Document:

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                                                                   EXHIBIT 10.85

                        AMENDMENT TO LIQUIDITY AGREEMENT

      THIS AMENDMENT TO LIQUIDITY AGREEMENT, dated as of June 20, 2001 (this
"Amendment"), and is among BLUE KEEL FUNDING, LLC, a Delaware limited liability
company ("Blue Keel"), each of the financial institutions party hereto as a
liquidity provider (the "Liquidity Institutions"), and FLEET NATIONAL BANK, as
agent for the Liquidity Institutions (in such capacity, the "Agent").

                                   BACKGROUND

      1.    Blue Keel, the Liquidity Institutions and the Agent are parties to
that certain Liquidity Agreement, dated as of July 31, 1998 (as heretofore
amended, the "Liquidity Agreement").

      2.    The parties hereto desire to amend the Liquidity Agreement as set
forth herein.

      NOW, THEREFORE, the parties hereto hereby agree as follows:

      SECTION 1.  Definitions.  Capitalized terms used in this Amendment and
not otherwise defined herein shall have the meanings thereto in the Liquidity
Agreement.

      SECTION 2.  Commitment Expiry Date.  The Commitment Expiry Date with
respect to each Liquidity Institution shall be September 24, 2001.

      SECTION 3.  Miscellaneous. The Liquidity Agreement, as amended hereby,
remains in full force and effect. Any reference to the Liquidity Agreement from
and after the date hereof shall be deemed to refer to the Liquidity Agreement
as amended hereby, unless otherwise expressly stated. This Amendment may be
executed in any number of counterparts and by the different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. This Amendment shall be governed by, and construed in accordance
with, the internal laws of the State of New York.

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

                                             BLUE KEEL FUNDING, L.L.C.

                                             By: /s/ CHRIS T. BURT
                                                 -------------------------------
                                                 Name Printed: Chris T. Burt
                                                               -----------------
                                                 Title:        Vice President
                                                        ------------------------

                                      S-1
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                                        FLEET NATIONAL BANK, as Agent

                                        By: /s/ LEE A. MERKLE-RAYMOND
                                            -------------------------------
                                             Name Printed: Lee A. Merkle-Raymond
                                                           ---------------------
                                            Title: Director
                                                   ------------------------

                                        LIQUIDITY INSTITUTIONS:

                                        FLEET NATIONAL BANK

                                        By: /s/ LEE A. MERKLE-RAYMOND
                                            -------------------------------
                                             Name Printed: Lee A. Merkle-Raymond
                                                           ---------------------
                                            Title: Director
                                                   ------------------------

                                      S-2
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                    BNP PARIBAS

                    By: /s/ Tjalling Terpsta
                        ----------------------------------
                        Name Printed: Tjalling Terpsta
                                      --------------------
                        Title:        Director
                               ---------------------------

                    By: /s/ Janice S. H. Ho
                        ----------------------------------
                        Name Printed: Janice S. H. Ho
                                      --------------------
                        Title:        Director
                               ---------------------------

                                      S-3
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                    THE BANK OF NOVA SCOTIA

                    By: /s/ ED KOFMAN
                        ----------------------------------
                        Name Printed: Ed Kofman
                                      --------------------
                        Title:        Director
                               ---------------------------

                                      S-4
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                                   COMERICA BANK

                                   By: /s/ D. SCATTINI
                                       ---------------------------------
                                       Name Printed: Devin Scattini
                                                    --------------------
                                       Title: V.P.
                                              --------------------------

                                      S-5

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                                   ING (U.S.) CAPITAL LLC

                                   By: /s/ LAUREL S. CHOATE
                                      --------------------------------
                                      Name Printed: Laurel S. Choate
                                                   -------------------
                                      Title: Vice President
                                            --------------------------

                                      S-6<PAGE>   1
                                                                   EXHIBIT 10.35

                              ESS TECHNOLOGY, INC.
                        1995 EMPLOYEE STOCK PURCHASE PLAN
                 (AS AMENDED AND RESTATED AS OF APRIL 21, 2001)

                                    SECTION 1
                                     PURPOSE

ESS Technology, Inc. hereby amends and restates the ESS Technology, Inc. 1995
Employee Stock Purchase Plan, effective as of April 21, 2001, in order to
continue to provide eligible employees of the Company and its participating
Subsidiaries with the opportunity to purchase Common Stock through payroll
deductions. The Plan is intended to qualify as an employee stock purchase plan
under Section 423(b) of the Code.

                                    SECTION 2
                                   DEFINITIONS

               2.1 "1934 Act" means the Securities Exchange Act of 1934, as
amended. Reference to a specific Section of the 1934 Act or regulation
thereunder shall include such Section or regulation, any valid regulation
promulgated under such Section, and any comparable provision of any future
legislation or regulation amending, supplementing or superseding such Section or
regulation.

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

               2.3 "Code" means the Internal Revenue Code of 1986, as amended.
Reference to a specific Section of the Code or regulation thereunder shall
include such Section or regulation, any valid regulation promulgated under such
Section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such Section or regulation.

               2.4 "Committee" shall mean the committee appointed by the Board
to administer the Plan. Any member of the Committee may resign at any time by
notice in writing mailed or delivered to the Secretary of the Company. As of the
effective date of the Plan, the Plan shall be administered by the Compensation
Committee of the Board.

               2.5 "Common Stock" means the common stock of the Company.

               2.6 "Company" means ESS Technology, Inc., a California
corporation.

               2.7 "Compensation" means a Participant's regular wages. The
Committee, in its discretion, may (on a uniform and nondiscriminatory basis)
establish a different definition of Compensation prior to an Enrollment Date for
all options to be granted on such Enrollment Date.

               2.8 "Eligible Employee" means every Employee of an Employer,
except (a) any Employee who immediately after the grant of an option under the
Plan, would own stock

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and/or hold outstanding options to purchase stock possessing five percent (5%)
or more of the total combined voting power or value of all classes of stock of
the Company or of any Subsidiary of the Company (including stock attributed to
such Employee pursuant to Section 424(d) of the Code), or (b) as provided in the
following sentence. The Committee, in its discretion, from time to time may,
prior to an Enrollment Date for all options to be granted on such Enrollment
Date, determine (on a uniform and nondiscriminatory basis) that an Employee
shall not be an Eligible Employee if he or she: (1) has not completed at least
two years of service since his or her last hire date (or such lesser period of
time as may be determined by the Committee in its discretion), (2) customarily
works not more than 20 hours per week (or such lesser period of time as may be
determined by the Committee in its discretion), (3) customarily works not more
than 5 months per calendar year (or such lesser period of time as may be
determined by the Committee in its discretion), or (4) is an officer or other
manager.

               2.9 "Employee" means an individual who is a common-law employee
of any Employer, whether such employee is so employed at the time the Plan is
adopted or becomes so employed subsequent to the adoption of the Plan.

               2.10 "Employer" or "Employers" means any one or all of the
Company, and those Subsidiaries which, with the consent of the Board, have
adopted the Plan.

               2.11 "Enrollment Date" means such dates as may be determined by
the Committee (in its discretion and on a uniform and nondiscriminatory basis)
from time to time.

               2.12 "Grant Date" means any date on which a Participant is
granted an option under the Plan.

               2.13 "Participant" means an Eligible Employee who (a) has become
a Participant in the Plan pursuant to Section 4.1 and (b) has not ceased to be a
Participant pursuant to Section 8 or Section 9.

               2.14 "Plan" means the ESS Technology, Inc. 1995 Employee Stock
Purchase Plan, as set forth in this instrument and as hereafter amended from
time to time.

               2.15 "Purchase Date" means such dates as may be determined by the
Committee (in its discretion and on a uniform and nondiscriminatory basis) from
time to time prior to an Enrollment Date for all options to be granted on such
Enrollment Date.

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

                                    SECTION 3
                           SHARES SUBJECT TO THE PLAN

               3.1 Number Available. A maximum of 925,000 of Common Stock shall
be available for issuance pursuant to the Plan. Shares sold under the Plan may
be newly issued shares or treasury shares.

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               3.2 Adjustments. In the event of any reorganization,
recapitalization, stock split, reverse stock split, stock dividend, combination
of shares, merger, consolidation, offering of rights or other similar change in
the capital structure of the Company, the Board may make such adjustment, if
any, as it deems appropriate in the number, kind and purchase price of the
shares available for purchase under the Plan and in the maximum number of shares
subject to any option under the Plan.

                                    SECTION 4
                                   ENROLLMENT

               4.1 Participation. Each Eligible Employee may elect to become a
Participant by enrolling or re-enrolling in the Plan effective as of any
Enrollment Date. In order to enroll, an Eligible Employee must complete, sign
and submit to the Company an enrollment form in such form, manner and by such
deadline as may be specified by the Committee from time to time (in its
discretion and on a nondiscriminatory basis). Any Participant whose option
expires and who has not withdrawn from the Plan automatically will be
re-enrolled in the Plan on the Enrollment Date immediately following the
Purchase Date on which his or her option expires. Any Participant whose option
has not expired and who has not withdrawn from the Plan automatically will be
deemed to be un-enrolled from the Participant's current option and be enrolled
as of a subsequent Enrollment Date if the price per Share on such subsequent
Enrollment Date is lower than the price per Share on the Enrollment Date
relating to the Participant's current option.

               4.2 Payroll Withholding. On his or her enrollment form, each
Participant must elect to make Plan contributions via payroll withholding from
his or her Compensation. Pursuant to such procedures as the Committee may
specify from time to time, a Participant may elect to have withholding equal to
a whole percentage from 1% to 15% (or such lesser percentage that the Committee
may establish from time to time for all options to be granted on any Enrollment
Date). A Participant may elect to increase or decrease his or her rate of
payroll withholding by submitting a new enrollment form in accordance with such
procedures as may be established by the Committee from time to time. A
Participant may stop his or her payroll withholding by submitting a new
enrollment form in accordance with such procedures as may be established by the
Committee from time to time. In order to be effective as of a specific date, an
enrollment form must be received by the Company no later than the deadline
specified by the Committee, in its discretion and on a nondiscriminatory basis,
from time to time. Any Participant who is automatically re-enrolled in the Plan
will be deemed to have elected to continue his or her contributions at the
percentage last elected by the Participant.

                                    SECTION 5
                        OPTIONS TO PURCHASE COMMON STOCK

               5.1 Grant of Option. On each Enrollment Date on which the
Participant enrolls or re-enrolls in the Plan, he or she shall be granted an
option to purchase shares of Common Stock.

               5.2 Duration of Option. Each option granted under the Plan shall
expire on the earliest to occur of (a) the completion of the purchase of shares
on the last Purchase Date occurring within 27 months of the Grant Date of such
option, (b) such shorter option period as

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may be established by the Committee from time to time prior to an Enrollment
Date for all options to be granted on such Enrollment Date, or (c) the date on
which the Participant ceases to be such for any reason. Until otherwise
determined by the Committee for all options to be granted on an Enrollment Date,
the period referred to in clause (b) in the preceding sentence shall mean the
period from the applicable Enrollment Date through the last business day prior
to the immediately following Enrollment Date.

               5.3 Number of Shares Subject to Option. The number of shares
available for purchase by each Participant under the option will be established
by the Committee from time to time prior to an Enrollment Date for all options
to be granted on such Enrollment Date.

               5.4 Other Terms and Conditions. Each option shall be subject to
the following additional terms and conditions:

               (a) payment for shares purchased under the option shall be made
        only through payroll withholding under Section 4.2;

               (b) purchase of shares upon exercise of the option will be
        accomplished only in accordance with Section 6.1;

               (c) the price per share under the option will be determined as
        provided in Section 6.1; and

               (d) the option in all respects shall be subject to such other
        terms and conditions (applied on a uniform and nondiscriminatory basis),
        as the Committee shall determine from time to time in its discretion.

                                    SECTION 6
                               PURCHASE OF SHARES

               6.1 Exercise of Option. Subject to Section 6.2, on each Purchase
Date, the funds then credited to each Participant's account shall be used to
purchase whole shares of Common Stock. Any cash remaining after whole shares of
Common Stock have been purchased shall be carried forward in the Participant's
account for the purchase of shares on the next Purchase Date. The price per
Share of the Shares purchased under any option granted under the Plan shall be
eighty-five percent (85%) of the lower of:

               (a) the closing price per Share on the last trading date prior to
        the Grant Date for such option on the NASDAQ National Market System; or

               (b) the closing price per Share on the last trading date prior to
        the Purchase Date on the NASDAQ National Market System.

               6.2 Delivery of Shares. As directed by the Committee in its sole
discretion, shares purchased on any Purchase Date shall be delivered directly to
the Participant or to a custodian or broker (if any) designated by the Committee
to hold shares for the benefit of the Participants. As determined by the
Committee from time to time, such shares shall be delivered as physical
certificates or by means of a book entry system.

<PAGE>   5

               6.3 Exhaustion of Shares. If at any time the shares available
under the Plan are over-enrolled, enrollments shall be reduced proportionately
to eliminate the over-enrollment. Such reduction method shall be "bottom up",
with the result that all option exercises for one share shall be satisfied
first, followed by all exercises for two shares, and so on, until all available
shares have been exhausted. Any funds that, due to over-enrollment, cannot be
applied to the purchase of whole shares shall be refunded to the Participants
(without interest thereon).

                                    SECTION 7
                                   WITHDRAWAL

               7.1 Withdrawal. A Participant may withdraw from the Plan by
submitting a completed enrollment form to the Company. A withdrawal will be
effective only if it is received by the Company by the deadline specified by the
Committee (in its discretion and on a uniform and nondiscriminatory basis) from
time to time. When a withdrawal becomes effective, the Participant's payroll
contributions shall cease and all amounts then credited to the Participant's
account shall be distributed to him or her (without interest thereon).

                                    SECTION 8
                           CESSATION OF PARTICIPATION

               8.1 Termination of Status as Eligible Employee. A Participant
shall cease to be a Participant immediately upon the cessation of his or her
status as an Eligible Employee (for example, because of his or her termination
of employment from all Employers for any reason). As soon as practicable after
such cessation, the Participant's payroll contributions shall cease and all
amounts then credited to the Participant's account shall be distributed to him
or her (without interest thereon). If a Participant is on a Company-approved
leave of absence, his or her participation in the Plan shall continue for so
long as he or she remains an Eligible Employee and has not withdrawn from the
Plan pursuant to Section 7.1.

                                    SECTION 9
                           DESIGNATION OF BENEFICIARY

               9.1 Designation. Each Participant may, pursuant to such uniform
and nondiscriminatory procedures as the Committee may specify from time to time,
designate one or more Beneficiaries to receive any amounts credited to the
Participant's account at the time of his or her death. Notwithstanding any
contrary provision of this Section 9, Sections 9.1 and 9.2 shall be operative
only after (and for so long as) the Committee determines (on a uniform and
nondiscriminatory basis) to permit the designation of Beneficiaries.

               9.2 Changes. A Participant may designate different Beneficiaries
(or may revoke a prior Beneficiary designation) at any time by delivering a new
designation (or revocation of a prior designation) in like manner. Any
designation or revocation shall be effective only if it is received by the
Committee. However, when so received, the designation or revocation shall be
effective as of the date the designation or revocation is executed (whether or
not the Participant still is living), but without prejudice to the Committee on
account of any payment made before the change is recorded. The last effective
designation received by the Committee shall supersede all prior designations.

<PAGE>   6

               9.3 Failed Designations. If a Participant dies without having
effectively designated a Beneficiary, or if no Beneficiary survives the
Participant, the Participant's Account shall be payable to his or her estate.

                                   SECTION 10
                                 ADMINISTRATION

               10.1 Plan Administrator. The Plan shall be administered by the
Committee. The Committee shall have the authority to control and manage the
operation and administration of the Plan.

               10.2 Actions by Committee. Each decision of a majority of the
members of the Committee then in office shall constitute the final and binding
act of the Committee. The Committee may act with or without a meeting being
called or held and shall keep minutes of all meetings held and a record of all
actions taken by written consent.

               10.3 Powers of Committee. The Committee shall have all powers and
discretion necessary or appropriate to supervise the administration of the Plan
and to control its operation in accordance with its terms, including, but not by
way of limitation, the following discretionary powers:

               (a) To interpret and determine the meaning and validity of the
        provisions of the Plan and the options and to determine any question
        arising under, or in connection with, the administration, operation or
        validity of the Plan or the options;

               (b) To determine any and all considerations affecting the
        eligibility of any employee to become a Participant or to remain a
        Participant in the Plan;

               (c) To cause an account or accounts to be maintained for each
        Participant;

               (d) To determine the time or times when, and the number of shares
        for which, options shall be granted;

               (e) To establish and revise an accounting method or formula for
        the Plan;

               (f) To designate a custodian or broker to receive shares
        purchased under the Plan and to determine the manner and form in which
        shares are to be delivered to the designated custodian or broker;

               (g) To determine the status and rights of Participants and their
        Beneficiaries or estates;

               (h) To employ such brokers, counsel, agents and advisers, and to
        obtain such broker, legal, clerical and other services, as it may deem
        necessary or appropriate in carrying out the provisions of the Plan;

               (i) To establish, from time to time, rules for the performance of
        its powers and duties and for the administration of the Plan;

<PAGE>   7

               (j) To adopt such procedures and subplans as are necessary or
        appropriate to permit participation in the Plan by employees who are
        foreign nationals or employed outside of the United States;

               (k) To delegate to any one or more of its members or to any other
        person, severally or jointly, the authority to perform for and on behalf
        of the Committee one or more of the functions of the Committee under the
        Plan.

               10.4 Decisions of Committee. All actions, interpretations, and
decisions of the Committee shall be conclusive and binding on all persons, and
shall be given the maximum possible deference allowed by law.

               10.5 Administrative Expenses. All expenses incurred in the
administration of the Plan by the Committee, or otherwise, including legal fees
and expenses, shall be paid and borne by the Employers, except any stamp duties
or transfer taxes applicable to the purchase of shares may be charged to the
account of each Participant. Any brokerage fees for the purchase of shares by a
Participant shall be paid by the Company, but fees and taxes (including
brokerage fees) for the transfer, sale or resale of shares by a Participant, or
the issuance of physical share certificates, shall be borne solely by the
Participant.

               10.6 Eligibility to Participate. No member of the Committee who
is also an employee of an Employer shall be excluded from participating in the
Plan if otherwise eligible, but he or she shall not be entitled, as a member of
the Committee, to act or pass upon any matters pertaining specifically to his or
her own account under the Plan.

               10.7 Indemnification. Each of the Employers shall, and hereby
does, indemnify and hold harmless the members of the Committee and the Board,
from and against any and all losses, claims, damages or liabilities (including
attorneys' fees and amounts paid, with the approval of the Board, in settlement
of any claim) arising out of or resulting from the implementation of a duty, act
or decision with respect to the Plan, so long as such duty, act or decision does
not involve gross negligence or willful misconduct on the part of any such
individual.

                                   SECTION 11
                      AMENDMENT, TERMINATION, AND DURATION

               11.1 Amendment, Suspension, or Termination. The Board, in its
sole discretion, may amend or terminate the Plan, or any part thereof, at any
time and for any reason. If the Plan is terminated, the Board, in its
discretion, may elect to terminate all outstanding options either immediately or
upon completion of the purchase of shares on the next Purchase Date, or may
elect to permit options to expire in accordance with their terms (and
participation to continue through such expiration dates). If the options are
terminated prior to expiration, all amounts then credited to Participants'
accounts which have not been used to purchase shares shall be returned to the
Participants (without interest thereon) as soon as administratively practicable.

<PAGE>   8

               11.2 Duration of the Plan. The Plan shall commence on the date
specified herein, and subject to Section 11.1 (regarding the Board's right to
amend or terminate the Plan), shall remain in effect thereafter.

                                   SECTION 12
                               GENERAL PROVISIONS

               12.1 Participation by Subsidiaries. One or more Subsidiaries of
the Company may become participating Employers by adopting the Plan and
obtaining approval for such adoption from the Board. By adopting the Plan, a
Subsidiary shall be deemed to agree to all of its terms, including (but not
limited to) the provisions granting exclusive authority (a) to the Board to
amend the Plan, and (b) to the Committee to administer and interpret the Plan.
An Employer may terminate its participation in the Plan at any time. The
liabilities incurred under the Plan to the Participants employed by each
Employer shall be solely the liabilities of that Employer, and no other Employer
shall be liable for benefits accrued by a Participant during any period when he
or she was not employed by such Employer.

               12.2 Inalienability. In no event may either a Participant, a
former Participant or his or her Beneficiary, spouse or estate sell, transfer,
anticipate, assign, hypothecate, or otherwise dispose of any right or interest
under the Plan; and such rights and interests shall not at any time be subject
to the claims of creditors nor be liable to attachment, execution or other legal
process. Accordingly, for example, a Participant's interest in the Plan is not
transferable pursuant to a domestic relations order.

               12.3 Severability. In the event any provision of the Plan shall
be held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.

               12.4 Requirements of Law. The granting of options and the
issuance of shares shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or securities
exchanges as the Committee may determine are necessary or appropriate.

               12.5 Compliance with Rule 16b-3. Any transactions under this Plan
with respect to officers (as defined in Rule 16a-1 promulgated under the 1934
Act) are intended to comply with all applicable conditions of Rule 16b-3. To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee. Notwithstanding any contrary provision of the Plan,
if the Committee specifically determines that compliance with Rule 16b-3 no
longer is required, all references in the Plan to Rule 16b-3 shall be null and
void.

               12.6 No Enlargement of Employment Rights. Neither the
establishment or maintenance of the Plan, the granting of options, the purchase
of shares, nor any action of any Employer or the Committee, shall be held or
construed to confer upon any individual any right to be continued as an employee
of the Employer nor, upon dismissal, any right or interest in any

<PAGE>   9

specific assets of the Employers other than as provided in the Plan. Each
Employer expressly reserves the right to discharge any employee at any time,
with or without cause.

               12.7 Apportionment of Costs and Duties. All acts required of the
Employers under the Plan may be performed by the Company for itself and its
Subsidiaries, and the costs of the Plan may be equitably apportioned by the
Committee among the Company and the other Employers. Whenever an Employer is
permitted or required under the terms of the Plan to do or perform any act,
matter or thing, it shall be done and performed by any officer or employee of
the Employers who is thereunto duly authorized by the Employers.

               12.8 Construction and Applicable Law. The Plan is intended to
qualify as an "employee stock purchase plan" within the meaning of Section
423(b) of the Code. Any provision of the Plan which is inconsistent with Section
423(b) of the Code shall, without further act or amendment by the Company or the
Committee, be reformed to comply with the requirements of Section 423(b). The
provisions of the Plan shall be construed, administered and enforced in
accordance with such Section and with the laws of the State of California
(excluding California's conflict of laws provisions).

               12.9 Captions. The captions contained in and the table of
contents prefixed to the Plan are inserted only as a matter of convenience, and
in no way define, limit, enlarge or describe the scope or intent of the Plan nor
in any way shall affect the construction of any provision of the Plan.

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