exv10w01



 





Exhibit 10.01




LERACH COUGHLIN STOIA GELLER

     RUDMAN & ROBBINS LLP

PATRICK J. COUGHLIN (111070) 

JOHN K. GRANT (169813)

LUKE O. BROOKS (212802)

100 Pine Street, Suite 2600

San Francisco, CA 94111

Telephone: 415/288-4545

415/288-4534 (fax)

PatC@lerachlaw.com

JohnKG@lerachlaw.com

LukeB@lerachlaw.com

             -and-


WILLIAM S. LERACH (68581) 

JOY ANN BULL (138009) 

655 West Broadway, Suite 1900

San Diego, CA 92101

Telephone: 619/231-1058 

619/231-7423 (fax)

BillL@lerachlaw.com




Lead Counsel for Plaintiffs




[Additional counsel appear on signature page.]




UNITED STATES DISTRICT COURT




NORTHERN DISTRICT OF CALIFORNIA




SAN JOSE DIVISION




	 	 	 	 	 
	In re ESS TECHNOLOGY, INC.
	 	)	 	Master File No. C-02-4497-RMW
	SECURITIES LITIGATION
	 	)	 	 
	 
	 	)	 	CLASS ACTION
	 
	 	)	 	 
	This Document Relates To:
	 	)	 	STIPULATION OF SETTLEMENT AND 

RELEASE
	 
	ALL ACTIONS.
	 	)	 	 
	 
	 	)	 	 






 









 





     This Stipulation of Settlement and Release dated as of November 12, 2006 (the “Stipulation”),
is made and entered into by and among the following Settling Parties (as defined further in §IV
hereof) to the above-entitled Litigation: (i) the Lead Plaintiff (on behalf of himself and each of
the Class Members), by and through their counsel of record in the Litigation; and (ii) the
Defendants, by and through their counsel of record in the Litigation. The Stipulation is intended
by the Settling Parties to fully, finally and forever resolve, discharge and settle the Released
Claims, upon and subject to the terms and conditions hereof.



I. THE LITIGATION




     On and after September 13, 2002, eight actions were filed in the United States District Court
for the Northern District of California (the “Court”) as securities class actions on behalf of
purchasers of the publicly traded securities of ESS Technology, Inc. during a defined period of
time. These actions were consolidated for all purposes by an order filed January 21, 2003. The
consolidated actions are referred to herein collectively as the “Litigation.” In addition, on
January 21, 2003, Steve Bardack was appointed Lead Plaintiff.



     The operative complaint in the Litigation is the Second Amended Complaint for Violations of
the Federal Securities Laws (the “Complaint”), filed November 3, 2003. As modified by orders of the
Court, the Complaint alleges violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder on behalf of a class of purchasers of ESST publicly traded
securities between August 1, 2002 and September 12, 2002. In an order filed on February 8, 2006,
the Court certified a plaintiff class of ESST investors, appointed Lead Plaintiff as class
representative, and appointed Lead Counsel as class counsel.



II. DEFENDANTS’ DENIALS OF WRONGDOING AND LIABILITY




     The Defendants have denied and continue to deny each and all of the claims alleged by the
Lead Plaintiff in the Litigation. The Defendants expressly have denied and continue to deny all
charges of wrongdoing or liability against them arising out of any of the conduct, statements,
acts or omissions alleged, or that could have been alleged, in the Litigation. The Defendants also
have denied and continue to deny, inter alia, the allegations that the Lead Plaintiff and/or the
Class have suffered damage, that the prices of ESST publicly traded securities were artificially
inflated by



      



			
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reasons of alleged misrepresentations, non-disclosures or otherwise, or that the Lead Plaintiff or
the Class were harmed by the conduct alleged in the Litigation.




     Nonetheless, the Defendants have concluded that further conduct of the Litigation would be
protracted and expensive, and that it is desirable that the Litigation be fully and finally settled
in the manner and upon the terms and conditions set forth in this Stipulation. The Defendants also
have taken into account the uncertainty and risks inherent in any litigation, especially in complex
cases like the Litigation. The Defendants have, therefore, determined that it is desirable and
beneficial to them that the Litigation be settled in the manner and upon the terms and conditions
set forth in this Stipulation. Defendants’ directors’ & officers’ insurance carriers are paying the
Defendants’ consideration for entering into this Stipulation.



III. CLAIMS OF THE LEAD PLAINTIFF AND BENEFITS OF SETTLEMENT




     The Lead Plaintiff believes that the claims asserted in the Litigation have merit and that the
evidence developed to date supports the claims. However, counsel for the Lead Plaintiff recognize
and acknowledge the expense and length of continued proceedings necessary to prosecute the
Litigation against the Defendants through trial and through appeals. Counsel for the Lead Plaintiff
also have taken into account the uncertain outcome and the risk of any litigation, especially in
complex actions such as the Litigation, as well as the difficulties and delays inherent in such
litigation. Counsel for the Lead Plaintiff also are mindful of the inherent problems of proof under
and possible defenses to the securities law violations asserted in the Litigation. Counsel for the
Lead Plaintiff believe that the settlement set forth in the Stipulation confers substantial
benefits upon the Class. Based on their evaluation, counsel for the Lead Plaintiff have determined
that the settlement set forth in the Stipulation is in the best interests of the Lead Plaintiff and
the Class.



IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT




     NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Lead Plaintiff (for
himself and the Class Members) and the Defendants, by and through their
respective counsel or attorneys of record, that, subject to the approval of the Court, the
Litigation and the Released Claims shall be finally and fully compromised, settled and released,
and the Litigation



      



			
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shall be dismissed with prejudice, as to all Settling Parties, upon and subject to the terms and
conditions of the Stipulation, as follows.




     1. Definitions



     As used in the Stipulation the following terms have the meanings specified below:



     1.1 “Authorized Claimant” means any Class Member whose claim for recovery has been allowed
pursuant to the terms of the Stipulation.



     1.2 “Claims Administrator” means the firm of Gilardi & Co. LLC.



     1.3 “Class” means all Persons (other than those Persons who timely and validly request
exclusion from the Class) who purchased or otherwise acquired ESST publicly traded securities
between August 1, 2002 and September 12, 2002. Excluded from the Class are the Defendants, their
families, and directors of ESST and their families, and short-sellers of ESST securities during the
Class Period.



     1.4 “Class Member “ or “Member of the Class” mean a Person who falls within the definition of
the Class as set forth in ¶1.3 above.



     1.5 “Class Period” means the period commencing on August 1, 2002 through September 12, 2002,
inclusive.



     1.6 “Defendants” means ESST and the Individual Defendants.



     1.7 “Effective Date” means the first date by which all of the events and conditions specified
in ¶7.1 of the Stipulation have been met and have occurred.



     1.8 “Escrow Agent” means the law firm of Lerach Coughlin Stoia Geller Rudman & Robbins LLP or
its successor(s).



     1.9 “ESST” means ESS Technology, Inc.



     1.10 “Final” means when the last of the following with respect to the Judgment approving the
Stipulation, substantially in the form of Exhibit B attached hereto, shall occur: (i) the
expiration of the time to file a motion to alter or amend the Judgment under Federal Rule of Civil
Procedure 59(e) without any such motion having been filed; (ii) the time in which to appeal the
Judgment has passed without any appeal having been taken; and (iii) if a motion to alter or amend
is filed or if an appeal is taken, immediately after the determination of that motion or
appeal in such a manner as to



      



			
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permit the consummation of the settlement substantially in accordance with the terms and conditions
of this Stipulation. For purposes of this paragraph, an appeal shall include any petition for a
writ of certiorari or other writ that may be filed in connection with approval or disapproval of
this settlement, but shall not include any appeal which concerns only the issue of attorneys’ fees
and reimbursement of expenses or any Plan of Allocation of the Settlement Fund, as hereinafter
defined.




     1.11 “Individual Defendants” means Robert L. Blair, James B. Boyd, Frederick S. L. Chan and
Patrick Ang.



     1.12 “Judgment” means the judgment to be rendered by the Court, substantially in the form
attached hereto as Exhibit B.



     1.13 “Lead Counsel” means Lerach Coughlin Stoia Geller Rudman & Robbins LLP, Joy Ann Bull, 655
W. Broadway, Suite 1900, San Diego, CA, 92101; and Lerach Coughlin Stoia Geller Rudman & Robbins
LLP, John K. Grant, 100 Pine Street, Suite 2600, San Francisco, CA 94111.



     1.14 “Lead Plaintiff” means Steve Bardack.



     1.15 “Person” means an individual, corporation, partnership, limited partnership,
association, joint stock company, estate, legal representative, trust, unincorporated association,
government or any political subdivision or agency thereof, and any business or legal entity and
their spouses, heirs, predecessors, successors, representatives, or assignees.



     1.16 “Plan of Allocation” means a plan or formula of allocation of the Settlement Fund whereby
the Settlement Fund shall be distributed to Authorized Claimants after payment of expenses of
notice and administration of the settlement, Taxes and Tax Expenses and such attorneys’ fees,
costs, expenses and interest as may be awarded by the Court. Any Plan of Allocation is not part of
the Stipulation and neither Defendants nor their Related Parties shall have any responsibility or
liability with respect thereto.



     1.17 “Related Parties” means each of a Defendant’s past or present directors, officers,
employees, partners, insurers, co-insurers, reinsurers, controlling shareholders,
attorneys, accountants, auditors, personal or legal representatives, predecessors, successors,
parents, subsidiaries, divisions, joint ventures, assigns, spouses, heirs, related or affiliated
entities, any entity in which a Defendant has a controlling interest, any members of any Individual
Defendant’s



      



			
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immediate family, or any trust of which any Individual Defendant is the settlor or which is for
the benefit of any Individual Defendant’s family.




     1.18 “Released Claims” shall collectively mean any and all claims, demands, rights, actions,
causes of action, liabilities, damages, losses, obligations, judgments, duties, suits, costs,
expenses, matters and issues of any kind or nature whatsoever whether individual, direct, class,
representative, legal, equitable, or any other type or in any other capacity, (including “Unknown
Claims” as defined in ¶1.22 hereof) relating to and/or arising from both the purchase or acquisition
of ESST publicly traded securities during the Class Period and the acts, facts, statements, or
omissions that were or could have been alleged by the Lead Plaintiff in the Litigation or in any
court, tribunal or proceeding by or on behalf of the Lead Plaintiff or by or on behalf of any other
member of the Class, including the allegations, acts, events, facts, matters, transactions,
occurrences, statements, representations, misrepresentations or omissions or any other matter,
thing or cause whatsoever, or any series thereof, embraced, involved or set forth in, or referred
to or otherwise related, directly or indirectly, in any way to, the Litigation or the subject
matter of or allegations in the Litigation, and including without limitations any claims in any way
related to any investment or loss involving ESST securities, or any benefits received by Released
Persons, or disclosures or public statements made in connection with any of the foregoing,
including, but not limited to, the accuracy, adequacy and completeness of such disclosures.



     1.19 “Released Persons” means each and all of the Defendants and their Related Parties.



     1.20 “Settlement Fund” means Three Million Five Hundred Thousand Dollars ($3,500,000) in cash
to be paid to the Escrow Agent pursuant to¶ 2.1 of this Stipulation, plus all interest subsequently
earned thereon.



     1.21 “Settling Parties” means, collectively, the Defendants and the Lead Plaintiff on behalf
of himself and the Members of the Class.



     1.22 “Unknown Claims” means any Released Claims which the Lead Plaintiff or any Class Member
does not know or suspect to exist in his, her or its favor at the time of the release of the
Released Persons which, if known by him, her or it, might have affected his, her or its settlement
with and release of the Released Persons, or might have affected his, her or its decision not to
object



      



			
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to this settlement. With respect to any and all Released Claims, the Settling Parties stipulate and
agree that, upon the Effective Date, the Lead Plaintiff shall expressly and each of the Class
Members shall be deemed to have, and by operation of the Judgment shall have, expressly waived the
provisions, rights and benefits of California Civil Code §1542, which provides:





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


The Lead Plaintiff shall expressly and each of the Class Members shall be deemed to have, and by
operation of the Judgment shall have, expressly waived any and all provisions, rights and benefits
conferred by any law of any state or territory of the United States, or principle of common law,
which is similar, comparable or equivalent to California Civil Code § 1542. The Lead Plaintiff and
Class Members may hereafter discover facts in addition to or different from those which he, she or
it now knows or believes to be true with respect to the subject matter of the Released Claims, but
the Lead Plaintiff shall expressly and each Class Member, upon the Effective Date, shall be deemed
to have, and by operation of the Judgment shall have, fully, finally, and forever settled and
released any and all Released Claims, known or unknown, suspected or unsuspected, disclosed or
undisclosed, contingent or non-contingent, liquidated or unliquidated, matured or unmatured,
accrued or unaccrued, apparent or unapparent, whether or not concealed or hidden, which now exist,
or heretofore have existed, or arise hereafter upon any theory of law or equity now existing or
coming into existence in the future, (including, but not limited to, any claims arising under
federal, state or foreign statutory or common law, including the federal securities laws and any
state statutory disclosure law, claims relating to alleged fraud, breach of any duty or rule,
negligence or otherwise, intentional conduct, actions with and without malice, and any claims
related to alleged unjust enrichment or self-dealing), and without regard to the subsequent
discovery or existence of such different or additional facts. The Lead Plaintiff acknowledges, and
the Class Members shall be deemed by operation of the Judgment to have acknowledged, that the
foregoing waiver was separately bargained for and a key element of the settlement of which this
release is a part.




      



			
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     2. The Settlement



          a. The Settlement Fund




     2.1 Defendants agree to the payment by their insurance carriers of $3,500,000 in settlement
consideration. The principal amount of $3.5 million in cash shall be paid to the Escrow Agent
within 20 calendar days after the Court enters the Notice Order as defined in ¶ 3.1 below. If the
agreed upon amount is not paid on or before the above date, interest will accrue at 8% per annum
from the date due until the date the $3.5 million is paid to the Escrow Agent.



          b. The Escrow Agent




     2.2 The Escrow Agent shall invest the Settlement Fund deposited pursuant to ¶2.1 hereof in
instruments backed by the full faith and credit of the United States Government or fully insured by
the United States Government or an agency thereof and shall reinvest the proceeds of these
instruments as they mature in similar instruments at their then-current market rates. All risks
related to the investment of the Settlement Fund shall be borne by the Settlement Fund. Defendants
and their Related Parties are not in any way responsible for such investments and bear no risk
whatsoever relating to such investments.



     2.3 The Escrow Agent shall not disburse the Settlement Fund except as provided in the
Stipulation, by an order of the Court, or with the written agreement of counsel for Defendants.



     2.4 Subject to further order(s) and/or directions as may be made by the Court, or as provided
in the Stipulation, the Escrow Agent is authorized to execute such transactions as are consistent
with the terms of the Stipulation.



     2.5 All funds held by the Escrow Agent shall be deemed and considered to be in custodia legis
of the Court, and shall remain subject to the jurisdiction of the Court, until such time as such
funds shall be distributed pursuant to the Stipulation and/or further order(s) of the Court.



     2.6 Within five (5) days after payment of the Settlement Fund to the Escrow Agent pursuant ¶2.1 hereof, the Escrow Agent may establish a “Notice and
 Administration Fund,” and may deposit up to
$100,000 from the Settlement Fund in it. The Notice and Administration Fund may be
used by Lead Counsel to pay costs and expenses reasonably and actually incurred in connection
with providing notice to the Class, locating Class Members, assisting with the filing of claims,



      



			
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administering and distributing the Settlement Fund to Authorized Claimants, processing Proof of
Claim and Release forms and paying escrow fees and costs, if any. The Notice and Administration
Fund shall also be invested and earn interest as provided for in ¶2.2 of this Stipulation.




             c. Taxes




     2.7 (a) The Settling Parties and the Escrow Agent agree to treat the Settlement Fund as being
at all times a “qualified settlement fund” within the meaning of Treas. Reg. §1.468B-1. In
addition, the Escrow Agent shall timely make such elections as necessary or advisable to carry out
the provisions of this ¶2.7, including the “relation-back election” (as defined in Treas. Reg.
§1.468B-1) back to the earliest permitted date. Such elections shall be made in compliance with
the procedures and requirements contained in such regulations. It shall be the responsibility of
the Escrow Agent to timely and properly prepare and deliver the necessary documentation for
signature by all necessary parties, and thereafter to cause the appropriate filing to occur.



          (b) For the purpose of §468B of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, the “administrator” shall be the Escrow Agent. The Escrow
Agent shall timely and properly file all informational and other tax returns necessary or advisable
with respect to the Settlement Fund (including without limitation the returns described in Treas.
Reg. §1.468B-2(k)). Such returns (as well as the election described in ¶2.7(a) hereof) shall be
consistent with this ¶2.7 and in all events shall reflect that all Taxes (including any estimated
Taxes, interest or penalties) on the income earned by the Settlement Fund shall be paid out of the
Settlement Fund as provided in ¶2.7(c) hereof.




          (c) All (a) Taxes (including any estimated Taxes, interest or penalties) arising with respect
to the income earned by the Settlement Fund, including any Taxes or tax detriments that may be
imposed upon the Defendants or their Related Parties or counsel with respect to any income earned
by the Settlement Fund for any period during which the Settlement Fund does not qualify as a
“qualified settlement fund” for federal or state income tax purposes (“Taxes”), and (b) expenses
and costs incurred in connection with the operation and implementation of this ¶2.7 (including,
without limitation, expenses of tax attorneys and/or accountants and mailing and distribution costs
and expenses relating to filing (or failing to file) the returns described in this ¶2.7) (“Tax
Expenses”), shall




      



			
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be paid out of the Settlement Fund; in all events the Defendants and their Related Parties and
counsel shall have no liability or responsibility for the Taxes or the Tax Expenses. The Settlement
Fund shall indemnify and hold each of the Defendants and their Related Parties and counsel harmless
for Taxes and Tax Expenses (including, without limitation, Taxes payable by reason of any such
indemnification). Further, Taxes and Tax Expenses shall be treated as, and considered to be, a cost
of administration of the Settlement Fund and shall be timely paid by the Escrow Agent out of the
Settlement Fund without prior order from the Court and the Escrow Agent shall be authorized
(notwithstanding anything herein to the contrary) to withhold from distribution to Authorized
Claimants any funds necessary to pay such amounts including the establishment of adequate reserves
for any Taxes and Tax Expenses (as well as any amounts that may be required to be withheld under
Treas. Reg. §1.468B-2(1)(2)); neither the Defendants nor their Related Parties or counsel are
responsible nor shall they have any liability therefor. The parties hereto agree to cooperate with
the Escrow Agent, each other, and their tax attorneys and accountants to the extent reasonably
necessary to carry out the provisions of this ¶2.7.




          (d) For the purpose of this ¶2.7, references to the Settlement Fund shall include both the
Settlement Fund and the Notice and Administration Fund and shall also include any earnings
thereon.




          d. Termination of Settlement




     2.8 In the event that the Stipulation is not approved or the Stipulation is terminated,
canceled, or fails to become effective for any reason, the Settlement Fund (including accrued
interest) less expenses paid, incurred or due and owing in connection with the settlement provided
for herein, shall be refunded to the Defendants’ insurance carriers based on their respective
contributions to the Settlement Fund.



     3. Notice Order and Settlement Hearing



     3.1 Promptly after execution of the Stipulation, the Settling Parties shall submit the
Stipulation together with its Exhibits to the Court and shall apply for entry of an order (the
“Notice Order”), substantially in the form of Exhibit A attached hereto, requesting, inter alia,
the preliminary approval of the settlement set forth in the Stipulation, and approval for the
mailing of a settlement



      



			
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notice (the “Notice”) and publication of a summary notice, substantially in the forms of Exhibits
A-l and A-3 attached hereto. The Notice shall include the general terms of the settlement set
forth in the Stipulation, the proposed Plan of Allocation, the general terms of the Fee and
Expense Application as defined in ¶ 6.1 hereof and the date of the Settlement Hearing as defined
below.




     3.2 Lead Counsel shall request that after notice is given, the Court hold a hearing (the
“Settlement Hearing”) and approve the settlement of the Litigation as set forth herein. At or
after the Settlement Hearing, Lead Counsel also will request that the Court approve the proposed
Plan of Allocation and the Fee and Expense Application and the Lead Plaintiff’s request for
reimbursement of expenses.



     4. Releases



     4.1
Upon the Effective Date, as defined in ¶ 1.7 hereof, the Lead Plaintiff and each of the
Class Members shall be deemed to have, and by operation of the Judgment shall have, fully, finally,
and forever released, relinquished and discharged all Released Claims against the Released Persons,
whether or not such Class Member executes and delivers the Proof of Claim and Release.



     4.2 The Proof of Claim and Release to be executed by Class Members shall release all Released
Claims against the Released Persons and shall be substantially in the form contained in Exhibit A-2
attached hereto.



     4.3
Upon the Effective Date, as defined in ¶ 1.7 hereof, each of the Released Persons shall be
deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released,
relinquished and discharged each and all of the Class Members and counsel to the Lead Plaintiff
from all claims (including Unknown Claims), arising out of, relating to, or in connection with the
institution, prosecution, assertion, settlement or resolution of the Litigation or the Released
Claims.



     5. Administration and Calculation of Claims and Supervision and Distribution of the Settlement Fund



     5.1 The Claims Administrator, subject to such supervision and direction of the Court as may
be necessary or as circumstances may require, shall administer and calculate the claims submitted
by Class Members and shall oversee distribution of the Net Settlement Fund (defined
below) to Authorized Claimants.



      



			
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     5.2 The Settlement Fund shall be applied as follows:



          (a) to pay counsel to the Lead Plaintiff attorneys’ fees and expenses with interest thereon
(the ‘Fee and Expense Award’), and to reimburse the Lead Plaintiff for his expenses, if and to the
extent allowed by the Court;




          (b) to pay all the costs and expenses reasonably and actually incurred in connection with
providing notice, locating Class Members, assisting with the filing of claims, administering and
distributing the Settlement Fund to Authorized Claimants, processing Proof of Claim and Release
forms and paying escrow fees and costs, if any;




          (c) to
pay the Taxes and Tax Expenses described in ¶ 2.7 hereof; and




          (d) to distribute the balance of the Settlement Fund (the “Net Settlement Fund”) to Authorized
Claimants as allowed by the Stipulation, the Plan of Allocation, or the Court.




     5.3 Upon the Effective Date and thereafter, and in accordance with the terms of the
Stipulation, the Plan of Allocation, or such further approval and further order(s) of the Court as
may be necessary or as circumstances may require, the Net Settlement Fund shall be distributed to
Authorized Claimants, subject to and in accordance with the following.



     5.4 Within ninety (90) days after the mailing of the Notice or such other time as may be set
by the Court, each Person claiming to be an Authorized Claimant shall be required to submit to the
Claims Administrator a completed Proof of Claim and Release, substantially in the form of Exhibit
A-2 attached hereto, signed under penalty of perjury and supported by such documents as are
specified in the Proof of Claim and Release and as are reasonably available to the Authorized
Claimant.



     5.5 Except as otherwise ordered by the Court, all Class Members who fail to timely submit a
Proof of Claim and Release within such period, or such other period as may be ordered by the Court,
or otherwise allowed, shall be forever barred from receiving any payments pursuant to the
Stipulation and the settlement set forth herein, but will in all other respects be subject to and
bound by the provisions of the Stipulation, the releases contained herein, and the Judgment.
Notwithstanding the foregoing, Lead Counsel shall have the discretion to accept late-submitted



      



			
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claims for processing by the Claims Administrator so long as distribution of the Net Settlement
Fund is not materially delayed thereby.




     5.6 The Net Settlement Fund shall be distributed to the Authorized Claimants substantially in
accordance with the Plan of Allocation set forth in the Notice and approved by the Court. If there
is any balance remaining in the Net Settlement Fund after six (6) months from the initial date of
distribution of the Net Settlement Fund (whether by reason of tax refunds, uncashed checks or
otherwise), Lead Counsel shall, if feasible, reallocate such balance among Authorized Claimants in
an equitable and economic fashion. Thereafter, any balance which still remains in the Net
Settlement Fund shall be donated to an appropriate non-profit organization.



     5.7 The Defendants and their Related Parties shall have no responsibility for, interest in, or
liability whatsoever with respect to the distribution of the Net Settlement Fund, the Plan of
Allocation, the determination, administration, or calculation of claims, the payment or withholding
of Taxes, or any losses incurred in connection therewith.



     5.8 No Person shall have any claim against Lead Counsel or the Claims Administrator, or other
Person designated by Lead Counsel, or Defendants or their counsel based on the distributions made
substantially in accordance with the Stipulation and the settlement contained herein, the Plan of
Allocation, or further order(s) of the Court.



     5.9 It is understood and agreed by the Settling Parties that any proposed Plan of Allocation
of the Net Settlement Fund including, but not limited to, any adjustments to an Authorized
Claimant’s claim set forth therein, is not apart of the Stipulation and is to be considered by the
Court separately from the Court’s consideration of the fairness, reasonableness and adequacy of the
settlement set forth in the Stipulation, and any order or proceeding relating to the Plan of
Allocation shall not operate to terminate or cancel the Stipulation or affect the finality of the
Court’s Judgment approving the Stipulation and the settlement set forth therein, or any other
orders entered pursuant to the Stipulation.



      



			
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     6. Lead Plaintiff’s Counsel’s Attorneys’ Fees and Reimbursement of
Expenses



     6.1 Counsel to the Lead Plaintiff may submit an application or applications (the “Fee and
Expense Application”) for distributions from the Settlement Fund for: (a) an award of attorneys’
fees; (b) reimbursement of actual expenses incurred in connection with prosecuting the Litigation;
and (c) any interest on such attorneys’ fees and expenses at the same rate and for the same periods
as earned by the Settlement Fund (until paid), as may be awarded by the Court. Lead Counsel reserve
the right to make additional applications for fees and expenses incurred.



     6.2 The fees and expenses, as awarded by the Court, shall be paid to Lead Counsel from the
Settlement Fund, as ordered, immediately after the Court executes an order awarding such fees and
expenses. Such counsel may thereafter allocate the attorneys’ fees among other plaintiff’s counsel
in a manner in which they in good faith believe reflects the contributions of such counsel to the
initiation, prosecution and resolution of the Litigation. In the event that the Effective Date does
not occur, or the Judgment or the order making the Fee and Expense Award is reversed or modified,
or the Stipulation is canceled or terminated for any other reason, and in the event that the Fee
and Expense Award has been paid to any extent, then such plaintiff’s counsel who have received any
portion of the Fee and Expense Award shall within five (5) business days from receiving notice from
Defendants’ counsel or from a court of appropriate jurisdiction, refund to the Settlement Fund such
fees and expenses previously paid to them from the Settlement Fund plus interest thereon at the
same rate as earned on the Settlement Fund in an amount consistent with such reversal or
modification. Each such plaintiff’s counsel’s law firm receiving fees and expenses, as a condition
of receiving such fees and expenses, on behalf of itself and each partner and/or shareholder of it,
agrees that the law firm and its partners and/or shareholders are subject to the jurisdiction of
the Court for the purpose of enforcing the provisions of this paragraph. Without limitation,
plaintiff’s counsel and their partners agree that the Court may, upon application of Defendants and
notice to Lead Counsel, summarily issue orders including, but not limited to, judgments and
attachment orders, and may make appropriate findings of or sanctions for contempt, should such law
firm fail timely to repay fees and expenses pursuant to this ¶ 6.2.



      



			
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     6.3 Lead Plaintiff may submit an application for reimbursement of his time and expenses
incurred in the prosecution of the Litigation.



     6.4 The procedure for and the allowance or disallowance by the Court of any applications by
any plaintiff’s counsel for attorneys’ fees and expenses, or the expenses of the Lead Plaintiff, to
be paid out of the Settlement Fund, are not part of the settlement set forth in the Stipulation,
and are to be considered by the Court separately from the Court’s consideration of the fairness,
reasonableness and adequacy of the settlement set forth in the Stipulation, and any order or
proceeding relating to the Fee and Expense Application, or the Lead Plaintiff’s expense application,
or any appeal from any order relating thereto or reversal or modification thereof, shall not
operate to terminate or cancel the Stipulation, or affect or delay the finality of the Judgment
approving the Stipulation and the settlement of the Litigation set forth therein.



     6.5 Defendants and their Related Parties shall have no responsibility for any payment of
attorneys’ fees and expenses to plaintiff’s counsel or to Lead Plaintiff over and above payment to
the Settlement Fund.



     6.6 Defendants and their Related Parties shall have no responsibility for the allocation among
plaintiff’s counsel, and/or any other Person who may assert some claim thereto (including without
limitation Lead Plaintiff), of any Fee and Expense Award that the Court may make in the Litigation,
and Defendants and their respective Related Parties take no position with respect to such matters.



     7. Conditions of Settlement, Effect of Disapproval,
Cancellation or Termination



     7.1 The Effective Date of the Stipulation shall be conditioned on the occurrence of all
of the following events:



          (a) Defendants’ insurance carriers have timely made their contributions to the Settlement Fund
as required by ¶2.1 hereof;




          (b) Defendants
have not exercised their option to terminate the Stipulation pursuant to ¶7.3
hereof;




          (c) the
Court has entered the Notice Order, as required by ¶3.1 hereof;




      



			
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          (d) the Court has entered the Judgment, or a judgment substantially in the form of Exhibit B
attached hereto; and




          (e) the
Judgment has become Final, as defined in ¶ 1.10 hereof.




     7.2
Upon the occurrence of all of the events referenced in ¶ 7.1 hereof, any and all remaining
interest or right of Defendants in or to the Settlement Fund, if any, shall be absolutely and
forever extinguished. If all of the conditions specified in ¶ 7.1 hereof are not met, then the
Stipulation shall be canceled and terminated subject to ¶ 7.4 hereof unless Lead Counsel and counsel
for the Defendants mutually agree in writing to proceed with the Stipulation.



     7.3 Defendants shall have the option to terminate the settlement in the event that Class
Members who purchased or acquired more than a certain number of shares of ESST publicly traded
securities during the Class Period choose to exclude themselves from the Class, as set forth in a
separate agreement (the ‘Supplemental Agreement”) executed between Lead Counsel and Defendants’
counsel.



     7.4 Unless otherwise ordered by the Court, in the event the Stipulation shall terminate, or be
canceled, or shall not become effective for any reason, within five (5) business days after written
notification of such event is sent by counsel for Defendants or Lead Counsel to the Escrow Agent,
the Settlement Fund (including accrued interest), plus any amount then remaining in the Notice and
Administration Fund (including accrued interest), less expenses which have either been disbursed
pursuant to ¶¶ 2.6 and 2.7 hereof, or are determined to be chargeable to the Notice and Administration
Fund, shall be refunded by the Escrow Agent pursuant to written instructions from Defendants’
counsel. At the request of counsel for the Defendants, the Escrow Agent or its designee shall apply
for any tax refund owed on the Settlement Fund and pay the proceeds, after deduction of any fees or
expenses incurred in connection with such application(s) for refund, at the written direction of
counsel to the Defendants.



     7.5 In the event that the Stipulation is not approved by the Court or the settlement set forth
in the Stipulation is terminated or fails to become effective in accordance with its terms, the
Settling Parties shall be restored to their respective positions in the Litigation as of November
11, 2006. In such event, the terms and provisions of the Stipulation,
with the exception of ¶¶ l.1-1.22,



      



			
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2.6, 2.7, 7.4-7.6, 8.3 and 8.4 hereof, shall have no further force or effect with respect to the
Settling Parties and shall not be used in this Litigation or in any other proceeding for any
purpose, and any judgment or order entered by the Court in accordance with the terms of the
Stipulation shall be treated as vacated, nunc pro tunc. No order of the Court or modification or
reversal on appeal of any order of the Court concerning the Plan of Allocation or the amount of
any attorneys’ fees, costs, expenses and interest awarded by the Court to any of plaintiff’s
counsel or expenses to the Lead Plaintiff shall constitute grounds for cancellation or termination
of the Stipulation.





     7.6 If the Effective Date does not occur, or if the Stipulation is terminated pursuant to its
terms, neither the Lead Plaintiff nor any of his counsel shall have any obligation to repay any
amounts actually and properly disbursed from the Notice and Administration Fund. In addition, any
expenses already incurred and properly chargeable to the Notice and
Administration Fund pursuant to ¶2.6 hereof at the time of such termination or cancellation but which have not been paid, shall be
paid by the Escrow Agent in accordance with the terms of the Stipulation prior to the balance being
refunded in accordance with ¶¶2.8 and 7.4 hereof.



     7.7 If a case is commenced with respect to any Defendant under Title 11 of the United States
Code (Bankruptcy), or a trustee, receiver or conservator is appointed under any similar law, and in
the event of the entry of a final order of a court of competent jurisdiction determining the
transfer of the Settlement Fund, or any portion thereof, by or on behalf of such Defendant to be a
preference, voidable transfer, fraudulent transfer or similar transaction, then, at Lead Plaintiff’s
option, as to such Defendant, the releases given and Judgment entered in favor of such Defendant
pursuant to this Stipulation shall be null and void, or, alternatively, Lead Plaintiff may
terminate the entire settlement as to all Defendants.



     7.8 Each of the Defendants warrants and represents that he, she or it is not “insolvent”
within the meaning of 11 U.S.C. §101(32) as of the time this Stipulation is executed and as of the
time any payments are transferred or made as required by this Stipulation.



     8. Miscellaneous Provisions



     8.1 The Settling Parties (a) acknowledge that it is their intent to consummate this
agreement; and (b) agree to cooperate to the extent reasonably necessary to effectuate and
implement



      



			
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all terms and conditions of the Stipulation and to exercise their best efforts to accomplish the
foregoing terms and conditions of the Stipulation.




     8.2 The Settling Parties intend this settlement to be a final and complete resolution of all
disputes between them with respect to the Litigation. The settlement compromises claims which are
contested and shall not be deemed an admission by any Settling Party as to the merits of any claim
or defense. The Final Judgment will contain a finding, during the course of the Litigation, the
parties and their respective counsel at all times complied with the requirements of Federal Rule of
Civil Procedure 11. The Settling Parties agree that the amount paid to the Settlement Fund and the
other terms of the settlement were negotiated in good faith by the Settling Parties, and reflect a
settlement that was reached voluntarily after consultation with competent legal counsel. The
Settling Parties reserve their right to rebut, in a manner that such party determines to be
appropriate, any contention made in any public forum that the Litigation was brought or defended in
bad faith or without a reasonable basis.



     8.3 Neither the Stipulation nor the settlement contained therein, nor any act performed or
document executed pursuant to or in furtherance of the Stipulation or the settlement: (a) is or may
be deemed to be or may be used as an admission of, or evidence of, the validity of any Released
Claim, or of any wrongdoing or liability of the Defendants; or (b) is or may be deemed to be or may
be used as an admission of, or evidence of, any fault or omission of any of the Defendants in any
civil, criminal or administrative proceeding in any court, administrative agency or other tribunal.
Defendants may file the Stipulation and/or the Judgment in any action that may be brought against
them in order to support a defense or counterclaim based on principles of res judicata, collateral
estoppel, release, good faith settlement, judgment bar or reduction or any other theory of claim
preclusion or issue preclusion or similar defense or counterclaim.



     8.4 All agreements made and orders entered during the course of the Litigation relating to the
confidentiality of information shall survive this Stipulation.



     8.5 All of the Exhibits to the Stipulation are material and integral parts hereof and are
fully incorporated herein by this reference.



      



			
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     8.6 The Stipulation may be amended or modified only by a written instrument signed by or on
behalf of all Settling Parties or their respective successors-in-interest.



     8.7 The Stipulation and the Exhibits attached hereto and the Supplemental Agreement constitute
the entire agreement among the parties hereto and no representations, warranties or inducements
have been made to any party concerning the Stipulation or its Exhibits or the Supplemental
Agreement other than the representations, warranties and covenants contained and memorialized in
such documents. Except as otherwise provided herein, each party shall bear its own costs.



     8.8 Lead Counsel, on behalf of the Class, are expressly authorized by the Lead Plaintiff to
take all appropriate action required or permitted to be taken by the Class pursuant to the
Stipulation to effectuate its terms and also are expressly authorized to enter into any
modifications or amendments to the Stipulation on behalf of the Class which they deem appropriate.



     8.9 Each counsel or other Person executing the Stipulation or any of its Exhibits on behalf of
any party hereto hereby warrants that such Person has the full authority to do so.



     8.10 The Stipulation may be executed in one or more counterparts. All executed counterparts
and each of them shall be deemed to be one and the same instrument. A complete set of original
executed counterparts shall be filed with the Court.



     8.11 The Stipulation shall be binding upon, and inure to the benefit of, the successors and
assigns of the parties hereto.



     8.12 The Court shall retain jurisdiction with respect to implementation and enforcement of the
terms of the Stipulation, and all parties hereto submit to the jurisdiction of the Court for
purposes of implementing and enforcing the settlement embodied in the Stipulation.



     8.13 This Stipulation and the Exhibits hereto shall be considered to have been negotiated,
executed and delivered, and to be wholly performed, in the State of California, and the rights and
obligations of the parties to the Stipulation shall be construed and enforced in accordance with,
and governed by, the internal, substantive laws of the State of California without giving effect to
that State’s choice-of-law principles.



      



			
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     IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be executed, by their
duly authorized attorneys, dated as of November 12, 2006.



LERACH COUGHLIN STOIA GELLER

     RUDMAN & ROBBINS LLP

PATRICK J. COUGHLIN

JOHN K. GRANT

LUKE O. BROOKS

100 Pine Street, Suite 2600

San Francisco, CA 94111

Telephone: 415/288-4545

415/288-4534 (fax)




LERACH COUGHLIN STOIA GELLER

     RUDMAN & ROBBINS LLP

WILLIAM S. LERACH

JOY ANN BULL




	 	 	 	 	 
	 

	 	/s/ JOY ANN BULL
 

JOY ANN BULL
	 	 






655 West Broadway, Suite 1900

San Diego, CA 92101

Telephone: 619/231-1058

619/231-7423 (fax)




Lead Counsel for Plaintiffs




SCOTT & SCOTT, LLC

DAVID R. SCOTT

108 Norwich Avenue

Colchester, CT 06415

Telephone: 860/537-3818

860/537-4432 (fax)




GLANCY & BINKOW LLP

LIONEL Z. GLANCY

KEVIN RUF

1801 Avenue of the Stars, Suite 311

Los Angeles, CA 90067

Telephone: 310/201-9150

310/201-9160 (fax)




Counsel for Plaintiffs




      



			
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O’MELVENY & MYERS LLP

MEREDITH N. LANDY

JOSHUA D. BAKER




	 	 	 	 	 
	 

	 	/s/ Meredith N. Landy
 

                  MEREDITH N. LANDY
	 	 






2765 Sand Hill Road

Menlo Park, CA 94025

Telephone: 650/473-2600

650/473-2601 (fax)




Counsel for Defendants




      



			
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CERTIFICATE OF SERVICE




     I hereby certify that on April 30, 2007, I electronically filed the foregoing with the Clerk
of the Court using the CM/ECF system which will send notification of such filing to the e-mail
addresses denoted on the attached Electronic Mail Notice List, and I hereby certify that I have
mailed the foregoing document or paper via the United States Postal Service to the non-CM/ECF
participants indicated on the attached Manual Notice List.



     I further certify that I caused this document to be forwarded to the following designated
Internet site at: http://securities.lerachlaw.com/.



     I certify under penalty of perjury under the laws of the United States of America that the
foregoing is true and correct. Executed on April 30, 2007.



	 	 	 	 	 
	 

	 	s/ Joy Ann Bull
 

JOY ANN BULL
	 	 






LERACH COUGHLIN STOIA GELLER

     RUDMAN & ROBBINS LLP 
655 West Broadway, Suite 1900

San Diego, CA 92101-3301

Telephone: 619/231-1058

619/231-7423 (fax)




E-mail: Joyb@lerachlaw. com




 









 





Mailing Information for a Case 5:02-cv-04497-RMW



Electronic Mail Notice List



The following are those who are currently on the list to receive e-mail notices for this case.





	 	•	 	Jeffrey S. Abraham
	 
	 	•	 	Joshua D. Baker

jbaker@omm.com lnewell@omm.com
	 
	 	•	 	Eric J. Belfi

ebelfi@labaton.com ElectronicCaseFiling@labaton.com
	 
	 	•	 	Luke O Brooks

lukeb@lerachlaw.com e_file_sf@lerachlaw.com
	 
	 	•	 	Patrick J. Coughlin

patc@lerachlaw.com e_file_sf@lerachlaw.com
	 
	 	•	 	Dario DeGhetaldi

deg@coreylaw.com
	 
	 	•	 	Dale M. Edmondson

dedmondson@omm.com

dbrown@omm.com;lhabbeshaw@omm.com;rbrown@omm.com;sfolchi@omm.com;jbaker@omn
	 
	 	•	 	Sara May Folchi

sfolchi@omm.com lnewell@omm.com
	 
	 	•	 	Lionel Z. Glancy

info@glancylaw.com
	 
	 	•	 	Michael M. Goldberg

info@glancylaw.com
	 
	 	•	 	John K. Grant

johnkg@lerachlaw.com

e_file_sf@lerachlaw.com;e_file_sd@lerachlaw.com;KiyokoH@lerachlaw.com;cwood@lerachlaw
	 
	 	•	 	Robert A. Jigarjian

CAND.USCOURTS@CLASSCOUNSEL.COM
	 
	 	•	 	Reed R. Kathrein

reed@hbsslaw.com nancyq@hbsslaw.com
	 
	 	•	 	Meredith N. Landy

mlandy@omm.com

dfurbush@omm.com;dbrown@omm.com;lhabbeshaw@omm.com;dedmondson@omm.com;jbake




 









 






	 	•	 	William S. Lerach

e_file_sd@lerachlaw.com
	 
	 	•	 	Thomas D. Mauriello

tomm@maurlaw.com
	 
	 	•	 	Jerry E. Nastari

jen@coreylaw.com deg@coreylaw.com
	 
	 	•	 	Jeffrey S. Nobel

firm@snlaw.net
	 
	 	•	 	Ira M. Press

ipress@kmslaw.com lmorris@kmslaw.com
	 
	 	•	 	Darren J. Robbins
	 
	 	•	 	Lori E. Romley

lromley@omm.com dbrown@omm.com
	 
	 	•	 	Kevin Ruf

info@glancylaw.com
	 
	 	•	 	Andrew M. Schatz

firm@snlaw.net
	 
	 	•	 	David R. Scott

drscott@scott-scott.com
	 
	 	•	 	Evan Jason Smith

esmith@brodsky-smith.com





Manual Notice List



The
following is the list of attorneys who are not on the list to receive e-mail notices for this
case (who therefore require manual noticing). You may wish to use your mouse to select and copy
this list into your word processing program in order to create notices or labels for these
recipients.




Howard K. Coates

Cauley Geller Bowman & Coates LLP

One Boca Place, Suite 421A

2255 Glades Road
Boca
Raton, FL 33431




George R. Corey

Corey Luzaich Pliska De Ghetaldi Nastari

700 El Camino Real

P.O. Box 669

Millbrae, CA 94030-0669




Kenneth A. Elan

Law Offices of Kenneth A. Elan




 









 





217 Broadway

Suite 404

New York, NY 10007




Brian M. Felgoise

Law Offices of Brian M. Felgoise

230 South Broad Street

Suite 404

Philadelphia, PA 19102




Joshua M. Lifshitz

Bull & Lifshitz, LLP

246 West 38th Street

New York, NY 10018




Laurence D. Paskowitz

Abraham & Paskowitz

60 East 42nd Street

New York, NY 10165




Jack Reise

Cauley Geller Bowman & Coates LLP

One Boca Place, Suite 421A

2255 Glades Road

Boca Raton, FL 33431




Amanda L. Riddle

Corey Luzaich Pliska De Ghetaldi Nastari

700 El Camino Real

P.O. Box 669

Millbrae, CA 94030-0669




Daniel S. Sommers

Cohen Milstein Hausfeld & Toll P.L.L.C.

1100 New York Avenue N.W.

West Tower, Suite 500

Washington, DC 20005




Steven J. Toll

Cohen Milstein Hausfeld & Toll, P.L.L.C.

1100 New York Avenue, N. W.

West Tower, Suite 500

Washington, DC 20005-3964




 









 





ESS Technology, Inc.

Manual Service List
 




Kip B. Shuman

Shuman & Berens LLP

801 East 17th Avenue

Denver, CO 80218




Marc A. Topaz

Schiffrin, Barroway, Topaz & Kessler, LLP

280 King of Prussia Road

Radnor, PA 19087