Document:

Exhibit 10.2(g) ECHELON CORPORATION STOCK APPRECIATION RIGHT AGREEMENT FOR
      NON-U.S. EMPLOYEES

    Exhibit
      10.2(g)

     

    ECHELON
      CORPORATION

    

    STOCK
      APPRECIATION RIGHT AGREEMENT

    

    FOR
      NON-U.S. EMPLOYEES

    

    TERMS
      AND CONDITIONS OF STOCK APPRECIATION RIGHTS

    

    

    By
      executing the Grant Acceptance process and using the services on this Smith
      Barney Benefit Access® website, you, the Employee and Echelon Corporation (the
“Company”) agree that this Award is granted under and governed by the terms and
      conditions of the Company’s 1997 Stock Plan (the “Plan”) and the Terms and
      Conditions of Stock Appreciation Rights (the “Agreement”), which may be amended
      or modified from time to time. Employee has reviewed the Plan and the Agreement
      in its entirety, has had an opportunity to obtain the advice of counsel prior
      to
      accepting this Award and fully understands provisions of the Plan and this
      Agreement. Employee hereby agrees to accept as binding, conclusive and final
      all
      decisions or interpretations of the Administrator upon any questions relating
      to
      the Plan and this Agreement. Employee further agrees to promptly notify the
      Company upon any change in the Employee’s residence address. [PLEASE BE SURE TO
      READ ALL OF THE TERMS AND CONDITIONS (IF ANY) AND APPENDICES, (IF ANY) FOR
      YOUR
      COUNTRY, THAT CONTAIN THE SPECIFIC TERMS AND CONDITIONS OF THIS
      AWARD.]

     

    

    ____________________

    

    The
      Company hereby grants you, the employee, a stock appreciation right (the “SAR”)
      under the Plan, to exercise in exchange for a payment from the Company pursuant
      to this SAR Agreement. However, as provided in the Agreement, this SAR may
      expire earlier than the Expiration Date.

    

    1. Grant
      of SAR.
      The
      Company hereby grants to the Employee under the Plan a SAR pertaining to all
      or
      any part of an aggregate of the number
      of
      shares set forth in the Summary of Grant, which SAR entitles the Employee to
      exercise the SAR in exchange for Shares in the amount determined under paragraph
      6 below.

     

    2. Vesting
      Schedule.
      Except
      as otherwise provided in this Agreement, the right to exercise this SAR will
      vest in accordance with the vesting schedule set forth in the Summary of Grant,
      subject to the Employee continuing to be a Service Provider on each relevant
      vesting date. Notwithstanding anything in this paragraph 2 to the contrary,
      and
      except as otherwise provided by the Administrator or as required by local law,
      vesting of the SAR will be suspended during any unpaid leave of absence other
      than military leave and will resume on the date the Employee returns to work
      on
      a regular schedule as determined by the Company; provided, however, that no
      vesting credit will be awarded for the time vesting has been suspended during
      such leave of absence, if permissible under local law. The Administrator, in
      its
      discretion, may accelerate the vesting of the balance, or some lesser portion
      of
      the balance, of the SAR at any time, subject to the terms of the Plan, and
      if
      permissible under local law. If so accelerated, such SAR (or the portion
      thereof) will be considered as having vested as of the date specified by the
      Administrator.

     

    3. Exercise
      of SAR.

     

    (a) Grant
      Price.
      The
      purchase price per Share for this SAR (the “Grant Price”) shall be the amount
      set forth in the Summary of Grant, which
      is
      the Fair Market Value of a Share on the Grant Date. 

     

    (b) Right
      to Exercise.
      This
      SAR is exercisable during its term in accordance with the vesting schedule
      set
      forth in the Summary of Grant and the applicable provisions of the Plan and
      this
      Agreement. 

     

    (c) Method
      of Exercise.
      This
      SAR is exercisable by (i) delivery of an exercise notice, in the form and manner
      determined by the Administrator, or (ii) following an electronic or other
      exercise procedure prescribed by the Administrator (which may require the
      Employee to exercise this SAR through the Company’s designated broker or
      administrator), which in either case shall state the election to exercise the
      SAR, the number of Shares in respect of which the SAR is being exercised (the
      “Exercised Shares”), and such other representations and agreements as may be
      required by the Company pursuant to the provisions of the Plan. Subject to
      paragraph 8, the Employee shall provide payment of any applicable withholding
      taxes arising in connection with such exercise. This SAR shall be deemed to
      be
      exercised upon receipt by the Company of a fully executed exercise notice or
      completion of such exercise procedure, as the Administrator may determine in
      its
      sole discretion, accompanied by any applicable withholding taxes.

     

    4. Death
      of Employee.
      In the
      event that the Employee dies while in the employ of the Company and/or a Parent
      or Subsidiary, the administrator or executor of the Employee’s estate (or such
      other person to whom the SAR is transferred pursuant to the Employee’s will or
      in accordance with the laws of descent and distribution), may exercise any
      vested but unexercised portion of the SAR within the period set forth in the
      Summary of Grant. 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 SAR and compliance
      with any laws or regulations pertaining to such transfer, and (c) written
      acceptance of the terms and conditions of this SAR as set forth in this
      Agreement.

     

    5. Persons
      Eligible to Exercise SAR.
      Except
      as provided in paragraph 4 above or as otherwise determined by the Administrator
      in its discretion, this SAR shall be exercisable during the Employee’s lifetime
      only by the Employee.

     

    6. Payment
      of SAR Amount.
      Upon
      exercise of this SAR, the Employee shall be entitled to receive the number
      of
      Shares (the “SAR Amount”), less applicable withholdings, determined by (i)
      multiplying (a) the difference between the Fair Market Value of a Share on
      the
      date of exercise over the Grant Price; times (b) the number of Shares with
      respect to which this SAR is exercised, and (ii) dividing the product of (a)
      and
      (b) by the Fair Market Value of a Share on the date of exercise. The SAR Amount
      shall be paid solely in whole Shares; any fractional amount shall be
      rounded down to
      the
      nearest whole share. Shares issued pursuant to the exercise of this SAR may
      be
      delivered in book form or listed in street name with a brokerage company of
      the
      Company’s choice.

     

    No
      payment shall be made pursuant to the exercise of this SAR unless such payment
      complies with Applicable Laws. Assuming such compliance, for income tax
      purposes, the payment shall be considered transferred to the Employee on the
      date the SAR is exercised with respect to such Exercised Shares.

     

    7. Term
      of SAR.
      This
      SAR may be exercised only within the term set out in the Summary of Grant,
      and
      may be exercised during such term only in accordance with the Plan and the
      terms
      of this Agreement.

     

    8. Tax
      Withholding and Payment Obligations.
      Regardless of any action the Company (or the employing Parent or Subsidiary)
      takes with respect to any or all income tax, social insurance, payroll tax,
      or
      other tax-related withholding (“Tax-Related Items”), the Employee acknowledges
      and agrees that the ultimate liability for all Tax-Related Items legally due
      by
      the Employee is and remains the Employee’s responsibility and that the Company
      (or the employing Parent or Subsidiary) (a) makes no representations or
      undertakings regarding the treatment of any Tax-Related Items in connection
      with
      any aspect of the SAR, including the grant, vesting, or exercise of the SAR,
      the
      subsequent sale of Shares acquired under the Plan and the receipt of dividends,
      if any; and (b) does not commit to structure the terms of the SAR or any aspect
      of the SAR to reduce or eliminate the Employee’s liability for Tax-Related
      Items.

     

    No
      payment will be made to the Employee (or his or her estate) for SARs unless
      and
      until satisfactory arrangements (as determined by the Administrator) have been
      made by the Employee with respect to the payment of any Tax-Related Items
      obligations of the Company (and/or the employing Parent or Subsidiary) with
      respect to the SARs. 

     

    In
      this
      regard, the Employee authorizes the Company (or the employing Parent or
      Subsidiary) to withhold a portion of the Shares otherwise issuable in payment
      for the exercise of this SAR that have an aggregate market value sufficient
      to
      pay the minimum required withholding amount for Tax-Related Items, determined
      on
      the date that the amount for Tax-Related Items to be withheld is to be
      determined. If the Company (or the employing Parent or Subsidiary) satisfies
      the
      obligation for Tax-Related Items by withholding a number of whole Shares as
      described herein, the Employee is deemed to have been issued the full number
      of
      Shares subject to the SAR award, notwithstanding that a number of the Shares
      is
      held back solely for the purpose of paying the Tax-Related Items due as a result
      of the exercise of the SAR. No fractional Shares will be withheld or issued
      pursuant to the exercise of this SAR and the issuance of Shares thereunder;
      any
      additional withholding necessary for this reason will be done by the Company
      (or
      employing Parent or Subsidiary) through the Employee’s paycheck or other cash
      compensation paid to the Employee by the Company (or employing Parent or
      Subsidiary) except as otherwise provided herein with respect to an Employee
      who
      is an “executive officer” of the Company within the meaning of Section 402 of
      the Sarbanes Oxley Act of 2002 (an “Executive Officer”). With respect to an
      Employee who is an Executive Officer, the Employee hereby agrees to pay the
      Company, on or prior to the date of exercise, by cash or check an amount equal
      to such additional withholding unless the Company otherwise determines that
      withholding such amount from the Employee’s paycheck or other cash compensation
      in accordance with the preceding sentence would not violate Section 402 of
      the
      Sarbanes Oxley Act of 2002. 

     

    Instead
      of or in combination with the foregoing, the Employee authorizes the Company
      and/or the employing Parent and/or Subsidiary, in their sole discretion, and
      in
      each case to the extent permissible under local law, to (i) sell or to arrange
      for the sale of Shares received as a result of the exercise of the SAR (on
      the
      Employee’s behalf and at the Employee’s discretion pursuant to the Employee’s
      authorization in this Agreement), with the proceeds going toward satisfaction
      of
      the Tax-Related Items, (ii) require the Employee to pay the Tax Related Items
      in
      the form of cash, check or other cash equivalent, and/or (iii) withhold all
      applicable Tax-Related Items legally payable by the Employee from the Employee’s
      paycheck or other cash compensation payable to the Employee by the Company
      (or
      the employing Parent or Subsidiary).

     

    The
      Employee shall pay to the Company (or the employing Parent or Subsidiary) any
      amount of Tax-Related Items that the Company may be required to withhold as
      a
      result of the Employee’s participation in the Plan that cannot be satisfied by
      one or more of the means previously described in this paragraph 8.

     

    The
      Employee acknowledges and agrees that the Company may refuse to honor the
      exercise and refuse to make the SAR Payment required under this Agreement if
      the
      Employee fails to comply with his or her obligations in connection with the
      Tax-Related Items as described in this paragraph 8. 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.

     

    9. Suspension
      of Exercisability.
      This
      SAR, in the sole discretion of the Company, may not be exercised, in whole
      or in
      part, and the Company shall not be required to issue any certificate or
      certificates for Shares hereunder prior to fulfillment of all the following
      conditions: (a) the admission of such Shares to listing on all stock exchanges
      on which such class of stock is then listed; (b) the completion of any
      registration or other qualification of such Shares, the filing of quarterly
      reports and the completion of any restatement of financial statements required
      under any state, federal, or local law or under the rulings or regulations
      of
      the U.S. Securities and Exchange Commission or any other governmental regulatory
      body, which the Administrator shall, in its absolute discretion, deem necessary
      or advisable; (c) the obtaining of any approval or other clearance from any
      governmental agency, which the Administrator shall, in its absolute discretion,
      determine to be necessary or advisable; and (d) the lapse of such reasonable
      period of time following the date of exercise of the SAR as the Administrator
      may establish from time to time for reasons of administrative convenience.
      Any
      suspension of exercise or delay in the issuance of Shares as a result of one
      or
      more of the foregoing conditions shall not extend the Expiration Date of this
      SAR, and the Company shall have no further obligation or liability with respect
      to this SAR as of and following the Expiration Date. 

     

    10. Rights
      as Stockholder.
      Neither
      the Employee nor any person claiming under or through the Employee will have
      any
      of the rights or privileges of a stockholder of the Company in respect of any
      of
      the Shares covered by this SAR unless and until certificates representing such
      Shares (which may be in book entry form) will have been issued, recorded on
      the
      records of the Company or its transfer agents or registrars, and delivered
      to
      the Employee (including through electronic delivery to a brokerage account).
      After such issuance, recordation and delivery, the Employee will have all the
      rights of a stockholder of the Company with respect to voting such Shares and
      receipt of dividends and distributions on such Shares. 

     

    11. Termination
      Period.
      This SAR
      will be exercisable for thirty (30) days after the Employee ceases to be a
      Service Provider, unless such termination is due to the Employee’s death or
      Disability, in which case this SAR will be exercisable for twelve (12) months
      after the Employee ceases to be a Service Provider. Notwithstanding the
      foregoing, in no event may this SAR be exercised after the Expiration Date
      as
      set forth in the Summary of Grant.

     

    12. No
      Effect on Employment.
      Subject
      to any employment contract with the Employee, the terms of such employment
      will
      be determined from time to time by the Company, or the Parent or Subsidiary
      employing the Employee, as the case may be, and the Company, or the Parent
      or
      Subsidiary employing the Employee, as the case may be, will have and the
      Employee’s participation in the Plan shall not interfere with, 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. The transactions contemplated hereunder, the Employee’s participation in
      the Plan, and the vesting schedule set forth in the Summary of Grant do not
      constitute an express or implied promise of continued employment for any period
      of time. In the event that the Employee is not an employee of the Company,
      the
      grant will not be interpreted to form an employment contract with the Employee’s
      employer or any Parent or Subsidiary of the Company.

     

    13. Nature
      of Grant.
      In
      accepting the SAR, the Employee acknowledges that: (a) the grant of the SAR
      is
      voluntary and occasional and does not create any contractual or other right
      to
      receive future grants of SARs, or benefits in lieu of SARs even if SARs have
      been granted repeatedly in the past; (b) all decisions with respect to future
      awards of SARs, if any, will be at the sole discretion of the Company; (c)
      the
      Employee’s participation in the Plan is voluntary; (d) SARs are extraordinary
      items that do not constitute regular compensation for services rendered to the
      Company (or the employing Parent or Subsidiary), and that are outside the scope
      of the Employee’s employment contract, if any; (e) SARs are not part of normal
      or expected compensation or salary for any purposes, including, but not limited
      to, calculating any severance, resignation, redundancy or end of service
      payments, bonuses, long-service awards, pension or retirement or welfare
      benefits or similar payments and in no event should be considered as
      compensation for, or relating in any way to, past services for the Company
      (or
      the employing Parent or Subsidiary); (f) the future value of the underlying
      Shares is unknown and cannot be predicted with certainty; (g) in consideration
      of the award of SARs, no claim or entitlement to compensation or damages shall
      arise from termination of the SARs or any diminution in value of the SAR or
      Shares received when the SARs are exercised resulting from termination of
      employment by the Company (or the employing Parent or Subsidiary) (for any
      reason whatsoever and whether or not in breach of local labor laws), and the
      Employee irrevocably releases the Company and/or the employing Parent or
      Subsidiary from any such claim that may arise; if, notwithstanding the
      foregoing, any such claim is found by a court of competent jurisdiction to
      have
      arisen, then, by signing this Agreement, the Employee shall be deemed
      irrevocably to have waived his or her entitlement to pursue such claim; (h)
      in
      the event of involuntary termination of the Employee’s employment (whether or
      not in breach of local labor laws), the Employee’s right to vest in SARs under
      the Plan, if any, will terminate effective as of the date that the Employee
      is
      no longer actively employed and will not be extended by any notice period
      mandated under local law (e.g., active employment would not include a period
      of
“garden leave” or similar period pursuant to local law); the Administrator shall
      have the exclusive discretion to determine when the Employee is no longer
      actively employed for purposes of the SAR; (i) the Company is not providing
      any
      tax, legal or financial advice, nor is the Company making any recommendations
      regarding the Employee’s participation in the Plan, or the Employee’s
      acquisition or sale of the underlying Shares; and (j) the Employee is hereby
      advised to consult with his or her own personal tax, legal and financial
      advisors regarding the Employee’s participation in the Plan before taking any
      action related to the Plan.

     

    14. Data
      Privacy.
      The Employee hereby explicitly and unambiguously consents to the collection,
      use
      and transfer, in electronic or other form, of the Employee’s personal data as
      described in this Agreement by and among, as applicable, the Employee’s
      employer, the Company and any Parent or Subsidiary for the exclusive purpose
      of
      implementing, administering and managing the Employee’s participation in the
      Plan.

     

    The
      Employee understands that the Company, the Parent and the Subsidiary may hold
      certain personal information about the Employee, including, but not limited
      to,
      the Employee’s name, home address and telephone number, date of birth, social
      insurance number or other identification number, salary, nationality, job title,
      any shares of stock or directorships held in the Company or any Parent or
      Subsidiary, details of all SARs or any other entitlement to shares of stock
      awarded, canceled, exercised, vested, unvested or outstanding in the Employee’s
      favor, for the exclusive purpose of implementing, administering and managing
      the
      Plan (“Personal Data”). The Employee understands that Personal Data may be
      transferred to any third parties assisting in the implementation, administration
      and management of the Plan, that these recipients may be located in the
      Employee’s country, or elsewhere, and that the recipient’s country may have
      different data privacy laws and protections than the Employee’s country. The
      Employee understands that he or she may request a list with the names and
      addresses of any potential recipients of the Personal Data by contacting the
      Employee’s local human resources representative. The Employee authorizes the
      recipients to receive, possess, use, retain and transfer the Personal Data,
      in
      electronic or other form, for the purposes of implementing, administering and
      managing the Employee’s participation in the Plan, including any requisite
      transfer of such Personal Data as may be required to a broker or other third
      party with whom the Employee may elect to deposit any Shares received upon
      exercise of the SAR. The Employee understands that Personal Data will be held
      only as long as is necessary to implement, administer and manage the Employee’s
      participation in the Plan. The Employee understands that he or she may, at
      any
      time, view Personal Data, request additional information about the storage
      and
      processing of Personal Data, require any necessary amendments to Personal Data
      or refuse or withdraw the consents herein, without cost, by contacting in
      writing the Employee’s local human resources representative. The Employee
      understands that refusal or withdrawal of consent may affect the Employee’s
      ability to realize benefits from the SAR. For more information on the
      consequences of the Employee’s refusal to consent or withdrawal of consent, the
      Employee understands that he or she may contact his or her local human resources
      representative.

     

    15. 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 the 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. 

     

    16. SAR
      is
      Not Transferable.
      Except
      as otherwise expressly provided in paragraph 4 above, this SAR and the rights
      and privileges conferred hereby shall not be sold, transferred, pledged,
      assigned, hypothecated or disposed of 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 sell, transfer, pledge, assign, hypothecate
      or otherwise dispose of this SAR, or of any right or privilege conferred hereby,
      or upon any attempted sale under any execution, attachment or similar process,
      this SAR and the rights and privileges conferred hereby immediately shall become
      null and void.

     

    17. Restrictions
      on Sale of Securities.
      Subject
      to the provisions of paragraph 9 above, the Shares issued upon exercise of
      this
      SAR will be registered under the U.S. federal securities laws and will be freely
      tradable upon receipt. However, your subsequent sale of the Shares will be
      subject to any market blackout-period that may be imposed by the Company and
      must comply with the Company’s insider trading policies, and any other
      applicable securities laws.

     

    18. Binding
      Agreement.
      Subject
      to the limitation on the transferability of this SAR 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 to the
      extent permissible under local law.

     

    19. Plan
      Governs.
      This
      Agreement is subject to all of the 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.
      Capitalized terms and phrases used and not defined in this Agreement shall
      have
      the meaning set forth in the Plan. 

     

    20. Administrator
      Authority.
      The
      Administrator shall have all discretion, power, and authority 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
      (including, but not limited to, the determination of whether or not any SARs
      have vested). All actions taken and all interpretations and determinations
      made
      by the Administrator in good faith will be final and binding upon the Employee,
      the Company and all other interested persons, and will be given the maximum
      deference permitted by law. No member of the Administrator shall be personally
      liable for any action, determination or interpretation made in good faith with
      respect to the Plan or this Agreement.

     

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

     

    22. 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.

     

    23. 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 executing this
      Agreement in reliance on any promises, representations, or inducements other
      than those contained herein. Except as otherwise provided herein, modifications
      to this Agreement can be made only in an express written contract executed
      by a
      duly authorized officer of the Company.

     

    24. Amendment,
      Suspension, or Termination of the Plan.
      By
      accepting this SAR, the Employee expressly warrants that he or she has received
      a SAR 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.

     

    25. Section
      409A.
      Under
      Section 409A of the Internal Revenue Code of 1986, as amended, a SAR that vests
      after December 31, 2004, that was granted with a per share Grant Price that
      is
      determined by the Internal Revenue Service (the “IRS”) to be less than the fair
      market value of a share of common stock on the date of grant (a “discount SAR”)
      may be considered “deferred compensation.” A SAR that is a “discount SAR” may
      result in, if the Employee is subject to tax in the United States, (i) income
      recognition by the Employee prior to the exercise of the SAR, (ii) an additional
      twenty percent (20%) tax, and (iii) potential penalty and interest charges.
      The
      Employee acknowledges that the Company cannot and has not guaranteed that the
      IRS will agree that the per Share Grant Price of this SAR equals or exceeds
      the
      Fair Market Value of a Share on the date of grant in a later examination. The
      Employee agrees that if the IRS determines that this SAR was granted with a
      per
      Share Grant Price that was less than the Fair Market Value of a Share on the
      date of grant, the Employee (if subject to tax in the United States) will be
      solely responsible for the Employee’s taxes and other costs related to such a
      determination.

     

    26. Notice
      of 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.

     

    27. Electronic
      Delivery.
      The
      Company may, in its sole discretion, decide to deliver any documents related
      to
      the SAR granted under, and participation in, the Plan or future Awards that
      may
      be granted under the Plan by electronic means or to request the Employee’s
      consent to participate in the Plan by electronic means. The Employee hereby
      consents to receive such documents by electronic delivery and, if requested,
      to
      agree to participate in the Plan through an on-line or electronic system
      established and maintained by the Company or another third party designated
      by
      the Company.

     

    28. Language.
      If the
      Employee has received this Agreement, including Appendices (if any), or any
      other document related to the Plan translated into a language other than
      English, and if the translated version is different than the English version,
      the English version will control.Ehxibit 10.2(h) ECHELON CORPORATION PERFORMANCE SHARE AGREEMENT

    

      Exhibit
        10.2(h)

      ECHELON
        CORPORATION

       

      Performance
        Share Agreement

       

       

      TERMS
        AND CONDITIONS OF PERFORMANCE SHARES

       

      By
        executing the Grant Acceptance process and using the services on this Smith
        Barney Benefit Access® website, you the Employee and Echelon Corporation (the
“Company”) agree that this Award is granted under and governed by the terms and
        conditions of the Company’s 1997 Stock Plan (“ Plan”) and the Terms and
        Conditions of Performance Shares (the “Agreement”), which may be amended or
        modified from time to time. Employee has reviewed the Plan and this Agreement
        in
        its entirety, has had an opportunity to obtain the advice of counsel prior
        to
        accepting this Award and fully understands provisions of the Plan and this
        Agreement. Employee hereby agrees to accept as binding, conclusive and final
        all
        decisions or interpretations of the Administrator upon any questions relating
        to
        the Plan and this Agreement. Employee further agrees to promptly notify the
        Company upon any change in the Employee’s residence address.

       

       

      ____________________

       

       

      The
        Company hereby grants the employee, an award of Performance Shares under
        the
        Plan. This Award is subject to the provisions of the Agreement and of the
        Plan.

       

      1. Grant.
        The
        Company hereby grants to the Employee under the 1997 Plan Performance Shares,
        subject to all of the terms and conditions in this Agreement and the Plan.
        When
        the Performance Shares are paid to the Employee, par value will be deemed
        paid
        by the Employee for each Performance Share by past services rendered by the
        Employee, and will be subject to the appropriate tax withholdings.

       

      2. Company’s
        Obligation to Pay.
        Each
        Performance Share has a value equal to the Fair Market Value of a Share on
        the
        date of grant. Unless and until the Performance Shares have vested in the
        manner
        set forth in paragraphs 3 or 4, the Employee will have no right to payment
        of such Performance Shares. Prior to actual payment of any vested Performance
        Shares, such Performance Shares will represent an unsecured obligation.

       

      3. Vesting
        Schedule/Period of Restriction.
        Except
        as otherwise provided in paragraph 4 of
        this
        Agreement, the Performance Shares awarded by this Agreement shall vest in
        accordance with the vesting schedule set forth in the Exhibit A, subject
        to the
        Employee’s continuing to be a Service Provider on each relevant vesting date.
        Notwithstanding anything in this paragraph 3 to the contrary, and except
        as
        otherwise provided by the Administrator, vesting of the Performance Shares
        shall
        be suspended during any unpaid leave of absence other than military leave
        and
        will resume on the date the Employee returns to work on a regular schedule
        as
        determined by the Company; provided, however, that no vesting credit will
        be
        awarded for the time vesting has been suspended during such leave of
        absence.

       

      4. Administrator
        Discretion.
        The
        Administrator, in its discretion, may accelerate the vesting of the balance,
        or
        some lesser portion of the balance, of the Performance Shares at any time,
        subject to the terms of the Plan. If so accelerated, such Performance Shares
        will be considered as having vested as of the date specified by the
        Administrator. 

       

      5. Payment
        after Vesting.
        Any
        Performance Shares that vest in accordance with paragraph 3 or 4 will be
        paid to
        the Employee (or in the event of the Employee’s death, to his or her estate) in
        Shares which have an aggregate Fair Market Value equal to the value of the
        earned Performance Shares at vesting as soon as practicable following the
        date
        of vesting, subject to paragraph 8. 

       

      6. Forfeiture.
        Notwithstanding any contrary provision of this Agreement, the balance of
        the
        Performance Shares that have not vested pursuant to paragraphs 3 or 4 at
        the
        time of the Employee’s termination as a Service Provider for any or no reason
        will be forfeited and automatically transferred to and reacquired by the
        Company
        at no cost to the Company. The Employee shall not be entitled to a refund
        of the
        price paid for the Performance Shares forfeited to the Company pursuant to
        this
        paragraph 6. 

       

      7. Death
        of Employee.
        Any
        distribution or delivery to be made to the Employee under this Agreement
        will,
        if the Employee is then deceased, be made to the administrator or executor
        of
        the Employee’s estate. Any such administrator or executor must furnish the
        Company with (a) written notice of his or her status as transferee, and (b)
        evidence satisfactory to the Company to establish the validity of the transfer
        and compliance with any laws or regulations pertaining to said
        transfer.

       

      8. Withholding
        of Taxes.
        When
        the Shares are issued as payment for vested Performance Shares, the Employee
        will recognize immediate U.S. taxable income if the Employee is a U.S. taxpayer.
        If the Employee is a non-U.S. taxpayer, the Employee will be subject to
        applicable taxes in his or her jurisdiction. The Company will withhold a
        portion
        of the vested Performance Shares 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. No fractional Shares
        will be withheld or issued pursuant to the grant of Performance Shares and
        the
        issuance of Shares thereunder; any additional withholding necessary for this
        reason will be done by the Company through the Employee’s paycheck. The Company,
        in its discretion, may, and with respect to its executive officers (as
        determined by the Company) will, withhold an amount equal to two (2) times
        the
        fair market value of a Share from the last paycheck due to the Employee prior
        to
        the vesting of the Performance Shares. 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 payment will be made to the Employee (or
        his
        or her estate) for Performance Shares 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 such Performance Shares. By accepting
        this Award, the Employee expressly consents to the withholding of Shares
        and to
        any additional cash withholding as provided for in this
        paragraph 8.

       

      9. Rights
        as Stockholder.
        Neither
        the Employee nor any person claiming under or through the Employee will have
        any
        of the rights or privileges of a stockholder of the Company in respect of
        any
        Shares deliverable hereunder unless and until certificates representing such
        Shares (which may be in book entry form) will have been issued, recorded
        on the
        records of the Company or its transfer agents or registrars, and delivered
        to
        the Employee (including through electronic delivery to a brokerage account).
        After such issuance, recordation and delivery, the Employee will have all
        the
        rights of a stockholder of the Company with respect to voting such Shares
        and
        receipt of dividends and distributions on such Shares. 

       

      10. No
        Effect on Employment.
        Subject
        to any employment contract with the Employee, the terms of such employment
        will
        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 employing
        the
        Employee, as the case may be, will 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. The transactions
        contemplated hereunder and the vesting schedule set forth in the Summary
        of
        Grant do not constitute an express or implied promise of continued employment
        for any period of time. 

       

      11. Address
        for Notices.
        Any
        notice to be given to the Company under the terms of this Agreement will
        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.

       

      12. Grant
        is Not Transferable.
        Except
        to the limited extent provided in paragraph 7 above, this grant of Performance
        Shares and the rights and privileges conferred hereby will not be sold, pledged,
        assigned, hypothecated, transferred or disposed of any way (whether by operation
        of law or otherwise) and will not be subject to sale under execution, attachment
        or similar process, until you have been issued the Shares. Upon any attempt
        to
        sell, pledge, assign, hypothecate, transfer or otherwise dispose of this
        grant,
        or any right or privilege conferred hereby, or upon any attempted sale under
        any
        execution, attachment or similar process, this grant and the rights and
        privileges conferred hereby immediately will become null and void. 

       

      13. Restrictions
        on Sale of Securities.
        The
        Shares issued as payment for vested Performance Shares awarded under this
        Agreement will be registered under the federal securities laws and will be
        freely tradable upon receipt. However, your subsequent sale of the Shares
        will
        be subject to any market blackout-period that may be imposed by the Company
        and
        must comply with the Company’s insider trading policies, and any other
        applicable securities laws.

       

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

       

      15. Additional
        Conditions to Issuance of Certificates for Shares.
        The
        Company shall not be required to issue any certificate or certificates for
        Shares hereunder prior to fulfillment of all the following conditions:
        (a) the admission of such Shares to listing on all stock exchanges on which
        such class of stock is then listed; (b) the completion of any registration
        or other qualification of such Shares under any state or federal law or under
        the rulings or regulations of the Securities and Exchange Commission or any
        other governmental regulatory body, which the Administrator shall, in its
        absolute discretion, deem necessary or advisable; (c) the obtaining of any
        approval or other clearance from any state or federal governmental agency,
        which
        the Administrator shall, in its absolute discretion, determine to be necessary
        or advisable; and (d) the lapse of such reasonable period of time following
        the date of vesting of the Performance Shares as the Administrator may establish
        from time to time for reasons of administrative convenience.

       

      16. 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 will govern. Capitalized
        terms used and not defined in this Agreement will have the meaning set forth
        in
        the Plan.

       

      17. Administrator
        Authority.
        The
        Administrator will 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
        (including, but not limited to, the determination of whether or not any
        Performance Shares have vested). All actions taken and all interpretations
        and
        determinations made by the Administrator in good faith will be final and
        binding
        upon the Employee, the Company and all other interested persons. No member
        of
        the Administrator will 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 will be held invalid or
        unenforceable, such provision will be severable from, and such invalidity
        or
        unenforceability will 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 or Termination of the Plan.
        By
        accepting this Award, the Employee expressly warrants that he or she has
        received a right 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. Notice
        of Governing Law.
        This
        grant of Performance Shares 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
        A

       

      

       

      Vesting
        of this Award is subject to specific performance requirements of the Company.
        The performance requirement is such that within three years from the date
        of
        grant, the Company must have achieved (calculated as of the date of announcement
        of its quarterly earnings) at least two (2) consecutive quarters of
        profitability, calculated on a non-GAPP basis excluding equity compensation
        or
        any other extraordinary expense, as reasonably determined by the Compensation
        Committee of the Board of Directors. If the performance criterion is not
        met
        during that three year period, then the Performance Shares will not vest
        and
        shall be returned to the Plan. If all or substantially all of the stock or
        assets of the Company are acquired, then the performance requirement will
        automatically be eliminated and the Performance Shares shall vest.

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