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                      KA'U ORCHARDS YEAR 2000 FARMING LEASE

                  THIS LEASE is made as of the 1st day of May 2000, and
effective May 1, 2000, by and between:

                  KA'U AGRIBUSINESS CO., INC., a Hawaii corporation, with place
of business at 96-3207 Maile Street, Pahala, Hawaii 96777, and post office
address at P.O. Box 130, Pahala, Hawaii 96777, hereinafter called the "Landlord,
and

                  ML MACADAMIA ORCHARDS, L.P., a Delaware limited partnership,
with place of business at 828 Fort Street, Suite 205, Honolulu, Hawaii, 96813,
hereinafter called the "Tenant".

                                   WITNESSETH

                  For the term, at the rents, and on the covenants, conditions
and provisions hereinafter set forth, Landlord hereby demises and leases, and
Tenant hereby accepts and rents, those certain parcels of land (or undivided
interests therein) situate at Ka'u in the County and State of Hawaii, as more
particularly described in Exhibit A attached hereto and made a part hereof,
subject, however, to the encumbrances described in said Exhibit A.

                  TO HAVE AND TO HOLD the same, together with all improvements
(excepting the Garage, Administration Building and Macadamia Nut Husking Plant
and all macadamia trees which are already owned by Tenant), rights, easements,
privileges and appurtenances thereunto belonging or appertaining, including
rights of access to the demised premises over Landlord's land, unto Tenant for a
term of forty-five years and two months commencing May 1, 2000, and ending June
30, 2045, unless sooner terminated as provided below.

                  Tenant hereby covenants and agrees to pay to Landlord, net
over and above all taxes, assessments and other charges hereunder payable by
Tenant, rent as set out in the Rent Schedule attached hereto and made a part
hereof.

                  AND LANDLORD hereby covenants with Tenant that upon payment by
Tenant of the rent as aforesaid and upon observance and performance of the
covenants by Tenant hereinafter contained, Tenant shall peaceably hold and enjoy
said premises for the term hereby demised without hindrance or interruption by
Landlord or any other person or persons lawfully claiming by, through or under
Landlord, except as herein expressly provided.

                  AND TENANT hereby covenants with Landlord as follows:

                  1. PAYMENT OF RENT. Tenant will pay said rent in lawful money
of the United States of America at the times and in the manner aforesaid,
without any deduction and without notice or demand, at the office of Landlord in
Pahala.

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                  2. TAXES AND OTHER CHARGES. Tenant will also pay to Landlord
at least ten (10) days before the same become delinquent all taxes, assessments,
rates, charges and other outgoings of every description (but not including
interest and penalties if Landlord makes late payment after receiving timely
remittance from Tenant) to which said premises or any part thereof or any
improvement thereon, or Landlord or Tenant in respect thereof, are now or may
during said term be assessed or become liable, whether made by governmental
authority, by any utility company or by any public or community service company;
provided, however, that with respect to any assessment made under any betterment
or improvement law which may be payable in installments, Tenant shall be
required to pay only such installments together with interest as shall become
due and payable during said term, and real property taxes shall be prorated
between Landlord and Tenant as of the dates of commencement and expiration
respectively of said term, and provided that Tenant's share of the real property
taxes for the land shall be proportionate to any undivided interests in the land
demised by this Lease and that Tenant shall be responsible for all real property
taxes attributable to trees and other improvements used or owned by Tenant on
the premises.

                  Tenant will also pay to Landlord with each installment of
rent, real property taxes and assessments and other charges hereunder payable by
Tenant the amount of all Hawaii general excise or similar taxes payable by
Landlord with respect thereto, whether actually or constructively received. If
at any time during said term there shall be assessed against the demised land or
any part thereof or any improvement thereon or any rents payable to Landlord
therefor or against Landlord in respect thereof, any new taxes (other than
federal or state net income, franchise, corporation, capital stock or excess
profits taxes or any other taxes existing at the commencement of said term)
which are in substitution for real property taxes or are in lieu of increases
thereof, Tenant will also pay to Landlord as additional rent, at least ten (10)
days before the same become delinquent, Tenant's proportionate share of all such
new taxes. Tenant will pay all Hawaii conveyance taxes, if any, payable with
respect to this Lease and any subleases hereunder.

                  3. IMPROVEMENTS REQUIRED BY LAW. Tenant will at Tenant's own
expense during the whole of said term make, build, maintain and repair all
fences, sewers, drains and roads which may be required by law to be made, built,
maintained and repaired upon or adjoining or in connection with or for the use
of the premises used or occupied by Tenant or any part thereof and will bear the
pro rata cost of all such features or facilities used by both Tenant and
Landlord, corresponding to the proportionate usage of the same by Tenant or
persons acting under Tenant.

                  4. REPAIR. Tenant will at Tenant's own expense from time to
time and at all times during said term repair, maintain and keep all of Tenant's
buildings and other improvements now or hereafter built on the demised land with
all necessary

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reparations and amendments whatsoever in good and safe repair, order and
condition, except for reasonable wear and use thereof and damage by unavoidable
casualty other than fire and extended coverage risks. If Tenant or any person
claiming by, through or under Tenant shall damage any private roadway giving
access to said premises, Tenant shall immediately upon written notice by
Landlord repair such roadway to the condition that existed prior to such damage,
and if Tenant shall fail to do so Landlord may accomplish such repair at
Tenant's expense. Tenant will also, at all times during said term at Tenant's
own expense, maintain in good order and condition all boundary monuments (if
any) now or hereafter constructed on the demised land. Landlord represents that
no major repairs that would be required pursuant to the terms of this paragraph
are necessary as of the date of this Lease.

                  5. OBSERVANCE OF LAWS. Tenant will at all times during said
term keep said premises in a safe condition and observe and perform all laws,
ordinances, rules and regulations now or hereafter made by any governmental
authority for the time being applicable to said premises or any improvement
thereon or use thereof.

                  6. INSPECTION. Tenant will permit Landlord and Landlord's
agents at all reasonable times during said term to enter said premises and
examine the state of repair and condition thereof, and will repair and make good
all defects required by the terms of this Lease to be repaired by Tenant of
which notice shall be given by Landlord or Landlord's agents within thirty (30)
days after the giving of such notice or such further time as may be required to
complete such repair with due diligence.

                  7. USE. Tenant will use said premises solely for the
cultivation and harvesting of macadamia nuts and for accessory buildings and
other improvements useful for or incidental to said purpose. Tenant will not
make or suffer any strip or waste or unlawful, improper or offensive use of said
premises or any part thereof.

                  8. GOOD HUSBANDRY. Tenant will in the use of the portions of
said premises used or occupied by Tenant follow approved methods of husbandry
practiced on lands similarly situated or subject to similar conditions. Tenant
will keep said premises in a good cultivated condition reasonably free from
weeds and other noxious growth. Tenant will seek the guidance of appropriate
governmental agencies on the matter of erosion control and will by proper
construction and use of drainage ditches and otherwise, take all reasonable
precautions to prevent or arrest loss of soil by erosion. Any buffer strip
required by Tenant for the protection of Tenant's agricultural crops on said
premises shall be provided by Tenant at Tenant's own expense within the land
hereby demised, and Tenant will not demand any contribution whatsoever for the
cost of providing or maintaining any such strip from Landlord or Landlord's
tenants of any land adjoining areas used by Tenant. Tenant understands and
agrees that neither Landlord nor Landlord's tenants shall be required to perform
any crop or weed control on any land adjoining said premises.

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                  9. REPORTS. Tenant will furnish to Landlord on or before the
expiration of sixty (60) days after the end of each calendar year during said
term a complete written statement stating in reasonable detail (a) the quantity
of macadamia nuts produced on or derived from the demised land which were sold
during such year, (b) a list of every sublease, tenancy and cropping agreement
effective at any time during such year with respect to any part of said premises
specifying the area, location and term thereof and the rent reserved thereunder,
(c) the extent of construction and maintenance of buildings and other
improvements on and general character and condition of the demised land, and (d)
the number of acres of the demised land cleared and planted with macadamia nut
trees and the location thereof.

                  10. FIRE INSURANCE. Tenant will at Tenant's own expense at all
times during said term keep all buildings now or hereafter erected on the
demised land used by Tenant exceeding $1,000 in actual value insured against
loss or damage by fire with extended coverage in an insurance company authorized
to do business in Hawaii in a sum not less than 80% of the value thereof, in the
joint names of Landlord, Tenant and any mortgagee as their interests may appear,
and will pay all premiums thereon when due, and will, whenever requested by
Landlord, deposit promptly with Landlord the current policies of such insurance
or certificates thereof. In every case of loss or damage to said buildings all
proceeds of such insurance shall be used with all reasonable speed by Tenant for
rebuilding, repairing or otherwise reinstating the same buildings in a good and
substantial manner according to the plan and elevation of the buildings so
destroyed or damaged or such modified plan as shall first be approved in writing
by Landlord; provided, however, that in lieu of such restoration Tenant may at
Tenant's option remove all debris and remains of such damaged buildings and
restore the site thereof to good condition and even grade, and all insurance
proceeds then remaining after the costs of restoration and debris removal shall
be payable to Tenant and any mortgagee as their interests may appear, except
that such remaining proceeds shall be payable to Landlord if there shall be
fewer than three (3) years remaining on the term of this Lease (not including
any extension options).

                  11. LIENS AND BONDS. Tenant will not commit or suffer any act
or neglect whereby said premises or any improvement thereon or the estate of
Tenant therein shall at any time during said term become subject to any
attachment, judgment, lien, charge or encumbrance whatsoever, and will indemnify
and hold Landlord harmless from and against all loss, cost and expense,
including reasonable attorneys' fees, with respect thereto. Tenant will, before
commencing construction of any improvements on said premises, deposit with
Landlord a fully-executed copy of the contract therefor and a copy of the
contractor's performance bond and labor and material payment bond naming
Landlord as an obligee, in an amount equal to the cost of such construction in
form and with surety satisfactory to Landlord, guaranteeing the completion of
such work free and clear of all mechanics' and materialmen's lien.

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                  12. INDEMNITY AND LIABILITY INSURANCE. Except as to injury,
death or property, damage resulting solely from the negligence of Landlord,
Tenant will indemnify and hold Landlord harmless from and against all claims and
demands for loss or damage, including property damage, personal injury and
wrongful death, arising out of or in connection with the use or occupancy of
said premises, or any road giving access to the premises, by Tenant or any
person claiming by, through or under Tenant, or any accident or fire on said
premises, or any nuisance made or suffered thereon, or any failure by Tenant to
keep said premises or, any adjoining land as set forth in paragraph 14 hereof in
a safe condition, or to perform any of the covenants herein contained, and will
reimburse Landlord for all costs and expenses, including reasonable attorneys'
fees, incurred by Landlord in connection with the defense of any such claims,
and will hold all goods, materials, furniture, fixtures, equipment, machinery,
livestock and other property whatsoever on said premises at the sole risk of
Tenant and hold Landlord harmless from any loss or damage thereto by any cause
whatsoever. Tenant will at Tenant's own expense effect and maintain during the
whole of said term comprehensive general liability insurance with respect to
said premises in an insurance company authorized to do business in Hawaii,
naming Landlord as an additional assured, with minimum limits of not less than
$1,000,000 for injury to one or more persons in any one accident or occurrence
and not less than $100,000 for property damage, or such higher limits as
Landlord may from time to time establish with due regard to the then prudent
business practice in the State of Hawaii as reasonably adequate for Landlord's
protection, and will from time to time deposit promptly with Landlord current
certificates of such insurance. Except as to injury, death or property damage
resulting solely from the negligence of Tenant, Landlord will indemnify and hold
Tenant harmless from and against all claims and demands for loss or damage,
including property damage, personal injury and wrongful death, arising out of or
in connection with the use or occupancy by Landlord or any person claiming by,
through or under Landlord, of the land represented by the undivided interest not
demised by this Lease, or out of or in connection with any accident or fire on
said land of Landlord not used or occupied by Tenant or persons claiming under
Tenant, or any nuisance made or suffered thereon (unless caused by Tenant), and
will reimburse Tenant for all costs and expenses, including reasonable
attorneys' fees, incurred by Tenant in connection with the defense of any such
claims for which Tenant and those claiming under Tenant shall be found to be
without fault.

                  13. OVERHANGING TREES. Tenant will not during said term plant,
cultivate or maintain on the demised land any trees whatsoever so close to any
boundary thereof as to overhang an adjoining lot, road or trail, and if
necessary to comply with this covenant will remove any trees or branches thereof
which at any time shall overhang an adjoining lot, road or trail.

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                  14. LAND ADJOINING ROAD. Tenant will at all times during said
term maintain and keep any adjoining land lying between the established road and
any parts of said premises used or occupied by Tenant or persons claiming under
Tenant along such road in a safe, neat and orderly condition free from all
brush, weeds and debris of every kind, and will also maintain and keep any ditch
now or hereafter existing within such adjoining land free from all boulders and
other obstructions whatsoever to flood waters.

                  15. ASSIGNMENT AND SUBLETTING Landlord and Tenant shall each
have the right to assign this Lease with the prior written consent of the other,
which consent shall not be unreasonably withheld. In the event of assignment of
this Lease by Tenant, Landlord shall have the right to condition its consent on
satisfactory proof of the financial strength of Tenant's assignee. Tenant may
sublet any part or parts of said land used or occupied by Tenant to others on
the express condition that such sublease shall incorporate all terms and
provisions herein contained pertaining to such land and that such sublease shall
be properly accounted for in detail in each annual report by Tenant herein
required to be furnished to Landlord. Landlord shall not unreasonably withhold
any such consent nor require the payment of any moneys or other consideration
for the giving of such consent other than a reasonable fee as hereinafter
provided in paragraph 16.

                  16. EXPENSES OF LANDLORD. Tenant will pay to Landlord on
demand (a) all costs and expenses, including reasonable attorneys' fees, paid or
incurred by Landlord in enforcing any of the covenants herein contained, in
remedying any breach by Tenant of said covenants, in recovering possession of
said premises or any part thereof, in collecting or causing to be paid any
delinquent rent, taxes or other charges hereunder payable by Tenant, or in
connection with any litigation (other than condemnation proceedings) commenced
by or against Tenant to which Landlord shall without fault be made a party, and
(b) a reasonable fee for reviewing and processing any request by Tenant for
Landlord's consent or approval, which fee shall be a flat-rate service charge as
established by the policy of Landlord then in effect or a sum equal to all costs
and expenses paid or incurred by Landlord, including without limitation
reasonable fees of attorneys and other consultants retained by Landlord and the
costs of Landlord's regular salaried staff in connection therewith, whichever is
greater.

                  17. CONDITION OF PREMISES. Tenant has examined and accepts
said premises in the existing condition thereof and shall be solely responsible
for the adequate design, construction and repair of all improvements now or
hereafter made on or in connection with the areas occupied or used by Tenant or
persons claiming under Tenant in respect of any undivided land interests demised
by this Lease, and for obtaining all necessary utility services and connections,
and Tenant agrees that Landlord shall have no liability whatsoever for such
condition or any further

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improvement or development thereof or any repair of any private roads serving
said areas.

                  18. CONSTRUCTION OF BUILDINGS. Tenant will not at any time
erect, place or maintain on said land any buildings or structures other than
fences, walls and water facilities, nor make or suffer any additions to or
alterations of the basic structure of any buildings thereon, except in
accordance with plans, specifications and plot plans therefor first approved in
writing by Landlord. Landlord shall not unreasonably withhold any such approval.

                  19. DEDICATION OF LAND. Tenant may, at Tenant's option at any
time during said term, petition the Director of Finance of the County of Hawaii
for dedication for agricultural uses of all or such portion of the land hereby
demised and actually used or occupied by Tenant and as shall qualify therefor
under the provisions of Section 19-55 of the Hawaii County Code, as amended. If
all or a portion of said land is now or hereafter to be developed as an orchard,
Tenant may also, at Tenant's option at any time during said term, apply to the
Board of Agriculture of the Department of Agriculture, State of Hawaii, for
classification of such land as orchard property under the provisions of Section
154-2, Hawaii Revised Statutes, as amended. If at any time after such dedication
or classification Tenant shall fail to observe the restrictions on the use of
such land or shall cancel or cause such dedication or classification to be
cancelled for any reason whatsoever, Tenant will promptly pay or cause to be
paid to Landlord all taxes, penalties and other charges imposed by the County of
Hawaii or the State of Hawaii on account of such cancellation, together with the
amount of all Hawaii general excise or similar taxes payable thereon by
Landlord, whether actually or constructively received.

                  20. SURRENDER. At the end of said term or other sooner
determination of this Lease, Tenant will peaceably deliver up to Landlord
possession of the land hereby demised, together with all improvements,
including, but not limited to fences, roads, bridges, underground sewers,
drains, buildings including administration building, field office and the
macadamia nut husking plant, and all macadamia nut trees and other trees upon or
belonging to the same, the buildings in "as is" condition and the remaining
improvements in good order and condition, unless Landlord shall advise Tenant in
writing of Landlord's decision to require removal, in which latter case Tenant
shall remove the same and promptly repair to Landlord's satisfaction all damage
caused by such removal. If not then in default hereunder, Tenant shall have the
right, upon written notice to Landlord, to remove from said premises prior to
the end of said term all or any number of the orchard trees thereon, promtly
repairing to Landlords's satisfaction all damage caused by such
removal;provided, however, if a growing orchard or other crop shall be in
existence on the last day of said term, Tenant shall have the right upon written
notice to Landlord to extend said term only for the continued cultivation and
harvest at maturity of such growing crop and removal of

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such trees as hereinbefore provided, but in no event for more than six (6)
months after the last harvest preceding expiration of said term, at the same
rent as was payable for the last full calendar year of said term, and Tenant's
right of removal of such trees shall continue during such period of extension..

                  21. INTEREST ON PAST DUE AMOUNTS. Any rent or other sums
payable Tenant to Landlord under this Lease which are not paid when due shall
bear interest from the date the same became due until paid at the greater of the
maximum rate then permitted to be contracted for by written contract under the
laws of the State of Hawaii, or in the absence of such maximum rate, at the rate
of one percent (1%) per month.

                  22. LANDLORD'S AGRICULTURAL OPERATING RIGHTS. Landlord
reserves and shall have the unrestricted right, appurtenant to its remaining
undivided interests in the demised premises and appurtenant to lands located
adjacent to or in the vicinity of the demised premises and now owned or used or
hereafter used by Landlord and its successors or assigns or lessees in
agricultural operations, to engage in any type of farming operation, including
but not limited to open burning, percolating, evaporating, fertilizing, milling,
power generation, water diversion, plowing, grading, storing, hauling, herbicide
and pesticide spraying, irrigating, crop dusting, and all other activities
incidental to the planting, farming, harvesting and processing of agricultural
products and by-products, which operations may from time to time cause noxious
emissions such as noise, smoke, dust, light, heat, vapor, odor, chemicals,
vibration and other nuisances to be discharged or emitted over and upon the
demised premises. Landlord and its successors and assigns shall not be
responsible or liable to Tenant or its successors or assigns for the
consequences from the creation and discharge of such noxious emissions. Tenant
and its assigns from time to time shall indemnify and hold Landlord and its
successors and assigns harmless from any liability or expense resulting from the
Tenant's or such assigns' claims, as the case may be, arising from such noxious
emissions.

                  23. LANDLORD'S EASEMENT RIGHTS. Landlord reserves, and shall
have appurtenant to its remaining undivided interest in the demised premises, if
any, and appurtenant to lands located adjacent to or in the vicinity of the
demised premises, the non-exclusive right to use all of the demised premises
which the Landlord, in its sole discretion, may require or deem necessary or
desirable for roads, trails, easements or rights-of-way which Landlord, in its
sole discretion may require or deem necessary or desirable for access,
utilities, pole and wire lines, flumes, ditches, pipelines and other water
courses, and the right to grant such rights to third parties; together with the
right to enter the demised premises for the construction, installation,
maintenance, repair, alteration or replacement of any such improvements. The
Landlord shall exercise its rights under this paragraph in such a manner to
cause the least practicable interference with the growing of macadamia nuts on
the demised land and shall compensate the Tenant fully for the lost value all
macadamia nut trees damaged or destroyed by the

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Landlord's exercise of such rights; provided however, that Landlord shall not be
liable for any consequential or other damages.

                  AND IT IS HEREBY MUTUALLY AGREED by and between the parties
hereto as follows:

                  A. CONDEMNATION. In case at any time or times during said term
said premises or any part thereof shall be required, taken or condemned by any
authority having the power of eminent domain, then and in every such case the
estate and interest of Tenant in the premises so required, taken or condemned
shall at once cease and determine, and Tenant shall not by reason thereof be
entitled to any claim against Landlord or others for compensation, or indemnity
for leasehold interest, and all compensation and damages payable for or on
account of any land, water and improvements thereon shall be payable to and be
the sole property of Landlord; provided, however, that all compensation and
damages for or on account of any buildings, sheds, drying platforms, water
tanks, surface pipelines and any trees and crops on the demised land shall be
payable to and be the sole property of Tenant; provided, further, that in case
only part of the land hereby demised shall be so required, taken or condemned,
the base rent hereunder payable for the remainder of said term shall be reduced
(calculated to the nearest dollar) in the proportion that the area of land in
macadamia nut cultivation so required, taken or condemned bears to the total
area of land in macadamia nut cultivation hereby demised, and Landlord shall
refund to Tenant any unearned rent therefor paid in advance prior to such date.
In case one-half or more of the total area of the land in macadamia nut
cultivation hereby demised shall be so required, taken or condemned, thereby
rendering use of the remaining portion of the land in macadamia nut cultivation
to be economically unsound, Tenant shall have the option within one hundred
twenty (120) days after such taking to surrender this Lease and be relieved of
further performance hereunder. Condemnation of any leasehold interest in said
premises or any part thereof shall not terminate this Lease nor excuse Tenant
from full performance of Tenant's covenants for the payment of money or any
other obligations hereunder capable of performance by Tenant, but in such case
Tenant may claim and recover from the condemning authority all compensation and
damages payable on account of Tenant's leasehold interest.

                  B. CONSENT TO MORTGAGE. Tenant may from time to time without
further consent of Landlord assign this Lease by way of mortgage to any bank,
insurance company or other established lending institution as mortgagee,
provided that Tenant shall upon execution of such mortgage promptly deliver a
true copy thereof to Landlord. The mortgagee or its assigns may enforce such
mortgage and acquire title to the leasehold estate in any lawful way, and
pending foreclosure of such mortgage may take possession of and rent said
premises, and upon foreclosure thereof may without further consent of Landlord
sell and assign the leasehold estate by assignment in which the assignee shall
expressly assume and agree to observe and perform all the covenants

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of Tenant herein contained, and such assignee may make a purchase money mortgage
of this Lease to the assignor, provided that upon execution of any such
assignment or mortgage a true copy thereof shall be delivered promptly to
Landlord and that no other or further assignment of this Lease for which any
provision hereof requires the written consent of Landlord shall be made without
such consent. The mortgagee or its assigns of such mortgage shall be liable to
perform the obligations herein imposed on Tenant only during the period such
person has possession or ownership of the leasehold estate. Nothing contained in
such mortgage shall release or be deemed to relieve Tenant from the full and
faithful observance and performance of Tenant's covenants herein contained or
from any liability for the nonobservance or nonperformance thereof, nor be
deemed to constitute a waiver of any rights of Landlord hereunder, and the
terms, covenants and conditions of this Lease shall control in case of any
conflict with the provisions of such mortgage.

                  C. PROTECTION OF MORTGAGE. During the continuance in effect of
any authorized mortgage of this Lease, Landlord will not terminate this Lease
because of any default on the part of Tenant to observe or perform any of the
covenants or conditions herein contained if the mortgagee or its assigns, within
one hundred twenty (120) days after Landlord has mailed to the mortgagee or its
assigns at the last known address thereof a written notice of intention to
terminate this Lease for such cause, shall cure such default, if the same can be
cured by the payment of money or, if such is not the case, shall undertake in
writing to perform and shall thereafter perform all the covenants of this Lease
capable of performance by the mortgagee or its assigns until such time as this
Lease shall be sold upon foreclosure, of such mortgage commenced promptly and
completed with due diligence, and upon foreclosure sale of this Lease, the time
for performance of any obligation of Tenant then in default other than payment
of money shall be extended by the time reasonably necessary to complete such
performance with due diligence. Any default consisting of Tenant's failure
promptly to discharge any lien, charge or encumbrance against said premises
junior in priority to such mortgage shall be deemed to be duly cured if such
mortgage shall be foreclosed by appropriate action instituted within said
120-day period and thereafter prosecuted in a diligent and timely manner.
Ownership by or for the same person of both the fee and leasehold estates in
said premises shall not effect the merger thereof without the prior written
consent of any mortgagee to such merger.

                  D. DESTRUCTION OF LAND. In case at any time or times during
said term any part or parts of, the demised land in macadamia nut cultivation
shall be rendered unfit for the cultivation of macadamia nuts by volcanic action
or other act of God, the base rent hereunder payable for the remainder of said
term shall be reduced in the ratio that the area of the land in macadamia nut
cultivation so affected bears to the total area of land in macadamia nut
cultivation hereby demised, and if a major portion of the land in macadamia nut
cultivation hereby demised shall be rendered unfit for said use by such act of
God thereby rendering the continuance of operations on the remainder of

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the land to be economically unsound, Tenant may at Tenant's option surrender
this Lease by giving written notice thereof to Landlord within thirty (30) days
after such casualty and thereby be relieved of any further obligations
hereunder.

                  E. DEFEASANCE. This demise is upon the express condition, that
if Tenant shall fail to pay said rent or any part thereof within thirty (30)
days after the same becomes due, whether the same shall or shall not have been
legally demanded, or shall fail to observe or perform any of the other covenants
herein contained and on the part of Tenant to be observed and performed and such
default shall continue for thirty (30) days after written notice thereof given
to Tenant at the address provided below, specifying said default in detail, or
if Tenant then owning this Lease shall make any assignment for the benefit of
creditors or abandon said premises, or if this Lease or any estate or interest
of Tenant hereunder shall be sold under any attachment or execution, Landlord
may in any such case at once re-enter said premises or any part thereof in the
name of the whole and, upon or without such entry, at Landlord's option
terminate this Lease without service of notice or legal process, and may expel
and remove from said premises Tenant and all persons claiming under Tenant and
their effects without being deemed guilty of any trespass or becoming liable for
any loss or damage occasioned thereby, and may bring an action for summary
possession of said premises, all without prejudice to any other remedy or right
of action which Landlord may have for arrears of rent or for any preceding or
other breach of contract. If this Lease or a memorandum thereof is recorded in
the Hawaii Bureau of Conveyances, such termination may but need not necessarily
be made effective by recording in such place an affidavit thereof by Landlord or
a judgment thereof by a court of competent jurisdiction.

                  F. NONWAIVER. Acceptance of rent by Landlord or its agent
shall not be deemed to be a waiver by Landlord of any breach by Tenant of any
covenant herein contained or of Landlord's right to re-enter or terminate for
breach of condition. Waiver by Landlord of any breach by Tenant shall not
operate to extinguish the term, covenant or condition the breach of which has
been waived nor be deemed to be a waiver of Landlord's right to declare a
forfeiture or termination for any other breach thereof.

                  G. NOTICES. Any notice or demand to Landlord or Tenant
provided for or permitted by this Lease may be given sufficiently for all
purposes in writing either (1) mailed as registered or certified mail, addressed
as follows:

                  If to Tenant, at          828 Fort Street Mall Suite 205
                                            Honolulu, Hawaii 96813

                  If to Landlord, at        P.O. Box 130
                                            Pahala, Hawaii 96777

                                      146
<PAGE>

                  With a copy to            Alan Kugle
                                            C. Brewer
                                            P.O. Box 1826
                                            Papaikou, Hawaii 96781-1826

or at the last address designated by such party in writing to the other, or (2)
delivered personally within the State of Hawaii to Landlord or Tenant or any
officer of Tenant if Tenant is a corporation or any general partner of Tenant if
Tenant is a partnership, as the case may be, and shall be deemed conclusively to
have been given on the date of such mailing or personal delivery.

                  H. NEGATION OF PARTNERSHIP. Nothing in this Lease shall be
construed to render Landlord in any way or for any purpose a partner, joint
venturer, or associate in any relationship with Tenant.

                  I. DEFINITIONS. The terms "Premises," "land" and "demised
land" herein shall be deemed or taken to include (except where such meaning
would be clearly repugnant to the context) all buildings and other improvements
now or hereafter built on the land hereby demised. The term "Landlord" herein
shall mean and include Landlord, its successors and assigns. The term "Tenant"
herein or any pronoun used in place thereof shall mean and include the masculine
or feminine, the singular or plural number, and jointly and severally
individuals, firms and corporations, and their and each of their respective
heirs, successors, personal representatives and permitted assigns, according to
the context hereof. The headings of paragraphs herein are inserted only for
convenience and reference and shall in no way define, expand or limit the scope
or intent of any provision of this Lease.

                  J. STATE LAND: 9-6-2-55. The parties acknowledge that Landlord
has specifically disclosed to Tenant that there is a twelve acre parcel owned by
the State of Hawaii and licensed to Landlord under a thirty day revocable permit
included in the demised premises. After this transaction closes Landlord will
seek to have the permit transferred to Tenant. Landlord discloses that it has
been farming the macadamia nut orchard on this twelve acre parcel since 1982 and
further discloses that this twelve acre parcel was given a separate Tax Map Key
number in 1997.

                  K. MAINTENANCE OF ROADS AND OTHER AREAS USED BY BOTH LANDLORD
AND TENANT. Landlord and Tenant agree to work cooperatively and share the
expense of maintenance for those roads and other areas used jointly by Landlord
and Tenant for which each has rights of possession in the Ka'u District of the
island of Hawaii. The expense of maintenance shall be shared based on the use by
each party and the damage occasioned by that use.

                                      147
<PAGE>

                  L. SUBDIVISIONS. Landlord shall have the right from time to
time to subdivide any part or all of the demised premises or to use part or all
of the demised premises in a parcel consolidation and resubdivision so long as
any such action does not unreasonably interfere with Tenant's use of the
premises.

                  M. LAND DEMISED BUT NOT NEEDED BY TENANT. Any areas of land
demised hereunder which are not needed by Tenant, including but not limited to
approximately five acres of the macadamia nut husking plant parcel, and/or any
office space in any of the buildings on the demised premises which is not needed
by Tenant, which Landlord desires to use, will be licensed to Landlord under a
long term license at no cost other than a pro rata share of real property taxes.

                  N. FIELD OFFICE 9-6-16-11. The field office parcel except for
the offices of Landlord's Ka'u Land Manager and his assistant is included in
this lease. Landlord's employees shall have the right to use the two offices,
the conference room, bathroom, and their parking spaces for the term of this
lease at no charge. Landlord shall pay Tenant a monthly fee for Landlord's use
of Tenant's water, utilities, copy machines, fax machines, microwave,
refrigerator and maintenance. This fee is presently set at $100 per month and
will be reviewed annually.

                  O. GARAGE AND ADMIN OFFICES PARCEL: 9-6-5-36. The Clubhouse,
presently licensed to Huliau O Ka'u, a self-help farming cooperative, the ILWU
Hall, presently licensed to Bay Clinic for a health and exercise facility, the
Cooler Room and the two bays adjacent to the cooler, which will be used by
Landlord or Landlord's lessees, are specifically excluded from this lease;
provided, however, that if either Landlord or Tenant deem it necessary Tenant
will license to Landlord these areas under a separate license at no charge.

                  P. PERMIT TO OPERATE THE SISAL WELL. Tenant is hereby granted
permission to enter on TMK parcel 9-6-3-22 for the purpose of operating the
Sisal Well for the term of the Lease. Tenant agrees to pay all of the costs of
operating the Sisal Well and to indemnify and hold harmless Landlord from any
and all costs or damages associated with the Sisal Well during the term of this
lease.

                  Q. ADDITIONAL ACCESS RIGHTS. In addition to the access rights
demised under this Lease Landlord hereby grants to Tenant such additional access
rights as reasonably necessary for Tenant to farm the macadamia nut trees owned
by Tenant in Ka'u. The term "reasonably necessary" shall be determined by past
practice of farming any specific macadamia nut orchard; provided, however,
Landlord shall have no obligation hereunder if the grant of such access would
unreasonably interfere with Landlord's use or plans for the property to be
encumbered.

                                      148
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have executed these
presents as of the day and year first above written

KA`U AGRIBUSINESS CO., INC.                 ML MACADAMIA ORCHARDS, L.P.
                                            a Delaware limited partnership

By   s/s Kent T. Lucien                     By  ML Resources, Inc.
    -------------------                           Its General Partner

         Its President

By   s/s J. Alan Kugle                      By  s/s Gregory A. Sprecher
    ------------------                         ------------------------

         Its Secretary                               Its Senior Vice President

                                            By  s/s Daryle S. Nekoba
                                                --------------------

                                                     Its Secretary

                                       149
<PAGE>

                               KA`U RENT SCHEDULE

                  Rents under the foregoing Lease shall be determined and
payable as follows:

                  A. YEARS 1 THROUGH 10.

                           i. BASE RENT. For and during each of the first ten
(10) fiscal years (July 1 through June 30) of the term, Tenant shall pay to
Landlord a base annual macadamia rent of TEN THOUSAND TWO HUNDRED NINE DOLLARS
($10,209.00, a rate of $72 per tree acre x 141.79 tree acres), and a base annual
ancillary land rent for the land used for roads, water drainage, windbreak
trees, storage, and offices (the difference between the TMK acres and the number
of tree acres, 89.98) of EIGHT HUNDRED NINETY-NINE DOLLARS ($899.00, a rate of
$10 per acre per year) both base rents payable in equal installments
semiannually in advance on January 1 and July 1 of each year with the first
payment to include additional payments of $1701.50 for base mac rent and $150
for base ancillary rent for the months of May and June 2000.

                           ii. ADDITIONAL RENT. For each of the first ten (10)
fiscal years of the term, Tenant shall pay to Landlord additional rent of ONE
HUNDRED FORTY ONE DOLLARS AND SEVENTY NINE CENTS ($141.79) for every one cent
(1CENTS) by which the average annual "Farm Price" for "Net" pounds of macadamia
nuts in the State of Hawaii for that year, as reported by the Hawaii
Agricultural Statistics Service, exceeds seventy two cents (72CENTS) per pound.
An example of such a publication is attached hereto as Exhibit B and made a part
hereof. Such additional rent shall be payable within thirty (30) days after the
final report of such average annual price per pound, published as stated above,
is available. If the Hawaii Agricultural Statistics Service shall discontinue
issuing such reports, Landlord and Tenant shall mutually agree on what reports
shall be substituted therefor.

                  B. YEARS 11 THROUGH 45.

                           i. BASE RENT. For and during each year of the three
(3) ten-year periods succeeding the tenth fiscal year of the term and for one
five-year period following the last of said ten-year periods, Tenant shall pay
to Landlord base annual macadamia rent and base ancillary land rent in a sum
equal to the then fair market rental of the demised land for the operation of
macadamia orchards (or for any higher and better use then being made of the
land), and for ancillary land use, determined by mutual agreement of Landlord
and Tenant based upon the factors that would be considered by the appraisers as
described in paragraph D below, as of the commencement of the respective
ten-year or five-year rental period, as the case may be, payable in equal
installments semiannually in advance on January 1 and July 1 of each year.

                           ii. ADDITIONAL RENT. For and during each year of the
three (3) ten-year periods succeeding the tenth fiscal year of the term and for
one five-year period following the last of said ten-year periods, Tenant shall
pay to Landlord additional rent determined pursuant to the following formula:

                                      150
<PAGE>

                           Additional Rent - (Annual Average "Farm Price" for
"Net" pounds of Macadamia Nuts in the State of Hawaii, as reported by the Hawaii
Agricultural Statistics Service, for the year under consideration) divided by
(Annual Average "Farm Price" for "Net" pounds of Macadamia Nuts in the State of
Hawaii, as reported by the Hawaii Agricultural Statistics Service, for the year
immediately preceding the commencement of such ten-year or five-year period, as
the case may be) x (Annual Base Rent for the year under consideration) - (Annual
Base Rent for the year under consideration). Such additional rent shall be
payable within thirty (30) days after the final report of such average annual
price per pound, published as stated above, is available. If the Hawaii
Agricultural Statistics Service shall discontinue issuing such reports, Landlord
and Tenant shall mutually agree on what reports shall be substituted therefor.

                           For example, if (a) the Annual Base Rent for Year 11
is $15,000, and (b) the average annual "Farm Price" for Years 10 and 11 are $.90
and $.95, respectively, then the additional rent for year 11 would be ($.95)
divided by ($.90) x ($15,000) - ($15,000), or $833.33.

                           iii. COMMON PROVISIONS. If Landlord and Tenant are
unable to agree upon such fair market rental or the means of determining
additional rent, the same shall be determined by an arbitrator or arbitrators
appointed as provided below, who shall ascertain the fair market rental or the
manner of determining additional rent, or both, as of the commencement of the
ten-year or five-year period for which rent is sought to be determined. Such
annual base rent, whether determined by agreement or arbitration, shall in no
event be less than the average annual total rent (base and additional rent)
payable for the immediately preceding ten-year period.

                  C. ARBITRATION. If Landlord and Tenant shall not have agreed
upon the fair market rental of the demised land or upon the means of determining
additional rent, or both, at least ninety (90) days prior to the commencement of
a ten-year or five-year period for which rent is to be determined, either party
may give to the other written notice of a desire to have an arbitration to
determine such fair market rental or such additional rent formula, or both,
pursuant to chapter 658, Hawaii Revised Statutes, as the same may be amended or
reenacted. If the parties agree upon a single arbitrator, such arbitrator shall
determine such fair market rental or such additional rent formula, or both, and
his decision shall be final, conclusive and binding upon both parties, subject
to the minimum limitation stated above. If the parties fail to agree upon a
single arbitrator or if either party prefers not to have an arbitration by a
single arbitrator, there shall be an arbitration by three (3) appraisers, in
which case either party shall name one of the appraisers by written notice to
the other party, whereupon the other party shall, within ten (10) days after
receipt of such notice, name a second appraiser, and in case of

                                      151
<PAGE>

failure to do so, the party who has already named an appraiser may have the
second appraiser selected or appointed by a judge of the First Circuit Court of
the State of Hawaii; and the two appraisers so appointed, in either manner,
shall select and appoint a third appraiser, and if the two appraisers so
appointed shall fail to appoint the third appraiser within ten (10) days after
the naming of the second appraiser, either party may have the third appraiser
selected or appointed by such judge; and the three appraisers so appointed shall
thereupon proceed to determine such fair market rental or such additional rent
formula, or both, as herein provided, and the decision and award of any two of
them shall be final, conclusive and binding upon both parties for the particular
ten-year or five-year rental period then under consideration, subject to the
minimum limitation stated above, unless such decision and award shall be
vacated, modified or corrected, all as provided in chapter 658. The appraisers
so selected shall be reputable persons experienced in valuing macadamia nut
orchards and shall not be regularly employed by or have any material interest in
either Landlord' or Tenant or in any affiliate of either (or in the outcome of
the appraisal proceedings). Such appraisers shall have all of the powers and
duties prescribed by chapter 658; and judgment may be entered upon any such
decision and award as therein provided.

                  In all cases of arbitration, Landlord and Tenant shall each
pay the expense of its own appointee and its own attorneys' and witnesses' fees;
and all other expenses of arbitration shall be divided equally between Landlord
and Tenant.

                  If and whenever the fixing of such fair market rental or such
additional rent formula, or both, is under arbitration, Tenant, pending the
determination thereof, shall continue to pay rent on the same terms in effect
during the last preceding rental period and shall promptly pay the deficiency,
if any, upon the conclusion of the arbitration proceedings plus interest at the
rate of one percent (A) per month on the amount of such deficiency computed from
the date or dates when the amount of such deficiency would have been payable but
for the pendency of the arbitration.

                                    Exhibit A

The land included under this lease is set forth in this table:

<TABLE>
<CAPTION>
----------------------- --------------------- -------------------- --------------------- --------------------
TMK                     TMK ACRES             TREE ACRES           FIELD NO              MISC INFO
----------------------- --------------------- -------------------- --------------------- --------------------

<S>                     <C>                   <C>                  <C>                   <C>
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-2-44                15.121                0.42                 N425                  Husking Plant
                                                                                         parcel
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-2-55                12.0                  11.47                E410  E415             State parcel--30
                                                                                         day permit
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-3-9                 4.6                   2.0                  G110                  Formerly P80A,
                                                                                         then F80A
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-4-8                 7.8                   12.2                 N275                  Formerly F75A and
9-6-4-16                4.13                                                             F75B
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-4-15                3.0                   3.93                 N284                  Formerly 84  1 aka
                                                                                         P84A
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-5-16                11.722                7.45                 G430                  Formerly P79C
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-5-36                25.35                                                            Garage and office
                                                                                         parcel
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-12-1                44.360                24.09                K551                  Anderson
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-12-19               26.733                17.65                B725                  Nakazono
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-12-23               76.2                  62.58                K552                  Anderson
----------------------- --------------------- -------------------- --------------------- --------------------
9-6-16-11               0.75                                                             Field office
----------------------- --------------------- -------------------- --------------------- --------------------

----------------------- --------------------- -------------------- --------------------- --------------------
Total                   231.77                141.79
----------------------- --------------------- -------------------- --------------------- --------------------

----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>

The metes and bounds descriptions which are available are attached hereto.

                                      152<PAGE>

                                                                    Exhibit 10.1

                             VEECO INSTRUMENTS INC.
                             2000 STOCK OPTION PLAN
                        (EFFECTIVE AS OF _________, 2000)

1.    PURPOSE

            The purpose of the Plan is to provide a means through which the
Company and its Affiliates may attract capable persons to enter and remain in
the employ of the Company and Affiliates and to provide a means whereby
employees, directors and consultants of the Company and its Affiliates can
acquire and maintain Common Stock ownership, thereby strengthening their
commitment to the welfare of the Company and Affiliates and promoting an
identity of interest between stockholders and these employees.

            The Plan provides for granting Incentive Stock Options and
Nonqualified Stock Options.

2.    DEFINITIONS

            The following definitions shall be applicable throughout the Plan.

            "Affiliate" means (i) any entity that directly or indirectly is
controlled by, or is under common control with the Company, (ii) any entity in
which the Company has a significant equity interest, and (iii) any Subsidiary;
in each case as determined by the Committee.

            "Board" means the Board of Directors of the Company or, to the
extent the Board of Directors of the Company has authorized a committee thereof
to take action with respect to the Plan on its behalf, the committee so
authorized.

            "Cause" means the Company or an Affiliate having "cause" to
terminate a Participant's employment or service, as defined in any existing
employment, consulting or any other agreement between the Participant and the
Company or an Affiliate or, in the absence of such an employment, consulting or
other agreement, upon (i) the determination by the Committee that the
Participant has ceased to perform his duties to the Company or an Affiliate
(other than as a result of his incapacity due to physical or mental illness or
injury), which failure amounts to an intentional and extended neglect of his
duties to such party, (ii) the Committee's determination that the Participant
has engaged or is about to engage in conduct materially injurious to the Company
or an Affiliate, (iii) the Participant having been convicted of, or pleaded
guilty or no contest to, a felony or a crime involving moral turpitude or (iv)
the failure of the Participant to follow instruction of the Board or his direct
superiors.

            "Change in Control, shall, unless in the case of a particular Option
the applicable Stock Option Agreement states otherwise or contains a different
definition of "Change in Control", be deemed to occur upon:
<PAGE>

                        (i) the acquisition by any individual, entity or group
      (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
      Exchange Act of 1934, as amended (the "Exchange Act")) (each, a "Person")
      of beneficial ownership (within the meaning of Rule 13d-3 promulgated
      under the Exchange Act) of 30% or more (on a fully diluted basis) of
      either (A) the then outstanding shares of Common Stock, taking into
      account as outstanding for this purpose such Common Stock issuable upon
      the exercise of options or warrants, the conversion of convertible stock
      or debt, and the exercise of any similar right to acquire such common
      stock (the "Outstanding Company Common Stock") or (B) the combined voting
      power of the then outstanding voting securities of the Company entitled to
      vote generally in the election of directors (the "Outstanding Company
      Voting Securities"); PROVIDED, HOWEVER, that for purposes of the Plan, the
      following acquisitions shall not constitute a Change of Control: (I) any
      acquisition by the Company, (II) any acquisition by any employee benefit
      plan sponsored or maintained by the Company or any Affiliate, (III) any
      acquisition by any Person which complies with clauses (A), (B) and (C) of
      subsection (v) of this Section 2(f), or (IV) in respect of an Award held
      by a particular Participant, any acquisition by the Participant or any
      "affiliate" (within the meaning of 17 C.F.R. ss.230.405) of the
      Participant (persons described in clauses (I), (II), and (IV) being
      referred to hereafter as "Excluded Persons");

                        (ii) Individuals who, on the date hereof, constitute the
      Board (the "Incumbent Directors") cease for any reason to constitute at
      least a majority of the Board, PROVIDED that any person becoming a
      director subsequent to the date hereof, whose election or nomination for
      election was approved by a vote of at least two-thirds of the Incumbent
      Directors then on the Board (either by a specific vote or by approval of
      the proxy statement of the Corporation in which such person is named as a
      nominee for director, without written objection to such nomination) shall
      be deemed to be an Incumbent Director; PROVIDED, HOWEVER, that no
      individual initially elected or nominated as a director of the Corporation
      as a result of an actual or threatened election contest with respect to
      directors or as a result of any other actual or threatened solicitation of
      proxies or consents by or on behalf of any person other than the Board
      shall be deemed to be an Incumbent Director;

                        (iii) the dissolution or liquidation of the Company;

                        (iv) the sale of all or substantially all of the
      business or assets of the Company; or

                        (v) the consummation of a merger, consolidation,
      statutory share exchange or similar form of corporate transaction
      involving the Company that requires the approval of the Company's
      stockholders, whether for such transaction or the issuance of securities
      in the transaction (a "Business Combination"), unless immediately
      following such Business Combination: (A) more than 50% of the total voting
      power of (x) the corporation resulting from such Business Combination (the
      "Surviving Corporation"), or (y) if applicable, the ultimate parent
      corporation that directly or indirectly has beneficial ownership of
      sufficient voting securities eligible to elect a majority of the directors
      of the Surviving Corporation (the "Parent Corporation"), is represented by
      the Outstanding Company Voting Securities that were outstanding
      immediately prior to

                                        2
<PAGE>

      such Business Combination (or, if applicable, is represented by shares
      into which the Outstanding Company Voting Securities were converted
      pursuant to such Business Combination), (B) no Person (other than any
      Excluded Person), is or becomes the beneficial owner, directly or
      indirectly, of 30% or more of the total voting power of the outstanding
      voting securities eligible to elect directors of the Parent Corporation
      (or, if there is no Parent Corporation, the Surviving Corporation) and (C)
      at least a majority of the members of the board of directors of the Parent
      Corporation (or, if there is no Parent Corporation, the Surviving
      Corporation) following the consummation of the Business Combination were
      Incumbent Directors.

            "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.

            "Committee" means a committee of at least two people as the Board
may appoint to administer the Plan or, if no such committee has been appointed
by the Board, the Board. Unless the Board is acting as the Committee or the
Board specifically determines otherwise, each member of the Committee shall, at
the time he takes any action with respect to a Option under the Plan, be an
Eligible Director. However, the mere fact that a Committee member shall fail to
qualify as an Eligible Director shall not invalidate any Option granted by the
Committee which Option is otherwise validly made under the Plan.

            "Common Stock" means the common stock, par value $0.01 per share, of
the Company.

            "Company" means Veeco Instruments Inc.

            "Date of Grant" means the date on which the granting of an Option is
authorized, or such other date as may be specified in such authorization or, if
there is no such date, the date indicated on the applicable Stock Option
Agreement.

            "Disability" means, unless in the case of a particular Option, the
applicable Option Agreement states otherwise, entitled to receive benefits under
the long-term disability plan of the Company or an Affiliate, as may be
applicable to the Participant in question, or, in the absence of such a plan,
the complete and permanent inability by reason of illness or accident to perform
the duties of the occupation at which a Participant was employed or served when
such disability commenced or, as determined by the Committee based upon medical
evidence acceptable to it.

            "Effective Date" means the means the date on which the Plan is
approved by the Board, subject to the approval of the stockholders of the
Company.

            "Eligible Director" means a person who is (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, or a person
meeting any similar requirement under any successor rule or regulation and (ii)
an "outside director" within the meaning of Section 162(m) of the Code, and the
Treasury Regulations promulgated thereunder; PROVIDED, HOWEVER, that clause (ii)
shall apply only with respect to grants of Options with respect to which the

                                        3
<PAGE>

Company's tax deduction could be limited by Section 162(m) of the Code if such
clause did not apply.

            "Eligible Person" means any (i) individual regularly employed by the
Company or an Affiliate who satisfies all of the requirements of Section 6;
PROVIDED, HOWEVER, that no such employee covered by a collective bargaining
agreement shall be an Eligible Person unless and to the extent that such
eligibility is set forth in such collective bargaining agreement or in an
agreement or instrument relating thereto; (ii) director of the Company or an
Affiliate or (iii) consultant or advisor to the Company or an Affiliate who may
be offered securities pursuant to Form S-8 (which, as of the Effective Date,
includes only those who (A) are natural persons and (B) provide BONA FIDE
services to the Company or an Affiliate other than in connection with the offer
or sale of securities in a capital-raising transaction, and do not directly or
indirectly promote or maintain a market for the Company's securities).

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

            "Fair Market Value", on a given date means (i) if the Stock is
listed on a national securities exchange, the closing price on the primary
exchange with which the Stock is listed and traded on the date prior to such
date, or, if there is no such sale on that date, then on the last preceding date
on which such a sale was reported; (ii) if the Stock is not listed on any
national securities exchange but is quoted in the National Market System of the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
on a last sale basis, the closing price reported on the date prior to such date,
or, if there is no such sale on that date, then on the last preceding date on
which a sale was reported; or (iii) if the Stock is not listed on a national
securities exchange nor quoted in the NASDAQ on a last sale basis, the amount
determined by the Committee to be the fair market value based upon a good faith
attempt to value the Stock accurately and computed in accordance with applicable
regulations of the Internal Revenue Service.

            "Incentive Stock Option" means an Option granted by the Committee to
a Participant under the Plan which is designated by the Committee as an
incentive stock option as described in Section 422 of the Code and which
otherwise meets the requirements set forth herein.

            "Mature Shares" means shares of Stock owned by a Participant which
are not subject to any pledge or other security interest and have either been
held by the Participant for six months, previously acquired by the Participant
on the open market or meet such other requirements as the Committee may
determine necessary in order to avoid an accounting earnings charge on account
of the use of such shares to pay the Option Price or satisfy a withholding
obligation in respect of an Option.

            "Non-Employee Director" means a member of the Board who is not an
employee of the Company or any Affiliate.

            "Nonqualified Stock Option" means an Option granted by the Committee
to a Participant under the Plan which is not designated by the Committee as an
Incentive Stock Option.

                                        4
<PAGE>

            "Normal Termination" means termination of employment or service with
the Company or an Affiliate:

                        (i)   on account of death or Disability;

                        (ii)  by the Company or such Affiliate without Cause; or

                        (iii) in the case of Options granted pursuant to Section
                              7(a)(ii) hereof, a resignation from or a failure
                              to be re-elected to the Board.

            "Option" means an award granted under Section 7.

            "Option Period" means the period described in Section 7(d).

            "Option Price" means the exercise price for an Option as described
in Section 7(a).

            "Participant" means an Eligible Person who has been selected by the
Committee to participate in the Plan and to receive an Option pursuant to
Section 6.

            "Plan" means this Veeco Instruments Inc. 2000 Stock Option Plan.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Stock" means the Common Stock or such other authorized shares of
stock of the Company as the Committee may from time to time authorize for use
under the Plan.

            "Stock Option Agreement" means any agreement between the Company and
a Participant who has been granted an Option pursuant to Section 7 which defines
the rights and obligations of the parties thereto.

            "Subsidiary" means any subsidiary of the Company as defined in
Section 424(f) of the Code.

3.    EFFECTIVE DATE AND DURATION

            The Plan is effective as of the Effective Date; provided that the
effectiveness of the Plan and the validity and exercisability of any and all
Options granted pursuant to the Plan is contingent upon approval of the Plan by
the shareholders of the Company in a manner intended to comply with the
shareholder approval requirements of Sections 162(m) and 422(b)(i) of the Code.

            The expiration date of the Plan, on and after which no Options may
be granted hereunder, shall be the tenth anniversary of the Effective Date;
PROVIDED, HOWEVER, that the administration of the Plan shall continue in effect
until all matters relating to Options previously granted have been settled.

                                        5
<PAGE>

4.    ADMINISTRATION

            The Committee shall administer the Plan. A majority of the members
of the Committee shall constitute a quorum. The acts of a majority of the
members present at any meeting at which a quorum is present or acts approved in
writing by a majority of the Committee shall be deemed the acts of the
Committee.

            Subject to the provisions of the Plan and applicable law, the
Committee shall have the power, in addition to other express powers and
authorizations conferred on the Committee by the Plan, to: (i) designate
Participants; (ii) determine the type or types of Options to be granted to a
Participant; (iii) determine the number of Shares to be covered by, or with
respect to which payments, rights, or other matters are to be calculated in
connection with, Options; (iv) determine the terms and conditions of any
Options; (v) determine whether, to what extent, and under what circumstances
Options may be settled or exercised in cash, Stock, other securities, other
Options or other property, or canceled, forfeited or suspended and the method or
methods by which Options may be settled, exercised, canceled, forfeited or
suspended; (vi) determine whether, to what extent, and under what circumstances
cash, Shares, other securities, other Options, other property and other amounts
payable with respect to an Option shall be deferred either automatically or at
the election of the holder thereof or of the Committee; (vii) interpret,
administer reconcile any inconsistency, correct any default and/or supply any
omission in the Plan and any instrument or agreement relating to, or Option
granted under, the Plan; (viii) establish, amend, suspend, or waive such rules
and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (ix) make any other determination and
take any other action that the Committee deems necessary or desirable for the
administration of the Plan.

            (b) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan or any Option or any documents evidencing Options shall be
within the sole discretion of the Committee, may be made at any time and shall
be final, conclusive and binding upon all parties, including, without
limitation, the Company, any Affiliate, any Participant, any holder or
beneficiary of any Option, and any shareholder.

            (c) Notwithstanding the above, no Committee member holding Options
granted pursuant to Section 7(a)(ii) hereof may participate in any action of the
Committee with respect to any claim or dispute regarding only that Committee
member.

5.    GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN

            The Committee may, from time to time, grant Options to one or more
Eligible Persons; PROVIDED, HOWEVER, that:

                  (a) Subject to Section 9, the aggregate number of shares of
Stock in respect of which Options may be granted under the Plan shall not exceed
1,250,000;

                  (b) Shares authorized under the Plan shall be deemed to have
been used in settlement of Options whether or not they are actually delivered.
In the event any Option shall

                                        6
<PAGE>

be surrendered, terminate, expire, or be forfeited, the number of shares of
Stock no longer subject thereto shall thereupon be released and shall thereafter
be available for new grants under the Plan;

                  (c) Stock delivered by the Company in settlement of Options
granted under the Plan may be authorized and unissued Stock or Stock held in the
treasury of the Company or may be purchased on the open market or by private
purchase;

                  (d) Subject to Section 9, no person may be granted Options
under the Plan during any calendar year with respect to more than 300,000 shares
of Stock; PROVIDED that such number shall be adjusted pursuant to Section 9 only
in a manner which will not cause the Options granted under the Plan to fail to
qualify as "performance-based compensation" under Section 162(m) of the Code;

                  (e) Without limiting the generality of the preceding
provisions of this Section 5, the Committee may, but solely with the
Participant's consent, agree to cancel any Option under the Plan and issue a new
Option in substitution therefor upon such terms as the Committee may in its sole
discretion determine, PROVIDED that the substituted Option satisfies all
applicable Plan requirements as of the date such new Award is made, PROVIDED
FURTHER that, without shareholder approval, no such action may lower the
exercise price of a previously granted option.

6.    ELIGIBILITY

            Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan.

7.    TERMS OF OPTIONS

                  (a)   OPTION GRANTS.

                        (i) ELIGIBLE PERSONS. The Committee is authorized to
grant one or more Incentive Stock Options or Nonqualified Stock Options to any
Eligible Person; PROVIDED, HOWEVER, that no Incentive Stock Options shall be
granted to any Eligible Person who is not an employee of the Company or a
Subsidiary. Each Option so granted shall be subject to the following conditions
of this Section 7, or to such other conditions as may be reflected in the
applicable Stock Option Agreement.

                        (ii) ELIGIBLE DIRECTORS. In addition to discretionary
grants of Options pursuant to Section 7(a)(i), each Participant who is a
Non-Employee Director of the Company shall receive upon initial election to
office and thereafter annually on the date of the Company's annual meeting of
stockholders (PROVIDED that such date is at least 6 months following such
Eligible Director's initial election to office) an Option to acquire 7,000
shares of Common Stock at a price equal to the Fair Market Value of the shares
of Common Stock subject to such Option on the Date of Grant.

                                        7
<PAGE>

                  (b) OPTION PRICE. The exercise price ("Option Price") per
share of Stock for each Option shall be set by the Committee at the time of
grant but shall not be less than the Fair Market Value of a share of Stock on
the Date of Grant subject, in the case of an Incentive Stock Option, to Section
7(g).

                  (c) MANNER OF EXERCISE AND FORM OF PAYMENT. No shares of Stock
shall be delivered pursuant to any exercise of an Option until payment in full
of the aggregate exercise price therefor is received by the Company. Options
which have become exercisable may be exercised by delivery of written notice of
exercise to the Committee accompanied by payment of the Option Price. The Option
Price shall be payable in cash and/or, at the sole discretion of the Committee,
shares of Stock valued at the Fair Market Value at the time the Option is
exercised (including by means of attestation of ownership of a sufficient number
of shares of Stock in lieu of actual delivery of such shares to the Company),
PROVIDED that such shares of Stock are Mature Shares, or, in the discretion of
the Committee, either (i) in other property having a fair market value on the
date of exercise equal to the Option Price, (ii) by delivering to the Committee
a copy of irrevocable instructions to a stockbroker to deliver promptly to the
Company an amount of loan proceeds, or proceeds of the sale of the Stock subject
to the Option, sufficient to pay the Option Price or (iii) by such other method
as the Committee may allow.

                  (d) VESTING.

                        (i) IN GENERAL. Unless otherwise provided in a Stock
Option Agreement or other written agreement between the Company and a
Participant, Options shall vest and become exercisable as follows:

                        (x) with respect to one-third of the shares of Stock
            covered by the Option, on the first anniversary of the Date of
            Grant;

                        (y) with respect to an additional one-third of the
            shares of Stock covered by the Option, on the second anniversary of
            the Date of Grant;

                        (z) with respect to the remaining one-third of the
            shares of Stock covered by the Option, on the third anniversary of
            the Date of Grant.

Notwithstanding the foregoing, the Committee may, in its sole discretion,
accelerate the exercisability of any Option, which acceleration shall not affect
the terms and conditions of any such Option other than with respect to
exercisability. If an Option is exercisable in installments, such installments
or portions thereof which become exercisable shall remain exercisable until the
Option expires.

                        (ii) NON-EMPLOYEE DIRECTORS. Notwithstanding
Section 7(d)(i), Options granted to Eligible Directors shall be immediately
vested and exercisable as of the Date of Grant.

                  (e) OPTION PERIOD AND TERMINATION.An Option may be exercised
by the holder thereof in accordance with Section 7(d) above; PROVIDED, HOWEVER,
that no Option shall be exercisable later than seven years from the Date of
Grant (the "Option Period").

                                        8
<PAGE>

Notwithstanding the foregoing, unless the applicable Stock Option Agreement or
other written agreement between the Company and a Participant provides
otherwise, an Option shall expire earlier than the end of the Option Period in
the following circumstances:

                        (i) If prior to the end of the Option Period, the
      Participant shall undergo a Normal Termination, the Option shall expire on
      the earlier of the last day of the Option Period or the date that is three
      months after the date of such Normal Termination; PROVIDED, HOWEVER, that
      any Participant whose employment with the Company or any Affiliate is
      terminated and who is subsequently rehired by the Company or any Affiliate
      prior to the expiration of the Option shall not be considered to have
      undergone a termination. In the event of a Normal Termination, the Option
      shall remain exercisable by the Participant for the period described
      above, only to the extent the Option was exercisable at the time of such
      Normal Termination.

                        (ii) If the Participant dies prior to the end of the
      Option Period and while still in the employ or service of the Company or
      an Affiliate, or following a Normal Termination but prior to the
      expiration of an Option, the Option shall expire on the earlier of the
      last day of the Option Period and the date that is one year after the date
      of death of the Participant. In such event, the Option shall remain
      exercisable by the person or persons to whom the Participant's rights
      under the Option pass by will or the applicable laws of descent and
      distribution until its expiration, only to the extent the Option was
      exercisable by the Participant at the time of death.

                        (iii) If the Participant ceases employment or service
      with the Company and Affiliates for reasons other than Normal Termination
      or death, the Option shall expire immediately upon such cessation of
      employment or service.

                  (f) OTHER TERMS AND CONDITIONS. Except as specifically
provided otherwise in a Stock Option Agreement, each Option granted under the
Plan shall be subject to the following terms and conditions:

                        (i) Each Option or portion thereof that is exercisable
      shall be exercisable for the full amount of such exercisable portion or
      for any part thereof.

                        (ii) Each Option shall cease to be exercisable, as to
      any share of Stock, when the Participant purchases the share or when the
      Option expires.

                        (iii) Subject to Section 8(h), Options shall not be
      transferable by the Participant except by will or the laws of descent and
      distribution and shall be exercisable during the Participant's lifetime
      only by him.

                        (iv) Each Option shall vest and become exercisable by
      the Participant in accordance the provisions of Section 7(d).

                        (v) At the time of any exercise of an Option, the
      Committee may, in its sole discretion, require a Participant to deliver to
      the Committee a written representation that the shares to be acquired upon
      such exercise are to be acquired for

                                        9
<PAGE>

      investment and not for resale or with a view to the distribution thereof.
      Upon such a request by the Committee, delivery of such representation
      prior to the delivery of any shares issued upon exercise of an Option
      shall be a condition precedent to the right of the Participant or such
      other person to purchase any shares. In the event certificates for Stock
      are delivered under the Plan with respect to which such investment
      representation has been obtained, the Committee may cause a legend or
      legends to be placed on such certificates to make appropriate reference to
      such representation and to restrict transfer in the absence of compliance
      with applicable federal or state securities laws.

                        (vi) Each Participant awarded an Incentive Stock Option
      under the Plan shall notify the Company in writing immediately after the
      date he or she makes a disqualifying disposition of any Stock acquired
      pursuant to the exercise of such Incentive Stock Option. A disqualifying
      disposition is any disposition (including any sale) of such Stock before
      the later of (a) two years after the Date of Grant of the Incentive Stock
      Option or (b) one year after the date the Participant acquired the Stock
      by exercising the Incentive Stock Option.

                  (g) INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS.
Notwithstanding anything to the contrary in this Section 7, if an Incentive
Stock Option is granted to a Participant who owns stock representing more than
ten percent of the voting power of all classes of stock of the Company or of a
Subsidiary, the Option Period shall not exceed five years from the Date of Grant
of such Option and the Option Price shall be at least 110 percent of the Fair
Market Value (on the Date of Grant) of the Stock subject to the Option.

                  (h) $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS.
To the extent the aggregate Fair Market Value (determined as of the Date of
Grant) of Stock for which Incentive Stock Options are exercisable for the first
time by any Participant during any calendar year (under all plans of the
Company) exceeds $100,000, such excess Incentive Stock Options shall be treated
as Nonqualified Stock Options.

                  (i) VOLUNTARY SURRENDER. The Committee may permit the
voluntary surrender of all or any portion of any Nonqualified Stock Option
granted under the Plan to be conditioned upon the granting to the Participant of
a new option for the same or a different number of shares as the option
surrendered or require such voluntary surrender as a condition precedent to a
grant of a new Option to such Participant. Such new Option shall be exercisable
at an Option Price, during an Option Period, and in accordance with any other
terms or conditions specified by the Committee at the time the new Option is
granted, all determined in accordance with the provisions of the Plan without
regard to the Option Price, Option Period, or any other terms and conditions of
the Nonqualified Stock Option surrendered.

8.    GENERAL

                  (a) ADDITIONAL PROVISIONS OF AN OPTION. Options granted to a
Participant under the Plan also may be subject to such other provisions (whether
or not applicable to the benefit awarded to any other Participant) as the
Committee determines appropriate including, without limitation, provisions to
assist the Participant in financing the purchase of Stock upon the exercise of
options, provisions for the forfeiture of or restrictions on resale or

                                       10
<PAGE>

other disposition of shares of Stock acquired under any Option, provisions
giving the Company the right to repurchase shares of Stock acquired under any
Option in the event the Participant elects to dispose of such shares, provisions
allowing the Participant to elect to defer the receipt of shares of Stock upon
the exercise of Options for a specified time or until a specified event, and
provisions to comply with Federal and state securities laws and Federal and
state tax withholding requirements. Any such provisions shall be reflected in
the applicable Stock Option Agreement.

                  (b) PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise
specifically provided in the Plan, no person shall be entitled to the privileges
of ownership in respect of shares of Stock which are subject to Options
hereunder until such shares have been issued to that person.

                  (c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Company to make payment of Options in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by governmental
agencies as may be required. Notwithstanding any terms or conditions of any
Option to the contrary, the Company shall be under no obligation to offer to
sell or to sell and shall be prohibited from offering to sell or selling any
shares of Stock pursuant to an Option unless such shares have been properly
registered for sale pursuant to the Securities Act with the Securities and
Exchange Commission or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such shares may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms and
conditions of such exemption have been fully complied with. The Company shall be
under no obligation to register for sale under the Securities Act any of the
shares of Stock to be offered or sold under the Plan. If the shares of Stock
offered for sale or sold under the Plan are offered or sold pursuant to an
exemption from registration under the Securities Act, the Company may restrict
the transfer of such shares and may legend the Stock certificates representing
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.

                  (d) TAX WITHHOLDING.

                        (i) A Participant may be required to pay to the Company
or any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Shares or other property deliverable
under any Option or from any compensation or other amounts owing to a
Participant the amount (in cash, Stock or other property) of any required tax
withholding and payroll taxes in respect of an Option, its exercise, or any
payment or transfer under an Option or under the Plan and to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes.

                        (ii) Without limiting the generality of clause (i)
above, the Committee may, in its sole discretion, permit a Participant to
satisfy, in whole or in part, the foregoing withholding liability (but no more
than the minimum required withholding liability) by (A) delivery of shares of
Stock owned by the Participant (which shares must be Mature Shares) with a Fair
Market Value equal to such withholding liability or (B) having the Company
withhold from the number of shares of Stock otherwise issuable pursuant to the
exercise of the Option a number of shares with a Fair Market Value equal to such
withholding liability.

                                       11
<PAGE>

                  (e) CLAIM TO OPTIONS AND EMPLOYMENT RIGHTS. No employee of the
Company or any Affiliate, or other person, shall have any claim or right to be
granted an Option under the Plan or, having been selected for the grant of an
Option, to be selected for a grant of any other Award. Neither the Plan nor any
action taken hereunder shall be construed as giving any Participant any right to
be retained in the employ or service of the Company or any Affiliate.

                  (f) NO LIABILITY OF COMMITTEE MEMBERS. No member of the
Committee shall be personally liable by reason of any contract or other
instrument executed by such member or on his behalf in his capacity as a member
of the Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Committee and each
other employee, officer or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; PROVIDED, HOWEVER, that approval of the Board
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

                  (g) GOVERNING LAW. The Plan shall be governed by and construed
in accordance with the internal laws of the State of Delaware without regard to
the principles of conflicts of law thereof, or principals of conflicts of laws
of any other jurisdiction which could cause the application of the laws of any
jurisdiction other than the State of Delaware.

                  (h) NONTRANSFERABILITY.

                        (i) Each Option shall be exercisable only by the
Participant during the Participant's lifetime, or, if permissible under
applicable law, by the Participant's legal guardian or representative. No Option
may be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant otherwise than by will or by the laws of descent and
distribution and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company or any Affiliate; PROVIDED that the designation of a beneficiary shall
not constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.

                        (ii) Notwithstanding the foregoing, the Committee or its
delegate may, in its sole discretion, permit Nonqualified Stock Options to be
transferred by a Participant, without consideration, subject to such rules as
the Committee may adopt consistent with any applicable Stock Option Agreement to
preserve the purposes of the Plan, to:

                  (A)   any person who is a "family member" of the Participant,
                        as such term is used in the instructions to Form S-8
                        (collectively, the "Immediate Family Members");

                                       12
<PAGE>

                  (B)   a trust solely for the benefit of the Participant and
                        his or her Immediate Family Members;

                  (C)   a partnership or limited liability company whose only
                        partners or shareholders are the Participant and his or
                        her Immediate Family Members; or

                  (D)   any other transferee as may be approved either (a) by
                        the Board or the Committee in its sole discretion, or
                        (b) as provided in the applicable Stock Option
                        Agreement;

(each transferee described in clauses (A), (B), (C) and (D) above is hereinafter
referred to as a "Permitted Transferee"); PROVIDED that the Participant gives
the Committee advance written notice describing the terms and conditions of the
proposed transfer and the Committee notifies the Participant in writing that
such a transfer would comply with the requirements of the Plan. For purposes of
this paragraph, "delegate" shall refer to the Chief Executive Officer of the
Company, except with respect to the transfer of any of Chief Executive Officer's
own Options.

                        (iii) The terms of any Option transferred in accordance
with the immediately preceding sentence shall apply to the Permitted Transferee
and any reference in the Plan, or in any applicable Stock Option Agreement, to a
Participant shall be deemed to refer to the Permitted Transferee, except that
(A) Permitted Transferees shall not be entitled to transfer any Options, other
than by will or the laws of descent and distribution; (B) Permitted Transferees
shall not be entitled to exercise any transferred Options unless there shall be
in effect a registration statement on an appropriate form covering the shares to
be acquired pursuant to the exercise of such Option if the Committee determines,
consistent with any applicable Stock Option Agreement, that such a registration
statement is necessary or appropriate, (C) the Committee or the Company shall
not be required to provide any notice to a Permitted Transferee, whether or not
such notice is or would otherwise have been required to be given to the
Participant under the Plan or otherwise, and (D) the consequences of termination
of the Participant's employment by, or services to, the Company or any Affiliate
under the terms of the Plan and the applicable Stock Option Agreement shall
continue to be applied with respect to the Participant, following which the
Options shall be exercisable by the Permitted Transferee only to the extent, and
for the periods, specified in the Plan and the applicable Stock Option
Agreement.

                  (i) RELIANCE ON REPORTS. Each member of the Committee and each
member of the Board shall be fully justified in relying, acting or failing to
act, and shall not be liable for having so relied, acted or failed to act in
good faith, upon any report made by the independent public accountant of the
Company and upon any other information furnished in connection with the Plan by
any person or persons other than himself.

                  (j) RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan
shall be taken into account in determining any benefits under any pension,
retirement, profit sharing, group insurance or other benefit plan of the Company
or any Affiliate except as otherwise specifically provided in such other plan.

                                       13
<PAGE>

                  (k) EXPENSES. The expenses of administering the Plan shall be
borne by the Company.

                  (l) PRONOUNS. Masculine pronouns and other words of masculine
gender shall refer to both men and women.

                  (m) TITLES AND HEADINGS. The titles and headings of the
sections in the Plan are for convenience of reference only, and in the event of
any conflict, the text of the Plan, rather than such titles or headings shall
control.

                  (n) TERMINATION OF EMPLOYMENT. For all purposes herein, a
person who transfers from employment or service with the Company to employment
or service with an Affiliate or vice versa, or from employment or service with
one Affiliate to employment or service with another Affiliate, shall not be
deemed to have terminated employment or service with the Company or any such
Affiliate.

                  (o) SEVERABILITY. If any provision of the Plan or any Stock
Option Agreement is or becomes or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction or as to any person or Option, or would
disqualify the Plan or any Option under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to the
applicable laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
the Option, such provision shall be stricken as to such jurisdiction, person or
Option and the remainder of the Plan and any such Option shall remain in full
force and effect.

9.    CHANGES IN CAPITAL STRUCTURE

            Options granted under the Plan and any Stock Option Agreements, the
maximum number of shares of Stock subject to all Options and Incentive Stock
Options stated in Section 5(a) and the maximum number of shares of Stock with
respect to which any one person may be granted Options during any period stated
in Section 5(d) shall be subject to adjustment or substitution, as determined by
the Committee in its sole discretion, as to the number, price or kind of a share
of Stock or other consideration subject to such Options or as otherwise
determined by the Committee to be equitable (i) in the event of changes in the
outstanding Stock or in the capital structure of the Company by reason of stock
or extraordinary cash dividends, stock splits, reverse stock splits,
recapitalization, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the Date
of Grant of any such Option or (ii) in the event of any change in applicable
laws or any change in circumstances which results in or would result in any
substantial dilution or enlargement of the rights granted to, or available for,
Participants, or which otherwise warrants equitable adjustment because it
interferes with the intended operation of the Plan. Any adjustment in Incentive
Stock Options under this Section 9 shall be made only to the extent not
constituting a "modification" within the meaning of Section 424(h)(3) of the
Code, and any adjustments under this Section 9 shall be made in a manner which
does not adversely affect the exemption provided pursuant to Rule 16b-3 under
the Exchange Act. Further, with respect to Options intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, such
adjustments or substitutions shall be made only to the extent that the Committee
determines that such adjustments or substitutions may be made without

                                       14
<PAGE>

causing the Company to be denied a tax deduction on account of Section 162(m) of
the Code. The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and binding for
all purposes.

            Notwithstanding the above, in the event of any of the following:

            A. The Company is merged or consolidated with another corporation or
entity and, in connection therewith, consideration is received by shareholders
of the Company in a form other than stock or other equity interests of the
surviving entity;

            B. All or substantially all of the assets of the Company are
acquired by another person;

            C. The reorganization or liquidation of the Company; or

            D. The Company shall enter into a written agreement to undergo an
event described in clauses A, B or C above,

then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Options and pay to the
holders thereof, in cash or stock, or any combination thereof, the value of such
Options based upon the price per share of Stock received or to be received by
other shareholders of the Company in the event. The terms of this Section 9 may
be varied by the Committee in any particular Stock Option Agreement.

10.   EFFECT OF CHANGE IN CONTROL

            Except to the extent reflected in a particular Stock Option
Agreement or other written agreement between the Company and a Participant:

                  (a) In the event of a Change in Control, all Options shall
become immediately vested and exercisable with respect to 100 percent of the
shares subject to such Option; PROVIDED, HOWEVER, that no such vesting shall
occur if provision has been made in writing in connection with such transaction
for (a) the continuation of the Plan and/or assumption of such Options by a
successor corporation (or a parent or subsidiary thereof) or (b) the
substitution for such Options of new options covering the stock of a successor
corporation (or a parent or subsidiary thereof), with appropriate adjustments as
to the number and kinds of shares and exercise prices. In the event of any such
continuation, assumption or substitution, the Plan and/or such Options shall
continue in the manner and under the terms so provided.

                  (b) In addition, in the event of a Change in Control, the
Committee may in its discretion and upon at least 10 days' advance notice to the
affected persons, cancel any outstanding Options and pay to the holders thereof,
in cash or stock, or any combination thereof, the value of such Options based
upon the price per share of Stock received or to be received by other
shareholders of the Company in the event.

                  (c) The obligations of the Company under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other

                                       15
<PAGE>

reorganization of the Company, or upon any successor corporation or organization
succeeding to substantially all of the assets and business of the Company. The
Company agrees that it will make appropriate provisions for the preservation of
Participants' rights under the Plan in any agreement or plan which it may enter
into or adopt to effect any such merger, consolidation, reorganization or
transfer of assets.

11.   NONEXCLUSIVITY OF THE PLAN

            Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either applicable generally or only in specific cases.

12.   AMENDMENTS AND TERMINATION

                  (a) AMENDMENT AND TERMINATION OF THE PLAN. The Board may
amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof
at any time; PROVIDED that no such amendment, alteration, suspension,
discontinuation or termination shall be made without shareholder approval if
such approval is necessary to comply with any tax or regulatory requirement
applicable to the Plan (including as necessary to prevent the Company from being
denied a tax deduction on account of Section 162(m) of the Code); and PROVIDED
FURTHER that any such amendment, alteration, suspension, discontinuance or
termination that would impair the rights of any Participant or any holder or
beneficiary of any Option theretofore granted shall not to that extent be
effective without the consent of the affected Participant, holder or
beneficiary.

                  (b) AMENDMENT OF STOCK OPTION AGREEMENTS. The Committee may
waive any conditions or rights under, amend any terms of, or alter, suspend,
discontinue, cancel or terminate, any Option theretofore granted or the
associated Stock Option Agreement, prospectively or retroactively; PROVIDED that
any such waiver, amendment, alteration, suspension, discontinuance, cancellation
or termination that would impair the rights of any Participant in respect of any
Option theretofore granted shall not to that extent be effective without the
consent of the affected Participant.

                               *       *       *

      As adopted by the Compensation Committee of the Board of Directors of
Veeco Instrument Inc. on April 28, 2000 and approved by the stockholders of
Veeco Instruments Inc. on

_____________.

                                       16

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00008-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00008-of-00352.parquet"}]]