AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

Execution Version

AGREEMENT AND PLAN OF MERGER

SEMICONDUCTOR HOLDING CORPORATION

ECHO MERGERCO, INC.

and

ECHO TECHNOLOGY (DELAWARE), INC.

Dated as of February 21, 2008

Table of Contents

						Page
ARTICLE I THE REINCORPORATION MERGER							1
		Section 1.1		The Reincorporation Merger			1
		Section 1.2		Effect of the Reincorporation Merger			2
		Section 1.3		Reincorporation Closing			2
		Section 1.4		Effective Time of the Reincorporation Merger			2
		Section 1.5		Certificate of Incorporation and Bylaws of ESS Delaware			2
		Section 1.6		Directors and Officers of ESS Delaware			3
ARTICLE II CONVERSION OF SECURITIES							3
		Section 2.1		Conversion of Capital Stock			3
		Section 2.2		Treatment of Company Options and Other Equity Awards			3
		Section 2.3		Treatment of Employee Stock Purchase Plan			4
ARTICLE III THE MERGER							4
		Section 3.1		The Merger			4
		Section 3.2		Effect of the Merger			4
		Section 3.3		Closing			4
		Section 3.4		Effective Time of the Merger			4
		Section 3.5		Certificate of Incorporation and Bylaws			4
		Section 3.6		Directors and Officers			5
ARTICLE IV CONVERSION OF SECURITIES							5
		Section 4.1		Conversion of ESS Delaware Capital Stock			5
		Section 4.2		Payment and Exchange of Certificates			6
		Section 4.3		Dissenting Shares			7
		Section 4.4		Treatment of ESS Delaware Options and Other Equity Awards			8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY							9
		Section 5.1		Organization			9
		Section 5.2		Capitalization			10
		Section 5.3		Corporate Authorization			11
		Section 5.4		Governmental Authorization			12
		Section 5.5		Non-contravention			13
		Section 5.6		Company SEC Documents and Financial Statements			13
		Section 5.7		Internal Controls; Sarbanes-Oxley Act			14
		Section 5.8		Absence of Certain Changes			15
		Section 5.9		No Undisclosed Liabilities			15
		Section 5.10		Litigation			15
		Section 5.11		Employee Benefit Plans; ERISA			15

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		Section 5.12		Taxes			17
		Section 5.13		Contracts			18
		Section 5.14		Properties			19
		Section 5.15		Intellectual Property			20
		Section 5.16		Labor Matters			22
		Section 5.17		Compliance with Laws; Permits			23
		Section 5.18		Information in the Proxy Statement and the Registration Statement			24
		Section 5.19		Insurance			24
		Section 5.20		Environmental Laws and Regulations			24
		Section 5.21		Opinions of Financial Advisors			24
		Section 5.22		Brokers			25
		Section 5.23		Affiliate Transactions			25
		Section 5.24		Takeover Statutes			25
		Section 5.25		Capitalization of Delaware Merger Sub; No Prior Activities			25
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER							26
		Section 6.1		Organization			26
		Section 6.2		Corporate Authorization			26
		Section 6.3		Governmental Authorization			26
		Section 6.4		Non-contravention			26
		Section 6.5		Sufficient Funds			27
		Section 6.6		Information in the Proxy Statement and the Registration Statement			27
		Section 6.7		Guarantee			27
		Section 6.8		Solvency of the Surviving Corporation			27
		Section 6.9		Capitalization of Merger Sub; No Prior Activities			28
		Section 6.10		Vote Required			28
ARTICLE VII CONDUCT OF BUSINESS PENDING THE MERGER							28
		Section 7.1		Interim Operations of the Company			28
		Section 7.2		Proxy Statement and Registration Statement; Company Shareholders’ Meeting			31
		Section 7.3		No Solicitation; Unsolicited Proposals			32
ARTICLE VIII ADDITIONAL AGREEMENTS							34
		Section 8.1		Notification of Certain Matters			34
		Section 8.2		Access to Information; Confidentiality			34
		Section 8.3		Consents and Approvals			35
		Section 8.4		Publicity			37
		Section 8.5		Directors’ and Officers’ Insurance and Indemnification			38
		Section 8.6		State Takeover Laws			39
		Section 8.7		Section 16			39
		Section 8.8		Obligations of Merger Sub; Contribution to Merger Sub			39
		Section 8.9		Assumption of Benefit Plans; Employee Benefits Matters			39
		Section 8.10		Termination of 401(k) Plan			40

						Page
		Section 8.11		Treatment of Employee Stock Purchase Plan			40
		Section 8.12		Approval of the Merger			41
		Section 8.13		Assumption of Registration Statements			41
		Section 8.14		Maintenance of NASDAQ Listing			41
		Section 8.15		Resignation of Directors			41
ARTICLE IX CONDITIONS TO THE REINCORPORATION MERGER							42
		Section 9.1		Conditions to the Reincorporation Merger			42
		Section 9.2		Additional Conditions For the Benefit of Parent			42
		Section 9.3		Additional Conditions to Obligations of the Company and Delaware Merger Sub			43
		Section 9.4		Frustration of Reincorporation Closing Conditions			43
ARTICLE X CONDITIONS TO THE MERGER							44
		Section 10.1		Conditions to the Merger			44
		Section 10.2		Frustration of Closing Conditions			44
ARTICLE XI TERMINATION							44
		Section 11.1		Termination			44
		Section 11.2		Effect of Termination			46
		Section 11.3		Fees and Expenses			46
		Section 11.4		Company Termination Fee			46
ARTICLE XII MISCELLANEOUS							47
		Section 12.1		Amendment and Modification; Waiver			47
		Section 12.2		Non-survival of Representations and Warranties			48
		Section 12.3		Notices			48
		Section 12.4		Certain Definitions			49
		Section 12.5		Terms Defined Elsewhere			54
		Section 12.6		Interpretation			56
		Section 12.7		Counterparts			56
		Section 12.8		Entire Agreement; No Third-Party Beneficiaries			56
		Section 12.9		Severability			57
		Section 12.10		Governing Law; Jurisdiction			57
		Section 12.11		Assignment			57
		Section 12.12		Enforcement; Remedies			58

EXHIBITS AND SCHEDULES

Exhibit A		Certificate of Incorporation of Delaware Merger Sub
Exhibit B		Bylaws of Delaware Merger Sub
Exhibit C		Amended and Restated Certificate of Incorporation of Surviving Corporation
Exhibit D		Amended and Restated Bylaws of Surviving Corporation
Exhibit E		Form of Limited Guarantee

Company Disclosure Schedule

AGREEMENT AND PLAN OF MERGER

          THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated February 21, 2008, is entered into by and among Semiconductor Holding Corporation, a Delaware corporation and wholly owned subsidiary of Imperium Master Fund, Ltd. (“ Parent ”), Echo Mergerco, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“ Merger Sub ”), ESS Technology, Inc., a California corporation (the “ Company ”) and Echo Technology (Delaware), Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“ Delaware Merger Sub ”).

          WHEREAS, the respective Boards of Directors of Parent, Merger Sub, the Company and Delaware Merger Sub deem it advisable and in the best interests of their respective stockholders, shareholders and corporations for Parent, Merger Sub, the Company and Delaware Merger Sub to engage in a business combination transaction;

          WHEREAS, the Company and Delaware Merger Sub intend to effect a merger of the Company with and into Delaware Merger Sub (the “ Reincorporation Merger ”) upon the terms and subject to the conditions of this Agreement and in accordance with the California Corporations Code (the “ CCC ”) and the Delaware General Corporation Law (the “ DGCL ”). Upon consummation of the Reincorporation Merger, the Company will cease to exist, and Delaware Merger Sub will continue as the surviving corporation in the Reincorporation Merger (such surviving corporation, “ ESS Delaware ”);

          WHEREAS, as soon as practicable following the Reincorporation Merger, Parent, Merger Sub, and ESS Delaware intend to effect a merger of Merger Sub with and into ESS Delaware (the “ Merger ”) upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL. Upon consummation of the Merger, Merger Sub will cease to exist, and ESS Delaware will continue as a wholly owned subsidiary of Parent; and

          WHEREAS, the Merger and this Agreement have, on the terms and subject to the conditions set forth herein, been approved by the respective Boards of Directors of Parent, Merger Sub, the Company and Delaware Merger Sub;

          NOW, THEREFORE, intending to be legally bound, the parties to this Agreement hereby agree as follows:

ARTICLE I

THE REINCORPORATION MERGER

     Section 1.1 The Reincorporation Merger . Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time of the Reincorporation Merger, the Company shall be merged with and into Delaware Merger Sub, the separate existence of the Company shall cease, and Delaware Merger Sub will continue as ESS Delaware, the surviving corporation in the Reincorporation Merger.

     Section 1.2 Effect of the Reincorporation Merger . The Reincorporation Merger shall have the effects set forth in this Agreement and in the applicable provisions of the CCC and the DGCL (including as more fully set forth in and Section 1107 of the CCC and Section 259 of the DGCL), and following the Reincorporation Merger, ESS Delaware, as the surviving corporation, (i) shall possess all of the Company’s and Delaware Merger Sub’s assets, rights, powers and property as constituted immediately prior to the Effective Time of the Reincorporation Merger, (ii) shall continue to be subject to all of the Company’s and Delaware Merger Sub’s debts, liabilities and obligations as constituted immediately prior to the Effective Time of the Reincorporation Merger and (iii) shall be subject to all actions previously taken by the Board of Directors of the Company and Delaware Merger Sub prior to the Effective Time of the Reincorporation Merger.

     Section 1.3 Reincorporation Closing . The consummation of the Reincorporation Merger (the “ Reincorporation Closing ”) shall take place at the offices of Latham & Watkins LLP, 140 Scott Drive, Menlo Park, California at 8:00 a.m. local time on a date to be specified by the parties, which shall be no later than the fifth business day after the satisfaction or waiver of the last of the conditions set forth in Article IX to be satisfied or waived (other than those conditions that by their nature are to be satisfied at the Reincorporation Closing), but subject to the satisfaction or waiver of such conditions, or at such other time, date and location as the parties hereto agree in writing. The date on which the Reincorporation Closing actually takes place is referred to in this Agreement as the “ Reincorporation Closing Date .”

     Section 1.4 Effective Time of the Reincorporation Merger . Contemporaneous with or as promptly as practicable after the Reincorporation Closing, the parties shall cause the Reincorporation Merger to be consummated by filing with (i) the Secretary of State of the State of Delaware a certificate of merger executed in accordance with the relevant provisions of the DGCL, and shall make all other filings or recordings required under the DGCL in order to consummate the Reincorporation Merger and (ii) the Secretary of State of the State of California an officer’s certificate executed in accordance with the relevant provisions of the CCC, and such filings or recordings as are required under the CCC in order to consummate the Reincorporation Merger. The Reincorporation Merger shall become effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware (the “ Effective Time of the Reincorporation Merger ”).

     Section 1.5 Certificate of Incorporation and Bylaws of ESS Delaware . Unless otherwise determined by Parent and the Company prior to the Effective Time of the Reincorporation Merger:

          (a) the certificate of incorporation of Delaware Merger Sub immediately prior to the Effective Time of the Reincorporation Merger (and a copy of the certificate of incorporation of Delaware Merger Sub as of the date of this Agreement is attached hereto as Exhibit A ) shall be the certificate of incorporation of ESS Delaware, except that the name of ESS Delaware as set forth in Article I thereof shall be amended to “ESS Technology, Inc.”; and

          (b) the bylaws of Delaware Merger Sub as of the Effective Time of the Reincorporation Merger shall be the bylaws of ESS Delaware (and a copy of the bylaws of Delaware Merger Sub as of the date of this Agreement is attached hereto as Exhibit B ).

     Section 1.6 Directors and Officers of ESS Delaware . Subject to Section 8.15, the directors of the Company immediately prior to the Effective Time of the Reincorporation Merger shall be the directors of ESS Delaware, each to hold office in accordance with the certificate of incorporation and bylaws of ESS Delaware. The officers of the Company immediately prior to the Effective Time of the Reincorporation Merger shall be the officers of the ESS Delaware, each to hold office until the earlier of his or her resignation or removal.

ARTICLE II

CONVERSION OF SECURITIES

     Section 2.1 Conversion of Capital Stock . At the Effective Time of the Reincorporation Merger, by virtue of the Reincorporation Merger and without any further action on the part of Parent, Merger Sub, the Company, Delaware Merger Sub or any holder of any capital stock of any of the Company, Delaware Merger Sub, Parent or Merger Sub:

          (a) Company Common Stock . Each Company Share shall be converted into and become one fully paid and nonassessable share of ESS Delaware Common Stock.

          (b) Cancellation of Delaware Merger Sub Common Stock . Each issued and outstanding share of common stock of Delaware Merger Sub, par value $0.0001 per share, shall be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

          (c) Transfer Books; Suspension of NASDAQ Trading . Each of the Company and Delaware Merger Sub shall, to the extent reasonably practicable and subject to Sections 7.2, 8.13 and 8.14 hereof and compliance with all applicable laws and rules and regulations of NASDAQ, use their commercially reasonable efforts to cause trading in shares of ESS Delaware Common Stock on NASDAQ (subsequent to any listing thereof in accordance with Section 8.14) to be suspended immediately following the Effective Time of the Reincorporation Merger and to close the stock transfer books of ESS Delaware immediately following the Effective Time of the Reincorporation Merger so that thereafter there shall be no further registration of transfers of ESS Delaware Shares on the records of ESS Delaware.

     Section 2.2 Treatment of Company Options and Other Equity Awards . At the Effective Time of the Reincorporation Merger, each option to purchase Common Stock granted pursuant to the Company Stock Plans (“ Company Options ”), by virtue of the Reincorporation Merger and without any further action on the part of any holder of any outstanding Company Option, that is outstanding immediately prior to the Effective Time of the Reincorporation Merger, whether vested or unvested, or exercisable or unexercisable, shall be deemed automatically converted into one option to purchase, on the same terms and conditions as were applicable under such Company Option at the Effective Time of the Reincorporation Merger (including, without limitation, the exercise price per share and the vesting schedule for such Company Option), such number of shares of ESS Delaware Common Stock as is equal to the number of shares of Common Stock that were subject thereto immediately prior to the Effective Time of the Reincorporation Merger (each, an “ ESS Delaware Option ”). A number of shares of ESS Delaware’s Common Stock shall be reserved for issuance upon the exercise of options,

warrants or rights equal to the number of shares of Common Stock so reserved immediately prior to the Effective Time of the Reincorporation Merger.

     Section 2.3 Treatment of Employee Stock Purchase Plan . Each outstanding purchase right (each, a “ Purchase Right ”) under the Company’s 1995 Employee Stock Purchase Plan (the “ ESPP ”) shall be treated as set forth in Section 8.11.

ARTICLE III

THE MERGER

     Section 3.1 The Merger . Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time of the Merger, Merger Sub shall be merged with and into ESS Delaware, the separate existence of Merger Sub shall cease, and ESS Delaware will continue as the surviving corporation in the Merger (the “ Surviving Corporation ”).

     Section 3.2 Effect of the Merger . The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the DGCL.

     Section 3.3 Closing . The consummation of the Merger (the “ Closing ”) shall take place as promptly as practicable following the Reincorporation Closing, which shall be no later than the second business day after the satisfaction or waiver of the last of the conditions set forth in Article X to be satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing), but subject to the satisfaction or waiver of such conditions, or at such other time, date and location as Parent and ESS Delaware agree in writing. The date on which the Closing actually takes place is referred to in this Agreement as the “ Closing Date .”

     Section 3.4 Effective Time of the Merger . Contemporaneously with or as promptly as practicable after the Closing, the parties shall cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware a certificate of merger executed in accordance with the relevant provisions of the DGCL, and shall make all other filings or recordings required under the DGCL in order to consummate the Merger. The Merger shall become effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware (the “ Effective Time of the Merger ”).

     Section 3.5 Certificate of Incorporation and Bylaws . Unless otherwise determined by Parent and ESS Delaware prior to the Effective Time of the Merger:

          (a) the certificate of incorporation of the Surviving Corporation as of the Effective Time of the Merger shall be the certificate of incorporation of ESS Delaware immediately prior to the Effective Time of the Merger, provided that, at the Effective Time of the Merger, the certificate of incorporation of the Surviving Corporation shall be amended to read in its entirety as set forth on Exhibit C hereto; and

          (b) the bylaws of the Surviving Corporation as of the Effective Time of the Merger shall be the bylaws of ESS Delaware immediately prior to the Effective Time of the Merger, provided that, at the Effective Time of the Merger, the bylaws of the Surviving Corporation shall be amended to read in their entirety as set forth on Exhibit D hereto.

     Section 3.6 Directors and Officers . The directors of the ESS Delaware immediately prior to the Effective Time of the Merger shall submit their resignations to be effective as of the Effective Time of the Merger. Immediately after the Effective Time of the Merger, Parent shall take the necessary actions to cause the directors of Merger Sub immediately prior to the Effective Time of the Merger to be the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation. The officers of ESS Delaware immediately prior to the Effective Time of the Merger shall be the officers of the Surviving Corporation, each to hold office until the earlier of his or her resignation or removal.

ARTICLE IV

CONVERSION OF SECURITIES

     Section 4.1 Conversion of ESS Delaware Capital Stock . At the Effective Time of the Merger, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, ESS Delaware or any holder of any capital stock of any of ESS Delaware, Parent or Merger Sub:

          (a) Conversion of ESS Delaware Common Stock . Each ESS Delaware Share, except for Exception Shares, shall be converted into the right to receive $1.64, payable to the holder thereof in cash, without interest (the “ Merger Consideration ”). From and after the Effective Time, all such ESS Delaware Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist. Except with respect to Exception Shares, each holder of a certificate representing any such ESS Delaware Share shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor upon the surrender of such certificate in accordance with Section 4.2, without interest thereon.

          (b) Merger Sub Common Stock . Each issued and outstanding share of common stock of Merger Sub, par value $0.0001 per share, shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.0001 per share, of the Surviving Corporation.

          (c) Cancellation of Certain ESS Delaware Shares . Each share of ESS Delaware Common Stock owned by Parent, Merger Sub or any of their respective wholly owned subsidiaries shall be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor. Each share of ESS Delaware Common Stock held by ESS Delaware or any Subsidiary of ESS Delaware (or held in the treasury of ESS Delaware) shall be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor. Each Dissenting Share shall be treated as provided in Section 4.3.

          (d) Adjustment to Merger Consideration . The Merger Consideration shall be adjusted appropriately to reflect the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Common Stock or ESS Delaware Common Stock), cash dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Common Stock or ESS

Delaware Common Stock occurring on or after the date hereof and prior to the Effective Time of the Reincorporation Merger or the Effective Time of the Merger, as applicable.

     Section 4.2 Payment and Exchange of Certificates .

          (a) Paying Agent . Parent or Merger Sub shall designate a bank or trust company to act as the payment agent in connection with the Merger (the “ Paying Agent ”). At the Effective Time of the Merger, Parent or Merger Sub shall cause to be deposited with the Paying Agent the aggregate Merger Consideration. Such funds shall be invested by the Paying Agent as directed by Parent, in its sole discretion, pending payment thereof by the Paying Agent to the holders of the ESS Delaware Shares entitled thereto. Earnings from such investments shall be the sole and exclusive property of Parent, and no part of such earnings shall accrue to the benefit of holders of ESS Delaware Shares.

          (b) Exchange Procedures . Promptly after the Effective Time of the Merger, the Paying Agent shall mail to each holder of record as of the Effective Time of the Merger of a certificate or certificates which immediately prior to the Effective Time represented outstanding ESS Delaware Shares (each such certificate, a “ Certificate ”) and whose ESS Delaware Shares were converted pursuant to Section 4.1(a) into the right to receive the Merger Consideration (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to Certificates shall pass, only upon delivery of Certificates to the Paying Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for effecting the surrender of Certificates in exchange for payment of the Merger Consideration. Upon surrender of a Certificate for cancellation in accordance with the instructions set forth in the letter of transmittal to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each ESS Delaware Share formerly represented by such Certificate and the Certificate so surrendered shall forthwith be cancelled. If payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition precedent of payment that (x) the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and (y) the Person requesting such payment shall have paid any transfer and other similar Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Certificate surrendered and shall have established to the satisfaction of the Surviving Corporation that such Tax either has been paid or is not required to be paid. As of the Effective Time of the Merger, and until surrendered as contemplated by this Section 4.2, each Certificate (except with respect to those ESS Delaware Shares represented thereby that are Exception Shares) shall be deemed at any time after the Effective Time of the Merger to represent only the right to receive the Merger Consideration in cash as contemplated by this Section 4.2, without interest thereon.

          (c) Transfer Books; No Further Ownership Rights in ESS Delaware Capital Stock . At the Effective Time of the Merger, the stock transfer books of ESS Delaware shall be closed and thereafter there shall be no further registration of transfers of ESS Delaware Shares on the records of ESS Delaware. From and after the Effective Time of the Merger, the holders of Certificates outstanding immediately prior to the Effective Time of the Merger shall cease to have any rights with respect to such ESS Delaware Shares except as otherwise provided for

herein, including, without limitation, Section 4.3 hereof, or by applicable law. If, after the Effective Time of the Merger, Certificates are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Article IV.

          (d) Termination of Fund; No Liability . At any time following six months after the Effective Time of the Merger, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) made available to the Paying Agent and not disbursed (or for which disbursement is pending subject only to the Paying Agent’s routine administrative procedures) to holders of Certificates, and thereafter such holders shall be entitled to look only to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, without any interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving Corporation or the Paying Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

          (e) Withholding Rights . Parent, Merger Sub, the Surviving Corporation and the Paying Agent, as the case may be, shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement to any holder of ESS Delaware Shares such amounts that Parent, Merger Sub, the Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “ Code ”), the rules and regulations promulgated thereunder or any provision of applicable state, local or foreign law. To the extent that amounts are so withheld by Parent, Merger Sub, the Surviving Corporation or the Paying Agent, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made by Parent, Merger Sub, the Surviving Corporation or the Paying Agent.

          (f) Lost, Stolen or Destroyed Certificates . In the event that any Certificates shall have been lost, stolen or destroyed, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, the Merger Consideration payable in respect thereof pursuant to Section 4.1 hereof; provided , however , that Parent may, in its discretion and as a condition precedent to the payment of such Merger Consideration, require the owners of such lost, stolen or destroyed Certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent, the Surviving Corporation or the Paying Agent with respect to the Certificates alleged to have been lost, stolen or destroyed.

     Section 4.3 Dissenting Shares .

          (a) Notwithstanding anything in this Agreement to the contrary, if any stockholder of ESS Delaware Common Stock (each, a “ Dissenting Stockholder ”) shall demand to be paid the “fair value” of its shares of ESS Delaware Common Stock (“ Dissenting Share ”), as provided in Section 262(d)(2) of the DGCL, such Dissenting Shares shall not be converted into or exchangeable for the right to receive the Merger Consideration (except as provided in this Section 4.3) and shall entitle such Dissenting Stockholder only to be paid the “fair value” of such Dissenting Shares, in accordance with Section 262 of the DGCL, unless and until such

Dissenting Stockholder (a) withdraws (in accordance with Section 262(k) of the DGCL) or (b) effectively loses the right to dissent and receive the “fair value” of such Dissenting Shares under Section 262 of the DGCL. ESS Delaware shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for payment of “fair value” of Dissenting Shares prior to the Effective Time of the Merger. ESS Delaware shall give Parent prompt notice of any written demand by a Dissenting Stockholder to be paid the “fair value” of its Dissenting Shares received by ESS Delaware prior to the Effective Time of the Merger, any attempted withdrawals of such demands and any other instruments received by ESS Delaware relating to stockholders’ rights of appraisal, and Parent shall have the right to participate in all negotiations and proceedings with respect to any such demand or instrument. If any Dissenting Stockholder shall have effectively withdrawn (in accordance with Section 262(k) of the DGCL) or otherwise lost its right to dissent and receive the “fair value” of its Dissenting Shares, then as of the later of the Effective Time of the Merger or the occurrence of such event, the Dissenting Shares held by such Dissenting Stockholder shall be cancelled and converted into and represent solely the right to receive (upon the surrender of the Certificate representing such share) the Merger Consideration, without interest thereon, in accordance with Section 4.1.

          (b) Notwithstanding any other provision of this Agreement to the contrary, any legal proceeding made or brought by any of the current or former shareholders of the Company asserting that ESS Delaware is required to purchase for cash at their fair market value any Dissenting Shares (and that have not lost their right to dissent) and that are owned by such shareholder may be considered for purposes of determining whether a Company Material Adverse Effect has occurred hereunder.

     Section 4.4 Treatment of ESS Delaware Options and Other Equity Awards .

          (a) At the Effective Time of the Merger, each ESS Delaware Option, by virtue of the Merger and without any further action on the part of any holder of any outstanding ESS Delaware Option, that is outstanding immediately prior to the Effective Time of the Merger, whether vested or unvested, exercisable or unexercisable, shall be deemed automatically converted into the right to receive an amount in cash equal to the product obtained by multiplying (x) the aggregate number of shares of ESS Delaware Common Stock subject to such ESS Delaware Option and (y) the excess, if any, of the Merger Consideration less the exercise price per share of ESS Delaware Common Stock subject to such ESS Delaware Option (the “ Option Consideration ”) after which it shall be cancelled and extinguished.

          (b) The Company and Delaware Merger Sub, and, after the Reincorporation Merger, ESS Delaware, shall take all necessary actions, including obtaining any required consents from holders of outstanding Company Options and ESS Delaware Options, respectively, necessary to effect the transactions described in Sections 2.2 and 4.4(a) above pursuant to the terms of the applicable Company Stock Plans and agreements evidencing the Company Options and the ESS Delaware Options, as applicable. All amounts payable pursuant to Section 4.4(a) shall be paid without interest in accordance with this Agreement. Any payments made pursuant to this Section 4.4 shall be net of all applicable withholding Taxes that Parent, Merger Sub, the Surviving Corporation and the Paying Agent, as the case may be, shall be required to deduct and withhold from the relevant Option Consideration or Merger

Consideration under the Code, the rules and regulations promulgated thereunder or any provision of applicable state, local or foreign law. To the extent that amounts are so withheld by Parent, Merger Sub, the Surviving Corporation or the Paying Agent, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made by Parent, Merger Sub, the Surviving Corporation or the Paying Agent.

ARTICLE V

REPRESENTATIONS AND
WARRANTIES OF THE COMPANY

          Except as set forth in the Company’s disclosure schedule delivered to Parent prior to the execution of this Agreement (the “ Company Disclosure Schedule ”) or (ii) any Company SEC Documents filed by the Company with the United States Securities and Exchange Commission (the “ SEC ”) after January 1, 2007, the Company represents and warrants to Parent and Merger Sub that the statements contained in this Article V are correct and complete as of the date of this Agreement. Each disclosure set forth in the Company Disclosure Schedule is identified by reference to, or has been grouped under a heading referring to, a specific section of this Agreement and disclosure made pursuant to any section thereof shall be deemed to be disclosed on each of the other sections of the Company Disclosure Schedule to the extent the applicability of the disclosure to such other section is reasonably apparent on its face from the disclosure made.

     Section 5.1 Organization .

          (a) The Company and each Subsidiary of the Company, including Delaware Merger Sub (each, a “ Company Subsidiary ”). is a corporation or other legal entity duly organized, validly existing and in good standing (with respect to jurisdictions which recognize such concept) under the laws of the jurisdiction in which it is organized and has the requisite corporate or other power, as the case may be, and authority to conduct its business as now being conducted, except, as to Company Subsidiaries, for those jurisdictions where the failure to be so organized, existing or in good standing would not, individually or in the aggregate, reasonably be expected to be material to the Company and the Company Subsidiaries taken as a whole. The Company and each of the Company Subsidiaries is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or to be in good standing would not, individually or in the aggregate, reasonably be expected to be material to the Company and the Company Subsidiaries taken as a whole. The Company has made available to Parent complete and correct copies of the articles of incorporation and bylaws of the Company and the similar organizational documents of each Company Subsidiary, and all amendments thereto, as currently in effect. Neither the Company nor any Company Subsidiary is in violation of its organizational or governing documents.

          (b) Subsidiaries . Each outstanding share of capital stock or other Equity Interest of each Company Subsidiary is owned, directly or indirectly, by the Company and is duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and is held by the Company or a Company Subsidiary free and clear of all Liens, except for Permitted Liens (as defined in Section 5.14). There are no outstanding options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or other agreements, contracts or commitments that could require any Company Subsidiary to issue, sell or otherwise cause to become outstanding any of its capital stock. Other than the Company Subsidiaries, the Company does not directly or indirectly beneficially own any Equity Interests in any other Person except for non-controlling investments made in the ordinary course of business in entities which are not individually or in the aggregate material to the Company and the Company Subsidiaries as a whole.

     Section 5.2 Capitalization .

          (a) The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock and (ii) 10,000,000 shares of preferred stock, no par value (the “ Preferred Stock ”). As of February 21, 2008, (A) 35,547,323 shares of Common Stock were issued and outstanding, (B) no shares of Preferred Stock were issued and outstanding, and (C) 12,619,152 shares of Common Stock were reserved for issuance pursuant to the Company Stock Plans of which 12,507,953 of Common Stock were subject to outstanding Company Options and 111,199 shares of Common Stock were reserved for issuance pursuant to the ESPP. All of the outstanding shares of the Company’s capital stock are, and all Common Stock which may be issued pursuant to the ESPP and the exercise of outstanding Company Options will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and non-assessable, free of preemptive rights. Except for issuances of Common Stock pursuant to Company Options described in the first sentence of Section 5.2(b) and issuances of Common Stock pursuant to the ESPP, since its initial public offering, the Company has not issued any Common Stock or designated or issued any shares of Preferred Stock. There are no bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having such rights) (“ Voting Debt ”) of the Company or any Company Subsidiary issued and outstanding. Other than the Company Options described in the first sentence of Section 5.2(b) and the rights outstanding under the ESPP, there are no Equity Interests or outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any Common Stock or any capital stock of, or other Equity Interests in, the Company or any Company Subsidiary or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in the Company or any Company Subsidiary. No Company Subsidiary owns any Common Stock.

          (b) All of such Company Options have been granted to employees, consultants and directors of the Company and the Company Subsidiaries in the ordinary course of business pursuant to the Company Stock Plans. Section 5.2(b) of the Company Disclosure Schedule sets forth a listing of all outstanding Company Options as of February 21, 2008 and (i) the date of their grant and the portion of which that is vested as of February 21, 2008 and if applicable, the exercise price therefor, (ii) the date upon which each Company Option would normally be expected to expire absent termination of employment or other acceleration, and (iii)

whether or not such Company Option is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code.

          (c) Each Company Option that is designated as an “incentive stock option” is intended to qualify as an “incentive stock option” under the Code. Each grant of a Company Option was duly authorized no later than the date on which the grant of such Company Option was by its terms to be effective (the “ Grant Date ”) by all necessary corporate action, including, as applicable, approval by the Board of Directors of the Company (or a duly constituted and authorized committee thereof) and any required shareholder approval by the necessary number of votes or written consents, and: (i) each such grant was made in accordance with the terms of the applicable Company Stock Plan, the Exchange Act and all other applicable laws and the rules of NASDAQ; (ii) the per share exercise price of each Company Option was equal to the fair market value of a share of Common Stock on the applicable Grant Date; and (iii) each such grant was properly accounted for in accordance with GAAP (as defined in Section 5.6(b)) in the financial statements (including the related notes) of the Company and disclosed in the Company SEC Documents (as defined in Section 5.6(a)) in accordance with the Exchange Act and all other applicable laws.

          (d) Section 5.2(d) of the Company Disclosure Schedule sets forth the maximum number of shares of Common Stock that could be purchased with accumulated payroll deductions under the ESPP at the close of business on last day of current offering/purchase period (assuming the fair market value of a share of Common Stock on such date is equal to $1.64 per share and payroll deductions continue at the rate in effect on the date of this Agreement).

          (e) Except as set forth in Section 5.2(a), there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of the capital stock or other securities of the Company or any Subsidiary; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of the capital stock or other securities of the Company or any Subsidiary; (iii) shareholder rights plan (or similar plan commonly referred to as a “poison pill”) or contract under which the Company or any Subsidiary is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities; or (iv) to the knowledge of the Company, condition or circumstance that could reasonably be expected to give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares of the capital stock or other securities of the Company or any Subsidiary.

          (f) There are no voting trusts or other agreements to which the Company or any Company Subsidiary is a party with respect to the voting of the Common Stock or any capital stock of, or other equity interest of the Company or any of the Company Subsidiaries. Neither the Company nor any Company Subsidiary has granted any preemptive rights, anti-dilutive rights or rights of first refusal or similar rights.

     Section 5.3 Corporate Authorization .

          (a) Each of the Company and Delaware Merger Sub has all necessary corporate power and corporate authority to enter into and to perform its obligations under this

Agreement and the execution, delivery and performance by each of the Company and Delaware Merger Sub of this Agreement have been duly authorized by all necessary action on the part of the Company, the Board of Directors of the Company, Delaware Merger Sub and the Board of Directors of Delaware Merger Sub. This Agreement constitutes the legal, valid and binding obligation of each of the Company and Delaware Merger Sub, enforceable against each of the Company and Delaware Merger Sub in accordance with its terms, subject to (i) the affirmative vote of the holders of a majority of the outstanding shares of Common Stock, which is the only vote of the holders of any of the capital stock of the Company necessary to approve the principal terms of the Reincorporation Merger (the “ Company Shareholder Approval ”), (ii) the affirmative vote or consent of the Company as the sole stockholder of Delaware Merger Sub, which is the only vote or consent of the holders of any of the capital stock of Delaware Merger Sub necessary to adopt this Agreement with respect to the Reincorporation Merger (and which shall occur immediately following the execution of this Agreement and evidence of which shall be provided to Parent on the date hereof), (iii) following the Reincorporation Closing, the affirmative vote or consent of the holders of a majority of the outstanding shares of ESS Delaware Common Stock, which is the only vote or consent of the holders of any of the capital stock of ESS Delaware necessary to adopt this Agreement with respect to the Merger (the “ ESS Delaware Stockholder Approval ”), (iv) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (v) rules of law governing specific performance, injunctive relief and other equitable remedies.

          (b) The Board of Directors of the Company, and any applicable special committee of the Board of Directors, by resolutions duly adopted at meetings duly called and held, have (A) determined that entry into this Agreement and consummation of the transactions contemplated by this Agreement are fair to and in the best interests of the Company and the shareholders of the Company, (B) approved and declared advisable this Agreement and the transactions contemplated by this Agreement, including the Reincorporation Merger and the Merger, and (C) recommended in accordance with applicable law that the shareholders of the Company vote in favor of approval of the principal terms of both the Reincorporation Merger and the Merger and the other transactions contemplated by this Agreement (the “ Company Recommendation ”).

          (c) The Board of Directors of Delaware Merger Sub, by resolutions duly adopted, has (A) determined that entry into this Agreement and consummation of the transactions contemplated by this Agreement are fair to and in the best interests of Delaware Merger Sub and the stockholder of Delaware Merger Sub and, following the Effective Time of the Reincorporation Merger, the stockholders of ESS Delaware, (B) approved and declared advisable this Agreement and the transactions contemplated by this Agreement, including the Reincorporation Merger and the Merger, (C) recommended in accordance with applicable law that the Company as the sole stockholder of Delaware Merger Sub adopt this Agreement with respect to the Reincorporation Merger, and (D) subject to the occurrence of the Reincorporation Closing, recommended in accordance with applicable law that, following the Effective Time of the Reincorporation Merger, the stockholders of ESS Delaware adopt the Merger Agreement with respect to the Merger (the “ ESS Delaware Recommendation ”).

     Section 5.4 Governmental Authorization . The execution, delivery and performance by the Company and Delaware Merger Sub of this Agreement and the consummation by the

Company and Delaware Merger Sub of the transactions contemplated by this Agreement require no action by or in respect of, or filing with, any Governmental Authority other than (i) filings with the Secretary of State of the State of Delaware in connection with the Reincorporation Merger and the Merger, filings with the Secretary of State of the State of California in connection with the Reincorporation Merger, and filings of appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, (ii) compliance with any applicable requirements of the HSR Act and of laws analogous to the HSR Act existing in foreign jurisdictions, (iii) compliance with any applicable requirements of the Securities Act and the Exchange Act (including the filing of the Registration Statement and the Proxy Statement), NASDAQ, and any other applicable U.S. state or federal securities laws, and (iv) any actions or filings the absence of which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or have a material adverse effect on the ability of the Company to consummate the transactions contemplated by this Agreement.

     Section 5.5 Non-contravention . The execution, delivery and performance by the Company and Delaware Merger Sub of this Agreement and the consummation of the transactions contemplated by this Agreement do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the articles or certificate of incorporation, respectively, or bylaws of the Company or Delaware Merger Sub, (ii) assuming compliance with the matters referred to in Section 5.4, contravene, conflict with or result in a violation or breach of any provision of any applicable law, (iii) assuming compliance with the matters referred to in Section 5.4, require any consent or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Company or any of the Company Subsidiaries is entitled under any provision of any agreement or other instrument binding upon the Company or any of the Company Subsidiaries or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of the Company and the Company Subsidiaries (a “ Company Agreement ”) or (iv) result in the creation or imposition of any Lien, other than Permitted Liens, on any asset of the Company or any of the Company Subsidiaries, with such exceptions, in the case of each of clauses (ii) through (iv), as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or have a material adverse effect on the ability of the Company to consummate the transactions contemplated by this Agreement.

     Section 5.6 Company SEC Documents and Financial Statements .

          (a) The Company has filed or furnished (as applicable) with the SEC all forms, reports, schedules, statements and other documents required by it to be filed or furnished (as applicable) since and including January 1, 2005, under the Exchange Act or the Securities Act (such documents, as have been amended or superseded since the time of their filing, collectively, the “ Company SEC Documents ”). Each Company SEC Document (a) as of its date, complied as to form in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, as in effect on the date so filed and (b) did not, at the time it was filed (or, if subsequently amended or supplemented, at the time of such amendment or supplement), contain any untrue statement of a material fact or omit to state a

material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, no Company Subsidiary is separately subject to the reporting requirements of the Exchange Act.

          (b) Each of the consolidated financial statements (including, in each case, any notes thereto) of the Company contained in the Company SEC Documents (collectively, the “ Financial Statements ”) was prepared in accordance with United States generally accepted accounting principles (“ GAAP ”), applied (except as may be indicated in the notes thereto and, in the case of unaudited quarterly financial statements, as permitted by Form 10-Q under the Exchange Act) on a consistent basis during the periods indicated (except as may be indicated in the Company SEC Documents), and each of the Financial Statements presents fairly, in all material respects, the consolidated financial position of the Company as of the respective dates thereof and the consolidated statements of income, stockholder’s equity and cash flows of the Company for the respective periods indicated therein (subject, in the case of unaudited financial statements, to normal period end adjustments).

     Section 5.7 Internal Controls; Sarbanes-Oxley Act .

          (a) The Company and the Company Subsidiaries have designed and maintained a system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting. The Company (i) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and (ii) has disclosed to the Company’s auditors and the audit committee of the Board of Directors of the Company (and made summaries of such disclosures available to Parent) (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

          (b) Since January 1, 2005, the Company has been in compliance in all material respects with (i) all effective provisions of the Sarbanes-Oxley Act and (ii) the applicable listing and corporate governance rules and regulations of NASDAQ.

          (c) Since January 1, 2005, neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices. No current or former attorney representing the Company or any of its Subsidiaries has reported evidence of a violation of securities laws, breach of fiduciary duty or similar violation by the Company or any

of its current or former officers, directors, employees or agents to the current Board of Directors of the Company or any committee thereof or to any current director or executive officer of the Company.

          (d) To the knowledge of the Company, no employee of the Company or any of the Company Subsidiaries has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable legal requirements of the type described in Section 806 of the Sarbanes-Oxley Act by the Company or any of its Subsidiaries. Neither the Company nor any of the Company Subsidiaries nor, to the knowledge of the Company, any director, officer, employee, contractor, subcontractor or agent of the Company or any Company Subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against an employee of the Company or any of its Subsidiaries in the terms and conditions of employment because of any lawful act of such employee described in Section 806 of the Sarbanes-Oxley Act.

     Section 5.8 Absence of Certain Changes .

          (a) Except as contemplated by this Agreement, since September 30, 2007 (the “ Balance Sheet Date ”), each of the Company and each Company Subsidiary has conducted its respective business in the ordinary course of business.

          (b) From the Balance Sheet Date through the date of this Agreement, there has not been any Company Material Adverse Effect.

     Section 5.9 No Undisclosed Liabilities . Except (a) as reflected or otherwise reserved against on the Financial Statements (including the notes thereto), (b) for liabilities and obligations incurred since the Balance Sheet Date in the ordinary course of business and (c) for liabilities and obligations incurred under this Agreement or in connection with the transactions contemplated by this Agreement, neither the Company nor any Company Subsidiary has incurred any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise required by GAAP to be recognized or disclosed on a consolidated balance sheet of the Company or any Company Subsidiary or in the notes thereto.

     Section 5.10 Litigation . Except as disclosed in the Company SEC Documents filed prior to the date hereof, there is no material action, suit, investigation or proceeding pending against, or, to the knowledge of the Company, threatened against or affecting, the Company, any of the Company Subsidiaries, any present or former officer, director or employee of the Company or any of the Company Subsidiaries or any Person for whom the Company or any Company Subsidiary may be liable or any of their respective properties before any court or arbitrator or before or by any Governmental Authority.

     Section 5.11 Employee Benefit Plans; ERISA .

          (a) Section 5.11(a) of the Company Disclosure Schedule sets forth a correct and complete list of all material employee benefit plans, programs, agreements or arrangements, including pension, retirement, profit sharing, deferred compensation, stock option, change in control, retention, equity or equity-based compensation, stock purchase, employee stock

ownership, severance pay, vacation, bonus or other incentive plans, all medical, vision, dental or other health plans, all life insurance plans, and all other material employee benefit plans or fringe benefit plans, including “employee benefit plans” as that term is defined in Section 3(3) of ERISA, maintained by the Company or any Company Subsidiary, or to which the Company or any Company Subsidiary contributes or is obligated to contribute thereunder, or with respect to which the Company or any Company Subsidiary has or may have any material liability (contingent or otherwise), in each case, for or to any current or former employees, directors or officers of the Company or any Company Subsidiary and/or their dependents (collectively, the “ Benefit Plans ”).

          (b) All Benefit Plans that are intended to be subject to Code Section 401(a) and any trust agreement that is intended to be tax exempt under Code Section 501(a) have been determined by the Internal Revenue Service to be qualified under Code Section 401(a) and exempt from taxation under Code Section 501(a), and, to the knowledge of the Company, nothing has occurred that would adversely affect the qualification of any such plan. Each Benefit Plan and any related trust subject to ERISA complies in all material respects with and has been administered in substantial compliance with, (A) the applicable provisions of ERISA, (B) all applicable provisions of the Code, (C) all other applicable laws, and (D) its terms and the terms of any collective bargaining or collective labor agreements. Each Benefit Plan which is maintained primarily for the benefit of any current or former employees, directors or officers of the Company or any Company Subsidiary not located primarily in the United States and/or their dependents complies in all material respects with and has been administered in substantial compliance with the laws of the applicable foreign country. Neither the Company nor any Company Subsidiary has received any written notice from any Governmental Authority questioning or challenging such compliance described above. There are no unresolved claims or disputes under the terms of, or in connection with, the Benefit Plans other than claims for benefits which are payable in the ordinary course. There has not been any non-exempt “prohibited transaction” (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Benefit Plan. No litigation has been commenced with respect to any Benefit Plan and, to the knowledge of the Company, no such litigation is threatened (other than routine claims for benefits in the normal course). There are no governmental audits or investigations pending or, to the knowledge of the Company, threatened in connection with any Benefit Plan.

          (c) Neither the Company nor any ERISA Affiliate of the Company (as defined below) (i) has an “obligation to contribute” (as defined in ERISA Section 4212) to a Benefit Plan that is a “multiemployer plan” (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)); (ii) sponsors, maintains or contributes to any plan, program or arrangement that provides for post-retirement or other post-employment welfare benefits (other than health care continuation coverage as required by applicable law); or (iii) sponsors a Benefit Plan that is a defined benefit pension plan intended to be registered or approved by any foreign Governmental Authority.

          (d) Neither the Company nor any ERISA Affiliate has ever maintained, established, sponsored, participated in, or contributed to, any defined benefit plan (as defined in ERISA Section 3(35)) subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code.

          (e) Neither the Company nor any Company Subsidiary has any obligations for retiree health or life insurance benefits under any Benefit Plan (other than for continuation coverage under Section 4980B(f) of the Code or any similar state, local or foreign law).

          (f) Section 5.11(f) of the Company Disclosure Schedule discloses: (i) each payment becoming due to any current or former employee under any Benefit Plan because of this Agreement (or the consummation of the transactions contemplated by this Agreement); (ii) any increase in any benefit otherwise payable under any Benefit Plan; or (iii) any acceleration of the time of payment, vesting or funding of any such benefits under any Benefit Plan in each case caused or triggered by the execution and delivery of this Agreement or the consummation of the Merger or the other transactions contemplated by this Agreement. No payment or benefit which has been, will or may be made by the Company or any Company Subsidiary with respect to any current or former employee located in the United States in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement would fail to be deductible under Section 162(m) of the Code. Neither this Agreement (or the consummation of the transactions contemplated by this Agreement) nor any other agreement, plan, arrangement or other contract between the Company or any Company Subsidiary and an employee or other service provider that, considered individually or considered collectively with any other such agreements, plans, arrangements or other contracts, will give rise directly or indirectly to the payment of any amount that would be characterized as an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code.

          (g) Correct and complete copies have been delivered or made available to Parent by the Company of all Benefit Plans (including all amendments and attachments thereto); all insurance contracts or other funding arrangements to the degree applicable; the most recent annual information filings (Form 5500) and annual financial reports for those Benefit Plans (where required); the most recent determination letter from the Internal Revenue Service (where required); all material written agreements and contracts relating to each Benefit Plan, including administrative service agreements and group insurance contracts; and the most recent summary plan descriptions for the Benefit Plans (where required) and in respect of Benefit Plans, the most recent actuarial valuation and any subsequent valuation or funding advice (where required, including draft valuations).

          (h) No payment pursuant to any Benefit Plans or other arrangement between the Company or a Company Subsidiary and any “service provider” (as such term is defined in Section 409A of the Code and the United States Treasury Regulations and IRS guidance thereunder), including, without limitation, the grant, vesting or exercise of any Company Option, would subject any Person to a Tax pursuant to Section 409A of the Code (based upon a good faith interpretation of Section 409A of the Code and the applicable regulations, notices and other regulatory guidance related thereto), whether pursuant to the consummation of the Merger, any other transactions contemplated by this Agreement or otherwise.

     Section 5.12 Taxes .

          (a) The Company and each Company Subsidiary have timely filed with the appropriate Tax authority all material Tax Returns required to be filed by them through the date hereof. All such Tax Returns are complete and accurate in all material respects. None of the

Company or any Company Subsidiary currently is the beneficiary of any extension of time within which to file any material Tax Return.

          (b) The unpaid Taxes of the Company and each Company Subsidiary did not, as of the dates of the Financial Statements, exceed the reserve for Tax liability set forth on the face of the balance sheets contained in such Financial Statements. Since the date of the most recent Financial Statements, neither the Company nor any of the Company Subsidiaries have incurred any material liability for Taxes outside the ordinary course of business or otherwise inconsistent with past practice.

          (c) No material deficiencies for Taxes of the Company and the Company Subsidiaries have been claimed in writing or proposed in writing or assessed by any Tax authority that have not been resolved or settled. To the knowledge of the Company, there are no pending audits of federal, state and local Tax Returns of the Company and the Company Subsidiaries by the relevant Tax authorities. Neither the Company nor the Company Subsidiaries nor any predecessor has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

          (d) There are no Liens for Taxes upon the assets of the Company and the Company Subsidiaries (other than Permitted Liens).

          (e) Neither the Company nor the Company Subsidiaries has any liability for the Taxes of any other Person (other than the Company and the Company Subsidiaries) under Treasury Regulation § 1.1502–6 (or any similar provision of state, local, or foreign law), as a transferee, by contract, or otherwise, except where such liability would not have (or reasonably be expected to have) a material effect.

          (f) There are no Tax sharing agreements or similar arrangements (including Tax indemnity arrangements) with respect to or involving the Company and the Company Subsidiaries (except for the allocation of Taxes set forth in leases, contracts and commercial agreements entered into in the ordinary course of business and except where such agreement or arrangement would not have (or reasonably be expected to have) a material effect).

          (g) Neither the Company nor any of the Company Subsidiaries has agreed, or is required, to make any adjustment under Section 481(a) of the Code for any period after the Closing Date by reason of a change in accounting method or otherwise.

     Section 5.13 Contracts .

          (a) Except as filed as exhibits to the Company SEC Documents filed prior to the date hereof (copies of which have been made available to Parent), there is no Company Agreement (a) any of the benefits to any party of which will be materially increased, or the vesting of the material benefits to any party of which will be materially accelerated, by the occurrence of any of the transactions contemplated by this Agreement or (b) which, as of the date hereof, (i) is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (ii) involves aggregate expenditures in excess of $500,000, (iii) was not entered into in the ordinary course of business, (iv) that contains “take or pay” provisions applicable to the Company or any Company Subsidiary, (v) that contains any non-compete or exclusivity

provisions with respect to any line of business or geographic area with respect to the Company or any Company Subsidiary, or which restricts the conduct of any line of business by the Company or any Company Subsidiary or any geographic area in which the Company or any Company Subsidiary conducts business, or (vi) which would prohibit or materially delay the consummation of the transactions contemplated by this Agreement. Each contract of the type described above in Section 5.13, whether or not set forth in Section 5.13 of the Company Disclosure Schedule, is referred to herein as a “ Company Material Contract .” Each Company Material Contract is valid and binding on the Company and each Company Subsidiary party thereto and, to the knowledge of the Company, each other party thereto, as applicable, and in full force and effect (except that (x) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors’ rights generally and (y) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought), and the Company and each Company Subsidiary has performed in all material respects all obligations required to be performed by it under each Company Material Contract and, to the knowledge of the Company, each other party to each Company Material Contract has performed in all material respects all obligations required to be performed by it under such Company Material Contract, except as would not, individually or in the aggregate, be reasonably expected to be material to the Company and the Company Subsidiaries, taken as a whole. None of the Company or any Company Subsidiary knows of, or has received notice of, any violation or default under (or any condition which with the passage of time or the giving of notice would cause such a violation of or default under) any Company Material Contract except for violations or defaults that would not, individually or in the aggregate, be reasonably expected to, (1) prevent or materially delay consummation of the Merger or any of the other transactions contemplated by this Agreement, or (2) have a Company Material Adverse Effect.

          (b) The Company has delivered or made available to Parent or provided to Parent for review, prior to the execution of this Agreement, true and complete copies of all of the Company Material Contracts required to be disclosed in Section 5.13 of the Company Disclosure Schedule, which are not filed as exhibits to the Company SEC Documents and the Company Material Contracts required to be disclosed in Section 5.13 of the Company Disclosure Schedule filed as exhibits to the Company SEC Documents are true and complete copies of such contracts.

     Section 5.14 Properties . Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company or a Company Subsidiary has good and marketable, indefeasible, fee simple title to, or in the case of leased property and assets, has valid leasehold interests in, all property and assets (whether real, personal, tangible or intangible), except for properties and assets sold since the Balance Sheet Date in the ordinary course of business. None of such property or assets is subject to any Lien, except:

          (a) Liens disclosed in the Financial Statements;

          (b) Liens consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real property or irregularities in title thereto, which

do not materially impair the value of such properties or the use of such property by the Company or any of the Company Subsidiaries in the operation of its respective business;

          (c) workmen’s, repairmen’s, warehousemen’s and carriers’ Liens arising in the ordinary course of business of the Company and the Company Subsidiaries;

          (d) Liens for Taxes, assessments or governmental charges or levies not yet due or being contested in good faith (and for which adequate accruals or reserves have been established on the appropriate Financial Statements); or

          (e) Liens and other imperfections of title (including matters of record) and encumbrances that do not materially interfere with the conduct of the business of the Company and the Company Subsidiaries, taken as a whole (the foregoing Liens (a)-(e), “ Permitted Liens ”).

     Section 5.15 Intellectual Property .

          (a) Section 5.15(a) of the Company Disclosure Schedule contains a complete and accurate list, as of the date hereof, of the following Owned Company IP: (i) all Company Registered IP; and (ii) all unregistered Trademarks used in connection with Company Products; in each case listing, as applicable, (A) the name of the applicant or registrant and current owner, (B) the jurisdiction where the application or registration is located, (C) the Governmental Authority with which the application or registration is filed, (D) the application or registration number, and (E) all proceedings or actions before any court or tribunal (including the United States Patent and Trademark Office or any equivalent authority anywhere else in the world) related to Company Registered IP. The Company and each of the Company Subsidiaries has in a timely manner made all filings, payments, and recordations and taken all other actions reasonably required to obtain and maintain ownership of all Intellectual Property Rights in each material item of Company Registered IP.

          (b) Section 5.15(b) of the Company Disclosure Schedule contains a complete and accurate list of all Company Agreements that are material to the Company, in effect as of the date hereof, in each case specifying the date of and parties to the agreement and whether such agreement is exclusive or non-exclusive, (i) under which the Company or any of its Subsidiaries uses or has the right to use any Licensed Company IP, other than non-exclusive licenses and related services agreements for generally commercially available software that is not incorporated into any Company Products or (ii) under which the Company or any of its Subsidiaries has licensed or otherwise permitted others the right to use any Company IP or Company Products (such agreements described in clauses (i) and (ii) above, the “ Company IP Agreements ”). Neither the Company nor any of its Subsidiaries has granted any exclusive license under any Owned Company IP. To the knowledge of the Company, there are no pending material disputes regarding the scope of any Company IP Agreements, performance under any Company IP Agreements, or with respect to payments made or received under any Company IP Agreements. To the knowledge of the Company (A) no parties to the Company IP Agreements are in breach thereof, and (B) all Company IP Agreements are binding and are in full force and effect except for those Company IP Agreements that by their terms have expired or been terminated since the date hereof.

          (c) To the knowledge of the Company, the Company and its Subsidiaries own or otherwise have licensed all Intellectual Property Rights needed to conduct the business of the Company and its Subsidiaries as conducted prior to the Closing Date.

          (d) The Company and its Subsidiaries own all right, title and interest in the Owned Company IP, free and clear of all Liens, other than Permitted Liens. Without limiting the foregoing, each Person who is or was an employee or contractor of Company or any of its Subsidiaries and who is or was involved in the creation or development of any Owned Company IP has executed a valid agreement containing an assignment of all Intellectual Property Rights in such employee’s or contractor’s contribution to the Owned Company IP.

          (e) Neither the Company nor any of its Subsidiaries is or has been a member of, or a contributor to, any domestic or foreign industry standards body or similar organization which membership or contribution may require the Company or any of its Subsidiaries to grant or offer to any other Third Party any compulsory license or right to any Owned Company IP. No Governmental Authority has any ownership interest in any Owned Company IP, and neither Company nor its Subsidiaries use or have used any funding, facilities, or personnel of any Governmental Authority in connection with the creation of the Owned Company IP in a manner that could give rise to an ownership interest in the Owned Company IP in favor of such Governmental Authority.

          (f) The Company and each of its Subsidiaries has taken reasonable and appropriate steps to protect and preserve the confidentiality of the Trade Secrets of Company and its Subsidiaries, and to the knowledge of the Company, there are no unauthorized uses, disclosures or infringements of any such Trade Secrets by any Person.

          (g) To the knowledge of the Company, none of the Company or any of its Subsidiaries or any of its or their current products or services or other operation of the Company’s or its Subsidiaries’ business has infringed upon, misappropriated, or otherwise violated, or is infringing upon, misappropriating, or otherwise violating, in any respect the Intellectual Property Rights of any Third Party. To the knowledge of the Company as of the date hereof, no Person or any of such Person’s products or services or other operation of such Person’s business is infringing upon or otherwise violating any Owned Company IP in any material respect.

          (h) No action, claim or proceeding alleging infringement, misappropriation, or other violation of any Intellectual Property Right of another Person is pending or, to the knowledge of the Company, has been threatened against Company or its Subsidiaries. Neither the Company nor any of its Subsidiaries has received any written notice or other communication relating to any actual, alleged, or suspected infringement, misappropriation, or violation of any Intellectual Property Right of another Person by Company or any Subsidiary. The Company and its Subsidiaries are not subject to any order, judgment, writ, stipulation, award, injunction, decree, arbitration award or finding of any Governmental Authority that restricts or impairs the use of any Company IP.

          (i) The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement will not (with or without notice or the lapse of

time, or both) result in (i) the Company or its Subsidiaries granting to any Third Party any rights or licenses to any Intellectual Property or Intellectual Property Rights, (ii) any right, including any right of termination, amendment, modification, cancellation or acceleration under any Company IP Agreement, (iii) the loss of or the imposition of any Lien on any Owned Company IP, or (iv) the release, disclosure, or delivery of any Owned Company IP by or to any escrow agent or other Person.

          (j) No software incorporated in any Company Product is subject to any “copyleft” or other obligation or condition (including any obligation or condition under any “open source” license such as the GNU Public License, Lesser GNU Public License, or Mozilla Public License) that could require, or could condition the use or distribution of any software contained in any Company Product on, the disclosure, licensing, or distribution of any source code for any portion of Owned Company IP in a Company Product.

          (k) None of the source code used by Company or any of its Subsidiaries and material to the conduct of the business of the Company, including software contained any of the Company Products, (collectively, “ Company Source Code ”) has been disclosed by the Company or any of its Subsidiaries, except to its employees or advisers or pursuant to non-disclosure agreements, or, to the knowledge of the Company, by any other Person except as authorized by the Company under a non-disclosure agreement. Neither the Company nor any of its Subsidiaries has provided or licensed, or has any duty or obligation (whether present, contingent, or othe