Exhibit 10.2(b) ECHELON CORPORATION NONQUALIFIED STOCK OPTION GRANT AGREEMENT
– Early Exercise


    Exhibit
      10.2(b)

    [EMPLOYEE
      NAME]

     

    Employee
      ID Number:

     

    Grant
      Number:

     

    ECHELON
      CORPORATION

    NONQUALIFIED
      STOCK OPTION GRANT AGREEMENT - Early Exercise

     

    Echelon
      Corporation (the “Company”) hereby grants you, [NAME OF EMPLOYEE] (the
“Employee”), an option under the Company’s 1997 Stock Plan (the “Plan”) to
      purchase shares of common stock of the Company. The date of this Nonqualified
      Stock Option Agreement (this “Agreement”) is [DATE] (the “Grant Date”). In
      general, the latest date this option will expire is the expiration date
      indicated on this Notice of Grant (the “Expiration Date”). However, as provided
      in this Agreement, this option may expire earlier than the Expiration Date.
      Subject to the provisions of Appendix A (attached to this Agreement) and of
      the
      Plan, the principal features of this option are as follows:

    
      	 Maximum Number of
              Shares	 	 
	 Purchasable with this
              Option: 	 [NUMBER]	  Exercise
              Price per Share:    
              US
              $______
	 	 	 
	 Vesting Commencement
              Date:	  [DATE]	 
	 	 	 
	 Scheduled Vesting
              Dates:	 	 Number of
              Shares
	 [DATE] 	 	
              [NUMBER]

            
	 [DATE]	 	
              [NUMBER]

            
	 [DATE]	 	
              [NUMBER]

            
	 [DATE]	 	
              [NUMBER]

            


    

     

    Expiration
      Date: Five
      Years from the Grant Date; provided, however, this option may terminate earlier
      than the Expiration Date, as set in Appendix A.

    


    IMPORTANT:

     

    By
      your
      signature and the signature of the Company’s representative below, you and the
      Company agree that this Option is granted under and governed by the terms and
      conditions of the Plan and this Agreement. Optionee has reviewed the Plan and
      this Agreement in their entirety, has had an opportunity to obtain the advice
      of
      counsel prior to executing this Agreement and fully understands all provisions
      of the Plan and Agreement. Optionee hereby agrees to accept as binding,
      conclusive and final all decisions or interpretations of the Administrator
      upon
      any questions relating to the Plan and Agreement. Optionee further agrees to
      notify the Company upon any change in the residence address indicated
      below.


     

    
      	 OPTIONEE:	 	 ECHELON CORPORATION
	 	 	 
	 	 	  
	 Signature	 	 By
	 	 	 
	 	 	 
	 Print Name	 	  Title
	 	 	 
	 Residence
              Address	 	 
	 	 	 
	 	 	 


    

         

    
      
        

      

    

     

    APPENDIX
      A - TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTION GRANT

     

    


     

     

    1.  Vesting
      Schedule; Right to Exercise.
      This
      option will vest as to 25% of the total shares at each one year anniversary
      of
      the date of grant, until this option shall have vested with respect to one
      hundred percent (100%) of such Shares. Shares scheduled to vest on any such
      date
      actually will vest only if the Employee has not incurred a Termination of
      Service prior to such date. Notwithstanding the foregoing, the Employee may
      exercise this option, in whole or in part, at any time as to shares that have
      not yet vested, provided that the Employee enters into a Restricted Stock
      Purchase Agreement, attached hereto as Exhibit
      1,
      which
      provides that the Company may repurchase the shares subject to this option
      to
      the extent that such shares are not vested upon the date of the Employee’s
      Termination of Service.

     

    2.  Termination
      of Option.
      In the
      event of the Employee’s Termination of Service for any reason other than
      Disability or death, the Employee may, within thirty (30) days after the date
      of
      such Termination of Service, or prior to the Expiration Date, whichever shall
      first occur, exercise any then vested but unexercised portion of this option.
      In
      the event of the Employee’s Termination of Service due to Disability, the
      Employee may, within one (1) year after the date of Termination of Service
      due
      to Disability, or prior to the Expiration Date, whichever shall first occur,
      exercise any then vested but unexercised portion of this option. 

    


     

    For
      purposes of this Agreement, the Employee shall be deemed to have incurred a
      Termination of Service prior to any period of notice for termination of
      employment mandated under applicable law. The Employee’s date of Termination of
      Service shall mean the date upon which the Employee ceases active performance
      of
      services following the provision of a notification of termination or resignation
      from employment or service, and shall be determined solely by this Agreement
      and
      without reference to any other agreement, written or oral, express or implied,
      including the Employee’s contract of employment, if any.

     

     

    3.  Death
      of Employee.
      In the
      event that the Employee dies while an Employee or during the thirty (30) days
      or
      one (1) year periods referred to in Paragraph 2 above, the Employee’s designated
      beneficiary, or if no beneficiary survives the Employee, the administrator
      or
      executor of the Employee’s estate (the “Transferee”), may, within one (1) year
      after the date of death, exercise any unexercised portion of the option that
      was
      vested prior to the Employee’s Termination of Service. Any such Transferee must
      furnish the Company (a) written notice of his or her status as a
      Transferee, (b) evidence satisfactory to the Company to establish the validity
      of the transfer of this option and compliance with any laws or regulations
      pertaining to such transfer, and (c) written acceptance of the terms and
      conditions of this option as set forth in this Agreement.

     

    4.  Persons
      Eligible to Exercise Option.
      Except
      as provided in Paragraph 3 above or as otherwise determined by the Committee
      in
      its discretion, this option shall be exercisable during the Employee’s lifetime
      only by the Employee.

     

    5.  Option
      is Not Transferable.
      Except
      as provided in Paragraph 3 above, this option and the rights and privileges
      conferred hereby shall not be transferred, assigned, pledged or hypothecated
      in
      any way (whether by operation of law or otherwise) and shall not be subject
      to
      sale under execution, attachment or similar process. Upon any attempt to
      transfer, assign, pledge, hypothecate or otherwise dispose of this option,
      or of
      any right or privilege conferred hereby, or upon any attempted sale under any
      execution, attachment or similar process, this option and the rights and
      privileges conferred hereby immediately shall become null and void.

     

    6.  Exercise
      of Option.
      This
      option may be exercised by the person then entitled to do so as to any shares
      which may then be purchased by (a) giving notice in such form or manner as
      the
      Company may designate, (b) providing full payment of the Exercise Price (and
      the
      amount of any income tax the Company determines is required to be withheld
      by
      reason of the exercise of this option or as is otherwise required under
      Paragraph 8 below), and (c) giving satisfactory assurances in the form or manner
      requested by the Company that the shares to be purchased upon the exercise
      of
      this option are being purchased for investment and not with a view to the
      distribution thereof. Notwithstanding any contrary provision of this Agreement,
      if the expiration date of this option falls on a Saturday, Sunday or California
      holiday, the Employee may exercise any then vested but unexercised portion
      of
      this option at any time prior to the close of business on the first business
      day
      following that Saturday, Sunday or California holiday. 

     

    7.  Conditions
      to Exercise.
      Except
      as provided in Paragraph 6 above or as otherwise required as a matter of law,
      the (i) Exercise Price for this option and (ii) minimum federal, state and
      local
      income, employment and any other applicable taxes required to be withheld by
      the
      Company as a result of the exercise of this option shall be made by “net
      exercise” unless the person entitled to exercise otherwise elects to pay such
      amounts by cash, personal check, cashier’s check or money order. For this
      purpose, “net exercise” means a procedure by which such person will be issued a
      number of Shares determined in accordance with a formula X = Y(A - (B+C)) /
      A
      (rounded up to the nearest whole Share), where:

     

    X
      = the
      number of Shares to be issued upon exercise of the option;

     

    Y
      = the
      total number of Shares with respect to which the person has elected to exercise
      the option;

     

    A
      = the
      Fair Market Value of one (1) Share;

     

    B
      = the
      exercise price per share; 

     

    C
      = the
      minimum federal, state and local income, employment and any other applicable
      taxes attributable to one (1) Share which are required to be withheld by the
      Company as a result of the exercise of the option.

     

    8.  Tax
      Withholding and Payment Obligations.
      The
      Company will assess its requirements regarding tax, social insurance and any
      other payroll tax withholding and reporting in connection with this option,
      including the grant, vesting or exercise of this option or sale of shares
      acquired pursuant to the exercise of this option (“tax-related items”). These
      requirements may change from time to time as laws or interpretations change.
      Regardless of the Company’s actions in this regard, the Employee hereby
      acknowledges and agrees that the ultimate liability for any and all tax-related
      items is and remains his or her responsibility and liability and that the
      Company (a) makes no representations or undertaking regarding treatment of
      any
      tax-related items in connection with any aspect of this option grant, including
      the grant, vesting or exercise of this option and the subsequent sale of shares
      acquired pursuant to the exercise of this option; and (b) does not commit to
      structure the terms of the grant or any aspect of this option to reduce or
      eliminate the Employee’s liability regarding tax-related items. In the event the
      Company determines that it and/or an affiliate must withhold any tax-related
      items as a result of the Employee’s participation in the Plan, the Employee
      agrees as a condition of the grant of this option to make arrangements
      satisfactory to the Company to enable it to satisfy all withholding
      requirements. The Employee authorizes the Company and/or an affiliate to
      withhold all applicable withholding taxes from the Employee’s wages.
      Furthermore, the Employee agrees to pay the Company and/or an affiliate any
      amount of taxes the Company and/or an affiliate may be required to withhold
      as a
      result of the Employee’s participation in the Plan that cannot be satisfied by
      deduction from the Employee’s wages or other cash compensation paid to the
      Employee by the Company and/or an affiliate. The Employee acknowledges that
      he
      or she may not exercise this option unless the tax withholding obligations
      of
      the Company and/or any affiliate are satisfied. Notwithstanding the foregoing,
      upon exercise of the option, the Company will withhold a portion of the Shares
      with respect to which the Employee (or such other authorized person) has elected
      to exercise the option that have an aggregate market value sufficient to pay
      the
minimum
      federal, state and local income, employment and any other applicable taxes
      required to be withheld by the Company
      as a
      result of the exercise of the option. No fractional Shares will be withheld
      or
      issued pursuant to the issuance of Shares; any additional withholding necessary
      for this reason will be done by the Company through the Employee’s paycheck.
      With respect to its executive officers (as determined by the Company), the
      Company will withhold an amount equal to the fair market value of two (2) Shares
      from the last paycheck due to such executive prior to the exercise of the
      option. With respect to other Employees, the Company, in its discretion, may
      withhold an amount equal to the fair market value of two (2) Shares from the
      first paycheck due to the Employee following the exercise of the option. In
      the
      event that the cash amounts withheld by the Company exceed the withholding
      taxes
      that are due after the automatic withholding of whole Shares, the Company will
      reimburse the Employee for the excess amounts. In the event the withholding
      requirements are not satisfied through the withholding of Shares (or, through
      the Employee’s paycheck, as indicated above), no Shares will be issued to the
      Employee (or his or her estate) unless and until satisfactory arrangements
      (as
      determined by the Administrator) have been made by the Employee with respect
      to
      the payment of any income and other taxes which the Company determines must
      be
      withheld or collected with respect to the exercise of the option. By accepting
      this option, the Employee expressly consents to the withholding of Shares and
      to
      any additional cash withholding as provided for in this
      paragraph 8.

     

    9.  Suspension
      of Exercisability.
      If at
      any time the Company shall determine, in its discretion, that the listing,
      registration or qualification of the shares upon any securities exchange or
      under any applicable law, or the consent or approval of any governmental
      regulatory authority, is necessary or desirable as a condition of the purchase
      of shares hereunder, this option may not be exercised, in whole or in part,
      unless and until such listing, registration, qualification, consent or approval
      shall have been effected or obtained free of any conditions not acceptable
      to
      the Company. The Company shall make reasonable efforts to meet the requirements
      of any applicable law or securities exchange and to obtain any required consent
      or approval of any governmental authority.

     

    10.  Address
      for Notices.
      Any
      notice to be given to the Company under the terms of this Agreement shall be
      addressed to the Company, in care of Human Resources Department, at Echelon
      Corporation, 550 Meridian Avenue, San Jose, CA 95126, or at such other address
      as the Company may hereafter designate in writing.

     

    11.  No
      Rights of Stockholder.
      Neither
      the Employee (nor any transferee) shall be or have any of the rights or
      privileges of a stockholder of the Company in respect of any of the shares
      issuable pursuant to the exercise of this option, unless and until certificates
      representing such shares shall have been issued, recorded on the records of
      the
      Company or its transfer agents or registrars, and delivered to the Employee
      (or
      transferee). Nothing in the Plan or this option shall create an obligation
      on
      the part of the Company to repurchase any shares purchased
      hereunder.

     

    12.  No
      Effect on Employment.
      The
      Employee’s employment with the Company and its affiliates is on an at-will basis
      only, subject to the provisions of applicable law. Accordingly, the terms of
      the
      Employee’s employment with the Company and its affiliates shall be determined
      from time to time by the Company or the affiliate employing the Employee (as
      the
      case may be), and the Company or the affiliate shall have the right, which
      is
      hereby expressly reserved, to terminate or change the terms of the employment
      of
      the Employee at any time for any reason whatsoever, with or without good cause
      (subject to the provisions of applicable law). 

     

    13.  Other
      Benefits.
      Except
      as provided below, nothing contained in this Agreement shall affect the
      Employee’s right to participate in and receive benefits under and in accordance
      with the then current provisions of any pension, insurance or other employee
      welfare plan or program of the Company or any affiliate. Notwithstanding any
      contrary provision of this Agreement, in the event that the Employee receives
      a
      hardship withdrawal from his or her pre-tax account under the Company’s 401(k)
      Plan (the “401(k) Plan”), this option may not be exercised during the six (6)
      month period following the receipt of such withdrawal, unless the Company
      determines that such exercise (or a particular manner of exercise) would not
      adversely affect the continued tax qualification of the 401(k)
      Plan.

     

    14.  Plan
      Governs.
      This
      Agreement is subject to all terms and provisions of the Plan. In the event
      of a
      conflict between one or more provisions of this Agreement and one or more
      provisions of the Plan, the provisions of the Plan shall govern. Terms used
      and
      not defined in this Agreement shall have the meaning set forth in the Plan.
      This
      option is not an incentive stock option as defined in Section 422 of the
      Internal Revenue Code. The Company may, in its discretion; issue newly issued
      shares or treasury shares pursuant to this option.

     

    15.  Maximum
      Term of Option.
      Except
      as provided in Paragraph 3 above, this option is not exercisable after the
      Expiration Date.

     

    16.  Binding
      Agreement.
      Subject
      to the limitation on the transferability of this option contained herein, this
      Agreement shall be binding upon and inure to the benefit of the heirs, legatees,
      legal representatives, successors and assigns of the parties
      hereto.

     

    17.  Committee
      Authority.
      The
      Committee shall have the power to interpret the Plan and this Agreement and
      to
      adopt such rules for the administration, interpretation and application of
      the
      Plan as are consistent therewith and to interpret or revoke any such rules.
      All
      actions taken and all interpretations and determinations made by the Committee
      in good faith shall be final and binding upon the Employee, the Company and
      all
      other interested persons. The Committee shall not be personally liable for
      any
      action, determination or interpretation made in good faith with respect to
      the
      Plan or this Agreement.

     

    18.  Captions.
      Captions provided herein are for convenience only and are not to serve as a
      basis for interpretation or construction of this Agreement.

     

    19.  Agreement
      Severable.
      In the
      event that any provision in this Agreement shall be held invalid or
      unenforceable, such provision shall be severable from, and such invalidity
      or
      unenforceability shall not be construed to have any effect on, the remaining
      provisions of this Agreement.

     

    20.  Modifications
      to the Agreement.
      This
      Agreement constitutes the entire understanding of the parties on the subjects
      covered. The Employee expressly warrants that he or she is not accepting this
      Agreement in reliance on any promises, representations, or inducements other
      than those contained herein. Modifications to this Agreement or the Plan can
      be
      made only in an express written contract executed by a duly authorized officer
      of the Company.

     

    21.  Amendment,
      Suspension, Termination.
      By
      accepting this option, the Employee expressly warrants that he or she has
      received an option to purchase stock under the Plan, and has received, read
      and
      understood a description of the Plan. The Employee understands that the Plan
      is
      discretionary in nature and may be modified, suspended or terminated by the
      Company at any time.

     

    22.  Labor
      Law.
      By
      accepting this option, the Employee acknowledges that: (a) the grant of this
      option is a one-time benefit which does not create any contractual or other
      right to receive future grants of options, or benefits in lieu of options;
      (b)
      all determinations with respect to any future grants, including, but not limited
      to, the times when the stock options shall be granted, the number of shares
      subject to each stock option, the Exercise Price, and the time or times when
      each stock option shall be exercisable, will be at the sole discretion of the
      Company; (c) the Employee’s participation in the Plan is voluntary; (d) the
      value of this option is an extraordinary item of compensation which is outside
      the scope of the Employee’s employment contract, if any; (e) this option is not
      part of the Employee’s normal or expected compensation for purposes of
      calculating any severance, resignation, redundancy, end of service payments,
      bonuses, long-service awards, pension or retirement benefits or similar
      payments; (f) the vesting of this option ceases upon termination of employment
      for any reason except as may otherwise be explicitly provided in the Plan or
      this Agreement; (g) the future value of the underlying shares is unknown and
      cannot be predicted with certainty; (h) if the underlying shares do not increase
      in value, this option will have no value; (i) this option has been granted
      to
      the Employee in the Employee’s status as an employee of the Company or its
      affiliates; (j) any claims resulting from this option shall be enforceable,
      if
      at all, against the Company; and (k) there shall be no additional obligations
      for any affiliate employing the Employee as a result of this
      option.

     

    23.  Disclosure
      of Employee Information.
      By
      accepting this option, the Employee consents to the collection, use and transfer
      of personal data as described in this paragraph. The Employee understands that
      the Company and its affiliates hold certain personal information about him
      or
      her, including his or her name, home address and telephone number, date of
      birth, social security or identity number, salary, nationality, job title,
      any
      shares of stock or directorships held in the Company, details of all stock
      options or any other entitlement to shares of stock awarded, canceled,
      exercised, vested, unvested or outstanding in his or her favor, for the purpose
      of managing and administering the Plan (“Data”). The Employee further
      understands that the Company and/or its affiliates will transfer Data amongst
      themselves as necessary for the purpose of implementation, administration and
      management of his or her participation in the Plan, and that the Company and/or
      any of its affiliates may each further transfer Data to any third parties
      assisting the Company in the implementation, administration and management
      of
      the Plan. The Employee authorizes the Company to receive, possess, use, retain
      and transfer the Data in electronic or other form, for the purposes of
      implementing, administering and managing his or her participation in the Plan,
      including any requisite transfer to a broker or other third party with whom
      he
      or she may elect to deposit any shares of stock acquired upon exercise of this
      option of such Data as may be required for the administration of the Plan and/or
      the subsequent holding of shares of stock on his or her behalf. The Employee
      understands that he or she may, at any time, view the Data, require any
      necessary amendments to the Data or withdraw the consent herein in writing
      by
      contacting the human resources department and/or the stock option administrator
      for his or her employer.

     

    24.  Legends.
      The
      Employee understands and agrees that the Company shall cause a legend to be
      placed upon any certificate(s) evidencing ownership of the shares purchased
      pursuant to this option indicating any right of repurchase held by the Company,
      along with any other legends that the Company deems to be appropriate or to
      be
      required by federal or state securities laws. 

     

    25.  Notice
      of Governing Law.
      This
      option shall be governed by, and construed in accordance with, the laws of
      the
      State of California without
      regard to principles of conflict of laws.

     

    
      
         

      

      
         

        
          

        

      

    

    

       

      EXHIBIT
        1

       

      ECHELON
        CORPORATION

      1997
        STOCK PLAN 

      RESTRICTED
        STOCK PURCHASE AGREEMENT

       

    

     

    THIS
      AGREEMENT is made between _____________________________ (the “Purchaser”) and
      Echelon Corporation (the “Company”) or its assignees of rights hereunder as of
      __________________, ____.

     

    Unless
      otherwise defined herein or in the Nonqualified Stock Option Agreement (the
      “Option Agreement”), the terms defined in the 1997 Stock Plan shall have the
      same defined meanings in this Agreement.

     

     

    RECITALS

    A. Pursuant
      to the exercise of the option (grant number ____) granted to Purchaser under
      the
      Plan and pursuant to the Option Agreement dated _______________, ____ by and
      between the Company and Purchaser with respect to such grant (the “Option”),
      which Plan and Option Agreement are hereby incorporated by reference, Purchaser
      has elected to purchase _________ of those shares of Common Stock which have
      not
      become vested under the vesting schedule set forth in the Option Agreement
      (“Unvested Shares”). The Unvested Shares and the shares subject to the Option
      Agreement, which have become vested are sometimes collectively referred to
      herein as the “Shares.”

     

    


     

    B. As
      required by the Option Agreement, as a condition to Purchaser’s election to
      exercise the option, Purchaser must execute this Agreement, which sets forth
      the
      rights and obligations of the parties with respect to Shares acquired upon
      exercise of the Option.

     

     

    1.  Repurchase
      Option.

     

    (a)  In
      the
      event of Purchaser’s Termination of Service for
      any
      reason, including for death and Disability, the Company shall have the right
      and
      option for ninety (90) days from such date to purchase from Purchaser, or
      Purchaser’s personal representative, as the case may be, all of the Purchaser’s
      Unvested Shares as of the date of such Termination of Service at the price
      paid
      by the Purchaser for such Shares (the “Repurchase Option”).

     

    (b)  Upon
      the
      occurrence of such a Termination of Service, the Company may exercise its
      Repurchase Option by delivering personally or by registered mail, to Purchaser
      (or his transferee or legal representative, as the case may be) with a copy
      to
      the escrow agent described in Section 2 below, a notice in writing indicating
      the Company’s intention to exercise the Repurchase Option AND, at the Company’s
      option, (i) by delivering to the Purchaser (or the Purchaser’s transferee or
      legal representative) a check in the amount of the aggregate repurchase price,
      or (ii) by the Company canceling an amount of the Purchaser’s indebtedness to
      the Company equal to the aggregate repurchase price, or (iii) by a combination
      of (i) and (ii) so that the combined payment and cancellation of indebtedness
      equals such aggregate repurchase price. Upon delivery of such notice and payment
      of the aggregate repurchase price in any of the ways described above, the
      Company shall become the legal and beneficial owner of the Unvested Shares
      being
      repurchased and the rights and interests therein or relating thereto, and the
      Company shall have the right to retain and transfer to its own name the number
      of Unvested Shares being repurchased by the Company.

     

    (c)  Whenever
      the Company shall have the right to repurchase Unvested Shares hereunder, the
      Company may designate and assign one or more employees, officers, directors
      or
      shareholders of the Company or other persons or organizations to exercise all
      or
      a part of the Company’s Repurchase Option under this Agreement and purchase all
      or a part of such Unvested Shares. 

     

    (d)  If
      the
      Company does not elect to exercise the Repurchase Option conferred above by
      giving the requisite notice within ninety (90) days following the termination,
      the Repurchase Option shall terminate.

     

    (e)  The
      Repurchase Option shall terminate in accordance with the vesting schedule
      contained in Purchaser’s Option Agreement.

     

    2.  Transferability
      of the Shares; Escrow.

     

    (a)  Purchaser
      hereby authorizes and directs the Secretary of the Company, or such other person
      designated by the Company, to transfer the Unvested Shares as to which the
      Repurchase Option has been exercised from Purchaser to the Company.

     

    (b)  To
      insure
      the availability for delivery of Purchaser’s Unvested Shares upon repurchase by
      the Company pursuant to the Repurchase Option under Section 1, Purchaser
      hereby appoints the Secretary, or any other person designated by the Company
      as
      escrow agent (the “Escrow Agent”), as its attorney-in-fact to sell, assign and
      transfer unto the Company, such Unvested Shares, if any, repurchased by the
      Company pursuant to the Repurchase Option and shall, upon execution of this
      Agreement, deliver and deposit with the Escrow Agent, the share certificates
      representing the Unvested Shares, together with the stock assignment duly
      endorsed in blank, attached hereto as Exhibit
      2.
      The
      Unvested Shares and stock assignment shall be held by the Escrow Agent in
      escrow, pursuant to the Joint Escrow Instructions of the Company and Purchaser
      attached as Exhibit
      3
      hereto,
      until the Company exercises its Repurchase Option, until such Unvested Shares
      are vested, or until such time as this Agreement no longer is in effect. Upon
      vesting of the Unvested Shares, the Escrow Agent shall promptly deliver to
      the
      Purchaser the certificate or certificates representing such Shares in the Escrow
      Agent’s possession belonging to the Purchaser, and the Escrow Agent shall be
      discharged of all further obligations hereunder; provided, however, that the
      Escrow Agent shall nevertheless retain such certificate or certificates as
      Escrow Agent if so required pursuant to other restrictions imposed pursuant
      to
      this Agreement.

     

    (c)  Neither
      the Company nor the Escrow Agent shall be liable for any act it may do or omit
      to do with respect to holding the Shares in escrow and while acting in good
      faith and in the exercise of its judgment.

     

    (d)  Transfer
      or sale of the Shares is subject to restrictions on transfer imposed by any
      applicable state and federal securities laws. Any transferee shall hold such
      Shares subject to all the provisions hereof and the Option Agreement and any
      exercise agreement executed by the Purchaser with respect to any Unvested Shares
      purchased by Purchaser and shall acknowledge the same by signing a copy of
      this
      Agreement. 

     

    3.  Ownership,
      Voting Rights, Duties.
      This
      Agreement shall not affect in any way the ownership, voting rights or other
      rights or duties of Purchaser, except as specifically provided herein.


     

    4.  Legends.
      The
      share certificate evidencing the Shares issued hereunder shall be endorsed
      with
      the following legend (in addition to any legend required under applicable
      federal and state securities laws):

    


    THE
      SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
      UPON
      TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE
      COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY
      OF
      THE COMPANY.

     

     

    5.  Adjustment
      for Stock Split.
      All
      references to the number of Shares and the purchase price of the Shares in
      this
      Agreement shall be appropriately adjusted to reflect any stock split, reverse
      stock split, stock dividend or other change in the Shares, which may be made
      by
      the Company pursuant to Section 11
      of the
      Plan after the date of this Agreement.

     

    6.  Notices.
      Notices
      required hereunder shall be given in person or by registered mail to the address
      of Purchaser shown on the records of the Company, and to the Company at their
      respective principal executive offices.

     

    7.  Survival
      of Terms.
      This
      Agreement shall apply to and bind Purchaser and the Company and their respective
      permitted assignees and transferees, heirs, legatees, executors, administrators
      and legal successors.

     

    8.  Section
      83(b) Election.
      Purchaser hereby acknowledges that he or she has been informed that, with
      respect to the exercise of an Option for Unvested Shares, an election (the
      “Election”) may be filed by the Purchaser with the Internal Revenue Service,
      within thirty (30) days of the purchase of the exercised Shares, electing
      pursuant to Section 83(b) of the Code to be taxed currently on any difference
      between the purchase price of the exercised Shares and their Fair Market Value
      on the date of purchase. Since the Option is a nonqualified stock option, this
      will result in a recognition of taxable income to the Purchaser on the date
      of
      exercise, measured by the excess, if any, of the Fair Market Value of the
      exercised Shares, at the time the Option is exercised over the purchase price
      for the exercised Shares. Absent such an Election, taxable income generally
      will
      be measured and recognized by Purchaser at the time or times on which the
      Company’s Repurchase Option lapses. Purchaser is strongly encouraged to seek the
      advice of his or her own tax consultants in connection with the purchase of
      the
      Shares and the advisability of filing of the Election under Section 83(b)
      of the Code. A form of Election under Section 83(b) is attached hereto as
Exhibit
      4
      for
      reference.

    


    PURCHASER
      ACKNOWLEDGES THAT IT IS PURCHASER’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO
      FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PURCHASER
      REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER’S
      BEHALF.

     

     

    9.  Representations.
      Purchaser has reviewed with his own tax advisors the federal, state, local
      and
      foreign tax consequences of this investment and the transactions contemplated
      by
      this Agreement. Purchaser is relying solely on such advisors and not on any
      statements or representations of the Company or any of its agents. Purchaser
      understands that he (and not the Company) shall be responsible for his own
      tax
      liability that may arise as a result of this investment or the transactions
      contemplated by this Agreement.

     

    10.  Governing
      Law.
      This
      Agreement shall be governed by, and construed in accordance with, the laws
      of
      the State of California without
      regard to principles of conflict of laws.

    


    Purchaser
      represents that he has read this Agreement and is familiar with its terms and
      provisions. Purchaser hereby agrees to accept as binding, conclusive and final
      all decisions or interpretations of the Board upon any questions arising under
      this Agreement.

     

     

    


     

    IN
      WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth
      above.

     

    OPTIONEE  ECHELON
      CORPORATION

    


     

     

     

    Signature  By

     

     

     

    Print
      Name  Title

     

     

     

     

     

    Residence
      Address

     

    Dated:
      _________________________, ____

    


    


    
       

      
        
          

        

      

      EXHIBIT
        2 

    

     

    ASSIGNMENT
      SEPARATE FROM CERTIFICATE

    


    FOR
      VALUE
      RECEIVED I, __________________________, hereby sell, assign and transfer unto
      Echelon Corporation ______________________ (__________) shares of the Common
      Stock of Echelon Corporation standing in my name of the books of said
      corporation represented by Certificate No. _____ herewith and do hereby
      irrevocably constitute and appoint _______________ to transfer the said
      stock on the books of the within named corporation with full power of
      substitution in the premises.

     

    This
      Stock Assignment may be used only in accordance with the Restricted Stock
      Purchase Agreement between Echelon Corporation and the undersigned dated
      ______________, _____ (the “Agreement”).

     

    


     

     

    Dated:
      _______________,____  Signature: 

     

    


     

    


     

    


     

    


     

    INSTRUCTIONS:
      Please do not fill in any blanks other than the signature line. The purpose
      of
      this assignment is to enable the Company to exercise its “repurchase option,” as
      set forth in the Agreement, without requiring additional signatures on the
      part
      of the Purchaser.

    


    
       

      
        
        

        
          

        

      

       

    


     

    EXHIBIT
      3

     

    JOINT
      ESCROW INSTRUCTIONS

    _________________,
      ____

    Corporate
      Secretary

    Echelon
      Corporation

    550
      Meridian Avenue,

    San
      Jose,
      CA 95126

    


    


    Dear
      _________________:

    


     

    As
      Escrow
      Agent for both Echelon Corporation (the “Company”), and the undersigned
      purchaser of stock of the Company (the “Purchaser”), you are hereby authorized
      and directed to hold the documents delivered to you pursuant to the terms of
      that certain Restricted Stock Purchase Agreement (the “Agreement”) between the
      Company and the undersigned, in accordance with the following
      instructions:

     

     

    1.  In
      the
      event the Company and/or any assignee of the Company (referred to collectively
      for convenience herein as the “Company”) exercises the Company’s repurchase
      option set forth in the Agreement, the Company shall give to Purchaser and
      you a
      written notice specifying the number of shares of stock to be purchased, the
      purchase price, and the time for a closing hereunder at the principal office
      of
      the Company. Purchaser and the Company hereby irrevocably authorize and direct
      you to close the transaction contemplated by such notice in accordance with
      the
      terms of said notice.

     

    2.  At
      the
      closing, you are directed (a) to date the stock assignments necessary for
      the transfer in question, (b) to fill in the number of shares being
      transferred, and (c) to deliver the stock assignments, together with the
      certificate evidencing the shares of stock to be transferred, to the Company
      or
      its assignee, against the simultaneous delivery to you of the purchase price
      (by
      cash, a check, or some combination thereof) for the number of shares of stock
      being purchased pursuant to the exercise of the Company’s repurchase
      option.

     

    3.  Purchaser
      irrevocably authorizes the Company to deposit with you any certificates
      evidencing shares of stock to be held by you hereunder and any additions and
      substitutions to said shares as defined in the Agreement. Purchaser does hereby
      irrevocably constitute and appoint you as Purchaser’s attorney-in-fact and agent
      for the term of this escrow to execute with respect to such securities all
      documents necessary or appropriate to make such securities negotiable and to
      complete any transaction herein contemplated, including but not limited to
      the
      filing with any applicable state blue sky authority of any required applications
      for consent to, or notice of transfer of, the securities. Subject to the
      provisions of this paragraph 3, Purchaser shall exercise all rights and
      privileges of a stockholder of the Company while the stock is held by
      you.

     

    4.  Upon
      written request of the Purchaser, but no more than once per calendar year,
      unless the Company’s repurchase option has been exercised, you will deliver to
      Purchaser a certificate or certificates representing so many shares of stock
      as
      are not then subject to the Company’s repurchase option. Within 120 days after
      cessation of Purchaser’s continuous employment by or services to the Company, or
      any parent or subsidiary of the Company, you will deliver to Purchaser a
      certificate or certificates representing the aggregate number of shares held
      or
      issued pursuant to the Agreement and not purchased by the Company or its
      assignees pursuant to exercise of the Company’s repurchase option.

     

    5.  If
      at the
      time of termination of this escrow you should have in your possession any
      documents, securities, or other property belonging to Purchaser, you shall
      deliver all of the same to Purchaser and shall be discharged of all further
      obligations hereunder.

     

    6.  Your
      duties hereunder may be altered, amended, modified or revoked only by a writing
      signed by all of the parties hereto.

     

    7.  You
      shall
      be obligated only for the performance of such duties as are specifically set
      forth herein and may rely and shall be protected in relying or refraining from
      acting on any instrument reasonably believed by you to be genuine and to have
      been signed or presented by the proper party or parties. You shall not be
      personally liable for any act you may do or omit to do hereunder as Escrow
      Agent
      or as attorney-in-fact for Purchaser while acting in good faith, and any act
      done or omitted by you pursuant to the advice of your own attorneys shall be
      conclusive evidence of such good faith.

     

    8.  You
      are
      hereby expressly authorized to disregard any and all warnings given by any
      of
      the parties hereto or by any other person or corporation, excepting only orders
      or process of courts of law and are hereby expressly authorized to comply with
      and obey orders, judgments or decrees of any court. In case you obey or comply
      with any such order, judgment or decree, you shall not be liable to any of
      the
      parties hereto or to any other person, firm or corporation by reason of such
      compliance, notwithstanding any such order, judgment or decree being
      subsequently reversed, modified, annulled, set aside, vacated or found to have
      been entered without jurisdiction.

     

    9.  You
      shall
      not be liable in any respect on account of the identity, authorities or rights
      of the parties executing or delivering or purporting to execute or deliver
      the
      Agreement or any documents or papers deposited or called for
      hereunder.

     

    10.  You
      shall
      not be liable for the outlawing of any rights under the Statute of Limitations
      with respect to these Joint Escrow Instructions or any documents deposited
      with
      you.

     

    11.  You
      shall
      be entitled to employ such legal counsel and other experts as you may deem
      necessary properly to advise you in connection with your obligations hereunder,
      may rely upon the advice of such counsel, and may pay such counsel reasonable
      compensation therefor.

     

    12.  Your
      responsibilities as Escrow Agent hereunder shall terminate if you shall cease
      to
      be an officer or agent of the Company or if you shall resign by written notice
      to each party. In the event of any such termination, the Company shall appoint
      a
      successor Escrow Agent.

     

    13.  If
      you
      reasonably require other or further instruments in connection with these Joint
      Escrow Instructions or obligations in respect hereto, the necessary parties
      hereto shall join in furnishing such instruments.

     

    14.  It
      is
      understood and agreed that should any dispute arise with respect to the delivery
      and/or ownership or right of possession of the securities held by you hereunder,
      you are authorized and directed to retain in your possession without liability
      to anyone all or any part of said securities until such disputes shall have
      been
      settled either by mutual written agreement of the parties concerned or by a
      final order, decree or judgment of a court of competent jurisdiction after
      the
      time for appeal has expired and no appeal has been perfected, but you shall
      be
      under no duty whatsoever to institute or defend any such
      proceedings.

     

    15.  Any
      notice required or permitted hereunder shall be given in writing and shall
      be
      deemed effectively given upon personal delivery or upon deposit in the United
      States Post Office, by registered or certified mail with postage and fees
      prepaid, addressed to each of the other parties thereunto entitled at the
      following addresses or at such other addresses as a party may designate by
      ten
      days’ advance written notice to each of the other parties hereto.

     

    16.  By
      signing these Joint Escrow Instructions, you become a party hereto only for
      the
      purpose of said Joint Escrow Instructions; you do not become a party to the
      Agreement.

     

    17.  This
      instrument shall be binding upon and inure to the benefit of the parties hereto,
      and their respective successors and permitted assigns.

     

    18.  These
      Joint Escrow Instructions shall be governed by, and construed in accordance
      with, the laws of the State of California without
      regard to principles of conflict of laws.

    


     

    PURCHASER  ECHELON
      CORPORATION

     

     

     

    Signature  By

     

     

     

    Print
      Name  Title

     

     

     

     

     

    Residence
      Address

     

    ESCROW
      AGENT

     

     

     

    Corporate
      Secretary

    Dated:
      ________________________,_____

     

    
      
        

      

    

    EXHIBIT
      4

     

    ELECTION
      UNDER SECTION 83(b)

     

    OF
      THE INTERNAL REVENUE CODE OF 1986

    


    The
      undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the
      Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income
      or alternative minimum taxable income, as the case may be, for the current
      taxable year the amount of any compensation taxable to taxpayer in connection
      with taxpayer’s receipt of the property described below

    


    1. The
      name,
      address, taxpayer identification number and taxable year of the undersigned
      are
      as follows:

    
      	
              NAME:

            	
              TAXPAYER:

            	
              SPOUSE:

            
	
              ADDRESS:

            	 	 
	
              IDENTIFICATION
                NO.:

            	
              TAXPAYER:

            	
              SPOUSE:

            
	
              TAXABLE
                YEAR:

            	 	 


    

    


    2. The
      property with respect to which the election is made is described as follows:
      __________ shares (the “Shares”) of the Common Stock of Echelon Corporation
      (the “Company”).

    


    3. The
      date
      on which the property was transferred is:___________________
      ,______.

    


    4. The
      property is subject to the following restrictions:

    


    The
      Shares may not be transferred and are subject to forfeiture under the terms
      of
      an agreement between the taxpayer and the Company. These restrictions lapse
      upon
      the satisfaction of certain conditions contained in such agreement.

    


    5. The
      fair
      market value at the time of transfer, determined without regard to any
      restriction other than a restriction which by its terms will never lapse, of
      such property is: $_________________.

    


    6. The
      amount (if any) paid for such property is: $_________________.

    


    The
      undersigned has submitted a copy of this statement to the person for whom the
      services were performed in connection with the undersigned’s receipt of the
      above-described property. The transferee of such property is the person
      performing the services in connection with the transfer of said
      property.

    


    The
      undersigned understands that the foregoing election may not be revoked except
      with the consent of the Commissioner.

     

    Dated:
      ______________________, _____     

    Taxpayer

    The
      undersigned spouse of taxpayer joins in this election.

     

    Dated:
      ______________________, _____     

    Spouse
      of
      Taxpayer