          for repurchase by Chips, when you buy any unvested
                          shares, you may be required to deposit the certificate
                          for the shares with an escrow agent designated by
                          Chips under the terms and conditions of an escrow
                          agreement approved by Chips. Chips will pay the escrow
                          costs.

Payment by Chips
through Escrow            If Chips exercises its right to repurchase your
                          unvested shares, Chips will make payment to the escrow
                          agent on behalf of you or your legal representative in
                          cash within sixty (60) days after Chips mails to you
                          its written notice of exercise of right of repurchase.
                          For purposes of this payment, cancellation of any
                          outstanding promissory note of yours that you have
                          previously delivered to Chips will be treated as
                          payment in cash to the extent of the unpaid principal
                          and any accrued interest canceled. Within thirty (30)
                          days after payment by Chips, the escrow agent will
                          give the shares which Chips has purchased to Chips and
                          give the payment received from Chips to you.

Legend on Unvested
Shares                    Chips may stamp your certificates for unvested shares
                          you purchase with a special legend referring to Chips'
                          right of repurchase. As your vesting percentage
                          increases, you may request, at reasonable intervals,
                          that Chips exchange


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                          such legended shares which have vested for shares
                          without such a legend.

Stock Dividends           If, from time to time, there is any stock dividend, 
                          stock split, or other change in the character or
                          amount of any of Chips' outstanding stock, then any
                          and all new substituted or additional securities to
                          which you are entitled by reason of your ownership of
                          option shares will be immediately subject to Chips'
                          right of repurchase with the same force and effect as
                          your option shares subject to the right of repurchase
                          immediately before such event. (See Right to
                          Repurchase above.)

Ownership Change          The following events constitute an "ownership
                          change" of Chips: (1) the direct or indirect sale or
                          exchange by Chips' stockholders of all or
                          substantially all of Chips' stock; (2) a merger in
                          which Chips is a party; or (3) the sale, exchange, or
                          transfer of all or substantially all of Chips' assets.

                          If there is an ownership change, Chips' right of
                          repurchase will continue but your service as a
                          director will include service with Chips and any
                          parent or subsidiary corporation of Chips (as defined
                          in Section 424 of the Code) at the time you were a
                          director whether or not such corporation was included
                          in such term before and after the ownership change.

Transfer of Control       A "transfer of control" of Chips means an
                          ownership change in which Chips' stockholders before
                          such ownership change do not retain, directly or
                          indirectly, at least a majority of the beneficial
                          interest in Chips' voting stock.

                          In the event of a transfer of control, the Board, in
                          its sole discretion, will either (i) provide that any
                          unvested portion of your option will become vested as
                          of a date prior to the transfer of control, as the
                          Board so determines, or (ii) arrange with the
                          surviving, continuing, successor, or purchasing
                          corporation, as the case may be, that such corporation
                          either assume Chips' rights and obligations under this
                          Agreement or substitute options for such corporation's
                          stock for your option. Your option will terminate on
                          the date of the transfer of control to the extent that
                          your option is neither exercised as of the date


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                          of the transfer of control nor assumed by the
                          surviving, continuing, successor, or purchasing
                          corporation, as the case may be.

Termination of Your
Service as Director       If you cease to be a director of Chips for
                          any reason, your option as to unvested shares expires
                          immediately.

                          If you cease to be a director of Chips because of your
                          death or disability as defined in Section 422(c) of
                          the Code, your option as to vested shares expires six
                          (6) months after your service as a director ends or on
                          the Expiration Date of the term of the option,
                          whichever is first.

                          If you cease to be a director of Chips because of any
                          other reason, your option as to vested shares expires
                          one (1) month after your service as a director ends or
                          on the Expiration Date of the term of the option,
                          whichever is first.

                          However, if a sale, within the applicable time periods
                          set forth in the preceding two paragraphs, of shares
                          acquired upon the exercise of the option would subject
                          you to suit under Section 16(b) of the Securities
                          Exchange Act of 1934, as amended, your option as to
                          vested shares will not expire until the earliest to
                          occur of (i) the tenth (10th) day following the date
                          on which your sale of such shares would no longer be
                          subject to such suit, (ii) the one hundred and
                          ninetieth (190th) day after your service as a director
                          ends, or (iii) the Expiration Date.

                          Notwithstanding the foregoing, no additional vesting
                          will occur after your service as a director
                          terminates.

Restrictions on
Resale                    You may not sell your option shares at any time you
                          are in possession of material inside information. In
                          addition, your sale of your option shares will be
                          governed by Chips' trade restriction policy in effect
                          at the time of the proposed sale.

                          You may sell your option shares only during the
                          trading window. This window currently commences on the
                          third day following the release of quarterly financial
                          results and


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                          ends twenty-eight (28) days thereafter, unless
                          extended by Chips' President or Chief Financial
                          Officer.

Notice of Exercise        When you wish to exercise your option, you
                          must send a signed Notice of Exercise to Chips at its
                          main office which currently is:

                                            Chips and Technologies, Inc.
                                            2950 Zanker Road
                                            San Jose, CA 95134
                                            Attn:  Corporate Services

                          Your notice must specify how many whole shares you
                          wish to purchase and must contain any representations
                          and agreements as to your investment intent with
                          respect to the shares required by Chips. Your notice
                          must be delivered in person, by certified or
                          registered mail, return receipt requested, by
                          confirmed facsimile transmission, or by such other
                          means as Chips may permit, to Chips' Stock
                          Administrator, or other authorized representative of
                          Chips, prior to the Expiration Date, accompanied by a
                          signed form of Chips' then current escrow
                          instructions, if you are exercising your option for
                          unvested shares, and full payment of the option price
                          for the number of shares you are purchasing. The
                          Notice of Exercise is effective when it is received by
                          Chips. Chips will not be required to issue fractional
                          shares upon the exercise of your option.

Form of Payment           When you submit your Notice of Exercise,
                          you must include payment of the option price for the
                          number of shares you are purchasing. Payment may be
                          made in one (or a combination of two or more) of the
                          following forms:

                                -     Your personal check
                                -     A cashier's check
                                -     Cash
                                -     Assignment of the sale proceeds of some or
                                      all of the shares acquired on exercise of
                                      the option (including an exercise
                                      complying with Regulation T of the Board
                                      of Governors of the Federal Reserve
                                      System)

Taxes                     You will be responsible for the payment of any tax
                          liability on income related to the option, its
                          exercise and/or the transfer of any shares acquired
                          upon exercise of the option


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                          and Chips will issue a Form 1099-MISC to report any
                          such income.

Certificate
Registration              Chips will register the certificate or certificates
                          issued upon the exercise of your option in your name
                          or, if applicable, in the name of your heir(s).

Transfer of Option        Prior to your death, only you may exercise
                          your option, and you cannot transfer or assign your
                          option. However, you may dispose of your option in
                          your will or by the laws of descent and distribution.

Stockholder Rights        You, or your estate or heirs, have no rights as
                          a stockholder of Chips until a certificate for your
                          option shares has been issued. No adjustments will be
                          made for dividends or other rights if the applicable
                          record date occurs prior to the date your stock
                          certificate is issued, unless there is a change in the
                          stock as described in the Plan.

Applicable Law            This Agreement will be interpreted and enforced
                          under the laws of the State of California.

Other Agreements          The Plan, as it may be amended from time to time, is
                          incorporated in this Agreement by reference.  This
                          Agreement and the Plan constitute the entire
                          understanding between you and Chips regarding your
                          option.  Any prior agreements, understandings,
                          commitments, or negotiations concerning your option 
                          are superseded.

Amendment                 Chips may at any time amend or terminate the Plan
                          and/or your option. However, no amendment or
                          termination may adversely affect your option without
                          your consent.

Binding Effect            This Agreement will benefit, and will bind,
                          you, Chips, and the respective heirs, executors,
                          administrators, successors and assigns of you and
                          Chips.

Time of Expiration        Whenever there is a reference in this
                          Agreement to a date when your option expires, the
                          option will expire on that date at 5:00 p.m. local
                          time in San Jose, California.


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      By signing this Agreement, you and Chips agree to all of the terms and
conditions described above and in the Plan, including Chips' right to repurchase
unvested shares.

                                           CHIPS AND TECHNOLOGIES, INC.

                                           By:
                                                 -----------------------
                                           Its:  
                                                 -----------------------
                                           Dated:
                                                 -----------------------
                                                 

                                           OPTIONEE


                                                                    
                                           -----------------------------
                                           Name:             
                                                 -----------------------
                                           Dated:   
                                                 -----------------------


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