Document:

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                                                                    EXHIBIT 10.2

                  AMENDED AND RESTATED GROUND LEASE AGREEMENT

        THIS AMENDED AND RESTATED GROUND LEASE AGREEMENT (this "Agreement"
herein), dated as of September 21, 2001 is entered into by and between:

                (1) NOVELLUS SYSTEMS, INC., a California corporation ("Ground
        Lessor"); and

                (2) ABN AMRO LEASING, INC., an Illinois corporation ("Ground
        Lessee").

                                    RECITALS

        A. Ground Lessor is the lessee of the land described in Exhibit A (as
more fully defined below, the "Land" under an Amendment and Restatement of
Ground Lease made effective as of July 1, 1998 by and between The Board of
Trustees of Stanford University ("Stanford"), as lessor, and Ground Lessor, as
lessee (as amended, the "Stanford Lease"). Pursuant to that certain Ground Lease
Agreement, dated as of August 7, 1998, Ground Lessor previously subleased to
Ground Lessee the Land upon the terms and subject to the conditions set forth
therein (the "Existing Ground Lease Agreement").

        B. Ground Lessor has requested Ground Lessee and the parties which are
"Participants" under the Participation Agreement referred to in Recital C below
(such parties to be referred to collectively as the "Participants") to provide
to Ground Lessor a lease facility, as the same may be amended, restated,
renewed, replaced or otherwise modified from time to time, pursuant to which:

                (1) Ground Lessee would (a) continue to sublease from Ground
        Lessor the Land, (b) sublease back to Ground Lessor the Land and lease
        to Ground Lessor certain improvements located on the Land owed by Ground
        Lessee and (c) grant to Ground Lessor the right to purchase such
        improvements; and

                (2) The Participants would participate in such lease facility by
        (a) funding the advances to be made by Ground Lessor and (b) acquiring
        participation interests in the rental and certain other payments to be
        made by Ground Lessor.

        C. Pursuant to a Participation Agreement dated of even date herewith (as
amended, restated, renewed, replaced or otherwise modified from time to time,
the "Participation Agreement") among Ground Lessee, Ground Lessor, the
Participants and ABN AMRO Bank N.V., as agent for the Participants (in such
capacity, "Agent"), Ground Lessee and the Participants have agreed to provide
such lease facility upon the terms and subject to the conditions set forth
therein, including without limitation the execution and delivery of this
Agreement amending and restating the Existing Ground Lease and setting forth the
terms of the lease by Ground Lessor to Ground Lessee of the Land.

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                                    AGREEMENT

        NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:

SECTION 1. INTERPRETATION.

        1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01 to the
Participation Agreement, when used in this Agreement or any other Operative
Document, shall have the respective meaning given to that term in such Schedule
1.01 or in the provision of this Agreement or other document, instrument or
agreement referenced in such Schedule 1.01, in each case as each such term may
be amended, restated or otherwise modified from time to time or as such
document, instrument or agreement may be amended, restated, renewed, replaced or
otherwise modified from time to time.

        1.02. Rules of Construction. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of construction set forth
in Schedule 1.02 to the Participation Agreement shall apply to this Agreement
and the other Operative Documents.

SECTION 2. BASIC PROVISIONS.

        2.01. Lease of the Property. For good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Ground Lessor agrees
to lease to Ground Lessee and Ground Lessee agrees to lease from Ground Lessor
the following property (the "Ground Lease Property") to the extent of Ground
Lessor's estate, right, title and interest therein, thereto or thereunder:

                (a) All lots, pieces, tracts and parcels of land described in
        Exhibit A (the "Land");

                (b) All Appurtenant Rights belonging, relating or pertaining to
        the Land;

                (c) All Related Permits and Related Agreements related to the
        foregoing Land or Appurtenant Rights; and

                (d) All accessions and accretions to and replacements and
        substitutions for the foregoing.

This Agreement does not cover the Improvements or other property not described
above related to the Land. Ground Lessor and Ground Lessee agree that Ground
Lessee owns such Improvements and such other property and that Ground Lessor's
only interest in the Improvements and such other property is the leasehold
interest granted to Ground Lessor therein in the Facility 2 Lease Agreement.

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        2.02. Term. The original term of this Agreement shall commence on the
Closing Date (the "Ground Lease Commencement Date") and shall end on the first
Business Day of August 2032 (the "Ground Lease Scheduled Expiration Date"),
subject to the terms of Subparagraph 4.01(a) below.

        2.03. Rent. On or before the Ground Lease Commencement Date, Ground
Lessee shall pay to Ground Lessor as rent hereunder for the entire term of this
Agreement the sum of Ten Dollars ($10.00); provided, however, that Ground Lessor
may, after the Expiration Date of the Facility 2 Lease Agreement and the
satisfaction in full of all Lessee Obligations, increase the rent payable by
Ground Lessee for the remaining term hereof to the "market rent," by delivering
to Ground Lessee not less than forty-five (45) days prior to the proposed date
of such increase, a written notice (a "Notice of Ground Lease Rent Increase").
The "market rent" for the remainder of the term shall be the rent that would be
agreed upon between a willing lessee, under no compulsion to lease, and a
willing lessor, under no compulsion to lease, for unimproved land comparable in
size and location to the Land, exclusive of any Improvements, at the time of
Ground Lessor's exercise of its rights under this Paragraph 2.03 and taking into
consideration, among other relevant factors, the condition of the Land and the
encumbrances affecting the title to the Land at the time of the exercise of such
rights and the obligations of the Ground Lessor under this Agreement, including
its obligation to pay taxes. If Ground Lessor and Ground Lessee cannot agree
upon such "market rent" within seven (7) days after the date Ground Lessor
delivers the Notice of Ground Lease Rent Increase (the "Rent Increase
Notification Date"), the "market rent" shall be determined as follows:

                (a) Not later than fourteen (14) days after the Rent Increase
        Notification Date, Ground Lessor and Ground Lessee each shall appoint a
        real estate appraiser familiar with properties in the vicinity of the
        Land and shall notify the other party of its appointment. If the two
        appraisers agree upon the "market rent" within twenty-one (21) days
        after the Rent Increase Notification Date, such rent will be binding
        upon Ground Lessor and Ground Lessee. If the two appraisers cannot agree
        upon the "market rent" within such time period, then, not later than
        twenty-eight (28) days after the Rent Increase Notification Date, such
        appraisers shall appoint a third real estate appraiser familiar with
        properties in the vicinity of the Land. Immediately after such
        appointment (and in no event later than thirty (30) days after the Rent
        Increase Notification Date), each of the first two appraisers will
        submit his/her best estimate of the "market rent", together with a
        written report supporting such estimate, to the third appraiser. Not
        later than thirty-five (35) days after the Rent Increase Notification
        Date, the third appraiser will select the estimate of the "market rent"
        he/she concludes to be the closest to the definition thereof set forth
        above in this Paragraph 2.03 and shall notify Ground Lessor and Ground
        Lessee of such selection. The estimate so selected by the third
        appraiser will be binding upon Ground Lessor and Ground Lessee.

                (b) If a third appraiser must be chosen pursuant to Subparagraph
        2.03(a) and the first two appraisers cannot agree upon the third
        appraiser within the prescribed time, either Ground Lessor or Ground
        Lessee may require each of the first two appraisers immediately to
        submit its choice for the third appraiser to the American Arbitration
        Association ("AAA") in San Francisco, California for selection in
        accordance with the

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        then rules of said association within thirty-five (35) days after the
        Rent Increase Notification Date. If such a procedure is necessary to
        appoint the third appraiser, then (i) the deadline for the two
        appraisers to submit to the third appraiser their estimates of the
        "market rent" and supporting report pursuant to Subparagraph 2.03(a)
        shall be not later than thirty-seven (37) days (rather than thirty (30)
        days) after the Rent Increase Notification Date and (ii) the deadline
        for the third appraiser to select one of the two estimates pursuant to
        Subparagraph 2.03(a) shall be not later than forty-two (42) days (rather
        than thirty-five (35) days) after the Rent Increase Notification Date.

                (c) If either party or its appraiser fails to comply with the
        procedures (including deadlines) set forth above, then the other party's
        appraiser will determine the "market rent".

                (d) Ground Lessor and Ground Lessee each shall bear the expense
        of the appraiser appointed by it, and the expenses of the third
        appraiser and the AAA will be shared equally by Ground Lessor and Ground
        Lessee.

                (e) All appraisers selected for the appraisal process set out in
        this Paragraph 2.03 will be disinterested, reputable, qualified real
        estate appraisers with the designation of MAI or equivalent and with at
        least five (5) years experience in appraising properties comparable to
        the Land. If a third appraiser must be chosen pursuant to Subparagraph
        2.03(a), such appraiser will be chosen on the basis of objectivity and
        competence, not on the basis of such appraiser's relationship with the
        other appraisers or the parties to this Agreement.

        2.04. Use . Ground Lessee may use the Ground Lease Property for any
lawful purpose.

        2.05. Title; Quiet Enjoyment.

                (a) Title. Ground Lessor represents and warrants to Ground
        Lessee that Ground Lessor has good and marketable title to the Ground
        Lease Property, subject to the Permitted Property Liens. Ground Lessor
        shall not sell, lease, transfer or otherwise dispose of its right, title
        and interest in the Ground Lease Property or this Agreement prior to the
        Expiration Date of the Facility 2 Lease Agreement and the satisfaction
        in full of all Lessee Obligations (except as permitted under the
        Facility 2 Lease Agreement).

                (b) No Merger. The leasehold estate in the Ground Lease Property
        created by this Agreement shall not be merged with the fee estate or any
        other interest in the Ground Lease Property as a result of the same
        Person acquiring, owning or holding, directly or indirectly, in whole or
        in part, (i) the leasehold estate in the Ground Lease Property created
        hereby or any interest in such leasehold estate and (ii) the fee estate
        in the Ground Lease Property or any interest in such fee estate, unless
        all parties with an interest in the Ground Lease Property that would be
        adversely affected by any such merger specifically agree in writing that
        such a merger shall occur.

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                (c) Quiet Enjoyment. Neither Ground Lessor nor any other Person
        lawfully claiming any right or interest in the Ground Lease Property
        shall, prior to the Ground Lease Expiration Date, disturb Ground
        Lessee's peaceable and quiet enjoyment of the Ground Lease Property;
        provided, however, that such enjoyment shall be subject to the terms of
        this Agreement and to Permitted Property Liens.

SECTION 3. OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS.

        3.01. Maintenance, Repair, Etc.

                (a) General. Until the Expiration Date of the Facility 2 Lease
        Agreement, Ground Lessor shall maintain the Ground Lease Property in
        accordance with the terms and provisions of the Facility 2 Lease
        Agreement. Following the Expiration Date of the Facility 2 Lease
        Agreement and until the Ground Lease Expiration Date, Ground Lessor
        shall maintain the Ground Lease Property on a basis consistent with the
        operation and maintenance of commercial properties comparable in type
        and location to the Ground Lease Property and in compliance with prudent
        industry practice.

                (b) Improvements. Ground Lessee, at its sole cost and expense,
        may from time to time make alterations, renovations, additions and other
        Improvements to the Ground Lease Property and substitutions and
        replacements therefor; provided, however, that, unless an Event of
        Default has occurred and is continuing under the Facility 2 Lease
        Agreement, Ground Lessee shall not make any such alterations,
        renovations, additions or other Improvements prior to the Expiration
        Date of the Facility 2 Lease Agreement, except pursuant to the terms of
        the Construction Agency Agreement. Unless purchased by Ground Lessor
        pursuant to the Facility 2 Purchase Agreement, all Improvements to the
        Ground Lease Property, whether constructed before or during the term of
        this Agreement, shall be the property of Ground Lessee and may be
        removed by Ground Lessee at any time at or prior to the termination of
        this Agreement; provided, however, that Ground Lessee shall not remove
        any such property prior to the Expiration Date of the Facility 2 Lease
        Agreement unless an Event of Default has occurred and is continuing
        under the Facility 2 Lease Agreement.

        3.02. Risk of Loss. Until the Expiration Date of the Facility 2 Lease
Agreement, Ground Lessor assumes all risks of loss arising from any Casualty or
Condemnation and all liability for all personal injuries and deaths and damages
to property suffered by any Person or property on or in connection with the
Ground Lease Property in accordance with the terms and provisions of the
Facility 2 Lease Agreement. If (a) Ground Lessor exercises the Expiration Date
Purchase Option pursuant to the Facility 2 Purchase Agreement and (b) Ground
Lessee elects to retain the Property pursuant to Subparagraph 3.02(d) of the
Facility 2 Purchase Agreement, Ground Lessee assumes such risks of loss and such
liability arising after the Scheduled Expiration Date, except to the extent any
such loss or liability is primarily caused by the gross negligence or willful
misconduct of Ground Lessor or the breach by Ground Lessor of its obligations
under the Operative Documents.

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        3.03. Insurance. Until the Expiration Date of the Facility 2 Lease
Agreement, Ground Lessor shall carry and maintain liability insurance coverage
for the Ground Lease Property as provided in Paragraph 3.03 of the Facility 2
Lease Agreement for the Property upon the same terms as set forth therein and
otherwise shall comply with the provisions of such paragraph.

        3.04. Casualty and Condemnation.

                (a) Repair. Until the Expiration Date of the Facility 2 Lease
        Agreement, Ground Lessor, at its sole cost and expense, shall diligently
        proceed to repair and restore the Ground Lease Property in accordance
        with the terms and provisions of the Facility 2 Lease Agreement. If any
        Casualty or Condemnation affecting the Ground Lease Property (except for
        any Casualty primarily caused by the gross negligence or willful
        misconduct of Ground Lessor or the breach by Ground Lessor of its
        obligations under the Operative Documents) shall occur after the
        Scheduled Expiration Date, Ground Lessee, at its sole cost and expense,
        shall diligently proceed to repair and restore the Ground Lease Property
        as near as practically possible to the condition in which it existed
        immediately prior to such Casualty or Condemnation and shall complete
        all such repairs and restoration not later than six (6) months after the
        occurrence of the Casualty or Condemnation.

                (b) Prosecution of Claims for Casualty and Condemnation
        Proceeds. Until the Expiration Date of the Facility 2 Lease Agreement,
        Ground Lessor shall proceed promptly and diligently to prosecute in good
        faith the settlement or compromise of any and all claims for Casualty
        and Condemnation Proceeds in accordance with the terms and provisions of
        the Facility 2 Lease Agreement. Following the Expiration Date of the
        Facility 2 Lease Agreement and until the Ground Lease Expiration Date,
        Ground Lessee shall proceed promptly and diligently to prosecute in good
        faith the settlement or compromise of any and all claims for Casualty
        and Condemnation Proceeds with respect to the Ground Lease Property and
        Ground Lessee is hereby authorized, in its own name or in Ground
        Lessor's name, to adjust any loss covered by insurance or any Casualty
        or Condemnation claim or cause of action, and to settle or compromise
        any claim or cause of action in connection therewith.

                (c) Assignment of Casualty and Condemnation Proceeds. Ground
        Lessor hereby absolutely and irrevocably assigns to Ground Lessee all
        Casualty and Condemnation Proceeds and all claims relating thereto,
        which Casualty and Condemnation Proceeds will be applied to repair and
        restore the Ground Lease Property pursuant to Subparagraph 3.04(a) of
        the Facility 2 Lease Agreement.

        3.05. Taxes. Ground Lessor shall promptly pay when due all taxes and
other Governmental Charges imposed on or payable by Ground Lessee in connection
with the Ground Lease Property, this Agreement or any of the transactions
contemplated hereby or thereby. Upon request of Ground Lessee, as promptly as
possible after any such taxes or other Governmental Charges are payable by
Ground Lessor, Ground Lessor shall send to Ground Lessee a certified copy of an
original official receipt received by Ground Lessor showing payment thereof. If
Ground Lessor fails to pay any such taxes or other Governmental Charges when due
to the appropriate taxing authority or fails to remit to Ground Lessee the
required receipts or other

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required documentary evidence, Ground Lessor shall indemnify Ground Lessee for
any incremental taxes, interest or penalties that may become payable by Ground
Lessee as a result of any such failure. The obligations of Ground Lessor under
this Paragraph 3.05 shall survive the termination of this Agreement.

        3.06. Environmental Matters. Ground Lessee shall not cause or permit the
Ground Lease Property to be used as a site for the use, generation, manufacture,
storage, treatment, release, discharge, disposal or transportation of any
Hazardous Materials in a manner that would materially decrease the value of the
Ground Lease Property or that would constitute a material violation of any
Environmental Laws.

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        3.07. Liens, Easements, Etc.

                (a) Ground Lessor's Covenants. Until the Expiration Date of the
        Facility 2 Lease Agreement and the satisfaction in full of all Lessee
        Obligations, Ground Lessor shall not create, incur, assume or permit to
        exist any Lien or easement on or with respect to any of the Ground Lease
        Property of any character, whether now owned or hereafter acquired,
        except for Permitted Property Liens of the types described in
        Subparagraph 3.07(a) of the Facility 2 Lease Agreement. Following the
        Expiration Date of the Facility 2 Lease Agreement and for the remainder
        of the term of this Agreement until the Ground Lease Expiration Date,
        Ground Lessor agrees that Ground Lessee may, and Ground Lessor hereby
        consents in each instance to the following actions by Ground Lessee for
        the following purposes, provided the same are in compliance with the
        Stanford Lease: (i) the granting of licenses and other rights and
        privileges reasonably necessary or desirable for the use, repair, or
        maintenance of the Ground Lease Property; (ii) the release of existing
        easements or other rights in the nature of easements which are for the
        benefit of the Ground Lease Property; (iii) the seeking of any zoning
        variances or modifications to existing zoning; and (iv) the imposition
        of and the execution of amendments to, or waivers or releases of any
        covenants, easements, licenses, and restrictions affecting the Ground
        Lease Property; provided, however that in each case (1) such grant,
        release, dedication, transfer or amendment does not impair the value,
        operation or remaining useful life of the Ground Lease Property or
        materially and adversely affect Ground Lessee's ability to perform its
        obligations hereunder, except such impairments which are not material,
        (2) such grant, release, dedication, transfer or amendment is reasonably
        necessary or desirable in connection with the use, maintenance,
        alteration or improvement of the Ground Lease Property, (3) such grant,
        release, dedication, transfer or amendment will not cause the Ground
        Lease Property or any portion thereof to fail to comply with the
        provisions of this Agreement or any other Operative Document or any
        Governmental Rule (including all applicable zoning, planning, building
        and subdivision ordinances, all applicable restrictive covenants and all
        applicable architectural approval requirements), (4) all governmental
        and other consents or approvals required prior to such grant, release,
        dedication, transfer, annexation or amendment or other action have been
        obtained, and all filings required prior to such action have been made,
        (5) Ground Lessee shall remain obligated under this Agreement as though
        such grant, release, dedication, transfer or amendment had not been
        effected, and (6) Ground Lessee shall pay and perform, or caused to be
        paid and performed, any obligations of Ground Lessor under such grant,
        release, dedication, transfer or amendment. Ground Lessor shall, upon
        the request of Ground Lessee, and at Ground Lessee's sole cost and
        expense, execute and deliver any instruments necessary or appropriate to
        confirm any such grant, release, dedication, transfer, annexation or
        amendment to any Person permitted under this Paragraph 3.07.

                (b) Ground Lessee's Covenants. Except for Leasehold Mortgages
        permitted by Subparagraph 3.07(c) and subject to Paragraph 3.11 relating
        to permitted contests, Ground Lessee shall not (i) transfer or assign to
        any Person any of Ground Lessee's interests in the Ground Lease Property
        in violation of any of the Operative Documents or (ii) create, incur,
        assume or permit to exist any Lien in the Ground Lease Property arising

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        as a result of any claim against Ground Lessee by any Person unrelated
        to any of the Operative Documents or the transactions contemplated
        thereby.

                (c) Leasehold Mortgages.

                        (i) Ground Lessor hereby consents to the Assignment of
                Lease, the Lessor Deed of Trust and the Lessor Security
                Agreement; the Liens granted to Agent therein; and all other
                Liens granted to Agent in any of the Operative Documents and the
                Property to secure the Lessor Obligations. After the Expiration
                Date of the Facility 2 Lease Agreement, Ground Lessee may, as
                security for any indebtedness of Ground Lessee, grant to any
                holder of such indebtedness a Lien in its leasehold interest in
                the Ground Lease Property (any such Liens, together with the
                Liens granted to Agent pursuant to the Operative Documents, to
                be referred to herein as "Leasehold Mortgages") in compliance
                with the applicable provisions of the Stanford Lease.

                        (ii) Subject to the terms of the Stanford Lease, any
                Person may become the legal owner and holder of the leasehold
                interest in the Ground Lease Property created by this Agreement
                by foreclosure of a Leasehold Mortgage or as a result of an
                assignment or conveyance in lieu of such foreclosure and, upon
                becoming such an owner, shall become the Ground Lessee hereunder
                with the rights and obligations thereof.

                        (iii) Ground Lessor shall notify each holder of a
                Leasehold Mortgage (a "Leasehold Mortgagee") of any default by
                Ground Lessee hereunder. No notice of a default by Ground Lessee
                shall be deemed effective until so served. Any Leasehold
                Mortgagee shall have the right to correct or cure any such
                default within the same period of time after receipt of such
                notice as is given to Ground Lessee under this Agreement to
                correct or cure defaults, plus an additional period of thirty
                (30) days thereafter. Ground Lessor will accept performance by
                any Leasehold Mortgagee of any covenant, condition or agreement
                on Ground Lessee's part to be performed hereunder with the same
                force and effect as though performed by Ground Lessee.

                        (iv) If this Agreement should terminate by reason of a
                disaffirmance or rejection of this Agreement by Ground Lessee or
                any receiver, liquidator or trustee for the property of Ground
                Lessee, or by any Governmental Authority that has taken
                possession of the business or property of Ground Lessee by
                reason of the insolvency or alleged insolvency of Ground Lessee,
                then:

                                (A) Ground Lessor shall give notice thereof to
                        each Leasehold Mortgagee and, upon request of any
                        Leasehold Mortgagee made within sixty (60) days after
                        Ground Lessor has given such notice, Ground Lessor shall
                        enter into a new ground lease of the Ground Lease
                        Property with such Leasehold Mortgagee for the remainder
                        of the term hereof on the same terms and conditions as
                        contained in this Agreement. (If more than

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                        one Leasehold Mortgagee shall request Ground Lessor to
                        enter into a new ground lease, Ground Lessor shall enter
                        into such a new ground lease with the requesting
                        Leasehold Mortgagee holding the highest priority
                        Leasehold Mortgage. If two or more requesting Leasehold
                        Mortgagees share the highest priority, the new ground
                        lease shall name all such Leasehold Mortgagees as
                        co-tenants thereunder.)

                                (B) The estate of any Leasehold Mortgagee, as
                        lessee under such a new ground lease, shall have the
                        same priority as the estate of Ground Lessee created
                        under this Agreement. If the Facility 2 Lease Agreement
                        or Facility 2 Purchase Agreement are in effect at the
                        time of execution of such new ground lease, such new
                        ground lease shall be made subject to the Facility 2
                        Lease Agreement and the Facility 2 Purchase Agreement.

                        (v) No modification or early termination of this
                Agreement shall be effective without the consent of a Leasehold
                Mortgagee if (A) Ground Lessee has agreed with such Leasehold
                Mortgagee that such Leasehold Mortgagee's consent will be
                required for any such modification or early termination and (B)
                Ground Lessor has been notified of such agreement.

                        (vi) No Leasehold Mortgagee will assume any liability
                under this Ground Lease either by virtue of its Leasehold
                Mortgage or by any subsequent receipt or collection of rents or
                profits generated from the Ground Lease Property, unless and
                until the Leasehold Mortgagee acquires Ground Lessee's leasehold
                interest in the Ground Lease Property at foreclosure or by deed
                in lieu of foreclosure.

        3.08. Assignments and Subletting.

                (a) Permitted Assignments and Subleases. Subject to the terms of
        the Stanford Lease, Ground Lessee may:

                        (i) Prior to the Expiration Date of the Facility 2 Lease
                Agreement, sublease the Ground Lease Property to Ground Lessor
                pursuant to the Facility 2 Lease Agreement and Ground Lessor may
                sublease the improvements on the Land to Cooley Godward, LLP
                under the Cooley Lease and in accordance with the subleases
                permitted under the Facility 2 Lease Agreement; and

                        (ii) On or after the Expiration Date of the Facility 2
                Lease Agreement, unless Ground Lessor purchases the Property on
                the Expiration Date pursuant to the Term Purchase Option or the
                Expiration Date Purchase Option in the Facility 2 Purchase
                Agreement and satisfies in full all Lessee Obligations, sublease
                the Ground Lease Property to any Person pursuant to a lease
                agreement that is subject to the terms of this Agreement or sell
                or assign this Agreement to any Person.

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                Ground Lessee shall notify Ground Lessor in writing of any such
                sublease, sale or assignment on or after the Expiration Date of
                the Facility 2 Lease Agreement.

        Except as permitted by clause (i) or (ii) above or by Subparagraph
        2.11(b) or Subparagraph 7.05(d) of the Participation Agreement, Ground
        Lessee shall not sell or assign this Agreement or sublease the Ground
        Lease Property.

                (b) Assumption of Ground Lessee Obligation. All obligations of
        Ground Lessee under this Agreement shall be assumed by (i) Ground Lessor
        during the Term of the Facility 2 Lease Agreement and while Ground
        Lessor is in possession of the Ground Lease Property, (ii) each other
        Person to whom Ground Lessee subleases the Ground Lease Property
        pursuant to Subparagraph 3.08(a) during the term of such sublease and
        while such Person is in possession of the Ground Lease Property and
        (iii) by any Person to whom Ground Lessee sells or assigns this
        Agreement pursuant to Subparagraph 3.08(a) at all times after such sale
        or assignment, and each such Person shall be deemed so to have assumed
        such obligations by entering into such sublease or by purchasing or
        taking assignment of this Agreement. Ground Lessor agrees that Ground
        Lessee shall have no duty to perform any of its obligations under this
        Agreement and shall be fully released from all such obligations during
        the periods when such obligations are so assumed by other Persons
        pursuant to clauses (i) and (ii) of the first sentence of this
        Subparagraph 3.08(b) and at all times after any sale or assignment of
        this Agreement.

        3.09. Utility Charges. Ground Lessor shall pay all charges for
electricity, power, gas, oil, water, telephone, sanitary sewer service and all
other utilities and services to, on or in connection with the Ground Lease
Property during the term of this Agreement.

        3.10. Removal of Property. Subject to the terms of the Stanford Lease
and the terms of Permitted Property Liens, unless purchased by Ground Lessor
pursuant to the Term Purchase Option or the Expiration Date Purchase Option in
the Facility 2 Purchase Agreement, all Improvements to the Ground Lease Property
and all other Property (other than the Land) may be removed by Ground Lessee at
any time at or prior to the termination of this Agreement; provided, however,
that Ground Lessee shall not remove any such property prior to the Expiration
Date of the Facility 2 Lease Agreement unless an Event of Default has occurred
and is continuing under the Facility 2 Lease Agreement.

        3.11. Permitted Contests. Ground Lessee may contest any alleged Lien on
any of the Ground Lease Property in violation of Subparagraph 3.07(b), provided
that any such contest is completed and such Lien is discharged (either pursuant
to such proceedings or otherwise) not later than the Ground Lease Expiration
Date.

        3.12. Estoppel Certificates. Each party shall, within ten (10) Business
Days after receipt of a written request from the other party, deliver a written
statement to the requesting party stating the date to which the rent and other
charges have been paid, whether the Ground Lease is unmodified and in full force
and effect, and any other matters that may reasonably be requested.

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        3.13. Recordation of Agreement. Neither Ground Lessor nor Ground Lessee
shall file or record this Agreement without the prior written consent of the
other party, but the parties will execute a good and sufficient memorandum of
lease for purposes of recording. Upon the expiration or earlier termination of
this Agreement, Ground Lessee shall promptly execute, acknowledge and deliver to
Ground Lessor any quitclaim deed or other document required by Ground Lessor or
a title company to evidence the termination of Ground Lessee's interests in the
Ground Lease Property.

        3.14. Stanford Lease.

                (a) With respect to the Stanford Lease, Ground Lessor agrees:

                        (i) To keep and perform each and every material
                covenant, agreement and obligation of the lessee set forth in
                the Stanford Lease and any statute, ordinance, rule or
                regulation relating thereto, and not to commit, suffer or permit
                any breach thereof. If Ground Lessor shall default under the
                Stanford Lease, Ground Lessee may, at its option but without any
                obligation to do so, take any action necessary or desirable to
                cure any default by Ground Lessor in the performance of any of
                the terms, covenants and conditions of the Stanford Lease,
                Ground Lessee being authorized to enter upon the Land for such
                purposes. Ground Lessor shall, immediately on demand, pay to
                Ground Lessee all costs of Ground Lessee reasonably incurred in
                curing any such default, together with interest on such costs
                from the date of expenditure.

                        (ii) To furnish to Ground Lessee all information that it
                may reasonably request concerning the performance by Ground
                Lessor of the covenants of the Stanford Lease and to give prompt
                notice to Ground Lessee (A) of any material default or event of
                default by any party under the Stanford Lease or notice thereof
                within Ground Lessor's knowledge; (B) of the receipt by it of
                any notice of default from the lessor under the Stanford Lease;
                and (C) of its irrevocable election to cure any default under
                the Stanford Lease within five (5) days of its receipt from
                Stanford of any notice of default pursuant to Section 18.1(a) of
                the Stanford Lease and within fifteen (15) days of Ground
                Lessor's receipt from Stanford of any notice of notice of
                default pursuant to Sections 18.1(b), (c) or (d) of the Stanford
                Lease.

                        (iii) That the provisions hereof shall be deemed to be
                obligations of Ground Lessor in addition to Ground Lessor's
                obligations as lessee with respect to similar matters contained
                in the Stanford Lease; provided, however, the inclusion herein
                of any covenants and agreements relating to similar matters as
                to which Ground Lessor is obligated under the Stanford Lease
                shall not restrict or limit Ground Lessor's duties and
                obligations to keep and perform promptly all of its covenants,
                agreements and obligations as lessee under the Stanford Lease,
                and nothing in this Agreement shall be construed as requiring
                Ground Lessor or Ground Lessee to take or omit to take any
                action which would cause a default under the Stanford Lease.

                                       12
<PAGE>

                        (iv) That, so long as this Agreement is in effect, no
                surrender (except a surrender upon the expiration of the term of
                the Stanford Lease) by Ground Lessor as lessee under the
                Stanford Lease to Stanford thereunder, or of any portion thereof
                or any interest therein shall be valid or effective. The terms
                of the Stanford Lease may not be amended, modified, changed,
                surrendered or cancelled, or subordinated to any mortgage, lease
                or other interest, either orally or in writing, without the
                prior written consent of Ground Lessee.

                        (v) That if the Stanford Lease is for any reason
                whatsoever terminated prior to the expiration of its term and,
                if pursuant to any provision of the Stanford Lease or otherwise,
                Ground Lessee or its designee shall acquire from Stanford a new
                lease or other agreement for the use of the Land, Ground Lessor
                shall have no right, title or interest in or to such new lease
                or other agreement or the estate created thereby.

                (b) Ground Lessor warrants that the Stanford Lease is in all
        respects valid and subsisting, that Ground Lessor and Stanford have duly
        performed all of their respective obligations thereunder, that neither
        Ground Lessor nor, to Ground Lessor's knowledge, Stanford is in material
        default under any of the terms or provisions of the Stanford Lease, and
        that neither Ground Lessor nor Stanford has made any claim of such
        default.

        3.15. Stanford's Bankruptcy.

                (a) Ground Lessor acknowledges that pursuant to Section 365 of
        the Bankruptcy Reform Act of 1978 (as the same may be amended from time
        to time, the "Bankruptcy Act") it is possible that a trustee in
        bankruptcy of Stanford or Stanford as a debtor-in-possession could
        reject the Stanford Lease, in which case Ground Lessor, as lessee, would
        have the election described in Section 365(h) of the Bankruptcy Act
        (which election, as the same may be amended from time to time, and
        together with any comparable right under any other state or federal law
        relating to bankruptcy, reorganization or other relief for debtors,
        whether now or hereafter in effect, is herein called the "Election") to
        treat the Stanford Lease as terminated by such rejection or, in the
        alternative, to remain in possession for the balance of the term of the
        Stanford Lease and any renewal or extension thereof that is enforceable
        by the lessee under applicable nonbankruptcy law. Ground Lessor
        covenants that it will not suffer or permit the termination of the
        Stanford Lease by exercise of the Election or otherwise without the
        prior written consent of Ground Lessee.

                (b) In order to secure the covenant made in this Section 3.15
        and as security for the obligations secured hereby as described above,
        Ground Lessor assigns the Election and all rights related thereto to
        Ground Lessee. Ground Lessor acknowledges and agrees that the foregoing
        assignment of the Election and related rights is one of the rights which
        Ground Lessee may use at any time in order to protect and preserve the
        other rights and interests of Ground Lessee under this Agreement, since
        exercise of the Election in favor of terminating the Stanford Lease
        would constitute waste hereunder. Ground Lessor acknowledges and agrees
        that the Election is in the nature of a remedy and is not a property
        interest which Ground Lessor can separate from the Stanford Lease.
        Therefore,

                                       13
<PAGE>

        Ground Lessor agrees that exercise of the Election in favor of
        preserving the right to possession under the Stanford Lease shall not be
        deemed to constitute a taking or sale of the Property by Ground Lessee
        and shall not entitle Ground Lessor to any credit against the
        obligations secured by this Agreement.

                (c) Ground Lessor acknowledges and agrees that in the event the
        Election is exercised in favor of Ground Lessor remaining in possession,
        Ground Lessor's resulting rights under the Stanford Lease, as adjusted
        by the effect of Section 365 of the Bankruptcy Act, shall then be part
        of the Ground Lease Property and shall be subject to this Agreement.

        3.16. Ground Lessor's Bankruptcy.

                (a) If there shall be filed by or against Ground Lessor a
        petition under the Bankruptcy Act, and Ground Lessor, as the lessee
        under the Stanford Lease, shall determine to reject the Stanford Lease
        pursuant to Section 365(a) of the Bankruptcy Act, then Ground Lessor
        shall give Ground Lessee not less than ten (10) days' prior notice of
        the date on which Ground Lessor shall apply to the bankruptcy court for
        authority to reject the Stanford Lease. Ground Lessee shall have the
        right, but not the obligation, to serve upon Ground Lessor within such
        10-day period a notice stating that (i) Ground Lessee demands that
        Ground Lessor assume and assign the Stanford Lease to Ground Lessee
        pursuant to Section 365 of the Bankruptcy Act and (ii) Ground Lessee
        covenants to cure or provide adequate assurance of prompt cure of all
        defaults and provide adequate assurance of future performance under the
        Stanford Lease. If Ground Lessee serves upon Ground Lessor the notice
        described in the preceding sentence, Ground Lessor shall not seek to
        reject the Stanford Lease and shall comply with the demand provided for
        in clause (i) of the preceding sentence within thirty (30) days after
        the notice shall have been given, subject to the performance by Ground
        Lessee of the covenant provided for in clause (ii) of the preceding
        sentence.

                (b) Effective upon the entry of an order for relief in respect
        of Ground Lessor under the Bankruptcy Act, Ground Lessor hereby assigns
        and transfers to Ground Lessee a non-exclusive right to apply to the
        Bankruptcy Act under Section 365(d)(4) of the Bankruptcy Act for an
        order extending the period during which the Stanford Lease may be
        rejected or assumed.

SECTION 4. TERMINATION.

        4.01. Termination Date.

                (a) Early Termination. This Agreement shall continue in full
        force and effect until the Ground Lease Scheduled Expiration Date except
        as follows:

                        (i) This Agreement may be terminated by Ground Lessee at
                any time upon one (1) month's prior written notice to Ground
                Lessor; provided, however, in no event shall Ground Lessee
                exercise the right of termination prior to the

                                       14
<PAGE>

                Expiration Date of the Facility 2 Lease Agreement unless an
                Event of Default has occurred and is continuing under the
                Facility 2 Lease Agreement and Ground Lessor's right as Lessee
                thereunder to remain in possession is terminated.

                        (ii) This Agreement may be terminated by Ground Lessor
                on the Expiration Date of the Facility 2 Lease Agreement upon
                one (1) month's prior written notice to Ground Lessee if Ground
                Lessor purchases the Property on such date pursuant to the Term
                Purchase Option or the Expiration Date Purchase Option in the
                Facility 2 Purchase Agreement and satisfies in full all Lessee
                Obligations on or prior to such date; provided, however, that,
                if this Agreement is so terminated on the Expiration Date but
                any amounts paid by Ground Lessor are thereafter recovered,
                Ground Lessor shall, at the request of Ground Lessee, enter a
                new Ground Lease in the form of this Agreement for the remaining
                term of this Agreement.

                (b) No Other Early Termination Date. Except as provided in
        Subparagraph 4.01(a), this Agreement shall not terminate prior to the
        Ground Lease Scheduled Expiration Date for any reason including, without
        limitation, (i) any Casualty to or Condemnation of all or any part of
        the Ground Lease Property, (ii) the occurrence of any Ground Lease Event
        of Default or any other default by Ground Lessee under this Agreement or
        (iii) any other cause whether similar or dissimilar to the foregoing,
        any existing or future law to the contrary notwithstanding; provided,
        however, that this Subparagraph 4.01(b) shall not abrogate any right
        Ground Lessor may have to recover damages or seek an injunction pursuant
        to Paragraph 5.02. It is the intention of the parties hereto that the
        obligations of Ground Lessor hereunder shall be separate and independent
        of the covenants and agreements of Ground Lessee.

        4.02. Surrender of Ground Lease Property. Ground Lessee shall vacate and
surrender the Ground Lease Property to Ground Lessor in its then-current
condition on the date (the "Ground Lease Expiration Date") that is the earlier
of (a) the Ground Lease Scheduled Expiration Date and (b) any earlier date on
which this Agreement is terminated pursuant to Subparagraph 4.01(a).

SECTION 5. DEFAULT.

        5.01. Ground Lease Events of Default. The occurrence or existence of any
one or more of the following shall constitute a "Ground Lease Event of Default"
hereunder:

                (a) Non-Payment. Ground Lessee shall fail to pay any installment
        of rent payable hereunder within sixty (60) days after such installment
        is due; or

                (b) Other Defaults. Ground Lessee shall fail to observe or
        perform any other covenant, obligation, condition or agreement contained
        in this Agreement or the Stanford Lease and such failure shall continue
        for a period of sixty (60) days after written notice thereof from Ground
        Lessor; provided, however, that in the event that such failure cannot

                                       15
<PAGE>

        reasonably be cured within such sixty (60) day period, such failure
        shall not constitute an Event of Default hereunder so long as Ground
        Lessee shall have commenced to cure such failure within such sixty (60)
        day period and shall thereafter diligently pursue such cure to
        completion, provided further that such failure shall in all events be
        cured by the earlier of (i) the Ground Lease Scheduled Expiration Date
        and (ii) one hundred and eighty days (180) days after Ground Lessor's
        notice thereof.

        5.02. Remedies. Upon the occurrence or existence of any Ground Lease
Event of Default and at any time thereafter unless such Ground Lease Event of
Default is waived, Ground Lessor may sue Ground Lessee for the collection of any
amount due under this Agreement or to enjoin the continuation of the Ground
Lease Event of Default; provided, however, that such remedies are the sole and
exclusive remedies of Ground Lessor hereunder. Ground Lessor may not terminate
this Agreement or Ground Lessee's right to possession under this Agreement
except as expressly provided herein.

        5.03. Limited Recourse. Neither a Ground Lessee that is a Lessor Party
nor any of its Affiliates or any of their respective directors, officers,
employees, agents, attorneys and advisors shall have any personal liability for
the payment of or performance of any obligations of Ground Lessee under this
Agreement. Any judgment which Ground Lessor may obtain against a Ground Lessee
that is a Lessor Party for amounts due under this Agreement may be collected
only through resort to a judgment lien against Ground Lessee's interest in the
Ground Lease Property.

SECTION 6. PURCHASE OPTION.

        6.01. Grant of Option. Ground Lessor hereby grants to Ground Lessee the
right to purchase the Ground Lease Property on the Expiration Date of the
Facility 2 Lease Agreement or any Business Day thereafter upon the terms and
subject to the conditions set forth in this Section 6 (the "Ground Lease
Purchase Option"); provided, however, that the Ground Lease Purchase Option
shall terminate on the Expiration Date of the Facility 2 Lease Agreement, and
shall not be exercisable by Ground Lessee, if Ground Lessor purchases the
Property on such date pursuant to the Term Purchase Option or the Expiration
Date Purchase Option in the Facility 2 Purchase Agreement and satisfies in full
all Lessee Obligations on or prior to such date. Ground Lessee shall notify
Ground Lessor of Ground Lessee's election to exercise the Ground Lease Purchase
Option by delivering to Ground Lessor, not less than one (1) month prior to the
date selected by Ground Lessee for its purchase of the Ground Lease Property
(the "Ground Lease Purchase Option Date"), a written notice (a "Notice of Ground
Lease Purchase Option Exercise") stating that Ground Lessee intends to exercise
the Ground Lease Purchase Option and specifying the Ground Lease Purchase Option
Date (the date such notice is delivered to be referred to as the "Option
Exercise Notification Date").

        6.02. Option Purchase Price The purchase price for the purchase of the
Ground Lease Property pursuant to the Ground Lease Purchase Option (the "Ground
Lease Option Price") shall be the price that would be agreed upon between a
willing buyer, under no compulsion to buy and a willing seller, under no
compulsion to sell, for unimproved land comparable in size and location to the
Land, exclusive of any Improvements, at the time of Ground Lessee's exercise of

                                       16
<PAGE>

the Ground Lease Purchase Option and taking into consideration, among other
relevant factors, the condition of the Land and the encumbrances affecting the
title to the Land at the time of the exercise of the Option. If Ground Lessor
and Ground Lessee cannot agree upon such price within seven (7) days after the
Option Exercise Notification Date, the Ground Lease Option Price shall be
determined as follows:

                (a) Not later than fourteen (14) days after the Option Exercise
        Notification Date, Ground Lessor and Ground Lessee each shall appoint a
        real estate appraiser familiar with properties in the vicinity of the
        Land and shall notify the other party of its appointment. If the two
        appraisers agree upon the Ground Lease Option Price within twenty-one
        (21) days after the Option Exercise Notification Date, such price will
        be binding upon Ground Lessor and Ground Lessee. If the two appraisers
        cannot agree upon the Ground Lease Option Price within such time period,
        then, not later than twenty-eight (28) days after the Option Exercise
        Notification Date, such appraisers shall appoint a third real estate
        appraiser familiar with properties in the vicinity of the Land.
        Immediately after such appointment (and in no event later than thirty
        (30) days after the Option Exercise Notification Date), each of the
        first two appraisers will submit his/her best estimate of the Ground
        Lease Option Price, together with a written report supporting such
        estimate, to the third appraiser. Not later than thirty-five (35) days
        after the Option Exercise Notification Date, the third appraiser will
        select the estimate of the Ground Lease Option Price he/she concludes to
        be the closest to the definition thereof set forth in the first sentence
        of this Paragraph 6.02 and shall notify Ground Lessor and Ground Lessee
        of such selection. The estimate so selected by the third appraiser will
        be binding upon Ground Lessor and Ground Lessee.

                (b) If a third appraiser must be chosen pursuant to Subparagraph
        6.02(a) and the first two appraisers cannot agree upon the third
        appraiser within the prescribed time, either Ground Lessor or Ground
        Lessee may require each of the first two appraisers immediately to
        submit its choice for the third appraiser to the American Arbitration
        Association ("AAA") in San Francisco, California for selection in
        accordance with the then rules of said association within thirty-five
        (35) days after the Option Exercise Notification Date. If such a
        procedure is necessary to appoint the third appraiser, then (i) the
        deadline for the two appraisers to submit to the third appraiser their
        estimates of the Ground Lease Option Price and supporting report
        pursuant to Subparagraph 6.02(a) shall be not later than thirty-seven
        (37) days (rather than thirty (30) days) after the Option Exercise
        Notification Date and (ii) the deadline for the third appraiser to
        select one of the two estimates pursuant to Subparagraph 6.02(a) shall
        be not later than forty-two (42) days (rather than thirty-five (35)
        days) after the Option Exercise Notification Date.

                (c) If either party or its appraiser fails to comply with the
        procedures (including deadlines) set forth above, then the other party's
        appraiser will determine the Ground Lease Option Price.

                (d) Ground Lessor and Ground Lessee each shall bear the expense
        of the appraiser appointed by it, and the expenses of the third
        appraiser and the AAA will be shared equally by Ground Lessor and Ground
        Lessee.

                                       17
<PAGE>

                (e) All appraisers selected for the appraisal process set out in
        this Paragraph 6.02 will be disinterested, reputable, qualified real
        estate appraisers with the designation of MAI or equivalent and with at
        least five (5) years experience in appraising properties comparable to
        the Land. If a third appraiser must be chosen pursuant to Subparagraph
        6.02(a), such appraiser will be chosen on the basis of objectivity and
        competence, not on the basis of such appraiser's relationship with the
        other appraisers or the parties to this Agreement.

        6.03. Other Terms

                (a) Upon Ground Lessee's tender of the Ground Lease Option Price
        to Ground Lessor, Ground Lessor will convey and assign good and
        marketable title to the leasehold estate under the Stanford Lease in the
        Ground Lease Property to Ground Lessee subject only to the Permitted
        Property Liens of the types described in clauses (i), (ii) and (iii) of
        Subparagraph 3.07(a) of the Facility 2 Lease Agreement.

                (b) Ground Lessee's obligation to close the purchase shall be
        subject to the following terms and conditions, all of which are for the
        benefit of Ground Lessee:

                        (i) Ground Lessee shall have been furnished with
                evidence satisfactory to Ground Lessee that Ground Lessor can
                convey title as required by the preceding subparagraph.

                        (ii) Nothing shall have occurred or been discovered
                after Ground Lessee exercised the Ground Lease Purchase Option
                that could adversely affect the title to or value of the Ground
                Lease Property or the Ground Lessee's use thereof.

                        (iii) Ground Lessee shall have tendered the instruments
                and other documents which are described in this Section 6 as
                documents to be delivered to Ground Lessee at the closing of
                Ground Lessee's purchase.

SECTION 7. MISCELLANEOUS.

        7.01. Notices. Except as otherwise specified herein, (a) all notices,
requests, demands, consents, instructions or other communications to or upon
Ground Lessee or Ground Lessor under this Agreement given on or prior to the
Expiration Date of the Facility 2 Lease Agreement shall be given as provided in
Subparagraph 2.02(c) and Paragraph 7.01 of the Participation Agreement and (b)
all notices, requests, demands, consents, instructions or other communications
to or upon Ground Lessee or Ground Lessor under this Agreement given after the
Expiration Date of the Facility 2 Lease Agreement shall be in writing and faxed,
mailed or delivered to its respective facsimile number or address set forth in
Paragraph 7.01 of the Participation Agreement (or to such other facsimile number
or address for either party as indicated in any notice given by that party to
the other party). All such notices and communications shall be effective (i)
when sent by Federal Express or other overnight service of

                                       18
<PAGE>

recognized standing, on the Business Day following the deposit with such
service; (ii) when mailed, first class postage prepaid and addressed as
aforesaid through the United States Postal Service, upon receipt; (iii) when
delivered by hand, upon delivery; and (iv) when faxed, upon confirmation of
receipt.

        7.02. Waivers; Amendments. Until the Expiration Date of the Facility 2
Lease Agreement and the satisfaction in full of all Lessee Obligations or, if
earlier, the date on which Ground Lessee sells or assigns this Agreement, any
term, covenant, agreement or condition of this Agreement may be amended or
waived only as provided in the Participation Agreement. Thereafter, any term,
covenant, agreement or condition of this Agreement may be amended or waived if
such amendment or waiver is in writing and is signed by Ground Lessor and Ground
Lessee. No failure or delay by either party in exercising any right hereunder
shall operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right. Unless otherwise specified in any such waiver or consent,
a waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.

        7.03. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Ground Lessor and Ground Lessee and their permitted
successors and assigns; provided, however, that Ground Lessor and Ground Lessee
shall not sell, assign or delegate their respective rights and obligations
hereunder except as provided in this Agreement or the Participation Agreement.

        7.04. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than Ground Lessor, Ground Lessee , the Lessor Parties, Lessee and each of
their permitted successors and assigns, any benefit or legal or equitable right,
remedy or claim under or by virtue of this Agreement or under or by virtue of
any provision herein.

        7.05. Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law or
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.

        7.06. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules.

        7.07. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.

                         [The signature page follows.]

                                       19

<PAGE>

        IN WITNESS WHEREOF, Ground Lessee and Ground Lessor have caused this
Agreement to be executed as of the day and year first above written.

GROUND LESSOR:                          NOVELLUS SYSTEMS, INC.

                                        By:
                                           -------------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

GROUND LESSEE:                          ABN AMRO LEASING, INC.

                                        By:
                                           -------------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                       20

<PAGE>

                                    EXHIBIT A

                                LEGAL DESCRIPTION

                                       A-1

<PAGE>

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Thomas Y. Coleman, Esq.
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California  94111

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

                             GROUND LEASE AGREEMENT

                                     BETWEEN

                             NOVELLUS SYSTEMS, INC.

                                       AND

                             ABN AMRO LEASING, INC.

                               SEPTEMBER 21, 2001

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                  PAGE
                                                                  ----
<S>                                                               <C>
SECTION 1.  INTERPRETATION.........................................2

      1.01. Definitions............................................2

      1.02. Rules of Construction..................................2

SECTION 2.  BASIC PROVISIONS.......................................2

      2.01. Lease of the Property..................................2

      2.02. Term...................................................3

      2.03. Rent...................................................3

      2.04. Use....................................................4

      2.05. Title; Quiet Enjoyment.................................4

SECTION 3.  OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS.........5

      3.01. Maintenance, Repair, Etc...............................5

      3.02. Risk of Loss...........................................5

      3.03. Insurance..............................................6

      3.04. Casualty and Condemnation..............................6

      3.05. Taxes..................................................6

      3.06. Environmental Matters..................................7

      3.07. Liens, Easements, Etc..................................8

      3.08. Assignments and Subletting............................10

      3.09. Utility Charges.......................................11

      3.10. Removal of Property...................................11

      3.11. Permitted Contests....................................11

      3.12. Estoppel Certificates.................................11

      3.13. Recordation of Agreement..............................12

      3.14. Stanford Lease........................................12

      3.15. Stanford's Bankruptcy.................................13

      3.16. Ground Lessor's Bankruptcy............................14

SECTION 4.  TERMINATION...........................................14

      4.01. Termination Date......................................14

      4.02. Surrender of Ground Lease Property....................15

SECTION 5.  DEFAULT...............................................15

      5.01. Ground Lease Events of Default........................15

      5.02. Remedies..............................................16

      5.03. Limited Recourse......................................16

SECTION 6.  PURCHASE OPTION.......................................16

      6.01. Grant of Option.......................................16
</TABLE>

                                      -i-

<PAGE>

                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                  PAGE
                                                                  ----
<S>                                                               <C>
      6.02.       Option Purchase Price...........................16

      6.03.       Other Terms.....................................18

SECTION 7.  MISCELLANEOUS.........................................18

      7.01.       Notices.........................................18

      7.02.       Waivers; Amendments.............................19

      7.03.       Successors and Assigns..........................19

      7.04.       No Third Party Rights...........................19

      7.05.       Partial Invalidity..............................19

      7.06.       Governing Law...................................19

      7.07.       Counterparts....................................19
</TABLE>

                                      -ii-

<PAGE>

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  AN EXTRA SECTION BREAK HAS BEEN INSERTED ABOVE THIS PARAGRAPH. DO NOT DELETE
         THIS SECTION BREAK IF YOU PLAN TO ADD TEXT AFTER THE TABLE OF
         CONTENTS/AUTHORITIES. DELETING THIS BREAK WILL CAUSE TABLE OF
 CONTENTS/AUTHORITIES HEADERS AND FOOTERS TO APPEAR ON ANY PAGES FOLLOWING THE
                         TABLE OF CONTENTS/AUTHORITIES.

================================================================================

<PAGE>
                   FIRST AMENDMENT TO PARTICIPATION AGREEMENT

        THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT (this "Amendment"),
dated as of September 21, 2001, is entered into by and among:

                (1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee");

                (2) ABN AMRO LEASING, INC., an Illinois corporation ("Lessor");

                (3) Each of the financial institutions listed in Schedule I to
        the Participation Agreement referred to in Recital A below
        (collectively, the "Participants"); and

                (4) ABN AMRO BANK, N.V., acting through its San Francisco
        International Branch, as agent for the Participants (in such capacity,
        "Agent").

                                    RECITALS

        A. Lessee, Lessor, the Participants and Agent are parties to a
Participation Agreement dated as of April 18, 2001 (the "Participation
Agreement").

        B. Lessee has recently approached Lessor, the Participants and Agent and
requested that Lessor, the Participants and Agent amend the Participation
Agreement in order to conform certain provisions contained therein with certain
provisions contained in that certain Participation Agreement, dated as of
September 21, 2001, among Lessor, Lessee, the Persons parties thereto as
"Participants", and Agent (the "Novellus VI Participation Agreement").

        C. Lessor, the Participants and Agent are willing so to amend the
Participation Agreement upon the terms and subject to the conditions set forth
herein.

                                    AGREEMENT

        NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lessee, Lessor, the Participants and Agent hereby agree as
follows:

        1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the Participation Agreement, as
amended by this Amendment. The rules of construction set forth in Schedule 1.02
to the Participation Agreement shall, to the extent not inconsistent with the
terms of this Amendment, apply to this Amendment and are hereby incorporated by
reference.

        2. AMENDMENT TO PARTICIPATION AGREEMENT. Subject to the satisfaction of
the conditions set forth in Paragraph 4 below, the Participation Agreement is
hereby amended as follows:

                                       1
<PAGE>

        (a) Subparagraph 2.08(a) is amended to read in its entirety as follows:

                (a) Reduction or Cancellation of Commitments. Lessee may, at any
        time prior to the Commitment Termination Date, upon five (5) Business
        Days written notice to Lessor, permanently reduce the Total Facility 3
        Commitment by an amount as so designated in writing by Lessee to Agent
        or cancel the Total Facility 3 Commitment in its entirety.

        (b) Subparagraph 2.10(a) is amended to read in its entirety as follows:

                (a) Tax Treatment. For purposes of all federal, state and local
        taxes, Lessee and Lessor Parties intend that the transactions evidenced
        by the Operative Documents shall be treated as loans by the Participants
        (through Lessor) to Lessee secured by the Property, with Lessee as owner
        of the Property. Lessee and the Lessor Parties may only take deductions,
        credits, allowances and other reporting positions on their respective
        returns, reports and statements which are consistent with such
        treatment, unless required to do otherwise by an appropriate taxing
        authority or after a clearly applicable change in applicable
        Governmental Rules; provided, however, that if an appropriate taxing
        authority or a clearly applicable change in applicable Governmental
        Rules requires any Lessor Party to take such an inconsistent position,
        such Lessor Party shall promptly notify Lessee.

        (c) Subparagraph 4.01(g) is amended to read in its entirety as follows:

                (g) Litigation. Except as set forth in the most recent Form
        10-Q, 10-K and 8-K reports filed by Lessee with the Securities and
        Exchange Commission or in Schedule 4.01(g), no actions (including,
        without limitation, derivative actions), suits, proceedings or
        investigations are pending or, to the knowledge of Lessee, threatened
        against Lessee or any of its Subsidiaries at law or in equity in any
        court or before any other Governmental Authority which (i) is reasonably
        likely (alone or in the aggregate) to have a Material Adverse Effect or
        (ii) seeks to enjoin, either directly or indirectly, the execution,
        delivery or performance by Lessee of the Operative Documents or the
        transactions contemplated thereby.

        (d) Subparagraph 4.01(h) is amended to read in its entirety as follows:

                (h) Title; Possession Under Leases. Except as set forth in the
        most recent Form 10-Q, 10-K and 8-K reports filed by Lessee with the
        Securities and Exchange Commission or in Schedule 4.01(h), Lessee and
        its Subsidiaries own and have good and marketable title, or a valid
        leasehold interest in, all their respective properties and assets as
        reflected in the most recent Financial Statements delivered to Agent
        (except those assets and properties disposed of in the ordinary course
        of business or otherwise in compliance with this Agreement since the
        date of such Financial Statements) and all respective assets and
        properties acquired by Lessee and its Subsidiaries since such date
        (except those disposed of in the ordinary course of business or
        otherwise in compliance with

                                       2
<PAGE>

        this Agreement), except in any case where the failure so to own or to
        have such title is not reasonably likely to have a Material Adverse
        Effect. Such assets and properties are subject to no Lien, except for
        Permitted Liens. Each of Lessee and its Subsidiaries has complied with
        all material obligations under all material leases to which it is a
        party and all such leases are in full force and effect. Each of Lessee
        and its Subsidiaries enjoys peaceful and undisturbed possession under
        such leases.

        (e) Subparagraph 4.01(i) is amended by changing clause (A) thereof to
read in its entirety as follows:

        (A) in the audited Financial Statements of Lessee dated December 31,
        2000, or the 10-Q reports filed by Lessee with the Securities and
        Exchange Commission for the quarters ended March 31, 2001 and June 30,
        2001 or the 8-K report filed by Lessee with the Securities and Exchange
        Commission on June 1, 2001, furnished by Lessee to Agent prior to the
        date hereof, or

        (f) Subparagraph 4.01(k) is amended to read in its entirety as follows:

        4.01(k) [Reserved].

        (g) Subparagraph 4.01(n) is amended to read in its entirety as follows:

                (n) Patent and Other Rights. Except as set forth in the most
        recent Form 10-Q, 10-K and 8-K reports filed by Lessee with the
        Securities and Exchange Commission or in Schedule 4.01(g), Lessee and
        its Subsidiaries own, license or otherwise have the right to use, under
        validly existing agreements, all patents, licenses, trademarks, trade
        names, trade secrets, service marks, copyrights and all rights with
        respect thereto, which are required to conduct their businesses as now
        conducted, except where the failure to have any such rights, either
        individually or collectively, is not reasonably likely to have a
        Material Adverse Effect.

        (h) Subparagraph 5.01(a) is amended by changing clause (v) thereof to
read in its entirety as follows:

                (v) As soon as available and in no event later than five (5)
        Business Days after they are sent, made available or filed, copies of
        (A) all registration statements and reports filed by Lessee or any of
        its Subsidiaries with any securities exchange or the Securities and
        Exchange Commission (including, without limitation, all 10-Q, 10-K, 8-Q
        and 8-K reports); (B) all reports, proxy statements and financial
        statements sent or made available by Lessee or any of its Subsidiaries
        to its security holders; and (C) all press releases and other similar
        public concerning any material developments in the business of Lessee or
        any of its Subsidiaries made available by Lessee or any of its
        Subsidiaries to the public generally; and

                                       3
<PAGE>

                (i) Subparagraph 5.01(a) is further amended by deleting clauses
        (vi) and (vii) thereof and renumbering existing clause (viii) thereof as
        "(vi)".

                (j) Subparagraph 5.01(h) is deleted.

                (k) Paragraph 5.02 is amended to read in its entirety as set
        forth on Attachment A hereto.

                (l) Paragraph 5.03 is amended to read in its entirety as set
        forth on Attachment B hereto.

                (m) Schedule 1.01 is amended by deleting the following
        definitions:

                "Adjusted Net Income;"
                "Cash Balances;"
                "Debt Service Coverage Ratio;"
                "Economically Defeased Portion of Synthetic Lease Obligation;"
                "Funded Indebtedness;"
                "Funded Indebtedness/Capital Ratio;"
                "Interest Expenses;"
                "Investment;"
                "Permitted Indebtedness;"
                "Related Credit Agreement;"
                "Related Credit Documents;" and
                "Related Credit Obligations."

                (n) Schedule 1.01 is further amended by changing the definition
        of "Indemnified Taxes" set forth therein to read in its entirety as
        follows."

                        "Indemnified Taxes" shall mean all income taxes, stamp
                taxes, sales taxes, use taxes, rental taxes, gross receipts
                taxes, property (tangible and intangible) taxes, franchise
                taxes, excise taxes, value added taxes, turnover taxes,
                withholding taxes and other taxes and Governmental Charges,
                together with any and all assessments, penalties, fines,
                additions and interest thereon, except:

                                (a) Net income taxes imposed on an Indemnitee by
                        the U.S. federal government (other than those imposed by
                        means of withholding at source) or net income taxes and
                        franchise taxes in lieu of net income taxes imposed on
                        any Lessor Party by its jurisdiction of incorporation
                        or, in the case of any Participant, the jurisdiction in
                        which its Applicable Participating Office is located, or
                        a jurisdiction in which such Indemnitee is otherwise
                        subject to tax other than as a result of transactions
                        contemplated by the Operative Documents (provided,
                        however, that this definition shall not be construed to
                        prevent a payment from being made on an after-tax
                        basis);

                                       4
<PAGE>

                                (b) Taxes and other Governmental Charges imposed
                        on an Indemnitee by a foreign Governmental Authority,
                        taxing authority or taxing jurisdiction, unless such
                        Taxes are imposed by reason of (i) the payment by Lessee
                        or any Affiliate of any amount pursuant to the Operative
                        Documents from, or the booking by Lessee or any
                        Affiliate of some or all of the transactions
                        contemplated by the Operative Agreements in, such
                        foreign jurisdiction, (ii) the location of the Property
                        in such jurisdiction or (iii) activities of the Lessee
                        or an Affiliate of the Lessee in such jurisdiction;

                                (c) Any tax or other Governmental Charge that
                        has not become a Lien on any of the Property and that
                        Lessee is contesting pursuant to Paragraph 3.12 of any
                        Lease Agreement (but only while Lessee is so contesting
                        such tax or Governmental Charge); or

                                (d) Any tax or other Governmental Charge that is
                        imposed upon an Indemnitee primarily as a result of the
                        gross negligence or willful misconduct of such
                        Indemnitee itself (as opposed to gross negligence or
                        willful misconduct imputed to such Indemnitee), but not
                        taxes or other Governmental Charges imposed as a result
                        of ordinary negligence of such Indemnitee.

               (o) Schedule 1.01 is further amended by changing the phrase
        "Lessee Obligations" set forth in the definition of "Economically
        Defeased Portion of Synthetic Lease Obligation" to "its obligations."

               (p) Schedule 1.01 is further amended by adding thereto in the
        appropriate alphabetical order the term "First Amendment Effective Date"
        to read in its entirety as follows:

               "First Amendment Effective Date" shall mean September 24, 2001.

               (q) Schedule 1.01 is further amended by changing the definition
        of "Quick Ratio" set forth therein to read in its entirety as follows:

                        "Quick Ratio" shall mean, with respect to Lessee at any
                time, the ratio, determined on a consolidated basis in
                accordance with GAAP, of:

                                (a) The remainder of (i) the sum (without
                        duplication) of all cash, Cash Equivalents, short-term
                        investments and net accounts receivable of Lessee and
                        its Subsidiaries at such time, minus (ii) the sum
                        (without duplication) of all such cash, Cash
                        Equivalents, short-term investments and net accounts
                        receivable that are subject to a Lien or are otherwise
                        restricted;

                                       to

                                       5
<PAGE>

                                (b) The remainder of (i) all current liabilities
                        of Lessee and its Subsidiaries at such time, minus (ii)
                        all such current liabilities that are secured by Liens
                        in cash, Cash Equivalents, short-term investments and
                        net accounts receivable and included in the calculation
                        of clause (a)(i) of this definition above.

                (In calculating the Quick Ratio, Cash Equivalents and short-term
                investments shall be marked to market quarterly.)

                (r) Schedule 5.01(b) is amended to refer to "Schedule 5.01(a)"
        and is amended to read in its entirety as set forth on Attachment C
        hereto.

        3. REPRESENTATIONS AND WARRANTIES. Lessee hereby represents and warrants
to Agent and the Participants that the following are true and correct on the
date of this Amendment and that, after giving effect to the amendment set forth
in Paragraph 2 above, the following will be true and correct on the Effective
Date (as defined below):

                (a) The representations and warranties of Lessee set forth in
        Paragraph 4.01 of the Participation Agreement (as amended by this
        Amendment) and in the other Operative Documents are true and correct in
        all material respects as if made on such date (except for
        representations and warranties expressly made as of a specified date,
        which shall be true as of such date);

                (b) No Default has occurred and is continuing; and

                (c) All of the Operative Documents are in full force and effect.

(Without limiting the scope of the term "Operative Documents," Lessee expressly
acknowledges in making the representations and warranties set forth in this
Paragraph 3 that, on and after the date hereof, such term includes this
Amendment.)

        4. EFFECTIVE DATE. The amendment effected by Paragraph 2 above shall
become effective upon the date (the "Effective Date") that (a) Lessor, Agent and
the Participants receives this Amendment, duly executed by Lessor, Lessee, each
Participant and Agent, (b) the Novellus VI Participation Agreement becomes
effective in accordance with its terms and (c) receipt by Agent from Lessee of a
non-refundable amendment fee in the amount of $150,000.

        5. EFFECT OF THIS AMENDMENT. On and after the Effective Date, each
reference in the Participation Agreement and the other Operative Documents to
the Participation Agreement shall mean the Participation Agreement as amended
hereby. Except as specifically amended above, (a) the Participation Agreement
and the other Operative Documents shall remain in full force and effect and are
hereby ratified and affirmed, and (b) the execution, delivery and effectiveness
of this Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power, or remedy of the Participants or Agent, nor
constitute a waiver of any provision of the Participation Agreement or any other
Operative Document.

                                       6
<PAGE>

        6. MISCELLANEOUS.

                (a) Counterparts. This Amendment may be executed in any number
        of identical counterparts, any set of which signed by all the parties
        hereto shall be deemed to constitute a complete, executed original for
        all purposes.

                (b) Headings. Headings in this Amendment are for convenience of
        reference only and are not part of the substance hereof.

                (c) Governing Law. This Amendment shall be governed by and
        construed in accordance with the laws of the State of California without
        reference to conflicts of law rules.

                            [Signature pages follow]

                                       7
<PAGE>

        IN WITNESS WHEREOF, Lessee, Lessor, Agent and the Participants have
caused this Amendment to be executed as of the day and year first above written.

LESSEE:                               NOVELLUS SYSTEMS, INC.

                                      By: _____________________________________
                                          Name: _______________________________
                                          Title: ______________________________

LESSOR:                               ABN AMRO LEASING, INC.

                                      By: _____________________________________
                                          Name: _______________________________
                                          Title: ______________________________

AGENT:                                ABN AMRO BANK, N.V.

                                      By: _____________________________________
                                          Name: _______________________________
                                          Title: ______________________________

                                      By: _____________________________________
                                          Name: _______________________________
                                          Title: ______________________________

PARTICIPANT:                          ABN AMRO BANK, N.V.

                                      By: _____________________________________
                                          Name: _______________________________
                                          Title: ______________________________

                                      By: _____________________________________
                                          Name: _______________________________
                                          Title: ______________________________

                                       8
<PAGE>

                                      ABN AMRO LEASING, INC.

                                      By: _____________________________________
                                          Name: _______________________________
                                          Title: ______________________________

                                       9
<PAGE>

                                  ATTACHMENT A

                             Amended Paragraph 5.02

        5.02 Lessee's Negative Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following negative
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:

                (a) Liens. Neither Lessee nor any of its Subsidiaries shall
        create, incur, assume or permit to exist any Lien on or with respect to
        any of its assets or property of any character, whether now owned or
        hereafter acquired, except for the following ("Permitted Liens"):

                        (i) Liens in favor of Lessor, Agent or any Participant
                securing the Lessee Obligations;

                        (ii) Liens securing Economically Defeased Synthetic
                Lease Obligations;

                        (iii) Liens listed in Schedule 5.02(a) and existing on
                the First Amendment Effective Date;

                        (iv) Liens for taxes or other Governmental Charges not
                at the time delinquent or thereafter payable without penalty or
                being contested in good faith, provided that adequate reserves
                for the payment thereof as required by GAAP have been
                established;

                        (v) Liens of carriers, warehousemen, mechanics,
                materialmen, vendors, and landlords and other similar Liens
                imposed by law incurred in the ordinary course of business for
                sums not overdue or being contested in good faith, provided that
                adequate reserves for the payment thereof as required by GAAP
                have been established;

                        (vi) Deposits under workers' compensation, unemployment
                insurance and social security laws or to secure the performance
                of bids, tenders, contracts (other than for the repayment of
                borrowed money) or leases, or to secure statutory obligations of
                surety or appeal bonds or to secure indemnity, performance or
                other similar bonds in the ordinary course of business;

                        (vii) Zoning restrictions, easements, rights-of-way,
                title irregularities and other similar encumbrances, which alone
                or in the aggregate are not substantial in amount and do not
                materially detract from the value of the property subject
                thereto or interfere with the ordinary conduct of the business
                of Lessee or any of its Subsidiaries;

                        (viii) Banker's Liens and similar Liens (including
                set-off rights) in respect of bank deposits;

                                      A-1
<PAGE>

                        (ix) Liens on property or assets of any corporation
                which becomes a Subsidiary of Lessee or on any property or
                assets acquired by Lessee or any of its Subsidiaries after the
                date of this Agreement, provided that (A) such Liens exist at
                the time the stock of such corporation or such assets or
                property is or are acquired by Lessee and (B) such Liens were
                not created in contemplation of such acquisition by Lessee;

                        (x) Judgement Liens, provided that such Liens do not
                have a value in excess of $10,000,000 or such Liens are
                released, stayed, vacated or otherwise dismissed within twenty
                (20) days after issue or levy and, if so stayed, such stay is
                not thereafter removed;

                        (xi) Liens in favor of customs and revenue authorities
                arising as a matter of law to secure payment of customs duties
                and in connection with the importation of goods in the ordinary
                course of Lessee's and its Subsidiaries' businesses;

                        (xii) Liens securing Indebtedness of Lessee and its
                Subsidiaries under purchase money loans, Capital Leases,
                conditional sale agreements or other title retention agreements
                that (A) is incurred by Lessee or any of its Subsidiaries to
                finance the acquisition by such Person of real property,
                fixtures or equipment, (B) is incurred by such Person at the
                time of, or not later than thirty (30) days after, the
                acquisition by such Person of the property so financed, and (C)
                does not exceed the purchase price of the property so financed,
                provided that (1) no Default has occurred and is continuing or
                will occur at the time each such Lien is granted and (2) in each
                case, such Lien (I) covers only those assets, the acquisition of
                which was financed by such Indebtedness, and (II) secures only
                such Indebtedness;

                        (xiii) Liens on the property or assets of any Subsidiary
                of Lessee in favor of Lessee or any other Subsidiary of Lessee;

                        (xiv) [Reserved];

                        (xv) Liens on insurance proceeds in favor of insurance
                companies with respect to the financing of insurance premiums;

                        (xvi) Permitted Property Liens in the Property; and

                        (xvii) Other Liens on the property of Lessee and its
                Subsidiaries, provided that the aggregate principal amount of
                all Indebtedness secured by such other Liens does not exceed at
                any time fifteen percent (15%) of the consolidated total assets
                of Lessee and its Subsidiaries at such time;

        Provided, however, that the foregoing exceptions shall not be construed
        to permit any Liens, except for Permitted Property Liens, in any of the
        Property.

                                      A-2
<PAGE>

                (b) Mergers, Acquisitions, Etc. Neither Lessee nor any of its
        Subsidiaries shall consolidate with or merge into any other Person or
        permit any other Person to merge into it, establish any new Subsidiary,
        acquire any Person as a new Subsidiary or acquire all or substantially
        all of the assets of any other Person, except for the following:

                        (i) Any Subsidiary of Lessee may merge or consolidate
                with any other Subsidiary of Lessee;

                        (ii) Any Subsidiary of Lessee may merge or consolidate
                with Lessee, provided that Lessee is the surviving corporation;
                and

                        (iii) Lessee may merge or consolidate with any other
                corporation, establish a new Subsidiary, acquire any Person as a
                new Subsidiary or acquire all or substantially all of the assets
                of any other Person, provided that:

                                (A) In the case of any merger or consolidation,
                        either (1) Lessee is the surviving corporation or (2)
                        the surviving corporation (x) is a Solvent United States
                        corporation, (y) assumes in writing all of the Lessee
                        Obligations and (x) immediately after giving effect to
                        such merger or consolidation, is in compliance with the
                        financial covenants contained in Paragraph 5.03; and

                                (B) No Default has occurred and is continuing at
                        the time of such merger, consolidation, establishment or
                        acquisition or will occur after giving effect to such
                        merger, consolidation or acquisition.

                (c) Change in Business. Neither Lessee nor any of its
        Subsidiaries shall engage, either directly or indirectly through
        Affiliates, in any material line of business other than the
        semiconductor capital equipment business and other businesses incidental
        or reasonably related thereto.

                (d) ERISA. Neither Lessee nor any ERISA Affiliate shall (i)
        adopt or institute any Employee Benefit Plan that is an employee pension
        benefit plan within the meaning of Section 3(2) of ERISA, (ii) take any
        action which will result in the partial or complete withdrawal, within
        the meanings of sections 4203 and 4205 of ERISA, from a Multiemployer
        Plan, (iii) engage or permit any Person to engage in any transaction
        prohibited by section 406 of ERISA or section 4975 of the IRC involving
        any Employee Benefit Plan or Multiemployer Plan which would subject
        either Lessee or any ERISA Affiliate to any tax, penalty or other
        liability including a liability to indemnify, (iv) incur or allow to
        exist any accumulated funding deficiency (within the meaning of section
        412 of the IRC or section 302 of ERISA), (v) fail to make full payment
        when due of all amounts due as contributions to any Employee Benefit
        Plan or Multiemployer Plan, (vi) fail to comply with the requirements of
        section 4980B of the IRC or Part 6 of Title I(B) of ERISA, or (vii)
        adopt any amendment to any Employee Benefit Plan which would require the
        posting of security pursuant to section 401(a)(29) of the IRC, where
        singly or cumulatively, the above would have a Material Adverse Effect.

                                      A-3
<PAGE>

                (e) Accounting Changes. Neither Lessee nor any of its
        Subsidiaries shall change (i) its fiscal year (currently January 1
        through December 31) or (ii) its accounting practices except as
        permitted by GAAP.

                                      A-4
<PAGE>

                                  ATTACHMENT B

                             Amended Paragraph 5.03

        5.03 Lessee's Financial Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following financial
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:

                (a) Quick Ratio. Lessee shall not permit its Quick Ratio on any
        day set forth below to be less than the ratio set forth opposite such
        day below:

<TABLE>
<S>                                                     <C>
                 The last day of any
                      fiscal quarter                     1.35 to 1.00.
</TABLE>

                (b) Tangible Net Worth. Commencing on June 30, 2001, Lessee
        shall not permit its Tangible Net Worth on the last day of any fiscal
        quarter (such date to be referred to herein as a "determination date")
        to be less than the sum on such determination date of the following:

                        (i) $1,300,000,000;

                                      plus

                        (ii) Fifty percent (50%) of the sum of Lessee's
                consolidated quarterly net income (ignoring any quarterly
                losses) for each fiscal quarter ending after June 30, 2001
                through and including the fiscal quarter ending on the
                determination date;

                                      plus

                        (iii) Seventy-five percent (75%) of the Net Proceeds of
                all Equity Securities issued by Lessee and its Subsidiaries (to
                Persons other than Lessee or its Subsidiaries) during the period
                commencing on July 1, 2001 and ending on the determination date;

                                      plus

                        (iv) Seventy-five percent (75%) of the principal amount
                of all debt securities of Lessee and its Subsidiaries converted
                into Equity Securities of Lessee and its Subsidiaries during the
                period commencing on July 1, 2001 and ending on the
                determination date.

                                      B-1
<PAGE>

                                  ATTACHMENT C

                            Amended Schedule 5.02(a)

                                SCHEDULE 5.02(a)

                                 EXISTING LIENS

The Lien encumbering certain proceeds from the issuance by Lessee of
$880,000,000 in Liquid Yield Option(TM) Notes ("LYONS") due 2031 (Zero Coupon --
Subordinated) which have been pledged to secure Lessee's obligations under the
LYONS until July 26, 2002, including Lessee's performance with respect to a
holder's option to require Lessee to purchase some or all of their LYONS on July
26, 2002 for cash, pursuant to a Pledge Agreement, dated as of July, 2001,
between Lessee and Union Bank of California, N.A., together with any permitted
investments thereof under such Pledge Agreement and the proceeds thereof.

                                       C-1<PAGE>
                                                                    EXHIBIT 10.1

                               1989 STOCK PLAN OF

                             SONICblue INCORPORATED

                    (Amended and Restated as of May 16, 2001)

SECTION 1. ESTABLISHMENT AND PURPOSE

        The Plan was established in 1989 to offer selected employees, directors,
advisers and consultants an opportunity to acquire a proprietary interest in the
success of the Company, or to increase such interest, by purchasing Shares of
the Company's Common Stock. The Plan provides both for the direct award or sale
of Shares and for the grant of Options to purchase Shares. Options granted under
the Plan may include Nonstatutory Options as well as ISOs intended to qualify
under Code section 422.

        The Plan was amended and restated as of December 14, 1998 to incorporate
prior amendments, to amend the provisions governing grants to Outside Directors,
to increase the number of shares which may be issued upon the exercise of ISOs
and to extend the term of the Plan. The Plan was amended and restated as of May
16, 2001 to incorporate prior amendments and to reflect the change of the
Company's name to SONICblue Incorporated.

SECTION 2. DEFINITIONS

        (a)    "Board of Directors" shall mean the Board of Directors of the
               Company, as constituted from time to time.

        (b)    "Change in Control" means the occurrence of either of the
               following events:

               (i)    a change in the composition of the Board of Directors, as
                      a result of which fewer than one-half of the incumbent
                      directors are directors who either:

                      (A)    Had been directors of the Company twenty-four (24)
                             months prior to such change; or

                      (B)    Were elected, or nominated for election, to the
                             Board of Directors with the affirmative votes of at
                             least a majority of the directors who had been
                             directors of the Company twenty-four (24) months
                             prior to such change and who were still in office
                             at the time of the election or nomination; or

               (ii)   Any "person" (as such term is used in sections 13(d) and
                      14(d) of the Exchange Act) by the acquisition or
                      aggregation of securities is or becomes the beneficial
                      owner, directly or indirectly, of securities of the
                      Company representing twenty percent (20%) or more of the
                      combined voting power of the Company's then outstanding
                      securities ordinarily (and apart from rights accruing
                      under special circumstances) having the right to vote at
                      elections of directors (the "Base Capital Stock"): except
                      that any change in the relative beneficial ownership of
                      the Company's securities, shall be disregarded until such
                      person increases in any manner, directly or indirectly,
                      such person's beneficial ownership of any securities of
                      the Company. For purposes of this Subsection (ii), the
                      term "person" shall not include an employee benefit plan
                      maintained by the Company.

        (c)    "Code" shall mean the Internal Revenue Code of 1986, as amended.

        (d)    "Committee" shall mean the committee designated by the Board of
               Directors, which is authorized to administer the Plan under
               Section 3 hereof. The Committee shall have membership composition
               which enables the Options or other rights granted under the Plan
               to qualify for exemption under Rule 16b-3 with respect to persons
               who are subject to Section 16 of the Exchange Act.

        (e)    "Company" shall mean SONICblue Incorporated, a Delaware
               corporation formerly known as S3 Incorporated.

        (f)    "Employee" shall mean (I) any individual who is a common-law
               employee of the Company or of a Subsidiary, (ii) a member of the
               Board of Directors and (iii) an independent contractor or advisor
               who performs services for the Company or a Subsidiary. Service as
               a member of the Board of Directors or as an independent
               contractor or advisor shall be considered employment for all
               purposes of the Plan except the second sentence of Section 4(a)
               and Section 4(b).

        (g)    "Exchange Act" shall mean the Securities Exchange Act of 1934, as
               amended.

        (h)    "Exercise Price" shall mean the amount for which one Share may be
               purchased upon exercise of an Option, as specified by the
               Committee in the applicable Stock Option Agreement.

        (i)    "Fair Market Value" shall mean (i) THE CLOSING PRICE OF A Share
               on the principal exchange which the Shares are trading, on the
               date on which the Fair Market Value is determined (if Fair Market
               Value is determined on a date which the principal exchange is
               closed, Fair Market Value shall be determined on the last
               immediately preceding trading day), or (ii) if the Shares are not
               traded on an exchange but are quoted on the Nasdaq National
               Market or a successor quotation system, the closing price on the
               date on which the Fair Market Value is determined, or (iii) if
               the Shares are not traded on an exchange or quoted on the Nasdaq
               National Market or a successor quotation system, the fair market
               value of a Share, as determined by the Committee in good faith.
               Such determination shall be conclusive and binding on all
               persons.

        (j)    "ISO" shall mean an employee incentive stock option described in
               Code section 422.

                                       32
<PAGE>

        (k)    "Nonstatutory Option" shall mean an employee stock option that is
               not an ISO.

        (l)    "Offeree" shall mean an individual to whom the Committee has
               offered the right to acquire Shares under the Plan (other than
               upon exercise of an Option).

        (m)    "Option" shall mean an ISO or Nonstatutory Option granted under
               the Plan and entitling the holder to purchase Shares.

        (n)    "Optionee" shall mean an individual who holds an Option.

        (o)    "Outside Director" shall mean a member of the Board of Directors
               who is not a common-law employee of the Company or of a
               Subsidiary.

        (p)    "Plan" shall mean this 1989 Stock Pan of SONICblue Incorporated,
               as amended from time to time.

        (q)    "Purchase Price" shall mean the consideration for which one Share
               may be acquired under the Plan (other than upon exercise of an
               Option), as specified by the Committee.

        (r)    "Service" shall mean service as an Employee.

        (s)    "Share" shall mean one share of Stock, as adjusted in accordance
               with Section 9 (if applicable).

        (t)    "Stock" shall mean the Common Stock of the Company.

        (u)    "Stock Option Agreement" shall mean the agreement between the
               Company and an Optionee which contains the terms, conditions and
               restrictions pertaining to his Option.

        (v)    "Stock Purchase Agreement" shall mean the agreement between the
               Company and an Offeree who acquires Shares under the Plan which
               contains the terms, conditions and restrictions pertaining to the
               acquisition of such Shares.

        (w)    "Subsidiary" shall mean any corporation, if the Company and/or
               one or more other Subsidiaries own not less than 50 percent of
               the total combined voting power of all classes of outstanding
               stock of such corporation. A corporation that attains the status
               of a Subsidiary on a date after the adoption of the Plan shall be
               considered a Subsidiary commencing as of such date.

        (x)    "Total and Permanent Disability" shall mean that the Optionee is
               unable to engage in any substantial gainful activity by reason of
               any medically determinable physical or mental impairment which
               can be expected to result in death or which has lasted, or can be
               expected to last, for a continuous period of not less than six
               (6) months.

SECTION 3. ADMINISTRATION.

        (a)    Committee Procedures. The Board of Directors shall designate one
               of the members of the Committee as chairman. The Committee may
               hold meetings at such times and places as it shall determine. The
               acts of a majority of the Committee members present at meetings
               at which a quorum exists, or acts reduced to or approved in
               writing by all Committee members, shall be valid acts of the
               Committee.

        (b)    Committee Responsibilities. Subject to the provisions of the
               Plan, the committee shall have full authority and discretion to
               take the following actions;

               (i)    To interpret the Plan and to apply its provisions;

               (ii)   To adopt, amend or rescind rules, procedures and forms
                      relating to the Plan;

               (iii)  To authorize any person to execute, on behalf of the
                      Company, any instrument required to carry out the purposes
                      of the Plan;

               (iv)   To determine when Shares are to be awarded or offered for
                      sale and when Options are to be granted under the Plan;

               (v)    To select the Offerees and Optionees;

               (vi)   To determine the number of Shares to be offered to each
                      Offeree or to be made subject to each Option;

               (vii)  To prescribe the terms and conditions of each award or
                      sale of Shares, including (without limitation) the
                      Purchase Price, the vesting of the award (including
                      accelerating the vesting of awards) and to specify the
                      provisions of the Stock Purchase Agreement relating to
                      such award or sale;

               (viii) To prescribe the terms and conditions of each Option,
                      including (without limitation) the Exercise Price, the
                      vesting or duration of the Option (including accelerating
                      the vesting of the Option), to determine whether such
                      Option is to be classified as an ISO or as a Nonstatutory
                      Option, and to specify the provisions of the Stock Option
                      Agreement relating to such Option;

               (ix)   To amend any outstanding Stock Purchase Agreement or Stock
                      Option Agreement, subject to applicable legal restrictions
                      and to the consent of the Offeree or Optionee who entered
                      into such agreement;

                                       33
<PAGE>

               (x)    To prescribe the consideration for the grant of each
                      Option or other right under the Plan and to determine the
                      sufficiency of such consideration;

               (xi)   To determine the disposition of each Option or other right
                      under the Plan in the event of an Optionee's or Offeree's
                      divorce or dissolution of marriage;

               (xii)  To determine whether Options or other rights under the
                      Plan will be granted in replacement of other grants under
                      an incentive or other compensation plan of an acquired
                      business;

               (xiii) To correct any defect, supply any omission, or reconcile
                      any inconsistency in the Plan, any Stock Option Agreement
                      or any Stock purchase Agreement; and

               (xiv)  To take any other actions deemed necessary or advisable
                      for the administration of the Plan.

Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options or other rights under
the Plan to persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all Optionees, and all persons deriving their rights from an
Offeree or Optionee. No member of the Committee shall be liable for any action
that he has taken or has failed to take in good faith with respect to the Plan,
any Option, or any right to acquire Shares under the Plan.

SECTION 4. ELIGIBILITY.

        (a)    General Rule. Only Employees shall be eligible for designation as
               Optionees or Offerees by the Committee. In addition, only
               individuals who are employed as common-law employees by the
               Company or a Subsidiary shall be eligible for the grant of ISOs.

        (b)    Outside Directors. Any other provision of the Plan
               notwithstanding, the participation of Outside Directors in the
               Plan shall be subject to the following restrictions:

               (i)    Outside Directors shall only be eligible for the grant of
                      Nonstatutory Options as described in this Section 4(b).

               (ii)   Each Outside Director shall automatically be granted a
                      Nonstatutory Option to purchase 40,000 Shares (subject to
                      adjustment under Section 9) as a result of their
                      appointment as an Outside Director. Subject to paragraph
                      (iii) below, upon the conclusion of each regular annual
                      meeting of the Company's stockholders following the
                      meeting at which they were appointed, each Outside
                      Director who will continue servicing as a member of the
                      Board thereafter shall receive a Nonstatutory Option to
                      purchase 20,000 Shares (subject to adjustment under
                      Section 9). All such Nonstatutory Options shall vest and
                      become exercisable at the rate of twenty-five percent
                      (25%) upon each one (1) year anniversary of the date the
                      option is granted to the Outside Director. No Shares shall
                      vest after termination of the Outside Director's Service.

               (iii)  Each Outside Director who serves on the Board on December
                      14, 1998 shall automatically be granted a Nonstatutory
                      Option to purchase 100,000 Shares (subject to adjustment
                      under Section 9): provided that such Nonstatutory Options
                      shall be lieu of any Nonstatutory Options that would
                      otherwise be granted to the Outside Director pursuant to
                      paragraph (ii) above before the 2004 annual meeting of the
                      Company's stockholders. Such Nonstatutory Options shall
                      vest and become exercisable as follows: 20,000 shares vest
                      and become exercisable at the rate of twenty-five percent
                      (25%) upon each one (1) year anniversary of the regular
                      annual meeting of the Company's stockholders occurring in
                      calendar year 1999; 20,000 shares vest and become
                      exercisable at the rate of twenty-five percent (25%) upon
                      each one (1) year anniversary of the regular annual
                      meeting of the company's stockholders occurring in
                      calendar year 2000; 20,000 shares vest and become
                      exercisable at the rate of twenty-five percent (25%) upon
                      each one (1) year anniversary of the regular annual
                      meeting of the Company's stockholders occurring in
                      calendar year 2001; 20,000 shares vest and become
                      exercisable at the rate of twenty-five percent (25%) upon
                      each one (1) year anniversary of the regular annual
                      meeting of the Company's stockholders occurring in
                      calendar year 2002; and 20,000 shares vest and become
                      exercisable at the rate of twenty-five percent (25%) upon
                      each one (1) year anniversary of the regular annual
                      meeting of the company's stockholders occurring in
                      calendar year 2003. No Shares shall vest after termination
                      of the Outside Director's Service.

               (iv)   All Nonstatutory Options granted to an Outside Director
                      under this Section 4(b) shall also become exercisable in
                      full in the event of (a) the termination of such Outside
                      Director's service because of death or Total and Permanent
                      Disability or (b) a Change in Control of the Company.

               (v)    The Exercise Price of all Nonstatutory Options granted to
                      an Outside Director under this Section 4(b) shall be equal
                      to one hundred percent (100%) of the Fair Market Value of
                      a Share on the date of grant, payable in one of the forms
                      described in Sections 8(a), (b) and (d).

               (vi)   All Nonstatutory Options granted to an Outside Director
                      under this Section 4(b) shall terminate on the earliest of
                      (A) the 10th anniversary of the date of grant of such
                      Options. (B) the date ninety (90) days after the
                      termination of such Outside Director's service for any
                      reason other than death, Total and Permanent Disability or
                      voluntary retirement as an Outside Director at or after
                      the age of 60, or (C) the date twelve (12) months after
                      the termination of such Outside Director's service because
                      of death, Total and Permanent Disability or voluntary
                      retirement as an Outside Director at or after the age of
                      60.

                                       34
<PAGE>

               (vii)  Each Outside Director serving on the Board on February 28,
                      2000 shall automatically be granted a Nonstatutory Option
                      to purchase 20,000 Shares (subject to adjustment under
                      Section 9) on such date. All such Nonstatutory Options
                      shall vest and become exercisable at the rate of
                      twenty-five percent (25%) upon each one (1) year
                      anniversary of the date the option is granted to the
                      Outside Director. No Shares shall vest after termination
                      of the Outside Director's Service.

        (c)    Limitation on Grants. No Employee shall be granted Options to
               purchase more than 1,500,000 Shares in any fiscal year of the
               Company; provided, however, that with respect to fiscal year
               1998, the 1,500,000 Share limit shall be increased to 4,500,000
               Shares.

        (d)    Ten-Percent Stockholders. An Employee who owns more than 10
               percent of the total combined voting power of all classes of
               outstanding stock of the Company or any of its Subsidiaries shall
               not be eligible for the grant of an ISO unless such grant
               satisfies the requirements of Code section 422(c)(6).

        (e)    Attribution Rules. For purposes of Subsection (d) above, in
               determining stock ownership, an Employee shall be deemed to own
               the stock owned, directly or indirectly, by or for his brothers,
               sisters, ancestors and lineal descendants. Stock owned, directly
               or indirectly, by or for a corporation, partnership, estate or
               trust shall be deemed to be owned proportionately by or for its
               shareholders, partners or beneficiaries.

        (f)    Outstanding Stock. For purposes of Subsection (d) above,
               "outstanding stock" shall not include shares authorized for
               issuance under outstanding options held by the Employee or by any
               other person.

SECTION 5. STOCK SUBJECT TO PLAN.

        (a)    Basic Limitation. Shares offered under the Plan shall be
               authorized but unissued Shares or treasury Shares. As of December
               14, 1999, 26,253,105 shares have been reserved for issuance under
               the Plan (upon exercise of Options or other rights to acquire
               Shares), which includes the 4,500,000 Shares reserved for
               issuance on October 20, 1998. On each January 1 for the remaining
               term of the Plan, the aggregate number of Shares which may be
               issued under the Plan to individuals other than Outside Directors
               (upon exercise of Options or other rights to acquire Shares)
               shall be increased by a number of Shares equal to 3.25 percent of
               the total number of Shares of the Common Stock of the Company
               outstanding at the end of the most recently concluded calendar
               year. Any Shares that have been reserved but not issued as Shares
               or Options during any calendar year shall remain available for
               grant during any subsequent calendar year. Notwithstanding the
               foregoing, no more than 36,000,000 Shares may be issued under
               ISO's for the remaining term of the Plan. The aggregate number of
               Shares which may be issued under the Plan shall at all times be
               subject to adjustment pursuant to Section 9. The number of Shares
               which are subject to Options or other rights outstanding at any
               time under the Plan shall not exceed the number of Shares which
               then remain available for issuance under the Plan. The Company,
               during the term of the Plan, shall at all times reserve and keep
               available sufficient Shares to satisfy the requirements of the
               Plan.

        (b)    Additional Shares. In the event that any outstanding Option or
               other right for any reason expires or is canceled or otherwise
               terminated, the Shares allocable to the unexercised portion of
               such Option or other right shall again be available for the
               purposes of the Plan. If Shares are forfeited before any
               dividends have been paid with respect to the Shares, then such
               Shares shall again be available for award or sale under the Plan.

SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.

        (a)    Stock Purchase Agreement. Each award or sale of Shares under the
               Plan (other than upon exercise of an Option) shall be evidenced
               by a Stock Purchase Agreement between the Offeree and the
               Company. Such award or sale shall be subject to all applicable
               terms and conditions of the Plan and may be subject to any other
               terms and conditions which are not inconsistent with the Plan and
               which the Committee deems appropriate for inclusion in a Stock
               Purchase Agreement. The provisions of the various Stock Purchase
               Agreements entered into under the Plan need not be identical.

        (b)    Duration of Offers and Nontransferability of Rights. Any right to
               acquire Shares under the Plan (other than an Option) shall
               automatically expire if not exercised by the Offeree with thirty
               (30) days after the grant of such right was communicated to him
               by the Committee. Such right shall not be transferable and shall
               be exercisable only by the Offeree to whom such right was
               granted.

        (c)    Purchase Price. The Purchase Price shall be determined by the
               Committee at its sole discretion. The Purchase Price shall be
               payable in one of the forms described in Sections 8(a) and (c).

        (d)    Withholding Taxes. As a condition to the purchase of Shares, the
               Offeree shall make such arrangements as the Committee may require
               for the satisfaction of any federal state or local withholding
               tax obligations that may arise in connection with such purchase.

        (e)    Restrictions on Transfer of Shares. Any Shares awarded or sold
               under the Plan shall be subject to such special forfeiture
               conditions, rights of repurchase, rights of first refusal and
               other transfer restrictions as the Committee may determine. Such
               restrictions shall be set forth in the applicable Stock Purchase
               Agreement and shall apply in addition to any general restrictions
               that may apply to all holders of Shares.

SECTION 7. TERMS AND CONDITIONS OF OPTIONS.

                                       35
<PAGE>

        (a)    Stock Option Agreement. Each grant of an Option under the Plan
               shall be evidenced by a Stock Option Agreement between the
               Optionee and the Company. Such Option shall be subject to all
               applicable terms and conditions of the Plan and may be subject to
               any other terms and conditions which are not inconsistent with
               the Plan and which the Committee deems appropriate for inclusion
               in a Stock Option Agreement. The provisions of the various Stock
               Option Agreements entered into under the Plan need not be
               identical.

        (b)    Number of Shares. Each Stock Option Agreement shall specify the
               number of Shares that are subject to the Option and shall provide
               for the adjustment of such number in accordance with Section 9.
               The Stock Option Agreement shall also specify whether the Option
               is an ISO or a Nonstatutory Option.

        (c)    Exercise Price. Each Stock Option Agreement shall specify the
               Exercise Price. The Exercise Price of an ISO shall not be less
               than 100 percent of the Fair Market Value of a Share on the date
               of grant, except as otherwise provided in Section 4(d). Subject
               to the preceding sentence, the Exercise Price under any Option
               shall be determined by the Committee at its sole discretion. The
               Exercise Price shall be payable in one of the forms described in
               Sections 8(a), (b) and (d).

        (d)    Withholding Taxes. As a condition to the exercise of an Option,
               the Optionee shall make such arrangements at the Committee may
               require for the satisfaction of any federal, state or local
               withholding tax obligations that may arise in connection with
               such exercise. The Optionee shall also make such arrangements as
               the Committee may require for the satisfaction of any federal,
               state or local withholding tax obligations that may arise in
               connection with the disposition of Shares acquired by exercising
               an Option.

        (e)    Exercisability and Term. Each Stock Option Agreement shall
               specify the date when all or any installment of the Option is to
               become exercisable. The Stock Option Agreement shall also specify
               the term of the Option. The term shall not exceed ten (1) years
               from the date of grant, except as otherwise provided in Section
               4(d). Subject to the preceding three sentences, the Committee at
               its sole discretion shall determine when all or any installment
               of an Option is to become exercisable and when an Option is to
               expire.

        (f)    Nontransferability. During an Optionee's lifetime, his Option(s)
               shall be exercisable only by him and shall not be transferable.
               In the event of an Optionee's death, his Option(s) shall not be
               transferable other than by will or by the laws of descent and
               distribution.

        (g)    Exercise of Options Upon Termination of Service. Each Stock
               Option Agreement shall set forth the extent to which the Optionee
               shall have the right to exercise the Option following termination
               of the Optionee's Service with the Company and its Subsidiaries,
               and the right to exercise the Option of any executors or
               administrators of the Optionee's estate or any person who has
               acquired such Option(s) directly from the Optionee by bequest or
               inheritance. Such provisions shall be determined in the sole
               discretion of the Committee, need not be uniform among all
               Options issued pursuant to the Plan, and may reflect distinctions
               based on the reasons for termination of Service.

        (h)    Leaves of Absence. An Optionee's Service shall be deemed to
               continue while the Optionee is on military leave, sick leave or
               other bonafide leave of absence (as determined by the Committee).
               The foregoing notwithstanding, in the case of an ISO granted
               under the Plan, Service shall not be deemed to continue beyond
               the first ninety (90) days of such leave, unless the Optionee's
               re-employment rights are guaranteed statute or by contract.

        (i)    No Rights as a Stockholder. An Optionee, or a transferee of an
               Optionee, shall have no rights as a stockholder with respect to
               any Shares covered by his Option until the date of the issuance
               of stock certificate for such Shares. No adjustments shall be
               made, except as provided in Section 9.

        (j)    Modification, Extension and Renewal of Options. Within the
               limitations of the Plan, the Committee may modify, extend or
               renew outstanding options or may accept the cancellation of
               outstanding options (to the extent not previously exercised),
               whether or not granted hereunder, in return for the grant of new
               Options at the same or a different price. The foregoing
               notwithstanding, no modification of an Option shall, without the
               consent of the Optionee, impair his rights or increase his
               obligations under such Option.

        (k)    Restrictions on Transfer of Shares. Any Shares issued upon
               exercise of an Option shall be subject to such special forfeiture
               conditions, rights of repurchase, rights of first refusal and
               other transfer restrictions as the Committee may determine. Such
               restrictions shall be set forth in the applicable Stock Option
               Agreement and shall apply in addition to any general restrictions
               that may apply to all holders of Shares.

SECTION 8. PAYMENT FOR SHARES.

        (a)    General Rule. The entire Purchase Price or Exercise Price of
               Shares issued under the Plan shall be payable in lawful money of
               the United States of America at the time when such Shares are
               purchased, except as provided in Subsections (b), (c) and (d)
               below.

        (b)    Surrender of Stock. To the extent that a Stock Option Agreement
               so provides, payment may be made all or in part with Shares which
               have already been owned by the Optionee or his representative for
               more than twelve (12) months and which are surrendered to the
               Company in good form for transfer. Such Shares shall be valued at
               their Fair Market Value on the date when the new Shares are
               purchased under the Plan.

        (c)    Services Rendered. At the discretion of the Committee, Shares may
               be awarded under the Plan in consideration of services rendered
               to the Company or a Subsidiary prior to the award. If Shares are
               awarded without the payment of

                                       36
<PAGE>

               a Purchase Price in each, the Committee shall make a
               determination (at the time of the award) of the value of the
               services rendered by the Offeree and the sufficiency of the
               consideration to meet the requirements of Section 6(c).

        (d)    Cashless Exercise. To the extent that a Stock Option Agreement so
               provides, payment may be made all or in part by delivery (on a
               form prescribed by the Committee) of an irrevocable direction to
               a securities broker to sell Shares and to deliver all or part of
               the sale proceeds to the Company in payment of the aggregate
               Exercise Price.

SECTION 9. ADJUSTMENT OF SHARES.

        (a)    General. In the event of a subdivision of the outstanding Stock,
               a declaration of a dividend payable in Shares, a declaration of a
               dividend payable in a form other than Shares in an amount that
               has a material effect on the value of Shares, a combination or
               consolidation of the outstanding Stock (by reclassification or
               otherwise) into a lesser number of Shares, a recapitalization or
               a similar occurrence, the Committee shall make appropriate
               adjustments in one or more of (i) the number of Shares available
               for future grants under Section 5, (ii) the number of Shares
               available for grants under Section 4(c), (iii) the number of
               Shares covered by each outstanding Option, (iv) the Exercise
               Price under each outstanding Option, (v) the number of shares
               covered by each outstanding award or (vi) the Purchase Price of
               each outstanding award.

        (b)    Reorganizations. In the event that the Company is a party to a
               merger or other reorganization, outstanding Options shall be
               subject to the agreement of merger or reorganization. Such
               agreement may provide for the assumption of outstanding Options
               by the surviving corporation or its parent or for their
               continuation by the Company (if the Company is a surviving
               corporation); provided, however, that if assumption or
               continuation of the outstanding Options is not provided by such
               agreement then the Committee shall have the option of offering
               the payment of a cash settlement equal to the difference between
               the amount to be paid for one Share under such agreement and the
               Exercise Price, in all cases without the Optionees' consent.

        (c)    Reservation of Rights. Except as provided in this Section 9, an
               Optionee or Offeree shall have no rights by reason of any
               subdivision or consolidation of shares of stock of any class, the
               payment of any dividend or any other increase or decrease in the
               number of shares of stock of any class. Any issue by the Company
               of shares of stock of any class, shall not affect, and no
               adjustment by reason thereof shall be made with respect to, the
               number or Exercise Price of Shares subject to an Option. The
               grant of an Option pursuant to the Plan shall not affect in any
               way the right or power of the Company to make adjustments,
               reclassifications, reorganizations or changes of its capital or
               business structure, to merge or consolidate or to dissolve,
               liquidate, sell or transfer all or any part of its business or
               assets.

SECTION 10. LEGAL AND REGULATORY REQUIREMENTS.

        Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations and the regulations of any stock exchange on which the
Company's securities may then be listed, and the Company has obtained the
approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable.

SECTION 11. NO EMPLOYMENT RIGHTS.

        No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason, with or
without notice.

SECTION 12. DURATION AND AMENDMENTS.

        (a)    Term of the Plan. The amended and restated Plan, as set forth
               herein, shall terminate automatically on December 13, 2008 and
               may be terminated on any earlier date pursuant to Subsection (b)
               below.

        (b)    Right to Amend or Terminate the Plan. The Board of Directors may
               amend the Plan at any time and from time to time. Rights and
               obligations under any Option granted before amendment of the Plan
               shall not be materially altered, or impaired adversely by such
               amendment, except with consent of the person to whom the Option
               was granted. An amendment of the Plan shall be subject to the
               approval of the Company's stockholders only to the extent
               required by applicable laws, regulations or rules.

SECTION 13. EMPLOYEES BASED OUTSIDE OF THE UNITED STATES.

        Notwithstanding any provision of the Plan to the contrary, in order to
foster and promote achievement of the purposes of the Plan or to comply with
provisions of laws or regulations in other countries in which the Company and
its Subsidiaries operate or have employees, the Committee, in its sole
discretion, shall have the power and authority to (a) determine which Employees
outside the United States are eligible to participate in the Plan, (b) modify
the terms and conditions of any Options granted to Employees outside the United
States and (c) establish subplans, modified option exercise procedures and other
terms and procedures to the extent such actions may be necessary or advisable.

SECTION 14. EXECUTION.

                                       37
<PAGE>

        To record the adoption of the amended and restated Plan by the Board of
Directors effective as of May 16, 2001, the Company has caused its authorized
officer to execute the same.

                                        SONICblue INCORPORATED

                                        By: /s/ Ken Potashner
                                            ------------------------------
                                        Ken Potashner
                                        President, Chairman and Chief
                                        Executive Officer

                                       38

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