Document:

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                                                                 Exhibit 10.17.2

                               CONTRACT OF SERVICE

                                     between

                               POET Software GmbH
                               hereafter "Company"
  represented by the Shareholders' Meeting, this in turn represented by all of
                                the shareholders

                                       and

                                Mr. Ludwig Lutter
                           hereafter "General Manager"

                                    Section 1

                                    ACTIVITY

1.    By Shareholders' resolution on May 22, 2002 the shareholder appointed the
      General Manager to be General Manager. This appointment does not exclude
      the appointment of further General Managers.

2.    The General Manager shall conduct the business of the Company
      conscientiously with the care of a proper businessman and shall exercise
      in a responsible way the duties assigned to him by the law, articles of
      incorporation, contract and where necessary general codes of practice and
      rules of procedure. In particular he shall also obey the basic principles
      of the Company's business plan.

3.    The Managing Director's main activity comprises the responsible management
      and supervision of the Company including the initiation, co-ordination and
      execution of all procedures.

4.    When appointing additional General Managers, the tasks of the management
      can be specified by the Shareholders' Meeting. The Managing Director shall
      co-ordinate his activities with the other General Managers in a helpful
      and considerate manner.

                                    Section 2
                            SHAREHOLDERS' RESOLUTIONS

1.    The General Manager is bound by the resolutions of the Shareholders'
      Meeting.

2.    In particular, the Shareholders' Meeting can define general guidelines
      regarding the conduct of business transactions.

3.    Moreover theShareholders' Meeting can issue binding rules of procedure
      defining the demarcation of the areas of activity of the General Managers.

4.    Subject to further instructions by the Shareholders' Meeting, the
      management activities listed in Appendix 1 require the consent of the
      Shareholders' Meeting.

5.    Consent can already be granted in advance, including for individual groups
      of transactions. Inclusion in the adopted annual budget counts as consent,
      unless a reservation was attached to its adoption in this respect.

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                                    Section 3
                                    DURATION

1.    This Contract of Service begins on April 1, 2002 and is entered into for
      an unspecified period of time.

2.    It ends at the latest with the expiry of the month in which the General
      Manager completes the 60th year of his life.

                                    Section 4
                              TERMINATION/DISMISSAL

1.    Regular termination

      Both parties can terminate this contract with a period of notice of 6
      (six) months to the end of each calendar-month-year.

      In case of doubt, the dismissal of the General Manager according to
      shareholdership law, which can take place at any time, shall be
      interpreted as termination of this contract at the next possible time.

2.    Extraordinary termination

      The termination of this contract for serious reason remains unaffected. A
      serious reason for the Company exists in particular if the Managing
      Director violates the provisions of this contract or the restrictions
      concerning management that are imposed on him in the internal
      relationship.

3.    Leave of absence

      In every case of termination and independently of the effectiveness of the
      termination, and subject to his other rights, the Company can give the
      General Manager leave of absence from his activity for the Company.

4.    Termination of the contract must be in writing.

                                    Section 5
                             POWER OF REPRESENTATION

1.    The General Manager represents the Company (alongside the other General
      Managers where necessary) legally and extrajudicially in accordance with
      the conditions of his appointment and the articles of incorporation.

2.    The General Manager shall obey the restrictions imposed on him by this
      contract, the articles of incorporation, the law, an instruction or a
      resolution by the Shareholders' Meeting.

                                    Section 6
                                  REMUNERATION

1.    The General Manager shall receive as remuneration for his work an annual
      gross salary amounting to EURO 95,049.00 payable in conformity with the
      statutory deductions in 12 equal instalments, each at the end of every
      calendar month.

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2.    At the beginning and end of this Service Contract, the remuneration will
      be paid pro rata temporis (= in proportion to time).

3.    No employer's pension commitment exists.

4.    The remuneration according to this provision is the settlement for the
      entire activity by the General Manager, in particular where necessary also
      that for subsidiary, part-owned or other companies or on Sundays and
      public holidays. Insofar as the General Manager receives remunerations for
      such activities directly from the companies involved, these shall be
      off-set against the remuneration according to this contract, except as
      expressly agreed otherwise.

                                    Section 7
                                 OTHER BENEFITS

1.    For the duration of this contract the Company shall make available to the
      General Manager a company car in the superior middle category, which he
      can also use privately. The income tax on the monetary value benefit of
      private use shall be borne by the General Manager. Section 12 applies
      accordingly.

2.    The Company shall insure the General Managers against accident to the
      usual and appropriate amount.

3.    The Company is obliged to refund to the General Manager necessary and
      appropriate expenses, including travel and hospitality costs, in
      accordance with the company's internal guidelines were necessary. In each
      individual case the expenses shall be proved in accordance with the tax
      regulations, except where permitted fixed rate amounts are accounted
      pursuant to the tax regulations.

4.    The General Manager has an entitlement to a capital sum (endowment) life
      insurance (direct insurance) in accordance with the provisions of Section
      40 b of the EStG (Income Tax Law).

                                    Section 8
                                     HOLIDAY

1.    The General Manager is entitled to an annual holiday of 28 working days.

2.    If necessary, the time of the holiday shall be mutually agreed with the
      other General Managers and with the Shareholders' Meeting, the Company's
      needs being safeguarded.

3.    The holiday entitlement expires at the latest on 31st March of the
      following year. There is no entitlement to compensation for days of
      holiday that are not taken.

                                    Section 9
             CONTINUATION OF SALARY PAYMENT IN THE EVENT OF ILLNESS

1.    In the event of illness or other impediment for which he is not to blame,
      the monthly remuneration (Section 6 Para. 1) will continue to be paid for
      a period of 6 months. The continuation of earnings shall take place until
      the termination of the Contract of Service at the latest.

2.    Any benefits from third parties, for example based on legal liability
      claims or sickness insurances, shall be off-set against the Company's
      performances to the extent that as a result of these (benefits from 3rd
      parties) and the Company's performances the net earnings

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      that the General Manager would have had according to Section 6 Paras. 1 to
      3 if he had not been unable to work are exceeded.

3.    If the General Manager dies during the term of the Service Contract, then
      where necessary his widow and his legitimate children provided that the
      latter have not yet completed the 25th year of their life and are still in
      pre-employment training, shall as joint creditors be entitled to the
      continuation of the monthly payment (Section 6 Para. 1) for the month of
      death and for the 3 following months. Para. 2 applies accordingly.

                                   Section 10
                          DUTIES, SECONDARY ACTIVITIES

1.    The General Manager shall put his entire working efforts and their results
      as well as the whole of his experience and knowledge at the sole disposal
      of the Company. The working hours are governed by the duties arising and
      amount to at least 40 hours per week.

2.    Every other employment aimed at earning income requires the prior written
      consent of the Shareholders' Meeting. The General Manager undertakes an
      obligation to give the Company advance notice of every secondary
      employment that may actually or possibly require permission.

3.    The written consent of the Shareholders' Meeting is also required in order
      to undertake honorary offices that cause a not inconsiderable expenditure
      of work, as well as for appointments to a supervisory board, association
      committee or similar institution. The same also applies to a scientific,
      authorship, consultancy or similar activity.

4.    The Shareholders' Meeting is permitted to refuse or, as is possible at any
      time, revoke its consent to a notified secondary activity only if the
      secondary activity involved, in itself or in conjunction with other
      secondary activities, gives reason to fear an impairment of the General
      Manager's activity for the Company or the Company's other needs.

5.    On the termination of the service relationship and/or at the time leave of
      absence is given in the case of premature leave of absence, the General
      Manager shall - in response to a resolution by the Shareholders' Meeting,
      give up all appointments that he undertook and/or carried out on the basis
      of his activity or in relation to his activity in the Company.

                                   Section 11
                         BUSINESS AND COMMERCIAL SECRETS

The General Manager undertakes an obligation to keep secret without reservation
all business and commercial secrets. The General Manager's obligation to
maintain secrecy continues to apply beyond the termination of the contractual
relationship.

                                   Section 12
                             SURRENDER OF DOCUMENTS

On the termination of this service contract and/or at the time leave of absence
is given in the case of leave of absence at an earlier time, the General Manager
is obliged to give back to the Company, without delay and unrequested, all
documents, recordings and other materials that are connected with his activity
as General Manager or affect the Company's affairs. The General Manager is not
entitled to exercise a right of retention on such items.

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                                   Section 13
                             INVENTIONS, COPYRIGHTS

1.    The General Manager shall provide the Company in advance with a written
      listing of all of the commercial proprietary rights and copyrights that
      belong to him or in which he has a power of disposal (in particular a
      licence) or any other kind of interest.

2.    Copyright and commercial proprietary rights, especially rights to
      inventions or technical improvements, which the General Manager has made
      or developed during his activity for the Company or in connection with his
      activity for the Company or based on experiences arising from his activity
      for the Company or based on the Company's work shall belong solely to the
      Company. The General Manager now already assigns all of the corresponding
      rights to the Company, which accepts this assignment. The Company is not
      obliged to pay any additional remuneration in this respect. In the absence
      of the General Manager's status as an employee, the Employee's Inventions
      Act shall not apply.

3.    Accordingly, the General Manager now already transfers to the Company,
      which accepts the transfer, the exclusive use free of charge of any
      copyrights arising in his person on any works created in connection with
      his activity or based on his experiences arising from his activity for the
      Company or based on the Company's works.

                                   Section 14
                              CONCLUDING PROVISIONS

1.    The parties assume, by agreement and without further checking by the
      Company, that the application documents submitted by the General Manager
      are correct and complete.

      This contract contains all of the agreements by the parties. Except where
      separately mentioned, no subsidiary agreements exist. Changes to the
      contract must be in writing in all cases, which also applies to the
      foregoing half-sentence.

2.    If individual provisions of this contract are or become ineffective, this
      does not affect the effectiveness of the other provisions. A ruling that
      approximates as closely as possible to the commercial purpose of the
      ineffective provision shall count as agreed in place of the ineffective
      provision. The same shall apply in the event that the contract contains
      loopholes.

3.    Insofar as permissible, the place of fulfilment and place of jurisdiction
      for all disputes that may possibly arise from this contract is the
      Company's registered office.

4.    All manifestations of intent by the General Manager that affect this
      contract shall be addressed to the Shareholders' Meeting. All of the
      rights reserved to the Shareholder's Meeting in this contract can where
      necessary be exercised by an advisory committee.

----------------------------------------
Place, Date, POET Holdings Inc.

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Place, Date, Ludwig Lutter

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APPENDIX 1: TRANSACTIONS REQUIRING CONSENT:

-     Calling in inpayments on original capital shares and surcharges

-     Consent to the splitting of participations

-     Appointment and dismissal of procurists and authorised agents for the
      entire business operation

-     Granting and termination of any sharings in the Company's profit,
      especially sleeping shareholder's interests, party legal relationships and
      bonuses.

-     Conclusion and termination of company premises leases, business management
      agreements and company transfer agreements and contracts that may result
      in a significant restriction of potential entrepreneurial activities by
      the Company.

-     Disposal of the Company's assets as a whole or a significant part of them

-     Founding and winding up companies or businesses, acquisition and disposal
      of holdings in other businesses, the conclusion, modification and
      termination of shareholdership agreements

-     The setting up, acquisition, closure and disposal of operations, partial
      operations or branches

-     The acquisition, disposal or charging of pieces of land and rights
      equivalent to pieces of land

-     The disposal of commercial proprietary rights and the conclusion or
      termination of patent, licence, know-how and co-operation contracts

-     The conclusion and termination of marketing/distribution contracts and the
      entering into of supply conditions

-     The taking of loans exceeding (individually or in total) ERRURO 25,000.-

-     Investments exceeding (individually or in total) EURO 25,000.- as well as
      investments leading to the budget being exceeded by more than 10%
      (individually or in total)

-     The initiation of development projects with a volume of (individually or
      in total) more than 0.5% of turnover but at least EURO 13,000.-

-     Provision of securities, issue of sureties and guarantees and entering
      into obligations arising from bills of exchange which (individually or in
      total) exceed EUR 50,000.-; the usual warranty for the Company's products
      is excepted.

-     Appointment and dismissal of employees, if their emolument exceeds 1.5
      times the respective contribution upper income limit in the pension
      insurance fund

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-     Consent to secondary activities by employees, insofar as the requirement
      for consent arises from the appointment relationship involved

-     Grant of retirement payment or pension commitments; any possible pension
      promises for General Managers or Shareholders, together with their costs
      to the Company shall be considered a part of salary

-     Entry into other contracts as a result of which the Company incurs
      expenses or obligations exceeding (individually or in total) EURO
      13,000.-, except for transfer transactions in the context of the normal
      course of business

-     Internal organisational changes of significant importance

-     Decisions concerning items whose result is comparable to one of the
      aforementioned points

-     All other unusual management actions

The aforementioned actions do not need the required consent insofar as they are
already included in an annual budget adopted without reservation.

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                                                                   EXHIBIT 10.48

                              ESS TECHNOLOGY, INC.

                           1995 EQUITY INCENTIVE PLAN

                          As Amended January 25, 2003

         1.       PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options, Restricted Stock and
Stock Bonuses. Capitalized terms not defined in the text are defined in Section
23.

         2.       SHARES SUBJECT TO THE PLAN.

                  2.1      NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2
and 18, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 3,000,000 Shares. Subject to Sections 2.2 and 18,
Shares that: (a) are subject to issuance upon exercise of an Option but cease to
be subject to such Option for any reason other than exercise of such Option; (b)
are subject to an Award granted hereunder but are forfeited or are repurchased
by the Company at the original issue price; or (c) are subject to an Award that
otherwise terminates without Shares being issued; will again be available for
grant and issuance in connection with future Awards under this Plan. At all
times the Company shall reserve and keep available a sufficient number of Shares
as shall be required to satisfy the requirements of all outstanding Options
granted under this Plan and all other outstanding but unvested Awards granted
under this Plan.

                  2.2      ADJUSTMENT OF SHARES. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.

         3.       ELIGIBILITY. ISOs (as defined in Section 5 below) may be
granted only to employees (including officers and directors who are also
employees) of the Company or of a Parent or Subsidiary of the Company. All other
Awards may be granted to employees, officers, directors, consultants,
independent contractors and advisors of the Company or any Parent, Subsidiary or
Affiliate of the Company; provided such consultants, contractors and advisors

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render bona fide services not in connection with the offer and sale of
securities in a capital-raising transaction. No person will be eligible to
receive more than 375,000 Shares in any calendar year under this Plan pursuant
to the grant of Awards hereunder, other than new employees of the Company or of
a Parent, Subsidiary or Affiliate of the Company (including new employees who
are also officers and directors of the Company or any Parent, Subsidiary or
Affiliate of the Company) who are eligible to receive up to a maximum of 750,000
Shares in the calendar year in which they commence their employment. A person
may be granted more than one Award under this Plan.

         4.       ADMINISTRATION.

                  4.1      COMMITTEE AUTHORITY. This Plan will be administered
by the Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:

                           (a)      construe and interpret this Plan, any Award
                                    Agreement and any other agreement or
                                    document executed pursuant to this Plan;

                           (b)      prescribe, amend and rescind rules and
                                    regulations relating to this Plan;

                           (c)      select persons to receive Awards;

                           (d)      determine the form and terms of Awards;

                           (e)      determine the number of Shares or other
                                    consideration subject to Awards;

                           (f)      determine whether Awards will be granted
                                    singly, in combination with, in tandem with,
                                    in replacement of, or as alternatives to,
                                    other Awards under this Plan or any other
                                    incentive or compensation plan of the
                                    Company or any Parent, Subsidiary or
                                    Affiliate of the Company;

                           (g)      grant waivers of Plan or Award conditions;

                           (h)      determining the vesting, exercisability and
                                    payment of Awards;

                           (i)      correct any defect, supply any omission or
                                    reconcile any inconsistency in this Plan,
                                    any Award or any Award Agreement;

                           (j)      determine whether an Award has been earned;
                                    and

                           (k)      make all other determinations necessary or
                                    advisable for the administration of this
                                    Plan.

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                  4.2      COMMITTEE DISCRETION. Any determination made by the
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under this Plan to Participants who are not Insiders
of the Company.

                  4.3      EXCHANGE ACT REQUIREMENTS. If two or more members of
the Board are Outside Directors, the Committee will be comprised of at least two
(2) members of the Board, all of whom are Outside Directors and Disinterested
Persons. During all times that the Company is subject to Section 16 of the
Exchange Act, the Company will take appropriate steps to comply with the
disinterested administration requirements of Section 16(b) of the Exchange Act,
which will consist of the appointment by the Board of a Committee consisting of
not less than two (2) members of the Board, each of whom is a Disinterested
Person.

         5.       OPTIONS. The Committee may grant Options to eligible persons
and will determine whether such Options will be Incentive Stock Options within
the meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the
number of Shares subject to the Option, the Exercise Price of the Option, the
period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:

                  5.1      FORM OF OPTION GRANT. Each Option granted under this
Plan will be evidenced by an Award Agreement which will expressly identify the
Option as an ISO or an NQSO ("Stock Option Agreement"), and will be in such form
and contain such provisions (which need not be the same for each Participant) as
the Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.

                  5.2      DATE OF GRANT. The date of grant of an Option will be
the date on which the Committee makes the determination to grant such Option,
unless otherwise specified by the Committee. The Stock Option Agreement and a
copy of this Plan will be delivered to the Participant within a reasonable time
after the granting of the Option.

                  5.3      EXERCISE PERIOD. Options will be exercisable within
the times or upon the events determined by the Committee as set forth in the
Stock Option Agreement governing such Option; provided, however, that no Option
will be exercisable after the expiration of ten (10) years from the date the
Option is granted; and provided further that no ISO granted to a person who
directly or by attribution owns more than ten person (10%) of the total combined
voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("Ten Percent Stockholder") will be exercisable after
the expiration of five (5) years from the date the ISO is granted. The Committee
also may provide for the exercise of Options to become exercisable at one time
or from time to time, periodically or otherwise, in such number of Shares or
percentage of Shares as the Committee determines.

                  5.4      EXERCISE PRICE. The Exercise Price of an Option will
be determined by the Committee when the Option is granted and may be not less
than 85% of the Fair Market Value of the Shares on the date of grant; provided
that: (i) the Exercise Price of an ISO will be

                                       -3-

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not less than 100% of the Fair Market Value of the Shares on the date of grant;
and (ii) the Exercise Price of any ISO granted to a Ten Percent Stockholder will
not be less than 110% of the Fair Market Value of the Shares on the date of
grant. Payment for the Shares purchased may be made in accordance with Section 8
of this Plan.

                  5.5      METHOD OF EXERCISE. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.

                  5.6      TERMINATION. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option will always be
subject to the following:

                           (a)      If the Participant is Terminated for any
                                    reason except death or Disability, then the
                                    Participant may exercise such Participant's
                                    Options only to the extent that such Options
                                    would have been exercisable upon the
                                    Termination Date no later than three (3)
                                    months after the Termination Date (or such
                                    shorter or longer time period not exceeding
                                    five (5) years as may be determined by the
                                    Committee, with any exercise beyond three
                                    (3) months after the Termination Date deemed
                                    to be an NQSO), but in any event, no later
                                    than the expiration date of the Options.

                           (b)      If the Participant is Terminated because of
                                    Participant's death or Disability (or the
                                    Participant dies within three (3) months
                                    after a Termination other than because of
                                    Participant's death or disability), then
                                    Participant's Options may be exercised only
                                    to the extent that such Options would have
                                    been exercisable by Participant on the
                                    Termination Date and must be exercised by
                                    Participant (or Participant's legal
                                    representative or authorized assignee) no
                                    later than twelve (12) months after the
                                    Termination Date (or such shorter or longer
                                    time period not exceeding five (5) years as
                                    may be determined by the Committee, with any
                                    such exercise beyond (a) three (3) months
                                    after the Termination Date when the
                                    Termination is for any reason other than the
                                    Participant's death or Disability, or (b)
                                    twelve (12) months after the Termination
                                    Date when the Termination is for
                                    Participant's death or Disability, deemed to
                                    be as NQSO), but in any event no later than
                                    the expiration date of the Options.

                  5.7      LIMITATIONS ON EXERCISE. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that

                                       -4-

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such minimum number will not prevent Participant from exercising the Option for
the full number of Shares for which it is then exercisable.

                  5.8      LIMITATIONS ON ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) will not exceed $100,000. If the
Fair Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, then the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year will be NQSOs. In the event that the Code of
the regulations promulgated thereunder are amended after the Effective Date of
this Plan to provide for a different limit of the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.

                  5.9      MODIFICATION, EXTENSION OR RENEWAL. The Committee may
modify, extend or review outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.

                  5.10     NO DISQUALIFICATION. Notwithstanding any other
provision in this Plan, no term of this Plan relating to ISOs will be
interpreted, amended or altered, nor will any discretion or authority granted
under this Plan be exercised, so as to disqualify this Plan under Section 422 of
the Code or, without the consent of the Participant affected, to disqualify any
ISO under Section 422 of the Code.

         6.       RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:

                  6.1      FORM OF RESTRICTED STOCK AWARD. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the

                                       -5-

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Restricted Stock Purchase Agreement along with full payment for the Shares to
the Company within thirty (30) days, then the offer will terminate, unless
otherwise determined by the Committee.

                  6.2      PURCHASE PRICE. The Purchase Price of Shares sold
pursuant to a Restricted Stock Award will be determined by the Committee and
will be at least 85% of the Fair Market Value of the Shares on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8 of
this Plan.

                  6.3      RESTRICTIONS. Restricted Stock Awards will be subject
to such restrictions (if any) as the Committee may impose. The Committee may
provide for the lapse of such restrictions in installments and may accelerate or
waive such restrictions, in whole or in part, based on length of service,
performance or such other factors or criteria as the Committee may determine.

         7.       STOCK BONUSES.

                  7.1      AWARDS OF STOCK BONUSES. A Stock Bonus is an award of
Shares (which may consist of Restricted Stock) for services rendered to the
Company or any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may
be awarded for past services already rendered to the Company, or any Parent,
Subsidiary or Affiliate of the Company pursuant to an Award Agreement (the
"Stock Bonus Agreement") that will be in such form (which need not be the same
for each Participant) as the Committee will from time to time approve, and will
comply with and be subject to the terms and conditions of this Plan. A Stock
Bonus may be awarded upon satisfaction of such performance goals as are set out
in advance in the Participant's individual Award Agreement (the "Performance
Stock Bonus Agreement") that will be in such form (which need not be the same
for each Participant) as the Committee will from time to time approve, and will
comply with and be subject to the terms and conditions of this Plan. Stock
Bonuses may vary from Participant to Participant and between groups of
Participants, and may be based upon the achievement of the Company, Parent,
Subsidiary or Affiliate and/or individual performance factors or upon such other
criteria as the Committee may determine.

                  7.2      TERMS OF STOCK BONUSES. The Committee will determine
the number of Shares to be awarded to the Participant and whether such Shares
will be Restricted Stock. If the Stock Bonus is being earned upon the
satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Committee will determine: (a) the nature, length and
starting date of any period during which performance is to be measured (the
"Performance Period") for each Stock Bonus; (b) the performance goals and
criteria to be used to measure the performance, if any; (c) the number of Shares
that may be awarded to the Participant; and (d) the extent to which such Stock
Bonuses have been earned. Performance Periods may overlap and Participants may
participate simultaneously with respect to Stock Bonuses that are subject to
different Performance Periods and different performance goals and other
criteria. The number of Shares may be fixed or may vary in accordance with such
performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make

                                       -6-

<PAGE>

such adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.

                  7.3      FORM OF PAYMENT. The earned portion of a Stock Bonus
may be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee may determine. Payment may be made in the
form of cash, whole Shares, including Restricted Stock, or a combination
thereof, either in a lump sum payment or in installments, all as the Committee
will determine.

                  7.4      TERMINATION DURING PERFORMANCE PERIOD. If a
Participant is Terminated during a Performance Period for any reason, then such
Participant will be entitled to payment (whether in Shares, cash or otherwise)
with respect to the Stock Bonus only to the extent earned as of the date of
Termination in accordance with the Performance Stock Bonus Agreement, unless the
Committee will determine otherwise.

         8.       PAYMENT FOR SHARE PURCHASES.

                  8.1      PAYMENT. Payment for Shares purchased pursuant to
this Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:

                           (a)      by cancellation of indebtedness of the
                                    Company to the Participant;

                           (b)      by surrender of shares that either: (1) have
                                    been owned by Participant for more than six
                                    (6) months and have been paid for within the
                                    meaning of SEC Rule 144 (and, if such shares
                                    were purchased from the Company by use of a
                                    promissory note, such note has been fully
                                    paid with respect to such shares); or (2)
                                    were obtained by Participant in the public
                                    market;

                           (c)      by tender of a full recourse promissory note
                                    having such terms as may be approved by the
                                    Committee and bearing interest at a rate
                                    sufficient to avoid imputation of income
                                    under Sections 483 and 1274 of the Code;
                                    provided, however, that Participants who are
                                    not employees or directors of the Company
                                    will not be entitled to purchase Shares with
                                    a promissory note unless the note is
                                    adequately secured by collateral other than
                                    the Shares;

                           (d)      by waiver of compensation due or accrued to
                                    the Participant for services rendered;

                           (e)      with respect only to purchases upon exercise
                                    of an Option, and provided that a public
                                    market for the Company's stock exists:

                                    (1)      through a "same day sale"
                                             commitment from the Participant and
                                             a broker-dealer that is a member of
                                             the National Association of
                                             Securities Dealers (an "NASD
                                             Dealer") whereby the Participant
                                             irrevocably elects to

                                       -7-

<PAGE>

                                             exercise the Option and to sell a
                                             portion of the Shares so purchased
                                             to pay for the Exercise Price, and
                                             whereby the NASD Dealer irrevocably
                                             commits upon receipt of such Shares
                                             to forward the Exercise Price
                                             directly to the Company; or

                                    (2)      through a "margin" commitment from
                                             the Participant and a NASD Dealer
                                             whereby the Participant irrevocably
                                             elects to exercise the Option and
                                             to pledge the Shares so purchased
                                             to the NASD Dealer in a margin
                                             account as security for a loan from
                                             the NASD Dealer in the amount of
                                             the Exercise Price, and whereby the
                                             NASD Dealer irrevocably commits
                                             upon receipt of such Shares to
                                             forward the Exercise Price directly
                                             to the Company; or

                           (f)      by any combination of the foregoing.

                  8.2      LOAN GUARANTEES. The Committee may help the
Participant pay for Shares purchased under this Plan by authorizing a guarantee
by the Company of a third-party loan to the Participant.

         9.       WITHHOLDING TAXES.

                  9.1      WITHHOLDING GENERALLY. Whenever Shares are to be
issued in satisfaction of Awards granted under this Plan, the Company may
require the Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such Shares. Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.

                  9.2      STOCK WITHHOLDING. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may allow the
Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). All elections by a Participant to have Shares withheld for
this purpose will be made in writing in a form acceptable to the Committee and
will be subject to the following restrictions:

                           (a)      the election must be made on or prior to the
                                    applicable Tax Date;

                           (b)      once made, then except as provided below,
                                    the election will be irrevocable as to the
                                    particular Shares as to which the election
                                    is made;

                           (c)      all elections will be subject to the consent
                                    or disapproval of the Committee;

                                       -8-

<PAGE>

                           (d)      if the Participant is an Insider and if the
                                    Company is subject to Section 16(b) of the
                                    Exchange Act: (1) the election may not be
                                    made within six (6) months of the date of
                                    grant of the Award, except as otherwise
                                    permitted by SEC Rule 16b-3(e) under the
                                    Exchange Act, and (2) either (A) the
                                    election to use stock withholding must be
                                    irrevocably made at least six (6) months
                                    prior to the Tax Date (although such
                                    election may be revoked at any time at least
                                    six (6) months prior to the Tax Date) or (B)
                                    the exercise of the Option or election to
                                    use stock withholding must be made in the
                                    ten (10) day period beginning on the third
                                    day following the release of the Company's
                                    quarterly or annual summary statement of
                                    sales or earnings; and

                           (e)      in the event that the Tax Date is deferred
                                    until six (6) months after the delivery of
                                    Shares under Section 839b) of the Code, the
                                    Participant will receive the full number of
                                    Shares with respect to which the exercise
                                    occurs, but such Participant will be
                                    unconditionally obligated to tender back to
                                    the Company the proper number of Shares on
                                    the Tax Date.

         10.      PRIVILEGES OF STOCK OWNERSHIP.

                  10.1     VOTING AND DIVIDENDS. No Participant will have any of
the rights of a stockholder with respect to any Shares until the Shares are
issued to the Participant. After Shares are issued to the Participant, the
Participant will be a stockholder and have all the rights of a stockholder with
respect to such Shares, including the right to vote and receive all dividends or
other distributions made or paid with respect to such Shares; provided that if
such Shares are Restricted Stock, then any new, additional or different
securities the Participant may become entitled to receive with respect to such
Shares by virtue of a stock dividend, stock split or any other change in the
corporate or capital structure of the Company will be subject to the same
restrictions as the Restricted Stock; provided, further, that the Participant
will have no right to retain such stock dividends or stock distributions with
respect to Shares that are repurchased at the Participant's original Purchase
Price pursuant to Section 12.

                  10.2     FINANCIAL STATEMENTS. The Company will provide
financial statements to each Participant prior to such Participant's purchase of
Shares under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.

         11.      TRANSFERABILITY. Awards granted under this Plan, and any
interest therein, will not be transferable or assignable by Participant, and may
not be made subject to execution, attachment or similar process, otherwise than
by will or by the laws of descent and distribution or as consistent with the
specific Plan and Award Agreement provisions relating thereto. During the
lifetime of the Participant an Award will be exercisable only by the
Participant, and any elections with respect to an Award, may be made only by the
Participant.

                                       -9-

<PAGE>

         12.      RESTRICTIONS ON SHARES. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
(a) a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, and/or (b) a
right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at: (A) with respect to Shares that are "Vested" (as defined in
the Award Agreement), the higher of: (1) Participant's original Purchase Price,
or (2) the Fair Market Value of such Shares on Participant's Termination Date,
provided, that such right of repurchase (i) must be exercised as to all such
"Vested" Shares unless a Participant consents to the Company's repurchase of
only a portion of such "Vested" Shares and (ii) terminates when the Company's
securities become publicly traded; or (B) with respect to Shares that are not
"Vested" (as defined in the Award Agreement), at the Participant's original
Purchase Price, provided, that the right to repurchase at the original Purchase
Price lapses at the rate of at least 20% per year over five (5) years from the
date the Shares were purchased (or from the date of grant of options in the case
of Shares obtained pursuant to a Stock Option Agreement and Stock Option
Exercise Agreement), and if the right to repurchase is assignable, the assignee
must pay the Company, upon assignment of the right to repurchase, cash equal to
the excess of the Fair Market Value of the Shares over the original Purchase
Price.

         13.      CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.

         14.      ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participants will be required to execute and deliver a written
pledge agreement in such form as the Committee will from time to time approve.
The Shares purchased with the promissory note may be released from the pledge on
a pro rata basis as the promissory note is paid.

         15.      EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time
or from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding

                                      -10-

<PAGE>

Awards. The Committee may at any time buy from a Participant an Award previously
granted with payment in cash, Shares (including Restricted Stock) or other
consideration, based on such terms and conditions as the Committee and the
Participant may agree.

         16.      SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will
not be effective unless such Award is in compliance with all applicable federal
and state securities laws, rules and regulations of any governmental body, and
the requirements of any stock exchange or automated quotation system upon which
the Shares may then be listed or quoted, as they are in effect on the date of
grant of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.

         17.      NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit
in any way the right of the Company or any Parent, Subsidiary or Affiliate of
the Company to terminate Participant's employment or other relationship at any
time, with or without cause.

         18.      CORPORATE TRANSACTIONS.

                  18.1     ASSUMPTION OR REPLACEMENT OF AWARDS BY SUCCESSOR. In
the event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company (other than any stockholder
which merges (or which owns or controls another corporation which merges) with
the Company in such merger) cease to own their shares or other equity interests
in the Company, (d) the sale of substantially all of the assets of the Company,
or (e) any other transaction which qualifies as a "corporate transaction" under
Section 424(a) of the Code wherein the stockholders of the Company give up all
of their equity interest in the Company (except for the acquisition, sale or
transfer of all or substantially all of the outstanding shares of the Company
from or by the stockholders of the Company), any or all outstanding Awards may
be assumed, converted or replaced by the successor corporation (if any), which
assumption, conversion or replacement will be binding on all Participants. In
the alternative, the successor corporation may substitute equivalent Awards or
provide substantially similar consideration to Participants as was provided to
stockholders (after taking into account the

                                      -11-

<PAGE>

existing provisions of the Awards). The successor corporation may also issue, in
place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant. In the event such successor
corporation (if any) refuses to assume or substitute Options, as provided above,
pursuant to a transaction described in this Subsection 18.1, such Options will
expire on such transaction at such time and on such conditions as the Board will
determine.

                  18.2     OTHER TREATMENT OF AWARD. Subject to any greater
rights granted to Participants under the foregoing provisions of this Section
18, in the event of the occurrence of any transaction described in Section 18.1,
any outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation, sale of assets or
other "corporate transaction."

                  18.3     ASSUMPTION OF AWARDS BY THE COMPANY. The Company,
from time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either: (a) granting an Award under this Plan in substitution
of such other company's award; or (b) assuming such award as if it had been
granted under this Plan if the terms of such assumed award could be applied to
an Award granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under this Plan if the other company had applied
the rules of this Plan to such grant. In the event the Company assumes an award
granted by another company, the terms and conditions of such award will remain
unchanged (except that the exercise price and the number and nature of Shares
issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.

         19.      ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become
effective on the date on which the registration statement filed by the Company
with the SEC under the Securities Act registering the initial public offering of
the Company's Common Stock is declared effective by the SEC (the "Effective
Date"); provided, however, that if the Effective Date does not occur on or
before December 31, 1995, this Plan will terminate as of December 31, 1995
having never become effective. This Plan shall be approved by the stockholders
of the Company (excluding Shares issued pursuant to this Plan), consistent with
applicable laws, within twelve (12) months before or after the date this Plan is
adopted by the Board. Upon the Effective Date, the Board may grant Awards
pursuant to this Plan; provided, however, that: (a) no Option may be exercised
prior to initial stockholder approval of this Plan; (b) no Option granted
pursuant to an increase in the number of Shares subject to this Plan approved by
the Board will be exercised prior to the time such increase has been approved by
the stockholders of the Company; and (c) in the event that stockholder approval
of such increase is not obtained within the time period provided herein, all
Awards granted hereunder will be canceled, any Shares issued pursuant to any
Award will be canceled, and any purchase of Shares hereunder will be rescinded.
So long as the Company is subject to Section 16(b) of the Exchange Act, the
Company will comply with the requirements of Rule 16b-3 (or its successor), as
amended, with respect to stockholder approval.

                                      -12-

<PAGE>

         20.      TERM OF PLAN. Unless earlier terminated as provided herein,
this Plan will terminate ten (10) years from the date this Plan is adopted by
the Board or, if earlier, the date of stockholder approval.

         21.      AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including, without limitation,
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or (if the Company is subject
to the Exchange Act or Section 16(b) of the Exchange Act) pursuant to the
Exchange Act or Rule 16b-3 (or its successor), as amended, thereunder,
respectively.

         22.      NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan
by the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.

         23.      DEFINITIONS. As used in this Plan, the following terms will
have the following meanings:

                  "Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.

                  "Award" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.

                  "Award Agreement" means, with respect to each Award, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Award.

                  "Board" means the Board of Directors of the Company.

                  "Code" means the Internal Revenue Code of 1986 as amended.

                  "Committee" means the committee appointed by the Board to
administer this Plan, or if no such committee is appointed, the Board.

                  "Company" means ESS Technology, Inc., a corporation organized
under the laws of the State of California, or any successor corporation.

                                      -13-

<PAGE>

                  "Disability" means a disability, whether temporary or
permanent, partial or total, within the meaning of Section 22(e)(3) of the Code,
as determined by the Committee.

                  "Disinterested Person" means a director who has not, during
the period that person is a member of the Committee and for one year prior to
commencing service as a member of the Committee, been granted or awarded equity
securities pursuant to this Plan or any other plan of the Company or any Parent,
Subsidiary or Affiliate of the Company, except in accordance with the
requirements set forth in Rule 16b-3(c)(2)(i) (and any successor regulation
thereto) as promulgated by the SEC under Section 16(b) of the Exchange Act, as
such rule is amended from time to time and as interpreted by the SEC.

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

                  "Exercise Price" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.

                  "Fair Market Value" means, as of any date, the fair market
value of the Common Stock, as determined by the Committee in good faith on such
basis as it deems appropriate and applied consistently with respect to
Participants. Whenever possible, the determination of Fair Market Value shall
be based upon the closing price for the Common Stock as reported in the Wall
Street Journal for the applicable date.

                  "Insider" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.

                  "Outside Director" means any director who is not, (a) a
current employee of the Company or any Parent, Subsidiary or Affiliate of the
Company; (b) a former employee of the Company or any Parent, Subsidiary or
Affiliate of the Company who is receiving compensation for prior services (other
than benefits under a tax-qualified pension plan); (c) a current or former
officer of the Company or any Parent, Subsidiary or Affiliate of the Company; or
(d) currently receiving compensation for personal services in any capacity,
other than as a director, from the

                                      -14-

<PAGE>

Company or any Parent, Subsidiary or Affiliate of the Company; provided,
however, that at such time as the term "Outside Director," as used in Section
162(m) of the Code is defined in regulations promulgated under Section 162(m) of
the Code, "Outside Director" will have the meaning set forth in such
regulations, as amended from time to time and as interpreted by the Internal
Revenue Service.

                  "Option" means an award of an option to purchase Shares
pursuant to Section 5.

                  "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if at the time of the
granting of an Award under this Plan, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined vesting power of
all classes of stock in one of the other corporations in such chain.

                  "Participant" means a person who receives an Award under this
Plan.

                  "Plan" means this ESS Technology, Inc. 1995 Equity Incentive
Plan, as amended from time to time.

                  "Restricted Stock Award" means an award of Shares pursuant to
Section 6.

                  "SEC" means the Securities and Exchange Commission.

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

                  "Shares" means shares of the Company's Common Stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.

                  "Stock Bonus" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.

                  "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one or the other corporations in such
chain.

                  "Termination" or "Terminated" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, director, consultant, independent contractor or
advisor to the Company or a Parent, Subsidiary or Affiliate of the Company;
except in the case of sick leave, military leave, or any other leave of absence
approved by the Committee, provided that such leave is for a period of not more
than ninety (90) days, or reinstatement upon the expiration of such leave is
guaranteed by contract or statute. The Committee will have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "Termination
Date").

                                      -15-

<PAGE>

                                                                        NO. ____

                              ESS TECHNOLOGY, INC.

                           1995 EQUITY INCENTIVE PLAN

                             STOCK OPTION AGREEMENT

         This Stock Option Agreement (this "AGREEMENT") is made and entered into
as of the date of grant set forth below (the "DATE OF GRANT"), by and between
ESS Technology, Inc., a California corporation (the "COMPANY"), and the
participant named below ("PARTICIPANT"). Capitalized terms not defined herein
shall have the meaning ascribed to them in the Company's 1995 Equity Incentive
Plan, as amended (the "PLAN").

PARTICIPANT                _____________________________________________________

SOCIAL SECURITY NUMBER:    _____________________________________________________

PARTICIPANT'S ADDRESS:     _____________________________________________________

                           _____________________________________________________

TOTAL OPTION SHARES:       _____________________________________________________

EXERCISE PRICE PER SHARE:  _____________________________________________________

DATE OF GRANT:             _____________________________________________________

VESTING START DATE:        _____________________________________________________

EXPIRATION DATE:           _____________________________________________________

TYPE OF STOCK OPTION

(CHECK ONE):                [ ]  INCENTIVE STOCK OPTION
                            [ ]  NONQUALIFIED STOCK OPTION

         1.       GRANT OF OPTION. The Company hereby grants to Participant an
option (this "OPTION") to purchase up to the total number of shares of Common
Stock of the Company set forth above (collectively, the "SHARES") at the
Exercise Price Per Share set forth above (the "EXERCISE PRICE"), subject to all
of the terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, this Option is intended to qualify as an
"incentive stock option"("ISO") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "CODE").

         2.       VESTING; EXERCISE PERIOD.

                  2.1      Vesting of Right to Exercise Option. This Option
shall become exercisable as to portions of the Shares as follows: (a) this
Option shall not be exercisable with respect to any of the Shares until _______,
199__ (the "FIRST VESTING DATE"); (b) if Participant

<PAGE>

has continuously provided services to the Company or any Subsidiary, Parent or
Affiliate of the Company from the Date of Grant through the First Vesting Date
and has not been Terminated on or before the First Vesting Date, then on the
First Vesting Date this Option shall become exercisable as to ____ percent
(___%) of the Shares; and [ALTERNATIVE #1 (Annual Vesting)] (c) thereafter, so
long as Participant continuously provides services to the Company or any
Subsidiary, Parent or Affiliate of the Company; and is not Terminated, on the
first anniversary of the First Vesting Date and on each successive anniversary
of the First Vesting Date thereafter, this Option shall become exercisable as to
an additional ____ percent (___%) of the Shares; provided that this Option shall
in no event ever become exercisable with respect to more than 100% of the
Shares,] or [ALTERNATIVE #2 (Monthly Vesting) (c) thereafter, so long as
Participant continuously provides services to the Company or any Subsidiary,
Parent or Affiliate of the Company and is not Terminated, upon the expiration of
each successive full month after the first anniversary of the First Vesting
Date, this Option shall become exercisable as to an additional ___ percent
(___%) of the Shares; provided that this Option shall in no event ever become
exercisable with respect to more than 100% of the Shares.]

                  2.2      Expiration. This Option shall expire on the
Expiration Date set forth above and must be exercised, if at all, on or before
the earlier of the Expiration Date or the date on which this Option is earlier
terminated in accordance with the provisions of Section 3.

         3.       TERMINATION.

                  3.1      Termination for Any Reason Except Death or
Disability. If Participant is Terminated for any reason, except Participant's
death or Disability, then this Option, to the extent (and only to the extent)
that it would have been exercisable by Participant on the date of Termination,
may be exercised by Participant no later than three (3) months after the date of
Termination (or seven (7) months after the date of Termination if the Company is
then subject to Section 16 of the Exchange Act and Participant's transactions in
securities of the Company were subject to Section 16(b) of the Exchange Act on
the date of Termination), but in any event no later than the Expiration Date.

                  3.2      Termination Because of Death or Disability. If
Participant is Terminated because of death or Disability of Participant, then
this Option, to the extent that it is exercisable by Participant on the date of
Termination, may be exercised by Participant (or Participant's legal
representative) no later than twelve (12) months after the date of Termination,
but in any event no later than the Expiration Date.

                  3.3      No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent, Subsidiary or Affiliate of
the Company, or limit in any way the right of the Company or any Parent,
Subsidiary or Affiliate of the Company to terminate Participant's employment or
other relationship at any time, with or without cause.

         4.       MANNER OF EXERCISE.

                  4.1      Stock Option Exercise Agreement. To exercise this
Option, Participant (or in the case of exercise after Participant's death,
Participant's executor,

                                       -2-

<PAGE>

administrator, heir or legatee, as the case may be) must deliver to the Company
an executed stock option exercise agreement in the form attached hereto as
Exhibit A, or in such other form as may be approved by the Company from time to
time (the "EXERCISE AGREEMENT"), which shall set forth, inter alia,
Participant's election to exercise this Option, the number of Shares being
purchased, any restrictions imposed on the Shares and any representations,
warranties and agreements regarding Participant's investment intent and access
to information as may be required by the Company to comply with applicable
securities laws. If someone other than Participant exercises this Option, then
such person must submit documentation reasonably acceptable to the Company that
such person has the right to exercise this Option.

                  4.2      Limitations on Exercise. This Option may not be
exercised unless such exercise is in compliance with all applicable federal and
state securities laws, as they are in effect on the date of exercise. This
Option may not be exercised as to fewer than 100 Shares unless it is exercised
as to all Shares as to which this Option is then exercisable.

                  4.3      Payment. The Exercise Agreement shall be accompanied
by full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted by law:

                  (a)      by cancellation of indebtedness of the Company to the
                           Participant;

                  (b)      by surrender of shares of the Company's Common Stock
                           that either: (1) have been owned by Participant for
                           more than six (6) months and have been paid for
                           within the meaning of SEC Rule 144 (and, if such
                           shares were purchased from the Company by use of a
                           promissory note, such note has been fully paid with
                           respect to such shares); or (2) were obtained by
                           Participant in the open public market; and (3) are
                           clear of all liens, claims, encumbrances or security
                           interests;

                  (c)      by tender of a full recourse promissory note having
                           such terms as may be approved by the Committee and
                           bearing interest at a rate sufficient to avoid
                           imputation of income under Sections 483 and 1274 of
                           the Code; provided, however, that Participants who
                           are not employees of the Company shall not be
                           entitled to purchase Shares with a promissory note
                           unless the note is adequately secured by collateral
                           other than the Shares;

                  (d)      by waiver of compensation due or accrued to
                           Participant for services rendered;

                  (e)      provided that a public market for the Company's stock
                           exists: (1) through a "same day sale" commitment from
                           Participant and a broker-dealer that is a member of
                           the National Association of Securities Dealers (an
                           "NASD DEALER") whereby Participant irrevocably elects
                           to exercise this Option and to sell a portion of the
                           Shares so purchased to pay for the exercise price and
                           whereby

                                       -3-

<PAGE>

                           the NASD Dealer irrevocably commits upon receipt of
                           such Shares to forward the exercise price directly to
                           the Company; or (2) through a "margin" commitment
                           from Participant and a NASD Dealer whereby
                           Participant irrevocably elects to exercise this
                           Option and to pledge the Shares so purchased to the
                           NASD Dealer in a margin account as security for a
                           loan from the NASD Dealer in the amount of the
                           exercise price, and whereby the NASD Dealer
                           irrevocably commits upon receipt of such Shares to
                           forward the exercise price directly to the Company;
                           or

                  (f)      by any combination of the foregoing.

                  4.4      Tax Withholding. Prior to the issuance of the Shares
upon exercise of this Option, Participant must pay or provide for any applicable
federal or state withholding obligations of the Company. If the Committee
permits, Participant may provide for payment of withholding taxes upon exercise
of this Option by requesting that the Company retain Shares with a Fair Market
Value equal to the minimum amount of taxes required to be withheld. In such
case, the Company shall issue the net number of Shares to the Participant by
deducting the Shares retained from the Shares issuable upon exercise.

                  4.5      Issuance of Shares. Provided that the Exercise
Agreement and payment are in form and substance satisfactory to counsel for the
Company, the Company shall issue the Shares registered in the name of
Participant, Participant's authorized assignee, or Participant's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.

         5.       NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If this
Option is an ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (a) the date two
(2) years after the Date of Grant, and (b) the date one (1) year after transfer
of such Shares to Participant upon exercise of this Option, then Participant
shall immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.

         6.       COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
Option and the issuance and transfer of Shares shall be subject to compliance by
the Company and Participant with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock exchange
on which the Company's Common Stock may be listed at the time of such issuance
or transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.

         7.       NONTRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of Participant only by
Participant. The terms of this Option shall be binding upon the executors,
administrators, successors and assigns of Participant.

                                       -4-

<PAGE>

         8.       TAX CONSEQUENCES Set forth below is a brief summary as of the
Date of Grant of some of the federal and California tax consequences of exercise
of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT
SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR DISPOSING OF THE
SHARES.

                  8.1      Exercise of ISO. If this Option qualifies as an ISO,
there will be no regular federal or California income tax liability upon the
exercise of this Option, although the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise Price will be treated as
a tax preference item for federal income tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.

                  8.2      Exercise of Nonqualified Stock Option. If this Option
does not qualify as an ISO, there may be a regular federal and California income
tax liability upon the exercise of this Option. Participant will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the fair market value of the Shares on the date of
exercise over the Exercise Price. The Company will be required to withhold from
Participant's compensation or collect from Participant and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.

                  8.3      Disposition of Shares. If the Shares are held for
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of this Option (and, in the case of an ISO, are
disposed of more than two (2) years after the Date of Grant), then any gain
realized on disposition of the Shares will be treated as long term capital gain
for federal and California income tax purposes. If Shares purchased under an ISO
are disposed of within one (1) year of exercise or within two (2) years after
the Date of Grant, then any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the fair market value of the Shares on the date of exercise
over the Exercise Price. The Company will be required to withhold from
Participant's compensation or collect from Participant and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.

         9.       PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any
of the rights of a shareholder with respect to any Shares until Participant
exercises this Option and pays the Exercise Price.

         10.      INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.

         11.      ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. This Agreement and the Plan and the Exercise Agreement constitute the
entire agreement and understanding of the parties hereto with respect to the
subject matter hereof and supersede all prior understanding and agreements with
respect to such subject matter.

                                       -5-

<PAGE>

         12.      NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by rapifax or telecopier.

         13.      SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.

         14.      GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California,
without regard to that body of law pertaining to choice of law or conflict of
law.

         15.      ACCEPTANCE. Participant hereby acknowledges receipt of a copy
of the Plan and this Agreement. Participant has read and understands the terms
and provisions thereof, and accepts this Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of this Option or disposition of
the Shares and that the Company has advised Participant to consult a tax advisor
prior to such exercise or disposition.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Participant has
executed this Agreement in duplicate as of the Date of Grant.

ESS TECHNOLOGY, INC.                         PARTICIPANT

By:__________________________________        ___________________________________
                                             (Signature)

_____________________________________
(Please print name)                          ___________________________________
                                             (Please print name)

_____________________________________
(Please print title)

                                       -6-

<PAGE>

                                    EXHIBIT A

                         STOCK OPTION EXERCISE AGREEMENT

<PAGE>

                                    EXHIBIT A

                              ESS TECHNOLOGY, INC.
                     1995 EQUITY INCENTIVE PLAN (THE "PLAN")
                         STOCK OPTION EXERCISE AGREEMENT

         I hereby elect to purchase the number of shares of Common Stock of ESS
TECHNOLOGY, INC. (the "Company") as set forth below:

<TABLE>
<S>                                              <C>
Participant:_________________________            Number of Shares Purchased:______________
Social Security Number:______________            Purchase Price per Share:________________
Address:_____________________________            Aggregate Purchase Price:________________
        _____________________________            Date of Option Agreement:________________
Type of Option:[ ] Incentive Stock Option        Exact Name of Title to Shares:___________
               [ ] Nonqualified Stock Option     _________________________________________
                                                 _________________________________________
</TABLE>

1.       DELIVERY OF PURCHASE PRICE. Participant hereby delivers to the Company
the Aggregate Purchase Price, to the extent permitted in the Option Agreement
(the "Option Agreement") as follows (check as applicable and complete):

[ ]      in cash (by check) in the amount of $_______________, receipt of which
         is acknowledged by the Company;

[ ]      by cancellation of indebtedness of the Company to Participant in the
         amount of $_________________;

[ ]      by delivery of ______________ fully-paid, nonassessable and vested
         shares of the common stock of the Company owned by Participant for at
         least six (6) months prior to the date hereof (and which have been paid
         for within the meaning of SEC Rule 144), or obtained by Participant in
         the open public market, and owned free and clear of all liens, claims,
         encumbrances or security interests, valued at the current Fair Market
         Value of $__________ per share;

[ ]      by the waiver hereby of compensation due or accrued to Participant for
         services rendered in the amount of $____________________ (except that
         the par value of the Shares is tendered in cash (by check) receipt of
         which is acknowledged by the Company);

[ ]      through a "same-day-sale" commitment, delivered herewith, from
         Participant and the NASD Dealer named therein, in the amount of
         $_____________; or

[ ]      through a "margin" commitment, delivered herewith from Participant and
         the NASD Dealer named therein, in the amount of $_____________________.

<PAGE>

2.       MARKET STANDOFF AGREEMENT. Participant, if requested by the Company and
an underwriter of Common Stock (or other securities) of the Company, agrees not
to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by Participant during the period requested by
the managing underwriter following the effective date of a registration
statement of the Company filed under the Securities Act, provided that all
officers and directors of the Company are required to enter into similar
agreements. Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or other securities) subject to the foregoing
restriction until the end of such period.

3.       TAX CONSEQUENCES. PARTICIPANT UNDERSTANDS THAT PARTICIPANT MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF PARTICIPANT'S PURCHASE OR DISPOSITION OF
THE SHARES. PARTICIPANT REPRESENTS THAT PARTICIPANT HAS CONSULTED WITH ANY TAX
CONSULTANT(S) PARTICIPANT DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT PARTICIPANT IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE.

4.       ENTIRE AGREEMENT. The Plan and Option Agreement are incorporated herein
by reference. This Exercise Agreement, the Plan and the Option Agreement
constitute the entire agreement and understanding of the parties and supersede
in their entirety all prior understandings and agreements of the Company and
Participant with respect to the subject matter hereof, and are governed by
California law except for that body of law pertaining to choice of law or
conflict of law.

Date:________________________                 __________________________________
                                              Signature of Participant

                                       -2-

<PAGE>

                                 SPOUSAL CONSENT

         I acknowledge that I have read the foregoing Stock Option Exercise
Agreement (the "AGREEMENT") and that I know its contents. I hereby consent to
and approve all the provisions of the Agreement, and agree that the shares of
the Common Stock of ESS Technology, Inc. purchased thereunder (the "SHARES") and
any interest I may have in such Shares are subject to all the provisions of the
Agreement. I will take no action at any time to hinder operation of the
Agreement on these Shares or any interest I may have on them.

Spouse of Participant

_______________________________________          Date:__________________________
Signature of Spouse

_______________________________________
Spouse's Name

_______________________________________
Participant's Name

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