Document:

<PAGE>   1
                                                                    EXHIBIT 10.3

                   RESTATED AND AMENDED CONTRIBUTION AGREEMENT

     This Restated and Amended Contribution Agreement ("Agreement") dated as of
June 29, 2001 by and among ACME Television, LLC, a Delaware limited liability
company ("ACME"), and ACME Communications, Inc., a Delaware corporation (the
"Company").

                                    RECITALS

     A. The Company indirectly owns 100% of the membership interests of ACME.

     B. ACME, certain "Lenders" named therein and Canadian Imperial Bank of
Commerce, as agent for the Lenders (the "Agent") are parties to a First Amended
and Restated Credit Agreement dated as of December 2, 1997, as amended through
the date hereof (as so amended and as hereinafter amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement").

     C. The Company and ACME are parties to a Contribution Agreement dated as of
December 29, 2000 (the Original Agreement").

     D. ACME, the Lenders, the Agent and Bankers Trust Company, as syndication
agent for the Lenders have entered into a Ninth Amendment to Credit Agreement
dated the date hereof (the "Ninth Amendment") amending certain terms and
conditions of the Credit Agreement. B. It is a condition precedent to the Ninth
Amendment that the Company and ACME enter into this Agreement to restate and
amend the Original Agreement to make certain corresponding revisions required
under the Ninth Amendment.

     E. Capitalized terms not defined herein shall have the meanings given to
such terms in the Credit Agreement.

     NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the Company
and ACME hereby agree as follows:

                                    AGREEMENT

SECTION 1. COMMITMENTS; PARENT RESERVE.

     (a) The Company hereby agrees to maintain, solely for ACME's benefit, cash
or cash equivalents for equity contributions to ACME in an aggregate amount
equal to the greater of (i) $13,000,000 or (ii) the aggregate amount of the
Company's cash on hand and cash equivalents as of the date hereof, to the extent
the same exceeds $7,500,000, which amount shall be permanently reduced by (x)
any voluntary cash equity contributions made by the Company to ACME after the
date hereof and (y) up to $2,500,000 in the aggregate, but only (dollar for
dollar) to the extent that ACME obtains commitments for New Lease Financing,
provided that such financing is funded before January 1, 2002. As used herein,
the term "New Lease Financing" means additional lease or vendor financing
commitments to finance Adjusted Capital Expenditures (as permitted under
SECTIONS 7.01(G) and 7.02(G) of the Credit Agreement and excluding ACME's
existing lease facility provided by Union Bank of California) The cash and cash
equivalents required to be maintained by the Company for ACME's benefit as
provided herein, after giving effect to the reductions described above, are
referred to as the "Parent Reserve").

<PAGE>   2

     (b) To the extent that ACME fails to obtain New Lease Financing as
scheduled in the Table below for any fiscal period, ACME may call against the
Parent Reserve, within ten (10) days after the end of such fiscal period, to
finance the shortfall, and the Company shall make payment to ACME from the
Parent Reserve within thirty (30) days after the end of such fiscal period.

             FISCAL PERIOD                       PROJECTED NEW LEASE FINANCING
             -------------                       ------------------------------
            July 1 through                                $2,400,000
             December 2001

           January 1 through                            None projected
            March 31, 2002

     April 1 through June 30, 2002                        $6,000,000

            July 1 through                                $2,500,000
          September 30, 2002

     (c) If ACME calls against the Parent Reserve upon the occurrence and during
the existence of any Event of Default under the Credit Agreement, as provided
thereunder, the Company will immediately contribute the full amount of the
Parent Reserve to ACME.

     (d) Upon receipt of any equity contribution pursuant to subsection (a) or
(b) above, the Company's capital account shall be adjusted to reflect the amount
of the equity contribution.

SECTION 2. NO SET OFF.

     The obligations of the Company under Section 1 shall be absolute and
unconditional under any and all circumstances, including without limitation, the
existence of any default or Event of Default by ACME in the performance or
observance of any of the agreements or covenants in the Credit Agreement, the
existence of any indebtedness owing by ACME or any if its Subsidiaries to the
Company or any set-off, counterclaim, abatement, recoupment, defense or other
right or claim which the Company may have against ACME, any of its Affiliates or
any other Person, including the Agent and any of the Lenders, the dissolution,
bankruptcy, insolvency or reorganization of the Company, ACME, any of their
respective Affiliates or any other Person or the pendency against the Company,
ACME, any of their respective Affiliates or any other Person of any case, suit
or proceeding under any bankruptcy or insolvency law or any other law providing
for the relief of debtors or any other circumstances whatsoever which might
otherwise constitute an excuse for non-performance of the obligations of the
Company under Section 1, whether similar or dissimilar to any of the
circumstances specified herein.

SECTION 3. BENEFICIARY.

     The parties hereto hereby acknowledge that this Agreement has been made for
the benefit of the Agent and the Required Lenders, as well as ACME. As third
party beneficiaries hereunder, the Agent and the Required Lenders shall have the
same rights, powers, privileges, interests and remedies as ACME, including the
right and power to require the Company to make equity contributions from the
Parent Reserve under Section 1(a), whether arising under this

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<PAGE>   3

Agreement or by statute or in law or in equity or otherwise, resulting from any
failure by the Company to perform its obligations under Section 1(a), together
with full power and authority in the names of the Agent or the Required Lenders
to enforce the Company's obligations under Section 1(a) directly.

SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

     (a) Membership Interest Ownership. The Company indirectly owns all of the
membership interests of ACME through its wholly-owned subsidiary, ACME
Intermediate Holdings, LLC.

     (b) Corporate Existence. The Company (i) is a corporation duly organized
and validly existing under the laws of the jurisdiction of its incorporation;
(ii) has all requisite corporate power and has all material governmental
licenses, authorizations, consents and approvals necessary to carry on its
business as now being conducted except where the failure to have such
governmental licenses, authorizations, consents and approvals would not have a
material adverse effect on the Company's business or operations; and (iii) is
qualified to do business in all jurisdictions in which the nature of its
business makes such qualification necessary and where the failure to so qualify
would have a material adverse effect on the Company's business or operations.

     (c) Corporate Action. The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement;
the execution, delivery and performance by the Company of this Agreement has
been duly authorized by all necessary corporate action on its part; and this
Agreement has been duly and validly executed and delivered by the Company and
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms, except (i) as may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of creditors' rights
in general, and (ii) enforceability thereof may be subject to general principles
of equity regardless of whether such enforceability is considered in a
proceeding at law or in equity.

     (d) Maintenance of Corporate Existence. The Company agrees that, so long as
this Agreement is in effect, it shall (i) preserve and maintain its corporate
existence; and (ii) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure to
comply with such requirements would materially and adversely affect the ability
of the Company to perform its obligations under this Agreement.

SECTION 5. MISCELLANEOUS.

     (a) Binding Effect; Assignment. This Agreement shall become effective when
it shall have been executed by the Company and ACME and thereafter shall be
binding upon and inure to the benefit of the Company and ACME and their
respective successors and assigns, except that none of the interests, rights or
obligations of the Company hereunder shall be transferable (whether by operation
of law or otherwise), without the prior written consent of the Agent.

     (b) Termination of Agreement. This Agreement and all obligations of the
parties hereunder shall not terminate until the earlier of full investment of
the Parent Reserve or the payment in full of the Obligations or the termination
of the Commitments.

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<PAGE>   4

     (c) Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
(excluding the laws applicable to conflicts or choice of law).

     (d) Notices. All notices required or permitted to be given to or made upon
any party to this Agreement shall be made in writing and shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested) or by facsimile transmission with confirmation by overnight
courier and shall be deemed to have been duly given or made when received by the
intended recipient in accordance with the provisions of this Section 5(c).
Unless otherwise specified in a notice given or made in accordance with this
provisions of this Section 5(c), notices shall be given to the respective
parties at their respective addresses indicated below.

      To the Company:            ACME Communications, Inc.
                                 Suite 202
                                 2101 E. Fourth Street
                                 Santa Ana, California  92705

      To ACME:                   ACME Television, LLC
                                 Suite 202
                                 2101 E. Fourth Street
                                 Santa Ana, California  92705

      In each case notice copy to:

                                 Canadian Imperial Bank of Commerce, as Agent
                                 425 Lexington Avenue
                                 New York, New York  10017
                                 Attention:  Harold Birk

     In the event of any strike or occurrence of another similar event which
interrupts mail service, notices may be served personally upon an individual,
partner or an officer or director of a corporation which is or is part of the
party being served.

     (e) Headings. Headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

     (f) Survival of Agreements. All covenants, agreements, representations and
warranties in this Agreement or in any certificate, instrument, document or
other writing delivered pursuant hereto shall survive the execution and delivery
of this Agreement, and, except as otherwise provided herein, all such covenants
and agreements shall continue in full force and effect.

     (g) Entire Agreement. This Agreement contains the full, final and exclusive
statement of the agreement among the Company and ACME relating to the
transactions contemplated hereby. Except as set forth in this Agreement, the
parties acknowledge and agree that the Company is not a guarantor of and shall
have no other obligations or liabilities under the Credit Agreement.

     (h) Counterparts. This Agreement may be executed in two or more
counterparts, which when so executed and delivered shall constitute one and the
same instrument.

                    * THE NEXT PAGE IS THE SIGNATURE PAGE. *

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                                         ACME COMMUNICATIONS, INC.

                                         By: /s/ Thomas D. Allen
                                             -------------------------------
                                             Name: Thomas D. Allen
                                             Title: Executive Vice President
                                                    and Chief Financial Officer

                                         ACME TELEVISION, LLC

                                         By: /s/ Thomas D. Allen
                                             -------------------------------
                                             Name: Thomas D. Allen
                                             Title: Executive Vice President
                                                    and Chief Financial Officer

                                      -5-<PAGE>   1

                                                                    EXHIBIT 10.1

                             SONICBLUE INCORPORATED
                                 P. O. BOX 58058
                           2841 MISSION COLLEGE BLVD.
                           SANTA CLARA, CA 95052-8058
                            Telephone: (408) 588-8000
                            Facsimile: (408) 980-5445

                                  June 21, 2001

Mr. Kenneth Potashner
16452 Avenida de los Olivos
Rancho Santa Fe, CA 92067

Dear Ken:

       This letter agreement (this "Agreement") supercedes that certain letter
agreement, dated October 30, 1998 by and between you and the Company (the "Prior
Agreement") and sets forth the terms and conditions of your continued employment
with SONICblue Incorporated (the "Company"). Effective upon the execution of
this Agreement, the Prior Agreement shall be null and void.

       In consideration of the mutual covenants and promises made in this
Agreement, you and the Company agree as follows:

       1. Employment. Commencing as of June 19, 2001 (the "Effective Date") and
during the Term, you will be employed on a full-time basis as President and
Chief Executive Officer of the Company. The Company's Board of Directors (the
"Board") has also elected you to serve as its Chairman and its shareholders have
elected you to serve as a director. During the Term, you will be given such
duties and authority as are appropriate to such positions. During the Term, you
will perform and discharge well and faithfully such duties for the Company as
are set forth in the bylaws of the Company regarding its Chairman of the Board,
President and Chief Executive Officer and such other duties relating to the
Company's business, administration and policies as may be reasonably assigned or
requested from time to time by the Company's Board of Directors (the "Board").
You will devote your full working time, attention and efforts to the affairs of
the Company during the Term; provided, however, you may continue to serve as a
member of the Board of Directors of Maxwell Technologies, Inc. ("Maxwell")
during your employment with the Company. You agree and understand that your
obligations to the Company under this Agreement will require your highest level
of attention and commitment.

       2. Term. The term of this Agreement will commence on the Effective Date
and will continue until October 30, 2002, unless earlier terminated as provided
herein (the "Term"). Either you or the Company can terminate your employment
hereunder, and your services as an officer and employee of the Company and
Chairman of its Board, at any time and for any reason, with or without cause and
with or without notice. Under certain circumstances you will be

<PAGE>   2

entitled to certain payments and other consideration on such termination,
pursuant to the terms and provisions of paragraph 9 below.

       3. Base Salary. For your services to the Company, you will be paid a base
salary, payable in accordance with the Company's usual payroll practices during
your full-time employment as President and Chief Executive Officer, at an
annualized rate of $650,000 per year. The Board may, in its sole discretion,
increase, but not decrease, your base salary each year after review of your
performance.

       4. Regular Bonus. You will be eligible to receive an annual bonus of up
to two hundred percent (200%) of your base salary subject to your achievement of
performance goals to be mutually determined and your continued full-time
employment as President and Chief Executive Officer though the end of each
relevant bonus period (typically, a calendar year). No minimum bonus shall be
payable with respect to any periods.

       5. Definitions. For purposes of this Agreement:

       "Change in Control" means: (i) the consummation of a merger or
consolidation of the Company with or into another entity or any other corporate
reorganization, if more than fifty percent (50%) of the combined voting power of
the continuing or surviving entity's securities outstanding immediately after
such merger, consolidation or other reorganization is owned by persons who were
not stockholders of the Company immediately prior to such merger, consolidation
or other reorganization; or (ii) the sale, transfer or other disposition of all
or substantially all of the Company's assets. A transaction will not constitute
a Change in Control if its sole purpose is to change the state of the Company's
incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company's securities
immediately before such transaction.

       "Cause" for termination of your employment with the Company will exist
when one or more of the following events has occurred: (i) your fraud or
criminal conduct affecting your employment or toward the Company, (ii) your
willful gross misconduct, willful gross neglect of duties or failure to act
which materially and adversely affects the business of the Company, or (iii)
your engaging in any activity in competition with Company in a material manner
(excluding a less than five percent (5%) investment in any public company, and
excluding your ongoing services as a director of Maxwell if it remains in
substantially the same business or another business that does not compete with
the Company).

       "Constructive Termination" means your termination of your employment with
the Company following the occurrence, without your written consent, of one or
more of the following events: (i) a diminution in your duties or the assignment
to you of duties which are materially inconsistent with your position or which
significantly impair your ability to function in your then current position,
provided that you provide notice of your objection in writing to such diminution
or assignment and the Company fails to rescind the same within two (2) weeks
after receipt of your notice; (ii) a reduction in compensation or material
reduction in benefits under this Agreement, which reduction is not cured within
two (2) weeks following written notice thereof from you; (iii) the Company's
requiring you to relocate your residence without your prior written consent from
the San Francisco Bay Area, or from any other area to which you

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<PAGE>   3

may voluntarily move with the Company's prior written consent during the Term;
or (iv) the unconsented (by you) relocation of the principal place for the
rendering of services hereunder to a location more than fifty (50) miles from
the present location of the principal executive office of Company.

       None of the foregoing will constitute a Constructive Termination to the
extent mutually agreed upon in writing by you and the Company in advance of the
occurrence thereof. A Constructive Termination will be treated as an involuntary
termination by the Company without Cause.

       "Disability" means your failure to effectively discharge your duties and
to render the services required hereunder due to physical or mental injury,
illness or disability for six (6) or more consecutive months or for more than
six (6) months in the aggregate during any period of twelve (12) calendar months
following the commencement of employment hereunder.

       6. Stock Options. In conjunction with the Prior Agreement you were
granted four stock options. You were granted a nonstatutory stock option to
purchase 1,468,317 shares of the Common Stock of the Company (the "Common
Stock") and a non-qualified option to purchase 31,683 shares of the Common Stock
of the Company (collectively, the "1,500,000 Share Option"). The 1,500,000 Share
Option is fully vested and exercisable. Concurrent with your execution of this
Agreement, the 1,500,000 Share Option will be amended to provide that it will
terminate on the earlier of (i) October 22, 2008 or (ii) ninety (90) days after
the later of (y) termination of service as a member of the Company's Board of
Directors, or (x) your termination of full-time employment with the Company
pursuant to paragraph 1 provided, however, that in the event that after your
full-time employment or service as a director with the Company ends, you
continue to serve the Company as a part-time employee or consultant pursuant to
a written consulting or employment agreement approved by its Board of Directors,
the 1,500,000 Share Option shall terminate upon the termination of such
agreement or service.

       In conjunction with the Prior Agreement, you were also granted an
incentive stock option to purchase 95,049 shares of the Common Stock and a
non-qualified option to purchase 2,904,951 shares of Common Stock (collectively,
the "3,000,000 Share Option"). Concurrent with your execution of this Agreement,
subject to the provisions of paragraph 9(b)(iii) and 9(c)(iii) of this Agreement
(which provide for vesting continuation under certain circumstances following a
termination without Cause or by Constructive Termination), the 3,000,000 Share
Option will terminate on the earlier of (i) October 22, 2008 or (ii) the later
of (x) or ninety (90) days after termination of your full-time employment
pursuant to paragraph 1 above or (y) termination of service as a member of the
Company's Board of Directors; provided, however, that in the event that after
your full-time employment or service as a director with the Company ends, you
continue to serve the Company as a part-time employee or consultant pursuant to
a written consulting or employment agreement approved by its Board of Directors,
the 1,500,000 Share Option shall terminate upon the termination of such
agreement or service. Concurrent with your execution of this Agreement, the
3,000,000 Share Option shall be amended to provide that you may continue to vest
thereunder, after your full-time employment by the Company pursuant to paragraph
1 hereof ends; for so long as you are employed by the Company on a part-time
basis pursuant to a written employment agreement approved by its Board of
Directors. Service on the Board of Directors of the Company shall not be deemed
service as a part or full-

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<PAGE>   4

time employee or consultant for purposes of continued vesting pursuant to the
3,000,000 Share Option.

       The Company has since issued you the options (the "Four Other Options")
set forth below:

<TABLE>
<CAPTION>
          Option        Option
          Number         Date          Plan/Type         Shares         Price
<S>                    <C>             <C>               <C>          <C>
          005896       02/07/00         1989/ISO          13,792      $ 14.5000

          005897       02/07/00         1989/NQ          486,208      $ 14.5000

          006920       01/09/01         1989/ISO           1,234      $  6.0000

          N06920       01/09/01         1989/NQ          198,766      $  6.0000
</TABLE>

       Nothing in this Agreement shall amend or modify the terms of any of the
options issued in conjunction with the Prior Agreement or issued to you
thereafter. Concurrent with the execution of this Agreement, you will be granted
an option to purchase 700,000 shares of the Company's Common Stock, in
substantially the form of Exhibit A hereto (the "700,000 Share Option") with an
exercise price equal to the Closing Price of the Common Stock on the date
immediately preceding the Effective Date. Conditioned on your continued
full-time employment with the Company pursuant to paragraph 1 hereof through
each of such dates or your continued part-time employment through each of such
dates as an employee or consultant pursuant to a written employment or
consulting agreement approved by its Board of Directors after your full-time
employment terminates, the option will vest twenty-five percent (25%) on October
29, 2002 and 2.08333333% each subsequent month thereafter (i.e., November 29,
2002, December 29, 2002 ...). The 700,000 Share Option shall terminate on the
earlier of (i) the tenth anniversary of the Effective Date (ii) or the later of
(x) first anniversary of your termination of service as a member of the
Company's Board of Directors or (y) the first anniversary of the termination of
your full-time employment pursuant to paragraph 1 above provided, however, that
in the event that after your full-time employment or service as a director with
the Company ends, you continue to serve the Company as a part-time employee or
consultant pursuant to a written consulting or employment agreement approved by
its Board of Directors, the 700,000 Share Option shall terminate upon the
termination of such agreement or service. Service on the Board of Directors of
the Company shall not be deemed service as a part or full-time employee or
consultant for purposes of continued vesting pursuant to the 700,000 Share
Option or creating eligibility for vesting acceleration upon achieving an
Operating Profit. In addition, if while the 700,000 Share Option is still
outstanding and you are still employed by the Company for an entire fiscal year
on a full-time basis pursuant to paragraph 1 hereof, the Company during such
fiscal year achieves an operating profit for such entire fiscal year (as
determined by its Chief Financial Officer based on its audited financial
statements for that year), then 50% of the then (as of the date of the Company's
receipt of such audited financial statements) unvested shares subject to the
700,000 Share Option shall immediately vest and the remaining shares shall
continue to vest (subject to the conditions set forth above) in equal increments
over the remainder of the vesting period. "Operating Profit" for these purposes
shall mean Earnings Before Taxes, Depreciation or Amortization net of any gains
or losses on the sale, revaluation, receipt of dividends or any other event or
entry relating to any equity investment by the Company, including without
limitation, Rioport or the UMC shares. Joint ventures formed by

                                      -4-
<PAGE>   5

the Company with third parties or subsidiaries of the Company (in which it owns
50% or more of the voting stock) shall not be treated as investments for these
purposes.

       7. Travel and Other Related Reimbursement. Your primary residence is
located in Southern California. For so long as you are a full-time employee of
the Company pursuant to paragraph 1 hereof, the Company will reimburse you for
all reasonable travel expenses incurred in commuting from your residence in
Southern California to the Company's offices to provide services hereunder, as
well as the reasonable rental costs of maintaining a second residence and a
leased car in the San Francisco Bay Area, including up to two trips a month for
your family to the Bay Area. The Company shall not require you to relocate your
residence to the San Francisco Bay Area without your prior written consent. In
addition, the Company will pay you a tax gross-up payment in an amount
sufficient to ensure that you do not incur any net income tax liability due to
the payments described in this Section 7.

       8. Employee Benefit Programs. Commencing on the Effective Date, and
during the period of your full-time employment pursuant to paragraph 1 hereof,
you will be entitled to participate in all Company employee benefit plans and
compensation and perquisite programs made available to the Company's executives
or salaried employees generally, including the Company's Employee Stock Purchase
Plan, 401(k) Plan and Executive Deferred Compensation Plan. You will be entitled
to reimbursement of reasonable work-related expenses. You will be entitled to
four weeks of paid vacation per year, provided that you will not accrue unused
vacation of more than eight weeks. You will be paid for unused vacation time.

       9. Consequences of Termination of Employment.

       (a) Involuntary Termination By Company For Cause. In the event the
Company terminates your full-time employment during the term of this Agreement
for Cause, you will be entitled to any unpaid salary, bonus and vacation due you
pursuant to paragraphs 3, 4 and 9 above through the date of termination and you
will be entitled to no other compensation from the Company.

       (b) Involuntary Termination (i) By Company Without Cause or (ii) by
Constructive Termination - Before Change in Control. In the event either (i) the
Company terminates your full-time employment without Cause during the Term and
before the consummation of a Change in Control or (ii) your employment is
terminated during the Term and before the consummation of a Change in Control by
Constructive Termination, you will be entitled to the following:

              (i) the Company will pay you any unpaid salary, bonus and vacation
       due you pursuant to paragraphs 3, 4 and 9 above through the date of
       termination. For twelve (12) months thereafter, your base salary and
       benefits will continue, and each month during that twelve (12) month
       period, in lieu of any bonus payments for which you would have been
       eligible had you remained employed by the Company during such period, you
       also will be paid 108,333.33 per month (for an aggregate of an additional
       $1,300,000); and

              (ii) the 3,000,000 Share Option will continue to vest during the
       twelve (12) month compensation and benefit continuation period, subject
       to your

                                      -5-
<PAGE>   6

       provision, if requested to do so by the Company, of consulting services
       to the Company and your agreement to, and compliance with,
       nonsolicitation and noncompetition agreements in favor of the Company
       (substantially in the form attached as Exhibit B) during such twelve (12)
       month period. The 3,000,000 Share Option, in such event shall terminate
       ninety (90) days after the end of such vesting continuation period.

       (c) Involuntary Termination (i) By Company Without Cause or (ii) by
Constructive Termination - Upon or After Change in Control. In the event either
(i) the Company terminates your employment without Cause during the Term upon or
after the consummation of a Change in Control or (ii) your employment is
terminated during the Term on or after the consummation of a Change in Control
of a Constructive Termination, you will be entitled to the following:

              (i) the Company will pay you any unpaid salary, bonus and vacation
       due you pursuant to paragraphs 3, 4 and 9 above through the date of
       termination. For eighteen (18) months thereafter, your base salary and
       benefits will continue, and each month during that eighteen (18) month
       period, in lieu of any bonus payments for which you would have been
       eligible had you remained employed by the Company during such period, you
       will also be paid $108,333 per month (for an aggregate of an additional
       $1,950,000);

              (ii) the 3,000,000 Share Option, the Four Other Options, and the
       700,000 Share Option will continue to vest as follows: the 3,000,000
       Share Option, the Four Other Options, and 700,000 Share Option will
       continue to vest over the eighteen (18) month compensation and benefit
       continuation period, subject to your provision, if requested to do so, of
       consulting services to the Company and your agreement to, and compliance
       with, nonsolicitation and noncompetition agreements in favor of the
       Company (substantially in the form attached as Exhibit C) during the
       remaining vesting period. The 3,000,000 Share Option, the Four Other
       Options, and the 700,000 Share Option would terminate ninety (90) days
       and one year, respectively after the end of such vesting continuation
       period;

       (d) Voluntary Termination, Death or Disability. In the event you
terminate your employment with the Company of your own volition (other than a
Constructive Termination) or as a result of death or Disability, such
termination will have the same consequences as a termination for Cause.

       10. Conditions to Receipt of Payments and Benefits.

       (a) Release of Claims. As a condition to the receipt of any the payments
and other consideration described in paragraph 9, you must execute and deliver
to the Company a full and complete release and covenant not to sue substantially
in the form of Exhibit C (the "Release") of all past, present and future claims
you may have against the Company or any of its officers, directors,
shareholders, employees, consultants and agents arising directly or indirectly
from your employment relationship with the Company, this Agreement or any act or
omission

                                      -6-
<PAGE>   7

predating the execution of the Release and thereafter take no action to void or
otherwise limit or terminate the Release within any applicable statutory periods
providing such rights.

       (b) Proprietary Information. In view of your position and access to
proprietary information, as a condition to the receipt of payments and other
consideration described in this Agreement, during the term of your employment by
the Company you will not, without the Company's written consent, directly or
indirectly, alone or as a partner, joint venturer, officer, director, employee,
consultant, agent or stockholder (other than a less than five percent (5%)
stockholder of a publicly traded company) (i) engage in any activity which is in
competition with the business, the products or services of the Company, (ii)
solicit any of the Company's employees, consultants or customers, (iii) hire any
of the Company's employees or consultants in an unlawful manner or actively
encourage employees or consultants to leave the Company, or (iv) otherwise
breach your proprietary information obligations.

       11. Assignability; Binding Nature. Commencing on the Effective Date, this
Agreement will be binding upon you and the Company and your respective
successors, heirs, and assigns. This Agreement may not be assigned by you except
that your rights to compensation and benefits hereunder, subject to the
limitations of this Agreement, may be transferred by will or operation of law.
No rights or obligations of the Company under this Agreement may be assigned or
transferred except by operation of law in the event of a merger or consolidation
in which the Company is not the continuing entity, or the sale or liquidation of
all or substantially all of the assets of the Company, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and assumes the Company's obligations under this Agreement
contractually or as a matter of law.

       12. Notice. Any notice to be delivered pursuant to this Agreement shall
be in writing and shall be deemed delivered upon service, if served personally,
or three (3) days after deposit in the United States Mail, if mailed by first
class mail, postage prepaid, registered or certified with return receipt
requested, addressed to the other party at the address set forth herein, or such
other address as may be designated in accordance herewith:

       If to you:                       Kenneth Potashner
                                        16452 Avenida de los Olivos
                                        Rancho Santa Fe, CA 92067

       with a copy to his counsel at:   Deidra Schneider
                                        Latham & Watkins
                                        701 B Street, Suite 2100
                                        San Diego, CA 92101-8197

       If to the Company:               SONICblue Incorporated
                                        2841 Mission College Boulevard
                                        P. O. Box 58058
                                        Santa Clara, CA

                                      -7-
<PAGE>   8

       with a copy to its counsel at:   Jorge del Calvo, Esq.
                                        Pillsbury Winthrop LLP
                                        2550 Hanover Street
                                        Palo Alto, CA 94304

       13. Dispute Resolution. Any disputes between you and the Company,
including but not limited to disputes arising out of or related to the Agreement
and disputes arising out of or related to the agreements evidencing your Company
stock options, shall be resolved by using the following procedures, except that
paragraphs (c) and (d) will not be followed in cases where the law specifically
forbids the use of arbitration as a final and binding remedy, or where paragraph
(d) below specifically allows a different remedy.

       (a) The party claiming to be aggrieved shall furnish to the other party a
written statement of the grievance identifying any witnesses or documents that
support the grievance and the relief requested or proposed.

       (b) If the other party does not agree to furnish the relief requested or
proposed, or otherwise does not satisfy the demand of the party claiming to be
aggrieved, the parties shall submit the dispute to nonbinding mediation before a
mediator to be jointly selected by the parties. The Company will pay the cost of
the mediation.

       (c) If the mediation does not produce a resolution of the dispute, the
parties agree that the dispute shall be resolved by final and binding
arbitration. The parties shall attempt to agree to the identity of an
arbitrator, and, if they are unable to do so, they will obtain a list of
arbitrators from the Federal Mediation and Conciliation Service and select an
arbitrator by striking names from that list. The arbitrator shall have the
authority to determine whether the conduct complained of in paragraph (a)
violates the rights of the complaining party and, if so, to grant any relief
authorized by law; subject to the exclusions of paragraph (d) below. The
arbitrator shall not have the authority to modify, change or refuse to enforce
the terms of this Agreement.

       The hearing shall be transcribed. The Company shall bear the costs of the
arbitration if you prevail. If the Company prevails, you will pay half the cost
of the arbitration. The prevailing party in the arbitration shall be entitled to
recover from the other party his or its reasonable attorney fees and its costs
incurred in connection with the arbitration, as determined by the arbitrator.

       (d) Arbitration shall be the exclusive final remedy for any dispute
between the parties, and the parties agree that no dispute shall be submitted to
arbitration where the party claiming to be aggrieved has not complied with the
preliminary steps provided for above. The parties agree that the arbitration
award shall be enforceable in any court having jurisdiction to enforce this
Agreement, so long as the arbitrator's findings of fact are supported by
substantial evidence on the whole and the arbitrator has not made errors of law;
provided however, that either party may bring an action, including but not
limited to an action for injunctive relief, in a court of competent
jurisdiction, regarding or related to matters involving the Company's
confidential, proprietary or trade secret information, or regarding or related
to inventions that the you may claim to have developed prior to joining the
Company or after joining the Company, pursuant to California Labor Code 2870.
The parties further agree that for violations of my confiden-

                                      -8-
<PAGE>   9

tial, proprietary information or trade secret obligations which the parties have
elected to submit to arbitration, the Company retains the right to seek
preliminary injunctive relief in court in order to preserve the status quo or
prevent irreparable injury before the matter can be heard in arbitration.

       14. Governing Law. This Agreement will be deemed a contract made under,
and for all purposes will be construed in accordance with, the laws of
California applicable to contracts between California residents and wholly to be
performed in California, notwithstanding California, without regard to
California choice of law provisions or principles of conflicts of law.

       15. Withholding. Anything to the contrary notwithstanding, following the
Effective Date all payments made by the Company hereunder to you or your estate
or beneficiaries will be subject to tax withholding pursuant to any applicable
laws or regulations. In lieu of withholding, the Company may, in its sole
discretion, accept other provision for payment of taxes as required by law,
provided it is satisfied that all requirements of law affecting its
responsibilities to withhold such taxes have been satisfied.

       16. Entire Agreement. Except as otherwise specifically provided in this
Agreement, this Agreement together with all Exhibits thereto, contains all the
legally binding understandings and agreements between you and the Company
pertaining to the subject matter of this Agreement and supersedes all such
agreements, whether oral or in writing, previously entered into between the
parties.

       17. Miscellaneous. No provision of this Agreement may be amended or
waived unless such amendment or waiver is agreed to by you and the Board in
writing. No waiver by you or the Company of the breach of any condition or
provision of this Agreement will be deemed a waiver of a similar or dissimilar
provision or condition at the same or any prior or subsequent time. In the event
any portion of this Agreement is determined to be invalid or unenforceable for
any reason, the remaining portions will be unaffected thereby and will remain in
full force and effect to the fullest extent permitted by law.

                                      -9-
<PAGE>   10

       The offer made by this letter will terminate if you do not return a
signed copy of this letter by June 21, 2001.

                                        Sincerely,

                                        SONICblue Incorporated

                                        By          /s/ Carm Santoro
                                          --------------------------------------
                                                      Carm Santoro
                                                        Director

ACKNOWLEDGED AND AGREED:

     /s/ Kenneth Potashner
--------------------------------
       Kenneth Potashner

Dated: June 21, 2001

                                      -10-
<PAGE>   11
                                    Exhibit A

                    1989 STOCK PLAN OF SONICBLUE INCORPORATED

                       NONSTATUTORY STOCK OPTION AGREEMENT

        SONICblue Incorporated, a Delaware corporation (the "Company"), hereby
grants an option to purchase shares of its common stock to the optionee named
below. The terms and conditions of the option are set forth in this cover sheet,
in the attachment and in the Company's 1989 Stock Plan (the "Plan").

Date of Option Grant: June 21, 2001

Name of Optionee: Kenneth Potashner

Optionee's Social Security Number:

Number of Shares of Covered by Option: 700,000

Exercise Price per Share: $3.01

Vesting Start Date: October 29, 2001

        BY SIGNING THIS COVER SHEET, YOU AGREE TO ALL OF THE TERMS AND
        CONDITIONS DESCRIBED IN THE ATTACHED AGREEMENT AND IN THE PLAN, A COPY
        OF WHICH IS ALSO ENCLOSED.

Optionee: _____________________________________________________________________
                                   (Signature)

Company: ______________________________________________________________________
                                   (Signature)

               Title: _________________________________________________________

Attachment

                                       A-1
<PAGE>   12

                    1989 STOCK PLAN OF SONICBLUE INCORPORATED

                       NONSTATUTORY STOCK OPTION AGREEMENT

STOCK OPTION          This option is intended to be a nonstatutory stock option
INCENTIVE             that is not qualified under section 422 of the Internal
                      Revenue Code and will be interpreted accordingly. This
                      Option is being granted in accordance with the terms of
                      the letter agreement governing your employment dated June
                      19, 2001 (the "Employment Agreement").

VESTING               Except as provided below with respect to vesting
                      acceleration on achievement of performance goals or
                      vesting continuation under certain circumstances following
                      a termination, after a Change in Control, either

                            by the Company without Cause or

                            by Constructive Termination,

                      your right to exercise this Option vests and becomes
                      exercisable while you provide services to the Company as a
                      full-time employee over the four year period beginning on
                      the Vesting Start Date shown on the cover sheet. The
                      Option will vest as to twenty five percent (25%) of the
                      shares on the first anniversary of the Vesting Start Date,
                      and will vest as to an additional 2.08333333% of the
                      shares at the end of each full month thereafter (beginning
                      with the first monthly vesting on November 30, 2002),
                      provided that you remain a full-time employee of the
                      Company on the applicable vesting date or remain as a
                      part-time employee or consultant to the Company on the
                      applicable vesting date pursuant to a written employment
                      or consulting agreement approved hereafter by the Board of
                      Directors. Notwithstanding the above, if, while you are
                      employed by the Company on a full-time basis, the Company
                      achieves an Operating Profit, as defined below, for an
                      entire fiscal year (as determined by its Chief Financial
                      Officer in its audited financial statements for that
                      year), then the Option shall vest as to fifty percent
                      (50%) of the unvested shares covered by the Option as of
                      the end of such fiscal year, provided, that the
                      determination that such vesting acceleration occurred
                      shall not be made until the date the Company receives such
                      audited financial statements for that year. In such event,
                      the remaining unvested shares shall vest ratably over the
                      remainder of the vesting period, conditioned on your
                      continued employment during such periods. Service as a
                      director shall not be deemed to be service as a full-time
                      or part-time employee or consultant pursuant to this
                      Agreement. "Operating Profit" for these purposes shall
                      mean Earnings Before Taxes, Depreciation or Amortization
                      net of any gains or losses on the sale, revaluation,
                      receipt of dividends or any other event or entry relating
                      to any equity investment by the Company, including without
                      limitation, Rioport or the UMC shares. Joint ventures
                      formed by

                                      A-2
<PAGE>   13

                      the Company with third parties or subsidiaries of the
                      Company (in which it owns 50% or more of the voting stock)
                      shall not be treated as investments for these purposes.
                      Examples of the operation of these vesting provisions are
                      attached hereto as Exhibit A. Fractional shares will be
                      rounded off to the nearest number.

                      Except as provided in the preceding and in the following
                      paragraph, if your status as a full-time employee of the
                      Company or part-time employee or consultant on the terms
                      referenced above terminates before the first anniversary
                      of the Vesting Start Date, you will not be entitled to
                      exercise any portion of this Option.

                      In the event either (i) the Company terminates your
                      employment without Cause upon or after the consummation of
                      a Change in Control or (ii) your employment is terminated
                      upon or after the consummation of a Change in Control by
                      Constructive Termination, this Option will continue to
                      vest over the 18-month compensation and benefit
                      continuation period specified in paragraph 9(c) of your
                      employment agreement with the Company, as amended, subject
                      to your provision, if requested by the Company, of
                      consulting services to the Company and your agreement to,
                      and compliance with, nonsolicitation and noncompetition
                      covenants in favor of the Company during the 18-month
                      period, all as provided in the form of Exhibit B to the
                      Employment Agreement.

                      Except as set forth in the preceding paragraph, and
                      notwithstanding anything to the contrary in the Plan,
                      vesting under this Option shall not be accelerated by or
                      otherwise affected by a Change in Control (as defined
                      herein or in the Plan).

CAUSE                 For purposes of this Option, "Cause" for termination of
                      your employment with the Company will exist when one or
                      more of the following events has occurred: (i) your fraud
                      or criminal conduct affecting your employment or toward
                      the Company, (ii) your willful gross misconduct, willful
                      gross neglect of duties or failure to act which materially
                      and adversely affects the business of the Company, or
                      (iii) your engaging in any activity in competition with
                      Company in a material manner (excluding a less than 5%
                      investment in any public company, and excluding your
                      ongoing services as a director of Maxwell if it remains in
                      substantially the same business or another business that
                      does not compete with the Company).

CONSTRUCTIVE          For purposes of this Option, "Constructive Termination"
TERMINATION           means your termination of your employment with the Company
                      following the occurrence, without your written consent, of
                      one or more of the following events: (i) a diminution in
                      your duties or the assignment to you of duties which are
                      materially inconsistent with your duties or which
                      significantly impair your ability to function in your then
                      current position, provided that

                                      A-3
<PAGE>   14

                      you object in writing to such diminution or assignment and
                      the Company fails to rescind the same within two (2) weeks
                      after receipt of your notice; (ii) a reduction in
                      compensation or material reduction in benefits under this
                      Agreement, which reduction is not cured within two (2)
                      weeks following written notice thereof from you; (iii) the
                      Company's requiring you to relocate your residence without
                      your prior written consent from the San Francisco Bay
                      Area, or from any other area to which you may voluntarily
                      move with the Company's prior written consent during the
                      Term; or (iv) the unconsented (by you) relocation of the
                      principal place for the rendering of services hereunder to
                      a location more than fifty (50) miles from the present
                      location of the principal executive office of Company.

                      None of the foregoing will constitute a Constructive
                      Termination to the extent mutually agreed upon in writing
                      by you and the Company in advance of the occurrence
                      thereof. A Constructive Termination will be treated as an
                      involuntary termination by the Company without Cause.

CHANGE IN             For purposes of this Option, "Change in Control" means:
CONTROL               (i) the consummation of a merger or consolidation of the
                      Company with or into another entity or any other corporate
                      reorganization, if more than 50% of the combined voting
                      power of the continuing or surviving entity's securities
                      outstanding immediately after such merger, consolidation
                      or other reorganization is owned by persons who were not
                      stockholders of the Company immediately prior to such
                      merger, consolidation or other reorganization; or (ii) the
                      sale, transfer or other disposition of all or
                      substantially all of the Company's assets. A transaction
                      will not constitute a Change in Control if its sole
                      purpose is to change the state of the Company's
                      incorporation or to create a holding company that will be
                      owned in substantially the same proportions by the persons
                      who held the Company's securities immediately before such
                      transaction.

TERM                  This Option will expire in any event at the close of
                      business at Company headquarters on the day before the
                      10th anniversary of the Date of Grant, as shown on the
                      cover sheet. (It will expire earlier if you cease to be a
                      full-time employee of the Company, as described below.)

EARLY                 Except as provided below with respect to termination after
TERMINATION           a Change in Control either (i) by the Company without
                      Cause or (ii) by Constructive Termination, if you cease to
                      be a full-time employee, member of the Company's Board of
                      Directors, or part-time employee or consultant of the
                      Company for any reason, then this Option will expire at
                      the close of business at Company headquarters on the date
                      of the first anniversary, after your status as a full-time
                      employee terminates. During such one year period, you may
                      exercise the portion of this Option that was vested and
                      exercisable on the termination of your full or part time
                      employment or

                                      A-4
<PAGE>   15

                      service as a consultant. In the event that your status as
                      a full or part-time employee or consultant terminates
                      before any portion of this Option is vested and
                      exercisable, then this Option shall immediately terminate.

                      Notwithstanding the foregoing, in the event this Option
                      continues to vest during the 18-month compensation and
                      benefit continuation period specified in paragraph 9(c) of
                      the Employment Agreement, then this Option will expire at
                      the close of business at Company headquarters on the date
                      of the first anniversary after such 18-month period
                      terminates; provided, however, that this Option shall
                      terminate immediately in the event you fail to provide, if
                      requested to do so by the Company, consulting services to
                      the Company, or fail to agree to, and comply with,
                      nonsolicitation and noncompetition agreements in favor of
                      the Company during such 18-month period in the form of
                      Exhibit B to the Employment Agreement. During such one
                      year period, you may exercise the portion of this Option
                      that was vested and exercisable on the day preceding the
                      commencement of the one year period.

RESTRICTIONS ON       The Company will not permit you to exercise this Option if
EXERCISE              the issuance of Shares at that time would violate any law
                      or regulation.

NOTICE OF             When you wish to exercise this Option, you must notify the
EXERCISE              Company by filing the proper "Notice of Exercise" form at
                      the address given on the form. Your Notice of Exercise
                      must specify how many Shares you wish to purchase and be
                      accompanied by full payment of the exercise price. Your
                      Notice of Exercise must also specify how your Shares
                      should be registered (in your name only, in your and your
                      spouse's names as community property or as joint tenants
                      with right of survivorship or in a trust for your
                      benefit). The Notice of Exercise will be effective when it
                      is received by the Company will full payment of the
                      exercise price.

                      If someone else wants to exercise this Option after your
                      death, that person must prove to the Company's
                      satisfaction that he or she is entitled to do so.

FORM OF               When you submit your Notice of Exercise, you must include
PAYMENT               payment of the Exercise Price for the Shares you are
                      purchasing. Payment may be made in one (or a combination)
                      of the following forms:

                          -  Your personal check, a cashier's check or a money
                             order.

                          -  Irrevocable directions to a securities broker
                          approved by the Company to sell the Shares acquired
                          upon exercise of this Option and to deliver all or a
                          portion of the sale proceeds to the Company in payment
                          of the Exercise Price. The balance of the sale
                          proceeds, if any, will be delivered to you. The
                          directions must be given by signing a special "Notice
                          of

                                      A-5
<PAGE>   16

                          Exercise" form provided by the Company.

                          -  Shares which have already been owned by you for
                          more than twelve months and which are surrendered to
                          the Company. The value of the Shares, determined as of
                          the effective date of the Option exercise, will be
                          applied to the Exercise Price.

                                      A-6
<PAGE>   17

WITHHOLDING           You will not be allowed to exercise this Option unless you
TAXES                 make acceptable arrangements to pay any withholding taxes
                      that may be due as a result of the Option exercise.

RESTRICTIONS ON       By signing this Agreement, you agree not to sell any
RESALE                Shares acquired upon exercise of this Option at a time
                      when applicable laws, regulations or Company or
                      underwriter trading policies prohibit a sale.

TRANSFER OF           Prior to your death, only you may exercise this Option.
OPTIONS               You cannot transfer or assign this Option. For instance,
                      you may not sell this Option or use it as security for a
                      loan. If you attempt to do any of these things, this
                      Option will immediately become invalid. You may, however,
                      dispose of this Option at your death either in your will
                      or pursuant to the laws of descent and distribution.

                      Regardless of any marital property settlement agreement,
                      the Company is not obligated to honor a Notice of Exercise
                      from your former spouse, nor is the Company obligated to
                      recognize your former spouse's interest in this Option in
                      any other way.

RETENTION             This Stock Option Agreement does not give you the right to
RIGHTS                be retained by the Company in any capacity. The Company
                      reserves the right to terminate your employment at any
                      time and for any reason.

STOCKHOLDER           Neither you, nor your estate or heirs, have any rights as
RIGHTS                a stockholder of the Company until a certificate for the
                      Shares acquired upon exercise of this Option has been
                      issued. No adjustments are made for dividends or other
                      rights if the applicable record date occurs before your
                      stock certificate is issued, except as described in the
                      Plan.

ADJUSTMENTS           In the event of a stock split, a stock dividend or a
                      similar change in the Company Stock, the number of Shares
                      covered by this Option and the Exercise Price per Share
                      may be adjusted pursuant to the Plan. This Option shall be
                      subject to the terms of the agreement of merger,
                      liquidation or reorganization in the event the Company is
                      subject to such corporate activity.

APPLICABLE LAW        This Agreement will be interpreted and enforced under the
                      laws of the State of California.

THE PLAN AND          The text of the Plan is incorporated in this Agreement by
OTHER                 reference. Capitalized terms that are used in this
AGREEMENTS            Agreement but not defined herein are defined in the Plan
                      as such may be amended from time to time.

                                      A-7
<PAGE>   18

        This Agreement, the Employment Agreement and the Plan constitute the
entire understanding between you and the Company regarding this Option. Any
prior agreements, commitments or negotiations concerning this Option are
superseded.

        By signing the cover sheet of this Agreement, you agree to all of the
terms and conditions described above and in the Plan.

                                      A-8
<PAGE>   19

                                    EXHIBIT A

<TABLE>
<CAPTION>
Examples
--------
<S>  <C>                                                                      <C>
1.   Your full-time employment terminates on October 28, 2002 and             No vesting
     the Company did not achieve an Operating Profit in the fiscal
     year ended December 31, 2001.  No change of Control has
     occurred prior to termination of employment and you are not
     employed by the Company after your full-time employment
     terminates as a part-time employee or consultant.

2.   Your full-time employment terminates on October 29, 2002 and             175,000 shares vested
     the Company did not achieve an Operating Profit in the fiscal
     year ended December 31, 2001.  No change of Control has
     occurred prior to termination of employment and you are not
     employed by the Company after your full-time employment
     terminates as a part-time employee or consultant.

3.   Your full-time employment terminates on November 29, 2002 and            175,000 shares vested
     the Company did not achieve an Operating Profit in the fiscal
     year ended December 31, 2001.  No change of Control has
     occurred prior to termination of employment and you are not
     employed by the Company after your full-time employment
     terminates as a part-time employee or consultant.

4.   Your full-time employment terminates on November 30, 2002 and            189,583 shares vested
     the Company did not achieve an Operating Profit in the fiscal
     year ended December 31, 2001.  No change of Control has
     occurred prior to termination of employment and you are not
     employed by the Company after your full-time employment
     terminates as a part-time employee or consultant.

5.   Your full-time employment terminates on November 30, 2002 and            189,583 shares vested
     the Company did achieve an Operating Profit in the fiscal year
     ended December 31, 2002.  No change of Control has occurred
     prior to termination of employment and you are not employed by
     the Company after your full-time employment terminates as a
     part-time employee or consultant.

6.   Your full-time employment terminates on October 28, 2002 and            350,000 shares vested
     the Company did achieve an Operating Profit in the fiscal year
     ended December 31, 2001.  No change of Control has occurred
     prior to termination of employment and you are not employed by
     the Company after your full-time employment terminates as a
     part-time employee or consultant.

7.   Your full-time employment terminates on October 29, 2002 and             437,500 shares vested
     the Company did achieve an Operating Profit in the fiscal year
     ended December 31, 2001.  No change of Control has occurred
     prior to
</TABLE>

                                      A-1
<PAGE>   20

<TABLE>
<S>  <C>                                                                      <C>
     termination of employment and you are not employed by
     the Company after your full-time employment terminates as a
     part-time employee or consultant.

8.   Your full-time employment terminates on November 29, 2002 and            437,500 shares vested
     the Company did achieve an Operating Profit in the fiscal year
     ended December 31, 2001.  No change of Control has occurred
     prior to termination of employment and you are not employed by
     the Company after your full-time employment terminates as a
     part-time employee or consultant.

9.   Your full-time employment terminates on November 30, 2002                444,791 shares vested*
     and the Company did achieve an Operating Profit in the
     fiscal year ended December 31, 2001.  No change of Control
     has occurred prior to termination of employment and you are
     not employed by the Company after your full-time employment
     terminates as a part-time employee or consultant.

10.  The Company achieves an Operating Profit in the fiscal year              452,083 shares vested**
     ended December 31, 2002 and your employment terminates on
     January 1, 2003.  No Change of Control has occurred prior
     to termination of employment and you are not employed by
     the Company after your full-time employment terminates as a
     part-time employee or consultant.

11.  The Company achieves an Operating Profit in the fiscal year              466,666 shares vested***
     ended December 31, 2002 and your employment terminates on
     March 1, 2003.  No Change of Control has occurred prior to
     termination of employment and you are not employed by the
     Company after your full-time employment terminates as a
     part-time employee or consultant.

12.  The Company did not achieve an Operating Profit in either       As of January 1, 2003,
     of the fiscal years ended December 31, 2001 or December 31,     204,166 shares were vested.
     2002 and your employment terminates either without Cause or     Provided you comply with the
     due to Constructive Termination on January 1, 2003.  Change     provisions of paragraph 9 of
     of Control occurred on December 31, 2002 and you are not        the Employment Agreement, you
     employed by the Company after your full-time employment         would be eligible for an
     terminates as a part-time                                       additional
</TABLE>

--------

* As of October 29, 2002, option had vested as to 350,000 (on December 31, 2001
due to operation of accelerator) and 87,500 shares due to cliff vesting as to
25% of the remaining shares on that date. Thereafter, (after October 29, 2002)
option vested as to 7,291.68 shares (1/36 x 262,500) at the end of each month
that you were fully employed.

** As of December 31, 2002 (prior to the acceleration of vesting due to
achieving an Operating Profit), you had vested as to 204,166 shares. You vested
as to an additional 247,917 shares (1/2 of the 495,833.33 unvested shares as of
December 31, 2002) resulting in a total number of vested shares as of January 1,
2003 of 452,083.

*** Same as example 10, except after January 1, 2003 the 247,917 remaining
unvested shares continued vesting ratably over the remaining 34 month vesting
period at a rate of 7,291.68 (1/34 x 247,917) shares per month resulting in an
aggregate of 466,666 shares vested (452,083 plus 14,583.35 shares).

                                       A-2
<PAGE>   21

<TABLE>
<S>  <C>                                                                      <C>
     employee or consultant.                                         18 months of vesting at a rate
                                                                     of 14,583.33 shares per month.

13.  The Company achieves an Operating Profit in the fiscal year     As of March 1, 2003, 466,666
     ended December 31, 2002 and your employment terminates          shares were vested.  Provided
     either due to a termination by the Company without Cause or     you comply with the provisions
     due to Constructive Termination on March 1, 2003. Change of     of paragraph 9 of the
     Control occurred March 1, 2003.                                 Employment Agreement, you
                                                                     would be eligible for an
                                                                     additional 18 months of
                                                                     vesting at a rate of 7,291.68
                                                                     shares per month.

14.  Your full-time employment terminates on November 30, 2002                204,166 shares vested
     and the Company did achieve an Operating Profit in the
     fiscal year ended December 31, 2002.  No change of Control
     has occurred prior to termination of employment.  You are
     employed on a part-time basis as an employee or consultant
     pursuant to a written agreement approved by the Board of
     Directors from November 30, 2002 to January 1, 2003.****

15.  Your full-time employment terminates on November 30, 2002                189,583 shares vested
     and the Company did achieve an Operating Profit in the
     fiscal year ended December 31, 2002.  No change of Control
     has occurred prior to termination of employment.  You are
     not employed by the Company on a part-time basis after
     November 30, 2002 but remain on its Board of Directors.*****
</TABLE>

--------

**** Operating Profit accelerator not triggered because no longer a full-time
employee.

***** Vesting does not continue because no longer part-time employee or
consultant. Would not continue if providing service solely as a director. Option
terminates November 30, 2003.

                                      A-3
<PAGE>   22

                                    EXHIBIT B

                              CONSULTING AGREEMENT

       THIS CONSULTING AGREEMENT (the "Agreement"), made and entered into as of
__________, by and between SONICBLUE INCORPORATED, a Delaware corporation (the
"Company") and KENNETH POTASHNER ("Executive"),

                              W I T N E S S E T H:

       WHEREAS, Executive's employment as its Chief Executive Officer and
President has terminated, and Executive and the Company have mutually agreed
upon a plan to transition Executive's duties to ____________________ (to be
referred to herein, along with any successor, as the "CEO"), effective
immediately; and

       WHEREAS, the Company wishes to incentivize Executive to remain available
to provide assistance to the CEO as requested by him on a project-by-project
basis; and

       WHEREAS, the parties hereto wish to enter into this Agreement to provide
for an orderly transition of Executive's responsibilities:

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

       1. Termination of Employment as Chief Executive Officer and President;
Part-Time Employment as Consultant Thereafter.

       (a) By execution hereof, Executive confirms that as of the date of this
Agreement (the "Effective Date") Executive's employment as the Company's Chief
Executive Officer and President has terminated and, if requested to do so,
Executive has resigned as a member and Chairman of the Board of Directors of the
Company.

       (b) On and following the Effective Date and, subject to Section 2,
Executive shall receive the compensation, benefits and continued option vesting
specified in Section 9(b) or 9(c), as applicable, of the employment agreement
between Executive and the Company dated May __, 2001 (the "Employment
Agreement"). The period during which Executive's compensation and benefits
continue and his options continue to vest as provided in Section 9(b) or 9(c)
shall be referred to herein as the "Salary Continuation Period."

       (c) During the Salary Continuation Period Executive will be a part-time
employee (or, at the discretion of the Company, an independent contractor) of
the Company. Executive's relationship as an employee or independent contractor
(as the case may be) during the Salary Continuation Period may be terminated by
the Company with or without cause at any time. During his employment Executive
shall devote his efforts on projects identified by the CEO and shall be
available to the extent reasonably needed to perform such projects. The days,
times and location at which Executive shall perform such tasks shall be
determined by the CEO, in his reasonable discretion. Executive shall not be
required to perform more than forty (40) hours of

                                      B-1
<PAGE>   23

services in any calendar month. Such services shall be ordinarily provided by
Executive by phone from his home, although the Company may from time-to-time
request that such services be provided at its offices. Executive shall not
retain an office at the Company for the provision of such services.

       (d) If Executive incurs reasonable expenses while providing services to
the Company hereunder, he shall be entitled to reimbursement in accordance with
the Company's standard policies. The Company further agrees to reimburse
Executive for all reasonable past expenses he has incurred while providing
services to the Company prior to the Salary Continuation Period.

       2. Conditions To Salary Continuation and Additional Vesting. The rights
of Executive to the consideration set forth in Section 9(b) or 9(c) of the
Employment Agreement, as applicable, are subject to continued satisfaction
during the Salary Continuation Period of the following conditions, which require
that Executive shall not have done or do any of the following during the Salary
Continuation Period:

       (a) Accepted employment with, or been engaged as a consultant by (whether
with or without compensation and whether on a part-time or full-time basis), or
served as an officer, director or partner of, or owned more than one percent
(1%) of the outstanding stock or other equity securities (or, in the case of a
company whose securities are publicly traded, more than five percent (5%) of the
outstanding stock or other equity securities) of, any corporation, partnership,
limited liability company or other entity (collectively "another company") that
directly or through a subsidiary or joint venture competes at such time directly
or indirectly with the Company (a "Competitor"). For purposes hereof, Competitor
shall mean any such entity that designs, develops or markets products for the
digital media, consumer electronics, Internet appliance and home networking
markets.

       (b) Diverted or attempted to divert, directly or indirectly, any business
of the Company.

       (c) Induced or attempted to induce, directly or indirectly, any person to
leave his or her employment or consulting relationship with the Company (in each
case, through assistance to professional recruiters or otherwise).

       (d) Served as a director, officer or employee of any company or other
entity that hires an employee of the Company or any person who was so employed
by the Company within three (3) months of being hired by such company or other
entity. In those instances in which Executive's services are conducted within a
subsidiary or division of another company, the reference in the preceding
sentence to "company or other entity" shall refer to the subsidiary or division
for whom Executive is providing services.

       (e) Materially breached his confidentiality and assignment of invention
obligations under the Executive's Proprietary Information and Inventions
Agreement, or materially breached any provision of this Agreement.

       (f) Initiated, filed, financed, participated as a named plaintiff in or
materially aided any action or other proceeding against the Company or any of
its officers, directors or employees

                                      B-2
<PAGE>   24

(including any class action or derivative action) based upon any claims, liens,
demands, causes of action, obligations, damages or liabilities.

       (g) Initiated, filed, financed, participated in or materially aided any
proxy fight or tender offer initiated against the Company.

       (h) Induced, or attempted to induce, any customers of the Company not to
purchase products from the Company; or

       (i) Fails to perform services request by the CEO, from the Effective Date
through the end of the Salary Continuation Period, on a part-time basis as an
employee (or at the Company's option as an independent contractor) on the terms
set forth in Section 1 (subject to second sentence of Section 1(c)).

       (j) Failed to comply with all insider trading policies of the Company
(including all blackout and window periods) until three (3) calendar days have
elapsed after the Company's announcement of earnings for the calendar quarter in
which the Effective Date occurred.

       (k) The Board of Directors shall determine reasonably and in good faith
whether Executive has committed any of the acts described in this Section 2.
Such determination may, in the discretion of the Board of Directors be made
effective retroactive to the date that Executive committed the acts or omissions
giving rise to the Board of Director's determination. If the Board of Director
determines that Executive has committed any of the acts described in this
Section 2, the Salary Continuation Period shall be deemed to have terminated as
of the date of such breach. The Company may also pursue any and all other
remedies which may be available to it as a result of such breach.

       It shall be a further condition to any payments, vesting of options or
other consideration hereunder that Executive execute a release, dated as of the
Effective Date, in the form of the release attached to the Employment Agreement.

       California law generally prohibits restraining an individual from
engaging in a lawful profession, trade or business of any kind (California
Business and Professions Code, Section 16600, et. seq.). The parties expressly
acknowledge that nothing in this Agreement or the Employment Agreement is
intended to prohibit Executive from working for a Competitor in any capacity,
competing with the Company or otherwise engaging in any profession trade or
business of any kind, in violation of California law, but rather that the
provisions of this Agreement are merely designed to provide incentives for
Executive not to compete with the Company.

       3. Executive's Representations. EXECUTIVE HEREBY REPRESENTS AND WARRANTS
TO THE COMPANY THAT HE HAS FULLY REVIEWED THIS AGREEMENT, AND THE TRANSACTIONS
CONTEMPLATED HEREBY, AND THAT HE FULLY UNDERSTANDS THIS AGREEMENT AND SUCH
TRANSACTIONS. IN CONNECTION WITH THIS REVIEW, EXECUTIVE HAS CONSULTED WITH LEGAL
COUNSEL AND HAS HAD AN OPPORTUNITY TO CONSULT WITH FINANCIAL AND OTHER ADVISORS
OF HIS CHOOSING, AND IF HE HAS DECIDED NOT TO DO SO, SUCH CHOICE WAS HIS
VOLUNTARY DECISION. THE TERMS OF THIS AGREEMENT ARE VOLUNTARILY ACCEPTED BY
EXECUTIVE WITHOUT DURESS OR COERCION.

                                      B-3
<PAGE>   25

       4. Mutual Non-Disparagement. The Company hereby agrees that it will not
in any way disparage Executive, which shall include, but not be limited to,
writing disparaging articles or making disparaging statements to the Company's
customers or employees, in the press, or in speeches at conferences. Executive
hereby agrees that he will not in any way disparage the Company, or its
officers, directors, employees or products, which shall include, but not be
limited to, writing disparaging articles or making disparaging statements to the
Company's customers, or suppliers, in the press, or in speeches at conferences.

       5. Limitation of Remedies; Standstill In the Event of Dispute. IN NO
EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, CONSEQUENTIAL OR INCIDENTAL
DAMAGES INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS (FROM THE SALE OF STOCK
OR OTHERWISE) OR GOODWILL, REGARDLESS OF THE FORM OF THE ACTION WHETHER IN
CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, AS A RESULT OF THE BREACH
OF THIS AGREEMENT OR ANY ACTION TAKEN HEREUNDER, EVEN IF THE PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR IF SUCH DAMAGE COULD HAVE BEEN
REASONABLY FORESEEN. The parties agree that if any dispute between Executive and
the Company arises over whether any of the conditions in Section 2 have been
met, then any shares issued or issuable to Executive upon exercise of the
3,000,000 Share Option during the Salary Continuation Period, to the extent
vesting thereon is in dispute, shall be placed in escrow during the term of any
such dispute, and that the 3,000,000 Share Option, to the extent vesting thereon
is in dispute, shall remain outstanding and unexercisable during the term of
such dispute.

       6. Notice. Any notice to be delivered pursuant to this Agreement shall be
in writing and shall be deemed delivered upon service, if served personally, or
three (3) days after deposit in the United States Mail, if mailed by first class
mail, postage prepaid, registered or certified with return receipt requested,
addressed to the other party at the address set forth herein, or such other
address as may be designated in accordance herewith:

       If to Executive:                   Kenneth Potashner
                                          16452 Avenida de los Olivos
                                          Rancho Santa Fe, CA 92067

       with a copy to his counsel at:
                                          --------------------------------------

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

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

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

       If to the Company:                 SONICblue Incorporated
                                          2841 Mission College Boulevard
                                          P. O. Box 58058
                                          Santa Clara, CA

                                      B-4
<PAGE>   26

       with a copy to its counsel at:     Jorge del Calvo, Esq.
                                          Pillsbury Winthrop LLP
                                          2550 Hanover Street
                                          Palo Alto, CA 94304

       7. Support for Company's Efforts. Executive agrees to support the
Company, the business groups and other organizations therein, and the management
and leadership of the Company and toward that end agrees not to (a) breach his
confidentiality and assignment of invention obligations under the Executive's
Proprietary Information and Inventions Agreement or any similar agreement he has
entered into with the Company, (b) induce, or endeavor to induce, any customers
of the Company not to purchase goods or services from the Company, or (c)
discourage potential employees from joining the Company or encourage Company
employees or consultants to leave the Company.

       8. Arbitration. Any disputes arising out of, or relating to, this
Agreement, or the making, performance, or interpretation of it, including any
determination by the CEO that Executive has committed any of the acts described
in Section 2 or breached his obligations under this Agreement shall be resolved
in accordance with Section 13 of the Employment Agreement.

       9. Binding Effect. This Agreement shall be binding upon, and inure to the
benefit of, Executive and his heirs, personal representatives, executors and
administrators, and shall inure to the benefit of and be binding upon the
Company, its successors and assigns.

       10. Amendment. This Agreement may be modified or amended only by written
consent of both parties.

       11. Governing Law. This Agreement shall be governed by the laws of the
State of California as if entered into between California residents and wholly
to be performed in California, notwithstanding California choice of law rules.

       12. Entire Agreement. This instrument contains the entire agreement of
the parties relating to the subject matter hereof, and supersedes all prior and
contemporaneous negotiations, correspondence, understandings and agreements of
the parties relating to the subject matter hereof.

       13. Severability. In the event that any provision of this Agreement is
held to be invalid or unenforceable for any reason, the Company and Executive
shall replace such provision with a valid provision which most closely
approximates the intent and economic effect of the invalid or unenforceable
provision, and the remaining provisions of the Agreement shall continue in full
force and effect.

       14. Waiver. The waiver by any party of any provision of this Agreement or
any breach of this Agreement shall not operate or be interpreted as a waiver of
any other provision or breach existing then or arising in the future.

       15. Expenses. Each party shall pay all costs and expenses incurred or to
be incurred by it in negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this Agreement.

                                      B-5
<PAGE>   27

       16. Authority of Signing Parties. Each party or responsible officer
thereof has read this Agreement and understands the contents hereof. Each party
or responsible officer thereof executing this Agreement is empowered to do so
and thereby binds himself or the party for whom he signs. This Agreement has
been approved by the Board of Directors of the Company.

       17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.

       18. Confidentiality. The parties acknowledge that the confidentiality of
all terms of this Agreement, including, without limitation, the payment of any
amount of consideration provided for herein, is of the essence. Except pursuant
to a court order, or as otherwise specifically required by law (including any
required disclosures in filings made by the Company under the securities laws)
as determined by their respective counsel, or with the written consent of the
other parties, the parties agree to maintain the confidentiality of this
Agreement, and to make no voluntary statement or take any other voluntary action
which might reasonably be expected to result in any disclosures of, or any
publicity concerning, any of the terms of this Agreement to anyone, including,
without limitation, past, present or future employees of the Company or past or
future employers of Executive. Notwithstanding the foregoing, the parties may
make confidential disclosures of pertinent terms of this Agreement to immediate
family members, taxing authorities and to professional tax or financial or legal
advisors, provided that prior to any such disclosure required to effect any such
consultation, the parties shall also disclose the existence of this covenant of
confidentiality.

       19. Separate Counsel. The Company and Executive have been separately
represented in conjunction with the negotiation and drafting of this Agreement
by their respective counsel.

       IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.

                                        SONICblue Incorporated

                                        By
                                           -------------------------------------

                                        Its
                                           -------------------------------------

                                        ----------------------------------------
                                                   Kenneth Potashner

                                      B-6
<PAGE>   28

                                    EXHIBIT C

                         AGREEMENT AND RELEASE OF CLAIMS

-      THIS DOCUMENT IS AN IMPORTANT ONE. YOU SHOULD REVIEW IT CAREFULLY AND, IF
       YOU AGREE TO IT, SIGN IN THE SPACE WHERE YOUR AGREEMENT IS INDICATED.

-      YOU HAVE TWENTY-ONE (21) DAYS TO DECIDE WHETHER OR NOT TO SIGN THIS
       AGREEMENT AND RELEASE OF CLAIMS. THIS PERIOD IS DESIGNED TO ALLOW YOU TO
       CONSULT WITH A FINANCIAL ADVISOR, ACCOUNTANT, ATTORNEY OR ANYONE ELSE
       WHOSE ADVICE YOU NEED. YOU SHOULD CONSULT APPROPRIATE ADVISORS, INCLUDING
       AN ATTORNEY, DURING THIS TIME PERIOD.

-      IF YOU AGREE TO THE TERMS IN THIS AGREEMENT AND RELEASE OF CLAIMS, SIGN
       IN THE SPACE BELOW WHERE YOUR AGREEMENT IS INDICATED. THE BENEFITS
       IDENTIFIED IN THIS DOCUMENT ARE CONTINGENT ON YOUR AGREEING TO THIS
       AGREEMENT AND RELEASE OF CLAIMS.

-      AFTER SIGNING THIS DOCUMENT YOU HAVE SEVEN (7) WORKING DAYS TO REVOKE
       YOUR AGREEMENT TO THE TERMS OF THIS DOCUMENT. ANY REVOCATION SHOULD BE IN
       WRITING AND DELIVERED TO [INSERT NAME AND ADDRESS OF REPRESENTATIVE AT
       THE COMPANY], BY CLOSE OF BUSINESS AT THE END OF THE SEVENTH BUSINESS DAY
       AFTER SIGNING THIS DOCUMENT.

-      THIS AGREEMENT AND RELEASE OF CLAIMS WILL NOT BECOME EFFECTIVE UNTIL THE
       SEVEN (7) DAY REVOCATION PERIOD HAS PASSED.

1.     I, Kenneth Potashner, have read the instructions above.

2.     I understand that my employment with SONICblue Incorporated (the
       "Company") will end effective [date of termination]. My compensation and
       benefits will continue as provided as set forth in the letter agreement
       between me and the Company dated May __, 2001 (the "Agreement"). I will
       receive no other compensation from the Company. I acknowledge that my
       agreement to this Agreement and Release of Claims is a condition to my
       receipt of such compensation and from the Company.

3.     I agree that the consideration referenced in paragraph 2 above is in full
       satisfaction of any claims, liabilities, demands or causes of action,
       known or unknown, that I ever had, now have or may claim to have had
       against the Company or any parents, subsidiaries, directors, officers,
       employees or agents of the Company as of the date of this Agreement and
       Release of Claims, excepting claims for vested benefits based on my
       employment and claims for workers' compensation insurance and
       unemployment insurance benefits. Any such claims whether for
       discrimination, including claims under the Fair Employment and Housing
       Act, Title VII of the Civil Rights Act of 1964 or the Age Discrimination
       in Employment Act, wrongful termination, breach of contract, breach of
       public policy, physical or mental harm or distress or any other claims
       (other than claims related to benefits or payments due me under the
       Agreement) are hereby released and I agree and promise that I will not
       file any lawsuit asserting any such claims.

                                      C-1
<PAGE>   29

4.     This Agreement and Release of Claims recognizes the rights and
       responsibilities of the Equal Employment Opportunity Commission ("EEOC")
       to enforce the statutes which come under its jurisdiction and is not
       intended to prevent me from filing a charge or participating in any
       investigation or proceeding conducted by the EEOC; provided, however,
       that nothing in this section limits or affects the finality or the scope
       of the release provided in Section 4, the waiver provided in Section 7 or
       the agreement to submit claims to final and binding arbitration.

5.     On _________, 1998 I signed the enclosed agreement regarding confidential
       information and intellectual property in which I agreed to protect
       Company confidential information both during and after my employment. I
       reaffirm my obligation to keep secret all confidential information that
       belongs to the Company.

6.     I agree to return all property that belongs to the Company.

7.     I hereby expressly waive the provisions of California Civil Code section
       1542 WITH REGARD TO CLAIMS RELATED UNDER SECTION 3. California Civil Code
       section 1542 provides as follows:

       "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
       KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
       RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
       SETTLEMENT WITH THE DEBTOR."

8.     I agree that if I bring an action to challenge the enforceability of this
       Agreement and Release of Claims, I will tender to a neutral escrow, as
       designated by the Company, all consideration that I received pursuant to
       this Agreement and Release of Claims.

9.     I agree that any future disputes between me and the Company, including
       but not limited to disputes arising out of or related to this Agreement
       and Release of Claims, shall be resolved by using the following
       procedures, except that steps c. and d. will not be followed in cases
       where the law specifically forbids the use of arbitration as a final and
       binding remedy, or where step d. below specifically allows a different
       remedy.

       (a)    The party claiming to be aggrieved shall furnish to the other
              party a written statement of the grievance identifying any
              witnesses or documents that support the grievance and the relief
              requested or proposed.

       (b)    If the other party does not agree to furnish the relief requested
              or proposed, or otherwise does not satisfy the demand of the party
              claiming to be aggrieved, the parties shall submit the dispute to
              nonbinding mediation before a mediator to be jointly selected by
              the parties. The Company will pay the cost of the mediation.

       (c)    If the mediation does not produce a resolution of the dispute, the
              parties agree that the dispute shall be resolved by final and
              binding arbitration. The parties shall attempt to agree to the
              identity of an arbitrator, and, if they are unable to do so, they
              will obtain a list of arbitrators from the Federal Mediation and
              Conciliation

                                      C-2
<PAGE>   30

              Service and select an arbitrator by striking names from that list.
              The arbitrator shall have the authority to determine whether the
              conduct complained of in step a. violates the rights of the
              complaining party and, if so, to grant any relief authorized by
              law; subject to the exclusions of step d below. The arbitrator
              shall not have the authority to modify, change or refuse to
              enforce the terms of this Agreement and Release of Claims.

              The hearing shall be transcribed. The Company shall bear the costs
              of the arbitration if I prevail. If the Company prevails, I will
              pay half the cost of the arbitration. Each party shall be
              responsible for paying its own attorneys' fees, unless the
              arbitrator orders otherwise, pursuant to applicable law.

       (d)    Arbitration shall be the exclusive final remedy for any dispute
              between the parties, and the parties agree that no dispute shall
              be submitted to arbitration where the party claiming to be
              aggrieved has not complied with the preliminary steps provided for
              above. The parties agree that the arbitration award shall be
              enforceable in any court having jurisdiction to enforce this
              Agreement and Release of Claims, so long as the arbitrator's
              findings of fact are supported by substantial evidence on the
              whole and the arbitrator has not made errors of law; provided
              however, that either party may bring an action, including but not
              limited to an action for injunctive relief, in a court of
              competent jurisdiction, regarding or related to matters involving
              the Company's confidential, proprietary or trade secret
              information, or regarding or related to inventions that I may
              claim to have developed prior to joining the Company or after
              joining the Company, pursuant to California Labor Code 2870
              ("Disputes Related to Inventions"). The parties further agree that
              for Disputes Related to Inventions which the parties have elected
              to submit to arbitration, each party retains the right to seek
              preliminary injunctive relief in court in order to preserve the
              status quo or prevent irreparable injury before the matter can be
              heard in arbitration.

10.    If any term of this Agreement and Release of Claims is held to be
       invalid, void or unenforceable, the remainder of this Agreement and
       Release of Claims shall remain in full force and effect and shall in no
       way be affected, and the parties shall use their best efforts to find an
       alternative way to achieve the same result.

11.    By signing below, I acknowledge that I am entering into this Agreement
       and Release of Claims knowingly and voluntarily. In addition, I hereby
       acknowledge by my signature that I have carefully read and fully
       understand all the provisions of this Agreement and Release of Claims.

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

       I understand that this document is of serious legal consequences and that
I should consult with someone whose opinion I trust before signing it.

                                      C-3
<PAGE>   31

       By my signature, I agree to the terms set forth above, and I agree to
this Agreement and Release of Claims.

       Date: __________, 200__

                                        ----------------------------------------
                                                   Kenneth Potashner

                                      C-4

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