Document:

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                                                                   EXHIBIT 10.49

                              ESS TECHNOLOGY, INC.

                        1995 DIRECTORS STOCK OPTION PLAN
                            (as of October 20, 2001)

      1. PURPOSE. This 1995 Directors Stock Option Plan (this "PLAN") is
established to provide equity incentives for nonemployee members of the Board of
Directors of ESS Technology, Inc. (the "COMPANY"), who are described in Section
6.1 below, by granting such persons options to purchase shares of stock of the
Company.

      2. ADOPTION AND STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board of Directors of the Company (the "BOARD"), this Plan will become effective
on the time and date (the "EFFECTIVE DATE") on which the registration statement
filed by the Company with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), to register the
initial public offering of the Company's Common Stock is declared effective by
the SEC; provided, however, that if the Effective Date does not occur on or
before December 31, 1995, this Plan and any Options granted hereunder will
terminate as of December 31, 1995 having never become effective. This Plan shall
be approved by the stockholders of the Company, consistent with applicable laws,
within twelve (12) months after the date this Plan is adopted by the Board.
Options ("OPTIONS") may be granted under this Plan after the Effective Date
provided that, in the event that stockholder approval is not obtained within the
time period provided herein, this Plan, and all Options granted hereunder, shall
terminate. No Option that is issued as a result of any increase in the number of
shares authorized to be issued under this Plan shall be exercised prior to the
time such increase has been approved by the stockholders of the Company and all
such Options granted pursuant to such increase shall similarly terminate if such
stockholder approval is not obtained. So long as the Company is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), the Company will comply with the requirements of Rule 16b-3 with respect
to stockholder approval.

      3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan shall be
nonqualified stock options ("NQSOS"). The shares of stock that may be purchased
upon exercise of Options granted under this Plan (the "SHARES") are shares of
the Common Stock of the Company.

      4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan (the "MAXIMUM NUMBER") is 600,000
Shares, subject to adjustment as provided in this Plan. If any Option is
terminated for any reason without being exercised in whole or in part, the
Shares thereby released from such Option shall be available for purchase under
other Options subsequently granted under this Plan. At all times during the term
of this Plan, the Company shall reserve and keep available such number of Shares
as shall be required to satisfy the requirements of outstanding Options granted
under this Plan; provided, however, that if the aggregate number of Shares
subject to outstanding Options granted under this Plan plus the aggregate number
of Shares previously issued by the Company pursuant to the exercise of Options
granted under this Plan equals or exceeds the Maximum Number of Shares, then
notwithstanding anything herein to the contrary, no further Options may be
granted under this Plan until the Maximum Number is increased or the aggregate
number of Shares subject to outstanding Options

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granted under this Plan plus the aggregate number of Shares previously issued by
the Company pursuant to the exercise of Options granted under this Plan is less
than the Maximum Number.

      5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "Committee"). As used in this Plan, references to the Committee shall
mean either such Committee or the Board if no Committee has been established.
The interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option.

      6. ELIGIBILITY AND AWARD FORMULA.

      6.1 Eligibility. Options may be granted only to directors of the Company
who are not employees of the Company or any Parent, Subsidiary or Affiliate of
the Company, as those terms are defined in Section 17 below.

      6.2 Initial Grant. Each Optionee who on or after the Effective Date
becomes a member of the Board will automatically be granted an Option for 40,000
Shares (the "Initial Grant"). Initial Grants shall be made on the date such
Optionee first becomes a member of the Board.

      6.3 Succeeding Grants. On the date of each annual meeting of the Company's
shareholders immediately following which an Optionee shall continue as a member
on the Board, each Optionee who is a member of the Board and has continuously
served as a director of the Company for at least six months will be
automatically granted an Option to purchase 10,000 Shares (the "Succeeding
Grant").

      7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following and to
Section 6 above:

      7.1 Form of Option Grant. Each Option granted under this Plan shall be
evidenced by a written Stock Option Grant ("GRANT") in such form (which need not
be the same for each Optionee) as the Committee shall from time to time approve,
which Grant shall comply with and be subject to the terms and conditions of this
Plan.

      7.2 Vesting. Options granted under this Plan shall be exercisable as they
vest. The date an Optionee receives an Initial Grant or a Succeeding Grant is
referred to in this Plan as the "GRANT DATE" for such Option.

            (a) Initial Grants. Each Option that is an Initial Grant will vest
as to twenty-five percent (25%) of the Shares on the first anniversary of the
Grant Date for such Initial Grant and thereafter an additional 1/48th of the
Shares shall vest on the same day each month as the Grant Date of the Initial
Grant, so long as the Optionee continuously remains a director of the Company.

            (b) Succeeding Grants. Each Succeeding Grant will vest as to 1/48th
of the Shares monthly on the same day each month as the Grant Date of the
Succeeding Grant beginning with the first month following the Grant Date of the
Succeeding Grant, so long as the Optionee continuously remains a director of the
Company.

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      7.3 EXERCISE PRICE. The exercise price of an Option shall be the Fair
Market Value (as defined in Section 17.4) of the Shares, at the time that the
Option is granted.

      7.4 TERMINATION OF OPTION. Except as provided below in this Section, each
Option shall expire ten (10) years after its Grant Date (the "EXPIRATION DATE").
The Option shall cease to vest if the Optionee ceases to be a member of the
Board. The date on which the Optionee ceases to be a member of the Board shall
be referred to as the "TERMINATION DATE". An Option may be exercised after the
Termination Date only as set forth below:

            (a) Termination Generally. If the Optionee ceases to be a member of
the Board for any reason except death or disability, then each Option then held
by such Optionee, to the extent (and only to the extent) that it would have been
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee within seven (7) months after the Termination Date, but in no event
later than the Expiration Date.

            (b) Death or Disability. If the Optionee ceases to be a member of
the Board because of the death of the Optionee or the disability of the Optionee
within the meaning of Section 22(e)(3) of the internal Revenue Code of 1986, as
amended (the "CODE"), then each Option then held by such Optionee, to the extent
(and only to the extent) that it would have been exercisable by the Optionee on
the Termination Date, may be exercised by the Optionee (or the Optionee's legal
representative) within twelve (12) months after the Termination Date, but in no
event later than the Expiration Date.

      8. EXERCISE OF OPTIONS.

      8.1 Notice. Options may be exercised only by delivery to the Company of an
exercise agreement in a form approved by the Committee stating the number of
Shares being purchased, the restrictions imposed on the Shares and such
representations and agreements regarding the Optionee's investment intent and
access to information as may be required 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.

      8.2 Payment. Payment for the Shares purchased upon exercise of an Option
may be made (a) in cash or by check; (b) by surrender of shares of Common Stock
of the Company that have been owned by the Optionee for more than six (6) months
(and which 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 were obtained by the
Optionee in the open public market, having a Fair Market Value equal to the
exercise price of the Option; (c) by waiver of compensation due or accrued to
the Optionee for services rendered; (d) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD DEALER") whereby the Optionee irrevocably elects to 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; (e) provided
that a public market for the Company's stock exists, through a "margin"
commitment from the Optionee and a NASD Dealer whereby the Optionee 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

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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.

      8.3 Withholding Taxes. Prior to issuance of the Shares upon exercise of an
Option, the Optionee shall pay or make adequate provision for any federal or
state withholding obligations of the Company, if applicable.

      8.4 Limitations on Exercise. Notwithstanding the exercise periods set
forth in the Grant, exercise of an Option shall always be subject to the
following limitations:

            (a) An Option shall not be exercisable until such time as this Plan
(or, in the case of Options granted pursuant to an amendment increasing the
number of shares that may be issued pursuant to this Plan, such amendment) has
been approved by the stockholders of the Company in accordance with Section 15
hereof.

            (b) An Option shall not be exercisable unless such exercise is in
compliance with the Securities Act and all applicable state securities laws, as
they are in effect on the date of exercise.

            (c) The Committee may specify a reasonable minimum number of Shares
that may be purchased upon any exercise of an Option, provided that such minimum
number will not prevent the Optionee from exercising the full number of Shares
as to which the Option is then exercisable.

      9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, an
Option shall be exercisable only by the Optionee or by the Optionee's guardian
or legal representative, unless otherwise permitted by the Committee. No Option
may be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution.

      10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
of exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company, at such time
after the close of each fiscal year of the Company as they are released by the
Company to its stockholders.

      11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such outstanding
Options shall be proportionately adjusted, subject to any required action by the
Board or stockholders of the Company and compliance with applicable securities
laws; provided, however, that no fractional shares shall be issued upon exercise
of any Option and any resulting fractions of a Share shall be rounded up to the
nearest whole Share.

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      12. NO OBLIGATION TO CONTINUE AS DIRECTOR. Nothing in this Plan or any
Option granted under this Plan shall confer on any Optionee any right to
continue as a director of the Company.

      13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of Shares
upon exercise of any Options shall be subject to and conditioned upon compliance
with all applicable requirements of law, including without limitation compliance
with the Securities Act, compliance with all other applicable state securities
laws and compliance with the requirements of any stock exchange or national
market system on which the Shares may be listed. The Company shall be under no
obligation to register the Shares with the SEC or to effect compliance with the
registration or qualification requirement of any state securities laws, stock
exchange or national market system.

      14. ACCELERATION OF OPTIONS. 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 Options
granted under this Plan are assumed or replaced by the successor corporation,
which assumption will be binding on all Optionees), (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 of the Code
wherein the stockholders of the Company give up all of their equity interests 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), the vesting of all options granted pursuant to
this Plan will accelerate and the options will become exercisable in full prior
to the consummation of such event at such times and on such conditions as the
Committee determines, and if such options are not exercised prior to the
consummation of the corporate transaction, they shall terminate in accordance
with the provisions of this Plan.

      15. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan (but may not terminate or amend the terms of any
outstanding option without the consent of the Optionee); provided, however, that
the Committee shall not, without the approval of the stockholders of the
Company, increase the total number of Shares available under this Plan (except
by operation of the provisions of Sections 4 and 11 above) or change the class
of persons eligible to receive Options. Further, the provisions in Sections 6
and 7 of this Plan shall not be amended more than once every six (6) months,
other than to comport with changes in the Code, the Employee Retirement Income
Security Act or the rules thereunder. In any case, no amendment of this Plan may
adversely affect any then outstanding Options or any unexercised portions
thereof without the written consent of the Optionee.

      16. TERM OF PLAN. Options may be granted pursuant to this Plan from time
to time within a period of ten (10) years from the date this Plan is adopted by
the Board.

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      17. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings:

      17.1 "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 the Option, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.

      17.2 "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 Option, each of the corporations other than the last corporation
in the unbroken chain 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.

      17.3 "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.

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

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FOR INITIAL GRANT

                              ESS TECHNOLOGY, INC.

                        1995 DIRECTORS STOCK OPTION PLAN

                DIRECTORS NONQUALIFIED INITIAL STOCK OPTION GRANT

      This Stock Option Grant (this "GRANT") 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 Optionee
named below ("OPTIONEE").

Optionee:
                                  ------------------------------------------
Optionee's Address:
                                  ------------------------------------------

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

Total Shares Subject to Option:
                                  ------------------------------------------
Exercise Price Per Share:
                                  ------------------------------------------
Date of Grant:
                                  ------------------------------------------
Expiration Date:
                                  ------------------------------------------

      1. GRANT OF OPTION. The Company hereby grants to Optionee 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 Grant and the Company's 1995 Directors Stock Option Plan, as
amended (the "PLAN"). Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in the Plan.

      2. EXERCISE AND VESTING OF OPTION. Subject to the terms and conditions of
the Plan and this Grant, this Option shall become exercisable as it vests.
Subject to the terms and conditions of the Plan and this Grant, this Option
shall vest as to twenty-five percent (25%) of the Shares upon each of the first
four (4) successive anniversaries of the Date of Grant so long as the Optionee
continuously remains a member of the Board of Directors of the Company (a "BOARD
MEMBER").

      3. RESTRICTION ON EXERCISE. This Option may not be exercised unless such
exercise is in compliance with the Securities Act, and all applicable state
securities laws, as they are in effect on the date of exercise, and the
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register, qualify or list
the Shares with the SEC, any state securities commission or any stock exchange
or national market system to effect such compliance.

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      4. TERMINATION OF OPTION. Except as provided below in this Section, this
Option shall terminate and may not be exercised if Optionee ceases to be a Board
Member. The date on which Optionee ceases to be a Board Member shall be referred
to as the "TERMINATION DATE."

            4.1 Termination Generally. If Optionee ceases to be a Board Member
for any reason except death or disability, then this Option, to the extent (and
only to the extent) that it would have been exercisable by Optionee on the
Termination Date, may be exercised by Optionee within seven (7) months after the
Termination Date, but in no event later than the Expiration Date.

            4.2 Death or Disability. If Optionee ceases to be a Board Member
because of the death of Optionee or the disability of Optionee within the
meaning of Section 22(e)(3) of the Code, then this Option, to the extent (and
only to the extent) that it would have been exercisable by Optionee on the
Termination Date, may be exercised by Optionee (or Optionee's legal
representative) within twelve (12) months after the Termination Date, but in no
event later than the Expiration Date.

      5. MANNER OF EXERCISE.

            5.1 Exercise Agreement. This Option shall be exercisable by delivery
to the Company of an executed written Directors Stock Option Exercise Agreement
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Committee, which shall set forth Optionee's election to exercise
some or all of this Option, the number of Shares being purchased, any
restrictions imposed on the Shares and such other representations and agreements
as may be required by the Company to comply with applicable securities laws.

            5.2 Payment. Payment for the Shares purchased upon exercise of this
Option may be made (a) in cash or by check; (b) by surrender of shares of Common
Stock of the Company that have been owned by Optionee for more than six (6)
months (and which 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 were obtained by the
Optionee in the open public market, having a Fair Market Value equal to the
Exercise Price of the Option; (c) by waiver of compensation due or accrued to
Optionee for services rendered; (d) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD DEALER") whereby the Optionee irrevocably elects to 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; (e) provided
that a public market for the Company's stock exists, through a "margin"
commitment from the Optionee and a NASD Dealer whereby the Optionee 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.

            5.3 Withholding Taxes. Prior to the issuance of the Shares upon
exercise of this Option, Optionee shall pay or make adequate provision for any
applicable federal or state withholding obligations of the Company.

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            5.4 Issuance of Shares. Provided that such notice and payment are in
form and substance satisfactory to counsel for the Company, the Company shall
cause the Shares to be issued in the name of Optionee or Optionee's legal
representative. To enforce any restrictions on Optionee's Shares, the Committee
may require Optionee to deposit all certificates, 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.

      6. NONTRANSFERABILITY OF OPTION. During the lifetime of the Optionee, this
Option shall be exercisable only by Optionee or by Optionee's guardian or legal
representative, unless otherwise permitted by the Committee. This Option may not
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution.

      7. INTERPRETATION. Any dispute regarding the interpretation of this Grant
shall be submitted by Optionee or the Company to the Committee that administers
the Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Committee shall be final and binding on the
Company and on Optionee. Nothing in the Plan or this Grant shall confer on
Optionee any right to continue as a Board Member.

      8. ENTIRE AGREEMENT. The Plan and the Directors Stock Option Exercise
Agreement in the form attached hereto as Exhibit A, and the terms and conditions
thereof, are incorporated herein by this reference. This Grant, the Plan and the
Directors Stock Option Exercise Agreement constitute the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersede all prior understandings and agreements with respect to such
subject matter.

                                         ESS TECHNOLOGY, INC.

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

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                        ACCEPTANCE OF STOCK OPTION GRANT

      Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee 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
Grant. Optionee acknowledges that there may be adverse tax consequences upon
exercise of this Option or disposition of the Shares and that Optionee has been
advised by the Company that Optionee should consult a qualified tax advisor
prior to such exercise or disposition.

                                         ---------------------------------------
                                                                      , Optionee
                                         -----------------------------

[ACCEPTANCE SIGNATURE PAGE TO DIRECTORS NONQUALIFIED INITIAL STOCK OPTION GRANT]

                                       4
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FOR SUCCEEDING GRANT

                              ESS TECHNOLOGY, INC.
                        1995 DIRECTORS STOCK OPTION PLAN
              DIRECTORS NONQUALIFIED SUCCEEDING STOCK OPTION GRANT

      This Stock Option Grant (this "GRANT") 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 Optionee
named below ("OPTIONEE").

Optionee:
                                  ------------------------------------------
Optionee's Address:
                                  ------------------------------------------

                                  ------------------------------------------
Total Shares Subject to Option:
                                  ------------------------------------------
Exercise Price Per Share:
                                  ------------------------------------------
Date of Grant:
                                  ------------------------------------------
Expiration Date:
                                  ------------------------------------------

      1. GRANT OF OPTION. The Company hereby grants to Optionee 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 Grant and the Company's 1995 Directors Stock Option Plan, as
amended (the "PLAN"). Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in the Plan.

      2. EXERCISE AND VESTING OF OPTION. Subject to the terms and conditions of
the Plan and this Grant, this Option shall become exercisable as it vests.
Subject to the terms and conditions of the Plan and this Grant, this Option
shall vest as to twenty-five percent (25%) of the Shares upon each of the first
four (4) successive anniversaries of the Date of Grant so long as the Optionee
continuously remains a member of the Board of Directors of the Company (a "BOARD
MEMBER").

      3. RESTRICTION ON EXERCISE. This Option may not be exercised unless such
exercise is in compliance with the Securities Act, and all applicable state
securities laws, as they are in effect on the date of exercise, and the
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register, qualify or list
the Shares with the SEC, any state securities commission or any stock exchange
or national market system to effect such compliance.

      4. TERMINATION OF OPTION. Except as provided below in this Section, this
Option shall terminate and may not be exercised if Optionee ceases to be a Board
Member. The date on which Optionee ceases to be a Board Member shall be referred
to as the "TERMINATION DATE."

<PAGE>

            4.1 Termination Generally. If Optionee ceases to be a Board Member
for any reason except death or disability, then this Option, to the extent (and
only to the extent) that it would have been exercisable by Optionee on the
Termination Date, may be exercised by Optionee within seven (7) months after the
Termination Date, but in no event later than the Expiration Date.

            4.2 Death or Disability. If Optionee ceases to be a Board Member
because of the death of Optionee or the disability of Optionee within the
meaning of Section 22(e)(3) of the Code, then this Option, to the extent (and
only to the extent) that it would have been exercisable by Optionee on the
Termination Date, may be exercised by Optionee (or Optionee's legal
representative) within twelve (12) months after the Termination Date, but in no
event later than the Expiration Date.

      5. MANNER OF EXERCISE.

            5.1 Exercise Agreement. This Option shall be exercisable by delivery
to the Company of an executed written Directors Stock Option Exercise Agreement
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Committee, which shall set forth Optionee's election to exercise
some or all of this Option, the number of Shares being purchased, any
restrictions imposed on the Shares and such other representations and agreements
as may be required by the Company to comply with applicable securities laws.

            5.2 Payment. Payment for the Shares purchased upon exercise of this
Option may be made (a) in cash or by check; (b) by surrender of shares of Common
Stock of the Company that have been owned by Optionee for more than six (6)
months (and which 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 were obtained by the
Optionee in the open public market, having a Fair Market Value equal to the
Exercise Price of the Option; (c) by waiver of compensation due or accrued to
Optionee for services rendered; (d) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD DEALER") whereby the Optionee irrevocably elects to 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; (e) provided
that a public market for the Company's stock exists, through a "margin"
commitment from the Optionee and a NASD Dealer whereby the Optionee 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.

            5.3 Withholding Taxes. Prior to the issuance of the Shares upon
exercise of this Option, Optionee shall pay or make adequate provision for any
applicable federal or state withholding obligations of the Company.

            5.4 Issuance of Shares. Provided that such notice and payment are in
form and substance satisfactory to counsel for the Company, the Company shall
cause the Shares to be issued in the name of Optionee or Optionee's legal
representative. To enforce any restrictions on Optionee's Shares, the Committee
may require Optionee to deposit all certificates, together with

                                       2
<PAGE>

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.

      6. NONTRANSFERABILITY OF OPTION. During the lifetime of the Optionee, this
Option shall be exercisable only by Optionee or by Optionee's guardian or legal
representative, unless otherwise permitted by the Committee. This Option may not
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution.

      7. INTERPRETATION. Any dispute regarding the interpretation of this Grant
shall be submitted by Optionee or the Company to the Committee that administers
the Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Committee shall be final and binding on the
Company and on Optionee. Nothing in the Plan or this Grant shall confer on
Optionee any right to continue as a Board Member.

      8. ENTIRE AGREEMENT. The Plan and the Directors Stock Option Exercise
Agreement in the form attached hereto as Exhibit A, and the terms and conditions
thereof, are incorporated herein by this reference. This Grant, the Plan and the
Directors Stock Option Exercise Agreement constitute the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersede all prior understandings and agreements with respect to such
subject matter.

                                         ESS TECHNOLOGY, INC.

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

                                       3
<PAGE>

                        ACCEPTANCE OF STOCK OPTION GRANT

      Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee 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
Grant. Optionee acknowledges that there may be adverse tax consequences upon
exercise of this Option or disposition of the Shares and that Optionee has been
advised by the Company that Optionee should consult a qualified tax advisor
prior to such exercise or disposition.

                                         ---------------------------------------
                                                                      , Optionee
                                         -----------------------------

[ACCEPTANCE SIGNATURE PAGE TO DIRECTORS NONQUALIFIED INITIAL STOCK OPTION GRANT]

                                       4
<PAGE>
                                        EXHIBIT A

                        DIRECTORS STOCK OPTION EXERCISE AGREEMENT

<PAGE>
                                    Exhibit A
                              ESS TECHNOLOGY, INC.
                 1995 DIRECTORS STOCK OPTION PLAN (THE "PLAN ")
                    DIRECTORS 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>
Optionee:_______________________________            Number of Shares Purchased:_________________
Social Security Number:_________________            Purchase Price per Share:___________________
Address:________________________________            Aggregate Purchase Price: __________________
________________________________________            Date of Stock Option Grant:_________________
Type of Stock Option: Nonqualified Stock Option     Exact Name of Title to Shares:______________
                                                    ____________________________________________
</TABLE>

1. DELIVERY OF PURCHASE PRICE. Optionee hereby delivers to the Company the
Aggregate Purchase Price, to the extent permitted in the Directors Nonqualified
Stock Option Grant referred to above (the "Grant"), as follows (check as
applicable and complete):

| |   in cash (by check) in the amount of $__________, receipt of which is
      acknowledged by the Company;

| |   by delivery of _________ fully-paid, nonassessable and vested shares of
      the common stock of the Company owned by Optionee 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 Optionee 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 Optionee for
      services rendered in the amount of $_________;

| |   through a "same-day-sale" commitment, delivered herewith, from Optionee
      and the NASD Dealer named therein, in the amount of $__________; or

| |   through a "margin" commitment, delivered herewith from Optionee and the
      NASD Dealer named therein, in the amount of $__________.

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

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

Date:
     ------------------------       --------------------------------------------
                                    Signature of Optionee

<PAGE>

                              ESS TECHNOLOGY, INC.
                        1995 DIRECTORS STOCK OPTION PLAN

                                SPOUSE'S CONSENT

      I acknowledge that I have read the foregoing Directors 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 Optionee
                                         Date:
---------------------------------------       ----------------------------------
                                         Date:
---------------------------------------       ----------------------------------
Optionee's Name<PAGE>

                                                                   EXHIBIT 10.50

                          JOINT DEVELOPMENT AGREEMENT

        This Joint Development Agreement ("Agreement") is made and entered into
effective as of this 14th day of December, 2001 ("Effective Date"), by and
between ESS Technology, Inc., ("ESS"), a California corporation, with its
principal place of business at 48401 Fremont Blvd., Fremont, CA 94538, USA, and
*** ("Counterparty*"), a corporation organized under the laws of ***, with its
principal place of business at ***.

                                    RECITALS

WHEREAS, ESS is engaged in the business of designing and developing MPEG 2
controller and other certain integrated circuits;

WHEREAS, Counterparty* is engaged in the business of designing and developing
*** and other certain integrated circuits;

WHEREAS, ESS and Counterparty* desire to work closely together to jointly
develop a *** product that combines the respective parties' MPEG 2 controller
and *** for DVD player application technology, and Counterparty* desires to
provide ESS ***;

WHEREAS, ESS and Counterparty* desire to enter into this Agreement to clarify
their respective rights and obligations to each other with respect to the joint
development of such new products among other things;

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
below, the parties agree as follows:

                                    AGREEMENT

1.      DEFINITIONS. As used in this Agreement, these terms shall have the
        following definitions:

        1.1 "Counterparty* Component" shall mean ***.

        1.2 "Counterparty* Deliverables" means the services and materials
        designated as "*** Deliverables" on the Development Schedule.

        1.3 "Counterparty* Existing IPR" shall mean the patents, copyrights,
        trade secrets, know-how and mask works based on inventions (whether
        patentable or not) developed on or prior to the Effective Date which are
        (a) owned or licensed by Counterparty* and which Counterparty* has the
        right to license or sublicense, (b) related to Counterparty* Component,
        and (c) reasonably necessary to develop, manufacture, use and sell the
        Combined Product.

        1.4 "Counterparty* Improvements" shall mean any modification, invention,
        discovery, development, or works of authorship, whether or not
        patentable, that modifies, improves upon, extends, enhances or
        constitutes a derivative work of the Counterparty* Existing IPR by
        either or both patties during the Term of this Agreement.

----------
* All references to the counterparty on this page have been replaced with the
term "Counterparty*." Confidential treatment has been requested with respect to
the replaced reference.

*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

<PAGE>

        1.5 "Counterparty* IPR" shall mean the Counterparty* Existing IPR and
        Counterparty* Improvements. Counterparty* IPR does not include any trade
        name, trademark or service mark owned and/or used by Counterparty*.

        1.6 "Combined Product" shall mean all single chip devices, which
        integrates ESS Component and Counterparty* Component, developed jointly
        by the parties pursuant to this Agreement and which incorporates the
        functional specifications for the Combined Product set forth in Exhibit
        A. There are two major categories of Combined Product as set forth in
        Exhibit A.

        1.7 "Confidential Information" shall mean the information of either
        party ("Disclosing Party") which is disclosed to the other party
        (`Receiving Party') pursuant to this Agreement, in written form and
        marked "Confidential" or if disclosed orally, the Disclosing Party shall
        send a written summary of such information to the Receiving Party within
        thirty (30) days of the date of the initial disclosure and mark such
        summary "Confidential." Confidential Information shall include, but not
        be limited to, trade secrets, know-how, inventions, techniques,
        processes, algorithms, software programs, schematics, designs,
        contracts, financial information, and non-public business information.

        1.8 "Deliverables" shall mean the Counterparty* Deliverables and ESS
        Deliverables.

        1.9 "Development Schedule" shall mean the schedule of Deliverables and
        timetable set forth in Exhibit B for the development of the Combined
        Product.

        1.10 "Engineering NRE" shall mean the engineering fees, costs, expenses
        and other charges of the independent companies to produce and package
        the engineering silicon for Combined Product. The Engineering NRE is
        limited to the cost of the masks, engineering fabrication, engineering
        packaging and all third-party testing costs related thereto. Unless
        agreed by both parties in writing, any other cost not related to the
        masks, engineering fabrication, engineering packaging and all
        third-party testing, shall not included in Engineering NRE.

        1.11 "Specifications" shall mean the functional specifications, set
        forth in Exhibit A, developed by Counterparty* and ESS for the Combined
        Product, and as amended from time to time by mutual written agreement of
        the Parties.

        1.12 "ESS Component" shall mean ESS's MPEG 2 controller.

        1.13 "ESS Deliverables" shall mean the services and materials designated
        as ESS Deliverables on the Development Schedule.

        1.14 "ESS Existing IPR" shall mean the patents, copyrights, trade
        secrets, know how and mask works based on inventions (whether patentable
        or not) developed on or prior to the Effective Date which are (a) owned
        or licensed to ESS and which ESS has the right to

----------
* All references to the counterparty on this page have been replaced with the
term "Counterparty*." Confidential treatment has been requested with respect to
the replaced reference.

*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

                                      -2-
<PAGE>

        license or sublicense, (b) related to Counterparty*, and (c) reasonably
        necessary to develop, manufacture, use and sell the Combined Product.

        1.15 "ESS Improvements" shall mean any modification, invention,
        discovery, development, or works of authorship, whether or not
        patentable, that modifies, improves upon, extends, enhances or
        constitutes a derivative work of the ESS Existing IPR by either or both
        parties during the Term of this Agreement.

        1.16 "ESS IPR" shall mean ESS Existing IPR and ESS Improvements. ESS IPR
        does not include any trade name, trademark or service mark owned and/or
        used by ESS.

        1.17 "R&D" shall mean Research and development.

        1.18 "Sales cost" shall mean (a) direct marketing/sales costs,
        including but not limited to commission and related cost, calculated at
        ***% of total sales; (b) Indirect sales cost charge is limited to the
        maximum ***% of total sales only. Items and amount of each indirect
        sales cost shall be discussed and agreed by both parties in writing
        prior to the release of the Profit Sharing Report; (c) Inventory costs
        shall be calculated at ***% of total sales; (d) Handling charge is
        limited to the maximum of ***% of total sales in *** only. Items and
        amount of each handling charge shall be discussed and agreed by both
        parties in writing prior to the release of the Profit Sharing Report;
        (e) Sales rebate and marketing developing fund ("MDF") shall be counted
        as a portion of the cost of total sales, with the actual figure agree by
        both parties.

        1.19 "***" shall mean the *** provided by Counterparty*.

2.      R&D RESPONSIBILITIES

        2.1 ESS'S R&D OBLIGATIONS. ESS will perform the design, develop, and
        integrate the Combined Product.

        2.2 COUNTERPARTY* R&D OBLIGATIONS. Counterparty* will provide necessary
        help and materials set forth in Exhibit B, Deliverables & Development
        Schedule, under the heading "Counterparty* Deliverables".

        2.3     R&D COST.

                2.3.1 Counterparty* and ESS will each be responsible for ***% of
                the Engineering NRE.

                2.3.2 Each party shall be responsible for their own internal
                engineering costs necessary to produce the Deliverables and the
                Combined Product.

        2.4 WORK AND TIME TABLE. The Counterparty*, ESS Deliverables, and
        Development set forth in Exhibit B shall be provided by both parties
        within thirty (30) after the Effective Day. The parties will also use
        their reasonable diligent efforts to meet the

----------
* All references to the counterparty on this page have been replaced with the
term "Counterparty*." Confidential treatment has been requested with respect to
the replaced reference.

*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

                                      -3-
<PAGE>

        target date of the Development Schedule set forth in Exhibit B. The
        parties may mutually agree to amend the Development Schedule.

3.      INTERNAL USE LICENSES

        3.1 INTERNAL USE LICENSE TO COUNTERPARTY*. ESS hereby grants to
        Counterparty* during the Term a nonexclusive, nontransferable,
        worldwide, royalty-free license to use, reproduce and modify the ESS IPR
        and any materials delivered to Counterparty* under this Agreement,
        internally at Counterparty*, for the sole purpose of developing the
        Combined Product.

        3.2 INTERNAL USE LICENSE TO ESS. Counterparty* hereby grants to ESS
        during the Term a nonexclusive, nontransferable, worldwide, royalty-free
        license to use, reproduce and modify the Counterparty* IPR and any
        materials delivered to ESS under this Agreement, internally at ESS, for
        the sole purpose of developing the Combined Product.

4.      MANUFACTURING, MARKETING AND DISTRIBUTION

        4.1 LICENSE TO ESS. Counterparty* hereby grants to ESS, and ESS accepts,
        an *** license to utilize during the Term the Counterparty* IPR solely
        on or in connection with the development, manufacture, promotion,
        distribution and sale of the Combined Product. The license includes the
        right to sublicense to ESS's fab foundries the right to manufacture the
        Counterparty* IPR solely as a component of the Combined Product.

        4.2 LICENSE TO COUNTERPARTY*. ESS hereby grants to Counterparty*, and
        Counterparty* accepts, an *** license to utilize during the Term the ESS
        IPR solely on or in connection with the distribution and sale of the
        Combined Product. The license includes the right to sublicense to
        Counterparty*'s fab foundries the right to manufacture the ESS IPR
        solely as a component of the Combined Product..

        4.3 ESS SUBLICENSE. The licenses of Section 4.1 shall be non
        sublicensable except: (a) the right of ESS to sublicense the software
        object code of the Counterparty* IPR to end users of the Combined
        Product; (b) the right to sublicense the software source code to
        customers of Combined Product upon terms to be negotiated by the parties
        in good faith.

        4.4 COUNTERPARTY* SUBLICENSE. The licenses of Section 4.2 shall be non
        sublicensable except: (a) the right of Counterparty* to sublicense the
        software object code of the ESS IPR to end users of the Combined
        Product; (b) the right to sublicense the software source code to
        customers of Combined Product upon terms to be negotiated by the parties
        in good faith.

        4.5 MANUFACTURING. *** have the manufacturing right of the Combined
        Product. ESS shall place all Combined Product purchase orders to
        Counterparty*. After receiving purchase orders from ESS, *** shall
        operate the manufacturing of Combined Product.

----------
* All references to the counterparty on this page have been replaced with the
term "Counterparty*." Confidential treatment has been requested with respect to
the replaced reference.

*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

                                      -4-
<PAGE>

        ESS shall pay for all inventory of Combined Product, including but not
        limited to the wafer and packaged integrated circuit, ***.

        4.6 MARKETING. ESS shall be entitled to market, promote, and sell the
        Combined Product utilizing the ESS sales channel.

        4.7 PROFIT-SHARING. The profit sharing scheme is subject to Exhibit C of
        the Agreement.

        4.8 MODIFICATIONS TO PROFIT SHARING STRUCTURE. The parties reserve the
        right to alter the terms of Exhibit C as they may agree from time to
        time in writing.

        4.9 SUPPORT. Each party shall bear its own engineering support costs,
        and each party shall provide the necessary manpower, support and service
        to customers utilizing the ESS sales channel.

        4.10 MAINTENANCE. ESS agrees to use reasonable commercial efforts to
        make bug fixes as requested by Counterparty* to the ESS Component of the
        Combined Product to the extent that such proprietary information and
        technology are incorporated as part of the Combined Product.
        Counterparty* agrees to use reasonable commercial efforts to make bug
        fixes as requested by ESS to the Counterparty* Component of the Combined
        Product to the extent that such proprietary information and technology
        are incorporated as part of the Combined Product. Any such bug fixes
        shall be deemed to constitute ESS IPR or Counterparty* IPR, as
        applicable.

        4.11 ***. Counterparty* agrees to provide ESS *** with a reasonable
        price, where reason price means the cost of *** plus handling charge.

5.      ACCOUNTING; AUDIT; PAYMENT

        5.1 REPORTS AND-PAYMENT. ESS shall (i) render a profit sharing report
        ("Profit Sharing Report") within thirty (30) days after the close of
        each calendar month during the Term hereof, whether or not any payment
        is shown to be due thereunder, and (ii) remit the Profit Payments
        (defined in Exhibit C) due Counterparty*, if any, within thirty (30)
        days after the close of each calendar month during the Term hereof. The
        Profit Sharing Payments shall be paid in U.S. Dollars and acceptance
        thereof by the payee and shall not preclude the payee from questioning
        the correctness of the Profit Sharing Payment at any time. All Profit
        Sharing Payments shall be paid without set-off of any amount whatsoever.
        The Profit Sharing Reports shall be in a form mutually agreeable to the
        Parties and be consistent with the revenue and profit sharing
        arrangement described in section 4.6 hereof. The Profit Sharing Report
        shall contain at least the following information for the previous
        calendar quarter: (i) the *** of the Combined Product sold; (ii) the ***
        of Combined Product; (iii) all *** of the Combined Product thereof; (iv)
        each item of ***; and (v) the amount of the Profit Sharing Payment.

----------
* All references to the counterparty on this page have been replaced with the
term "Counterparty*." Confidential treatment has been requested with respect to
the replaced reference.

*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

                                      -5-
<PAGE>

        5.2 Each party shall keep complete and accurate records and accounts
        with respect to its manufacturing, sales and distribution of the
        Combined Product. These records shall be retained by each party for a
        period of not less than three (3) years after expiration or termination
        of this Agreement. Not more than twice per calendar year, the Parties
        shall be entitled to audit, through an independent auditor retained by
        the auditing party the other Parties books and records, upon at least
        thirty (30) days prior written notice to the other party. Each party
        shall pay to the other party an amount corresponding to the net amount
        of any underpayment of the profit sharings due hereunder within thirty
        (30) days after notice by the auditor of such underpayment or
        overpayment, as applicable, as well as an interest on such underpayment
        or overpayment at the rate of twelve percent (12%) per year, or the
        maximum rate permitted by law, whichever is lower. A failure to complete
        an audit and assert a claim within a three-year period after delivery of
        a Revenue and Profit Sharing Report shall constitute a waiver of the
        right to audit and/or assert a claim with respect to such Revenue and
        Profit Sharing Report. If a Party's duly authorized representative
        discovers a deficiency in the amounts due under this Agreement (an
        "Audit Deficiency") the audited Party shall promptly pay such Audit
        Deficiency to the auditing Party and, if such Audit Deficiency is five
        percent (5%) or more of the amount paid to the auditing Party for such
        audit period, the audited Party shall also reimburse the auditing Party
        for all reasonable costs and expenses incurred by the auditing Party in
        connection with such audit and collection of the Audit Deficiency. The
        results of such audit shall be deemed Confidential Information pursuant
        to Section 10 hereof.

6.      RESPONSIBILITY FOR TAXES

        Each party agrees to pay, indemnify and, hold the other party harmless
        from any sales, use, excise, import or export, value-added, or similar
        tax or duty, and any other tax or duty not based on the other party's
        net income ("Taxes"), and all government permit fees, license fees,
        royalty fees, customs fees or similar fees ("Fees"), levied upon any
        deliverables by such party under this Agreement or due to any payment to
        be made pursuant to this Agreement, and any penalties, interest,
        collection costs and withholding costs associated with any of the
        foregoing items ("Additional Costs"). Taxes, Fees and Additional Costs
        required to be paid by each party pursuant to this Section 6 are in
        addition to, and may not be claimed as a reduction or offset against,
        any payments due to the other party under this Agreement.

7.      DISCLAIMER OF WARRANTIES

        NEITHER PARTY MAKES ANY WARRANTIES IN THIS AGREEMENT AS TO ESS
        COMPONENT, COUNTERPARTY* COMPONENT, THE COMBINED PRODUCT, ESS IPR,
        COUNTERPARTY* IPR, TECHNOLOGY, MATERIALS, SERVICES, INFORMATION OR OTHER
        ITEMS IT FURNISHES PURSUANT TO THIS AGREEMENT, EXPRESS, IMPLIED, OR
        STATUTORY, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY
        AND FITNESS FOR A PARTICULAR PURCHASE, OR THAT SUCH ITEMS ARE FREE FROM
        THE

----------
* All references to the counterparty on this page have been replaced with the
term "Counterparty*." Confidential treatment has been requested with respect to
the replaced reference.

*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

                                      -6-
<PAGE>

        RIGHTFUL CLAIM OF ANY THIRD PARTY BY WAY OF INFRINGEMENT OR THE LIKE.

8.      REPRESENTATIONS AND WARRANTIES

        8.1 ESS REPRESENTATIONS AND WARRANTIES. ESS represents and warrants to
        Counterparty* that ESS has the corporate power, legal capacity and
        authority to enter into and perform its obligations under this Agreement
        and to consummate the transactions contemplated hereby. ESS further
        represents and warrants to Counterparty* that no approval or consent of,
        notice to, filing or registration with any third party or governmental
        agency is necessary in connection with ESS's performance of ESS's
        obligations hereunder that have not been obtained.

        8.2 COUNTERPARTY* REPRESENTATIONS AND WARRANTIES. Counterparty*
        represents and warrants to ESS that Counterparty* has the corporate
        power, legal capacity and authority to enter into and perform its
        obligations under this Agreement and to consummate the transactions
        contemplated hereby. Counterparty* further represents and warrants to
        ESS that no approval or consent of, notice to, filing or registration
        with any third party or governmental agency is necessary in connection
        with Counterparty*'s performance of Counterparty*'s obligations
        hereunder that have not been obtained.

9.      PROPRIETARY RIGHTS OWNERSHIP

        9.1 PRIOR RIGHTS. All intellectual property rights, including patents,
        patent applications, copyrights and trade secrets, owned by a party as
        of the Effective Date shall remain the property of such party and no
        licenses or other rights with respect to such intellectual property are
        granted to the other party except as expressly set forth in this
        Agreement. Without limiting the foregoing, ESS shall own all right,
        title and interest in and to the ESS Existing IPR, and Counterparty*
        shall own all right, title and interest in and to the Counterparty* IPR,
        subject only to the terms of this Agreement.

        9.2 ***. Both parties, ESS and Counterparty*, agree that the
        manufacturing kits, including but not limited to mask set of the
        Combined Products are intellectual properties of *** and are ***. *** is
        allowed to use the manufacturing kits to manufacture Combined Product
        without the approval from *** in writing.

        9.3     IMPROVEMENTS.

                9.3.1 COUNTERPARTY* IMPROVEMENTS. To the extent ESS or
                Counterparty* develops any Counterparty* Improvements, whether
                or not as a joint invention, Counterparty* shall own all
                intellectual property rights in such Counterparty* Improvements.
                ESS hereby assigns to Counterparty* all ESS's right, title and
                interest, worldwide, if any, in all intellectual property rights
                in the Counterparty* Improvements.

----------
* All references to the counterparty on this page have been replaced with the
term "Counterparty*." Confidential treatment has been requested with respect to
the replaced reference.

*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

                                      -7-
<PAGE>

                9.3.2 ESS IMPROVEMENTS. To the extent Counterparty* develops any
                ESS improvements, whether or not as a joint invention, ESS shall
                own all intellectual property rights in such ESS Improvements.
                Counterparty* hereby assigns to ESS all Counterparty's right,
                title and interest, worldwide, if any, in all intellectual
                property rights in the ESS Improvements.

10.     CONFIDENTIALITY

        10.1 CONFIDENTIALITY OBLIGATIONS. Each party acknowledges that in the
        course of the performance of this Agreement, it may obtain the
        Confidential Information of the other party. The Receiving Party (as
        defined in Section 1.7 "Confidential Information") shall at all times,
        both during the Term of this Agreement and thereafter, keep in
        confidence all of the Disclosing Party's (as defined herein)
        Confidential Information received by it. The Receiving Party shall not
        use the Confidential Information of the Disclosing Party other than as
        expressly permitted under the Terms of this Agreement or by a separate
        written agreement. The Receiving Party shall take all reasonable steps
        to prevent unauthorized disclosure or use of the Disclosing Party's
        Confidential Information and to prevent it from failing into the public
        domain or into the possession of unauthorized persons. The Receiving
        Party shall not disclose Confidential Information of the Disclosing
        Party to any person or entity other than its officers, employees and
        consultants who need access to such Confidential Information in order to
        effect the intent of this Agreement and who have entered into written
        confidentiality agreements with the Receiving Party which protects the
        Confidential Information of the Disclosing Party. The Receiving Party
        shall immediately give notice to the Disclosing Party of any
        unauthorized use or disclosure of Disclosing Party's Confidential
        Information. The Receiving Party agrees to assist the Disclosing Party
        in remedying such unauthorized use or disclosure of its Confidential
        Information. The foregoing obligations shall not apply to the extent
        that Confidential Information includes information which:

                10.1.1 is already known to the Receiving Party at the time of
                disclosure, which knowledge the Receiving Party shall have the
                burden of proving;

                10.1.2 is, or, through no act or failure to act of the Receiving
                Party, becomes publicly known;

                10.1.3 is received by the Receiving Party from a third party
                without restriction on disclosure;

                10.1.4 is independently developed by the Receiving Party without
                reference to the Confidential information of the Disclosing
                Party, which independent development the Receiving Party will
                have the burden of proving;

                10.1.5 is approved for release by written authorization of the
                Disclosing Party, or

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                10.1.6 is required to be disclosed by a government agency to
                further the objectives of this Agreement or by a proper order of
                a court of competent jurisdiction; provided, however that the
                Receiving Party will use its best efforts to minimize such
                disclosure and will consult with and assist the Disclosing Party
                in obtaining a protective order prior to such disclosure.

        10.2 Except as expressly provided herein, the Confidential Information
        disclosed, delivered to or required hereunder shall be and remain the
        sole property of the Disclosing Party. Upon the termination or
        expiration of this Agreement, and the Disclosing Party's request, the
        Receiving Party agrees to return or destroy all of the Confidential
        information of the Disclosing Party and any copies of the same promptly
        to the Disclosing Party.

11.     INDEMNIFICATION

        11.1 ESS INDEMNIFICATION. ESS shall at it's sole expense indemnify,
        defend and hold harmless Counterparty* and it's officers, directors and
        employees, against any claims, liabilities, demands, causes of action,
        judgements, settlements, and expenses (including reasonable attorneys
        fees) relating to, arising out of or resulting from (i) any breach of
        the warranties and/or representations in Section 8 hereof, or (ii)
        Counterparty*'s use of the ESS Component, ESS IPR, or ESS contributions
        to the Counterparty* Improvements.

                11.1.1 ESS's obligations hereunder are contingent upon (a)
                Counterparty* giving prompt written notice to ESS of any such
                claim, action or demand, (b) Counterparty* allowing ESS to
                control the defense and related settlement negotiations;
                provided, however, that ESS shall not enter into any agreement
                which results in any liability to Counterparty* without
                Counterparty*'s prior written consent and (c) Counterparty*
                fully assisting in the defense so long as ESS reimburses
                Counterparty* for its reasonable fees, expenses and employee
                time.

                11.1.2 ESS will have no obligation hereunder for any such
                claims, actions or demands that result from:

                        (a) Counterparty*'s use of the Combined Product in a
                        combination with materials or products not supplied by
                        ESS which violates the rights of third parties to the
                        extent that such infringement would not have arisen
                        except for such combination, or

                        (b) The modification or attempted modification of the
                        Combined Product by parties other than ESS (without
                        ESS's consent).

                11.1.3 In the event that any such claim, action or demand is
                made against Counterparty*, Counterparty* will promptly furnish
                ESS with copies of any and

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                all documents (inclusive of all correspondence and pleadings
                other than attorney-client communications) pertaining thereto.

                11.1.4 THE TOTAL MONETARY AMOUNT OF ESS'S INDEMNIFICATION TO
                COUNTERPARTY* SHALL BE LIMITED TO A MAXIMUM OF ***.

                11.1.5 THE FOREGOING STATES COUNTERPARTY*'S SOLE AND EXCLUSIVE
                REMEDY WITH RESPECT TO CLAIMS OF INFRINGEMENT OF PROPRIETARY
                RIGHTS OF ANY KIND,

        11.2 COUNTERPARTY*'S INDEMNIFICATION. Counterparty* shall at it's sole
        expense, indemnify, defend and hold harmless ESS and its officers,
        directors and employees, against any claims, liabilities, demands,
        causes of action, judgments, settlements, and expenses (including
        reasonable attorneys' fees) relating to, arising out of or resulting
        from (i) any breach of the warranties and/or representations in Section
        8 hereof, or (ii) ESS's use of the Counterparty* Component,
        Counterparty* IPR or Counterparty* contributions, to the ESS
        Improvements.

                11.2.1 Counterparty*'s obligations hereunder are contingent upon
                (a) ESS giving prompt written notice to Counterparty* of any
                such claim, action or demand, (b) ESS allowing Counterparty* to
                control the defense and related settlement negotiations;
                provided, however, that Counterparty* shall not enter into any
                agreement which results in any liability to ESS without ESS's
                prior written consent and (c) ESS fully assisting in the defense
                so long as Counterparty* reimburses ESS for its reasonable fees,
                expenses and employee time.

                11.2.2 Counterparty* will have no obligation hereunder for any
                such claims, actions or demands that result from:

                        (a) ESS's use of the Combined Product in a combination
                        with materials or products not supplied by Counterparty*
                        which violates the rights of third parties to the extent
                        that such infringement would not have arisen except for
                        such combination, or

                        (b) The modification or attempted modification of the
                        Combined Product by parties other than Counterparty*
                        (without Counterparty*'s consent).

                11.2.3 In the event that any such claim, action or demand is
                made against ESS, ESS will promptly furnish Counterparty* with
                copies of any and all documents (inclusive of all correspondence
                and pleadings other than attorney-client communications)
                pertaining thereto.

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                11.2.4 THE TOTAL MONETARY AMOUNT OF COUNTERPARTY*'S
                INDEMNIFICATION TO ESS SHALL BE LIMITED TO A MAXIMUM OF ***.

                11.2.5 THE FOREGOING STATES ESS's SOLE AND EXCLUSIVE REMEDY WITH
                RESPECT TO CLAIMS OF INFRINGEMENT OF PROPRIETARY RIGHTS OF ANY
                KIND.

12.     WAIVER OF CONSEQUENTIAL DAMAGES

        12.1 IN NO EVENT, WHETHER BASED IN CONTRACT OR TORT (INCLUDING
        NEGLIGENCE) SHALL EITHER PARTY BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL,
        INDIRECT OR SPECIAL DAMAGES OF ANY KIND OR FOR LOSS OF REVENUE, LOSS OF
        BUSINESS OR OTHER FINANCIAL LOSS ARISING OUT OF OR RELATING TO THIS
        AGREEMENT OR THE BREACH THEREOF, WHETHER OR NOT THE PARTY WAS ADVISED OF
        THE POSSIBILITY OF SUCH DAMAGE.

13.     TERM AND TERMINATION

        13.1 TERM. This Agreement will be in effect for a one (1) year period
        commencing from the Effective Date, unless terminated earlier by either
        party pursuant to the provisions in this section 13 (the "Original
        Term"). This Agreement will be automatically renewed for a successive
        one (1) year period each time(the "Additional Term" and, together with
        the Original Term, the "Term")unless either party provides written
        notice of intent to terminate at least (30) days prior to the end of
        each Term. The Exhibit A "Specifications" and the Exhibit B
        "Deliverables & Development Schedule" of the Agreement may be amended
        upon the mutual agreement of the parties in writing during the Term.

        13.2 DEFAULT BY COUNTERPARTY*. ESS has the right to terminate this
        Agreement and its further obligations hereunder upon the occurrence of
        any of the following events of default (subject to Counterparty*'s
        ability to cure or remedy such event as described in Section 13.2.3):

                13.2.1 Counterparty* is involved in any voluntary or involuntary
                bankruptcy proceeding or any other proceeding concerning
                insolvency, dissolution, cessation of operations, reorganization
                or indebtedness or the like, and the proceeding is not dismissed
                within sixty (60) days,

                13.2.2 Counterparty* becomes insolvent or unable to pay its
                debts as they mature in the ordinary course of business or makes
                an assignment for the benefit of its creditors; or

                13.2.3 Counterparty* is in material default of any provision of
                this Agreement,

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        13.3 DEFAULT BY ESS. Counterparty* has the right to terminate this
        Agreement and its further obligations hereunder upon the occurrence of
        any of the following events of default (subject to ESS's ability to cure
        or remedy such event as described in Section 13.3.3):

                13.3.1 ESS is involved in any voluntary or involuntary
                bankruptcy proceeding or any other proceeding concerning
                insolvency, dissolution, cessation of operations, reorganization
                or indebtedness or the like, and the proceeding is not dismissed
                within sixty (60) days,

                13.3.2 ESS becomes insolvent or unable to pay its debts as they
                mature in the ordinary course of business or makes an assignment
                for the benefit of its creditors; or

                13.3.3 ESS is in material default of any provision of this
                Agreement,

        13.4 RIGHT TO CURE EVENT OF DEFAULT. Upon the occurrence of any event of
        default entitling a party to terminate this Agreement, the
        non-defaulting party may send notice of termination, specifying the
        nature of the default, to the other party. The non-defaulting party will
        permit thirty (30) days following the date of such notice to enable the
        other party to cure the default. Failure to cure the default will result
        in termination without further notice by the non-defaulting party,
        unless such non-defaulting party extends the cure period by written
        notice or withdraws the default notice.

        13.5 EFFECT OF TERMINATION. Upon termination or expiration of this
        Agreement:

                13.5.1 All rights and licenses granted hereunder shall terminate
                immediately; provided, however, that each party may sell its
                inventory of the Combined Product in existence on the
                termination date.

                13.5.2 All sublicense agreements entered into pursuant to this
                Agreement shall terminate immediately.

        13.6 SURVIVAL. The termination or expiration of this Agreement shall in
        no way relieve either party from its obligations to pay the other any
        sums accrued hereunder prior to such termination. The parties agree that
        their respective rights, obligations and duties under Section 4.7
        ("Profit Sharing"); Section 5 ("Accounting; Audit; Payment"), Section 7
        ("Disclaimer of Warranties"), Section 9 ("Propriety Rights Ownership"),
        Section 10 ("Confidentiality"), Section 11 ("Indemnification"), Section
        13 ("Term and Termination") and Section 14 ("General Provisions") of
        this Agreement shall survive any termination or expiration of this
        Agreement.

14.     GENERAL PROVISIONS

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        14.1 NOTICE. Any notice provided for or permitted under this Agreement
        will be treated as having been given when (a) delivered personally, (b)
        sent by confirmed telex or telecopy, (c) sent by commercial overnight
        courier with written verification of receipt (d) mailed postage prepaid
        by certified or registered mail, return receipt requested, to the party
        to be notified, at the addresses set forth below, or at such other place
        of which the other party has been notified in accordance with the
        provisions of this Section 14.

        If to ESS:           ESS Technology, Inc.
                             48401 Fremont Blvd.,
                             Fremont, California 94538
                             Attn:

        If to Counterparty*: ***
                             ***
                             ***
                             ***

        Such notice will be treated as having been received upon the earlier of
        actual receipt or five (5) days after posting.

        14.2 NO MODIFICATION WAIVER. The terms of this Agreement shall not be
        modified except by an agreement in writing signed by both parties
        hereto. No waiver by either party of a breach or default hereunder shall
        be deemed a waiver by such party of a subsequent breach or default of a
        like or similar nature.

        14.3 ENTIRE-AGREEMENT. This Agreement, including Exhibits, shall
        constitute the entire understanding of the parties with respect to the
        subject matter, superseding all prior and contemporaneous promises,
        agreements and understandings, whether written or oral pertaining
        thereto.

        14.4 RELATIONSHIP OF THE PARTIES. This Agreement does not appoint either
        party as the agent of the other party, or create a partnership of joint
        venture between the parties.

        14.5 GOVERNING-LAW. This Agreement shall be construed and interpreted
        pursuant to the laws of the State of California, and the parties hereto
        submit and consent to the jurisdiction of the courts of the State of
        California, excluding its choice of law provisions.

        14.6 SEVERABILITY. In the event that any provision of this Agreement
        shall be unenforceable or invalid under any applicable law or be so held
        by applicable court decision, such unenforceability or invalidity shall
        not render this Agreement unenforceable or invalid as a whole, and, in
        such event, such provision shall be changed and interpreted so as to
        best accomplish the objectives of such unenforceable or invalid
        provision within the limits of applicable law or applicable court
        decisions.

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        14.7 COUNTERPARTS. This Agreement may be executed in any number of
        counterparts; each of which shall be deemed to be an original and all of
        which together shall be deemed to be one and the same Agreement.

        14.8 FURTHER ASSURANCES. The parties hereto shall execute such further
        documents and perform such further acts as may be necessary to comply
        with the Terms of this Agreement and consummate the transactions herein
        provided.

        14.9 ATTORNEY'S FEES. If any legal action or any other proceeding is
        brought for the enforcement of this Agreement, or if a dispute arises
        under this Agreement, the successful or prevailing party shall be
        entitled to recover reasonable attorneys' fees and other costs incurred
        in that action or proceeding, in addition to any other relief to which
        it may be entitled.

        14.10 HEADINGS. The headings contained in this Agreement are for
        convenience and reference purposes only. They do not form a part hereof
        and shall not affect the meaning or interpretation of this Agreement.

        14.11 ASSIGNMENT. Except as provided in this Agreement and in the event
        of acquisition, neither party may assign any of its rights hereunder
        (whether voluntarily, involuntarily, by operation of law or otherwise)
        unless it has obtained the prior written consent of the other party to
        the assignment of such rights. Except as provided in this Agreement and
        in the event of acquisition, neither party may delegate any of its
        obligations hereunder (whether voluntarily, involuntarily, by operation
        of law or otherwise) unless it has obtained the prior written consent of
        the other party to the delegation of such obligations. Any purported
        assignment or delegation by either party of any rights or obligations
        hereunder without the other parties prior written approval shall be void
        and of no further force and effect.

        14.12 EQUITABLE REMEDIES. Each party acknowledges that its failure to
        perform any of the material terms or conditions of this Agreement shall
        result in immediate and irreparable damage. The Parties also acknowledge
        that there may be no adequate remedy at law for such failures and that
        in the event thereof, each party shall be entitled to equitable relief
        in the nature of an injunction and to all other available relief, at law
        or in equity.

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        IN WITNESS WHEREOF, the parties have caused this Agreement to be as of
        the Effective Date.

        ESS TECHNOLOGY INC.                 ***

        By: /s/ Fred S. L. Chan             By:  /s/ ***
           -------------------------           -----------------------------
           Authorized Representative           Authorized Representative

        Name:  Fred S. L. Chan              Name: ***

        Title: Chairman                     Title: President

        Date: 12/14/2001                    Date: 12/14/2001

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        Exhibit A     Specifications

        Exhibit B     Deliverables & Development Schedule

        Exhibit C     Profit Sharing

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                                    EXHIBIT A

                                 SPECIFICATIONS

        ***

        1.      CLASSIFICATION OF THE ***

                *** can be classified into two major categories, one with Basic
                Features while the other with Advanced Features. The Basic
                Features and Advanced Features shall be mutually acceptable by
                both Parties in writing and can be updated by both Parties from
                time to time in writing during the Term of this Agreement.

        2.      FEATURES OF EACH OF ***

                This section lists the Basic Features, Advanced features of ***.

                The product specification is defined in EXHIBITION A.  All the
                products with one of the following features are defined as ***
                with Advanced Features :
                1. ***
                2. ***
                3. ***
                4. ***

                All the products which are not ***s with Advanced Features are
                defined as *** with Basic features.

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                                    EXHIBIT B

        1.      COUNTERPARTY* DELIVERABLES

<TABLE>
        <S>                        <C>                      <C>
        -------------------------- ------------------------ --------------------
        Item                       Deliverables             Due Date
        -------------------------- ------------------------ --------------------

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

        -------------------------- ------------------------ --------------------
</TABLE>

        2.    ESS DELIVERABLES

<TABLE>
        <S>                        <C>                      <C>
        -------------------------- ------------------------ --------------------
        Item                       Deliverables             Due Date
        -------------------------- ------------------------ --------------------

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

        -------------------------- ------------------------ --------------------
</TABLE>

        3.      Development Schedule

                Project                                  Target Completion Date

                1.     Tape out

                2.     Demonstration

                3.     Production

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                                    EXHIBIT C

                                 PROFIT SHARING

        1.      DEFINITIONS

                1.1     "Combined Product B" shall mean Combined Product with
                        Basic Features.

                1.2     Combined Product A" shall mean Combined Product with
                        Advanced Features.

                1.3     "Combined Product Price B" means the average selling
                        price of Combined Product B sold.

                1.4     "Combined Product Price A" means the average selling
                        price of Combined Product A sold.

                1.5     "Combined Product Cost" shall mean ***.

                1.6     "Extra Die Cost" shall mean extra cost of each die due
                        to Advanced Features.

                1.7     "Extra Testing Cost" shall mean extra testing cost due
                        to Advanced Features.

                1.8     "Extra Sales Cost" = ***

                1.9     "Total Extra Cost" = ***

        2.      PROFIT SHARING OF PRODUCT B

                The Profit of each Combined Product B will be shared with the
                following equations:

                ***

        3.      PROFIT SHARING OF PRODUCT A

                The Profit of each Combined Product A will be shared with the
                following equations:

                ***

        4.      PRICING OF COMBINED PRODUCT B

                ***

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                                      -19-

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