International Distributor Agreement

EXHIBIT 10.8





INTERNATIONAL DISTRIBUTOR AGREEMENT





ECHELON CORPORATION





EBV ELEKTRONIK GMBH



AS OF DECEMBER 1, 1997



-i-

INTERNATIONAL DISTRIBUTOR AGREEMENT

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THIS AGREEMENT (the "Agreement") is entered into effective as of December 1, 1997 (the "Effective Date"), between Echelon Corporation ("Echelon"), a Delaware corporation with principal offices at 4015 Miranda Avenue, Palo Alto, California 94304, and EBV Elektronik GmbH ("Distributor"), a corporation organized under the laws of Germany, with principal offices at Ammerthalstr. 28, D-85551 Kirchheim, Germany.



WHEREAS, Echelon has developed and distributes products for intelligent distributed control systems;



WHEREAS, Echelon wishes to appoint Distributor to distribute Echelon's products on a non-exclusive basis in the Territory (as hereinafter defined); and



WHEREAS, Distributor is willing to accept such appointment.



NOW, THEREFORE, the parties hereto agree as follows:



1. DEFINITIONS

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(a) "Products" shall mean those hardware and/or software products and

services for which Distributor will serve as a non-exclusive

distributor or sales representative, as applicable, hereunder, which

are identified in Exhibit A hereto, as it may be amended from time to

time pursuant to Section 9 below.



(b) "Development Products" shall mean those Products identified in Exhibit

A as such.



(c) "OEM Products" shall mean those Products identified in Exhibit A as



(d) "Software Products" shall mean those Products identified in Exhibit A

as such.



(e) "Territory" shall mean the territory set forth in Exhibit B.



(f) "Development License Agreement" shall mean Echelon's standard

LonWorks(R) Development License Agreement and "OEM License Agreement"

shall mean Echelon's standard LonWorks OEM License Agreement.



(g) "Software" shall mean any Software Product that is listed in Exhibit A

and any software that is included in or with a Product that is listed

in Exhibit A. All references to the Products herein include reference

to the Software.



(h) "Software Copy" shall mean an object code copy of any of the Software,

together with a copy of any user manual or other documentation

customarily supplied with the Software Copy to end users by Echelon.

(i) Registered Customer" shall mean a customer of Distributor that has

been registered by Distributor with Echelon pursuant to Echelon's

standard customer registration policies and procedures. Such

registration policies and procedures (and a list of customers not

currently eligible for registration) are set forth in Exhibit A.

Echelon may amend the registration policies and procedures set forth

in Exhibit A from time to time in its sole discretion, including

eliminating the registration program. Any such change shall be

effective upon notice to Distributor.



(j) "Regular Product(s)" shall mean those products identified as such in

Exhibit H, as such list of products is amended by Echelon from time to

time in its sole discretion.



(k) "Target Inventory Level" shall mean the quantity set forth in Exhibit

H for each Regular Product, as such exhibit is amended by the parties

from time to time.



(l) "Volume Product(s)" shall mean those products identified as such in

Exhibit H, as such list of products is amended by Echelon from time to

time in its sole discretion.



(m) All references in this Agreement to the "sale" of or "selling"

Software or Software Copies shall mean the sale of a license to use

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such Software or Software Copies. All references in this Agreement to

the "purchase" of Software or Software Copies shall mean the purchase

of a license to use such Software or Software Copy.

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2. DUTIES OF DISTRIBUTOR

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(a) Activities of Distributor. Subject to the terms and conditions

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herein, Echelon hereby appoints and retains Distributor to solicit

sales of and distribute the Products identified with a "Distributor

Price" on Exhibit A hereto in the Territory on a non-exclusive basis.

As a distributor of the Products, Distributor shall have the right to

market and distribute Products solely to end user customers and not to

any party for subdistribution. Echelon further appoints Distributor as

a non-exclusive sales representative for the Products identified with

a "Sales Representative Commission" on Exhibit A hereto in the

Territory. As a sales representative of the Products, Distributor

shall have the non-exclusive right to solicit orders from end user

customers for sale and shipment by Echelon subject to the procedures

set forth in Exhibit A.



(b) Direct Activities by Echelon. Nothing herein shall prevent Echelon

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from marketing and distributing the Products directly to end user

customers or to other distributors in the Territory.



(c) Independent Contractors. The relationship of Distributor and Echelon

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established by this Agreement is that of independent contractors, and

nothing contained in this Agreement shall be construed to (i) give

either party the

power to direct and control the day-to-day activities of the other,

(ii) constitute the parties as partners, joint venturers, principal

and agent, employer and employee, co-owners, franchisor and franchisee

or otherwise as participants in a joint undertaking, or (iii) allow

Distributor to create or assume any obligation on behalf of Echelon

for any purpose whatsoever. All financial and other obligations

associated with Distributor's business are the sole responsibility of

Distributor. Distributor shall be solely responsible for, and shall

indemnify and hold Echelon free and harmless from, any and all claims,

damages or lawsuits (including Echelon's attorneys' fees) arising out

of the acts of Distributor, its employees or its agents.



3. REMUNERATION.

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Distributor's sole remuneration with respect to the distribution of

Products hereunder shall be (i) the difference between Distributor's price

from Echelon and Distributor's price to its customers and (ii) any

commissions, sales credits, or bonus payable pursuant to Sections 8 (g), 8

(h), or 8(i), below.



4. LICENSE AGREEMENTS

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Distributor acknowledges and agrees that certain Products may only be

distributed pursuant to signed license agreements, as indicated by the

Licensing Requirements set forth in Exhibit A. Distributor shall only

distribute such Products to customers who have entered into all required

license agreements with Echelon.



5. FORECASTS AND ORDERS OF PRODUCTS

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(a) Forecasts. On a quarterly basis, Distributor shall provide Echelon

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with a one-year sales forecast setting forth its estimated monthly

requirements for shipment of Products by Echelon's model number for

the upcoming twelve (12) month period. The first such forecast shall

be furnished to Echelon upon execution of this Agreement in the form

of the Initial Order as defined in Section 5 (b) (ii), below, and each

subsequent forecast shall be furnished not later than the fifteenth

day of the month preceding the end of each calendar quarter. The

forecasts are non-binding and will be used by Echelon only for

planning purposes. Upon thirty (30) days' advance written notice to

Distributor, Echelon shall have the right in its sole discretion to

require monthly updates to the forecasts.



(b) Orders and Acceptance.

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i) Distributor shall initiate purchases under this Agreement by

submitting written or facsimile purchase orders to Echelon. All

purchase orders shall contain the following: (a) model numbers of

Products, (b) quantity of Products to be purchased, (c) shipping

point (Echelon's manufacturing facility or Echelon's European

shipping point) and special shipping instructions, if any, (d)

requested delivery schedule, which shall be within the next

succeeding six (6) months, and which

shall conform to the minimum lead times for such Products as set

forth in Exhibit A", (e) destination, (f) billing address if

different from address listed above and (g) the net price for the

Products, which shall conform to the minimum aggregate invoice

value set forth on Exhibit A. No purchase order shall be binding

upon Echelon until accepted by Echelon in writing. Echelon shall

use reasonable commercial efforts to notify Distributor of the

acceptance or rejection of a purchase order within fifteen (15)

days of receipt of the purchase order.



ii) As a material inducement for Echelon to enter into this

Agreement, Distributor has agreed to provide Echelon with the

initial order attached to this Agreement as Exhibit I (the

"Initial Order"). Echelon's acknowledgment thereof is attached to

this Agreement as Exhibit J. Echelon agrees that, notwithstanding

the requirements of Section 5 (b) (i), above, such Initial Order

sets forth delivery dates within the next succeeding twelve (12)

months. For each Regular Product the requested scheduled delivery

dates are December 15, 1997; March 15, 1998; June 15, 1998;

September 15, 1998 and November 15, 1998. Such dates will be

adjusted as set forth in Section 5 (b) (iii), below. For each

Volume Product there is one (1) requested scheduled delivery date

per month.



iii) With respect to each Regular Product, Distributor shall place one

order per calendar month by the tenth (10th) working day thereof

with a requested delivery date within such month. The quantity of

each Regular Product set forth on such order shall be determined

by subtracting Distributor's ending inventory for such Regular

Product as of the last day of the preceding month (including any

Products in transit from Echelon to Distributor) from the then

current Target Inventory Level for such Regular Product. During

the first twelve (12) months of this Agreement, or, if earlier,

until delivery of all units of such Regular Product scheduled for

delivery under the Initial Order, Distributor shall effect such

order by requesting a delivery date in the current month for a

portion of the Regular Product ordered on the Initial Order and

scheduled for delivery in a subsequent month. Thereafter,

Distributor shall place a new order each month for the quantity

of Regular Product determined hereunder. The parties will meet

once each calendar quarter to negotiate the following provisions

of Exhibit H, establishing the Target Inventory Levels for

Regular Products added to Exhibit A pursuant to Section 9 (a),

adjusting Target Inventory Levels for Regular Products deleted

from Exhibit A pursuant to Section 9 (b), or increasing or

decreasing the Target Inventory Level for any Regular Product

based upon current sales levels for such Regular Product.



iv) With respect to the Initial Order for each Volume Product,

Distributor may follow the procedure set forth in Section 5 (c)

to request modification of any scheduled delivery date.

Commencing in June

1998, Distributor shall place one order per month for that

quantity of each Volume Product requested for delivery six (6)

months thereafter, thereby maintaining an order backlog of six

(6) months for each Volume Product.



(c) Cancellation, Delay or Reduction of Orders.

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i) Distributor may not cancel, delay or reduce the quantity of Product(s)

on that portion of an order with a scheduled delivery date in the

period within and including sixty (60) days of the then current date

without Echelon's prior written approval granted in each instance in

Echelon's sole discretion, and subject to a fifteen percent (15%)

cancellation charge. Distributor will have no rights in partially

completed goods from canceled orders.



ii) One time with respect to each order, Distributor may cancel, delay or

reduce the quantity of Product(s) on that portion of an order that has

a scheduled delivery date in the period beyond sixty (60) days of the

then current date subject to the following provisions: (i) the

combined effect of such cancellation or reduction shall not reduce the

total quantity of each Product to be delivered on all scheduled

delivery dates in such period by more than forty percent (40%); (ii)

no scheduled delivery date may be delayed by more than three (3)

months; (iii) no scheduled delivery date with respect to the Initial

Order maybe delayed beyond November 30, 1998; (iv) with respect to

cancellation under the Initial Order, Distributor must order other

Products for delivery prior to November 30, 1998 to ensure that the

total dollar value of all shipments thereunder is no less than the

amount set forth on Schedule I; and (v) the remaining orders shall

continue to be subject to the minimum aggregate invoice value set

forth on Exhibit A. For purposes of this Section 5 (c), each scheduled

delivery under the Initial Order shall be deemed to be an individual

order. Notwithstanding the provisions of this Section 5 (c),

Distributor may not cancel, delay or reduce the quantity of any order

if the effect would be for Distributor's inventory level to fall below

the Target Inventory Level for any Regular Product.



iii) If under this Section 5 (c) Distributor is permitted a delay in

delivery, and if Echelon has, prior to Distributor's request therefor,

notified Distributor of Distributor Price changes that are effective

at the time of the new delivery date, then Echelon's price to

Distributor on Products for which delivery was delayed and any

penalties due to Echelon hereunder shall be based upon Echelon's new

Distributor Price. 6. SHIPPING AND RETURN

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(a) Delivery. Echelon shall use reasonable commercial efforts to deliver

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Products on the specified delivery date. Products shall be packaged in

anti-static material, as appropriate.



(b) Shipping. All Products delivered pursuant to this Agreement shall be

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marked for shipment to Distributor's facility at the address set forth

above or specified in Distributor's written purchase order, and

delivered to a carrier or forwarding agent chosen by Distributor and

approved by Echelon in its sole discretion; provided, that Echelon may

designate the carrier in the event Distributor fails to designate a

carrier or Echelon does not approve Distributor's selection; provided,

further, that if Distributor requests delivery from Echelon's European

shipping point, then Distributor agrees that Echelon shall have the

sole right to select the freight carrier and method of transportation.

Shipments shall be F.O.B. Echelon's manufacturing facility (currently

at the address set forth above), or Echelon's European shipping point,

as requested by Distributor, at which time risk of loss and, except as

provided in Section 7 below, title shall pass to Distributor. All

freight, insurance, duty and other shipping expenses, as well as any

special packing expenses, shall be borne by Distributor. Each

Distributor shipment shall have an individual packing list.



(c) Security Interest. Until the purchase price and all other charges

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payable to Echelon hereunder have been received in full, Echelon

hereby retains and Distributor hereby grants to Echelon a security

interest in the Products delivered to Distributor and any proceeds

therefrom. Distributor agrees to promptly execute all documents

reasonably requested by Echelon to perfect and protect such security

interest. In the event Distributor fails promptly to execute such

documents, Distributor hereby appoints Echelon its attorney-in-fact

for the sole purpose of executing such documents, which appointment

shall be a power coupled with an interest and shall be irrevocable.



(d) Return.

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i) With respect to Products shipped to Distributor (as opposed to

Products shipped directly to Distributor's customers),

Distributor shall inspect all such Products for visable defects

upon receipt thereof, and Distributor may reject any item that

fails substantially to conform to the then current Product

specifications. To reject a Product, Distributor shall within

five (5) working days of receipt of such Product notify Echelon

in writing or by facsimile of its rejection and request a Return

Material Authorization ("RMA") number. Within ten (10) working

days of receipt of the RMA number, Distributor shall return the

rejected Product, freight prepaid and properly insured, in its

original shipping carton with the RMA number displayed on the

outside of the carton.

ii) If Echelon confirms the defect, Echelon shall, at Echelon's

option and expense, either repair or replace the Product. Echelon

shall reimburse Distributor for the shipping charges to return

properly rejected Products and shall pay the shipping charges for

the delivery of such repaired or replacement Products to

Distributor; otherwise, Distributor shall be responsible for all

shipping charges.



(e) Stock Rotation. Distributor shall be entitled to rotate its stock of

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OEM Products according to the policies and procedures set forth in

Exhibit A. Echelon may amend the stock rotation policies and

procedures set forth in Exhibit A from time to time in its sole

discretion, including eliminating the stock rotation program. Any such

change shall be effective upon notice to Distributor.



7. SOFTWARE

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(a) Notwithstanding anything to the contrary contained herein, title to

all Software shall remain with Echelon. Distributor shall have a

nonexclusive license to distribute Software Copies; provided, that

such Software Copies are delivered to customers in unopened packages

in good condition and at the same time as associated hardware

Products, if any.



(b) Distributor shall have no right to copy the Software or to reverse

engineer, disassemble, decompile or otherwise attempt to derive the

source code from the Software, except to the extent that such

activities may not be prohibited under local law. With respect to any

Software Copies to be used for demonstration purposes, in addition to

the requirements set forth in Sections 8 (b) and 17 (b) below,

Distributor agrees to the terms of the (i) Software License Agreement

accompanying the Software Copies, for Software identified with a Note

2, 3 or 4 Licensing Requirement in Exhibit A, and (ii) the Software

License Agreement set forth in Exhibit G hereto, for Software

identified with a Note 5 Licensing Requirement in Exhibit A.

Distributor shall not remove, alter, cover or obfuscate any copyright

notices or other proprietary rights notices placed or embedded by

Echelon on or in the Software.



8. PRICING AND PAYMENT

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(a) Pricing. Echelon shall provide Distributor with Echelon's Suggested

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International List Prices for the Products, as such prices are updated

from time to time. The Distributor Prices for the Products are set

forth in Exhibit A and may only be revised as set forth in SECTIONS 8

(C) AND 8 (D) BELOW. DISTRIBUTOR ACKNOWLEDGES THAT ECHELON SHALL

PUBLISH AND DISTRIBUTE FROM TIME TO TIME ITS PRICE LISTS TO ITS



(b) Demonstration Products. Distributor may purchase reasonable

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quantities of Development Products or OEM Products (other than those

Products identified in Exhibit A as "not available for

demonstration"), to be used solely for demonstration purposes, at the

demonstration products discount set forth in

Exhibit A off the Distributor Price set forth in Exhibit A. Upon

request, Echelon may, in it sole determination of Distributor's

demonstration capabilities, provide Distributor at no charge with one

(1) copy of any Software Product (other than those Software Products

identified in Exhibit A as "not available for demonstration"), to be

used solely for demonstration purposes. Distributor certifies that

Products purchased or provided on this basis ("Demonstration

Products") shall be used exclusively for demonstration and/or

troubleshooting purposes and shall in no event be resold by

Distributor. Distributor shall have the right to use and lend

Demonstration Products pursuant to Section 17 (b) below.



(c) Price Increase. Echelon has the right at any time to increase the

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Distributor Price of any Product upon thirty (30) days advance written

notice to Distributor. Such increases shall apply to all purchase

orders received after the effective date of the increase. Distributor

may order any quantity of Products within such thirty-day period at

the pre-revised price or discount; provided that Distributor requests

delivery to occur no later than fifteen (15) days after the effective

date of the price increase and pays for any invoices associated with

such order pursuant to the terms set forth in Section 8 (f) below.



(d) Price Decrease and Credit. In the event Echelon decreases the

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Distributor Price of a Product, Echelon shall notify Distributor in

writing of such decrease, and such decrease shall apply to Distributor

immediately on all unshipped Products. In addition, Distributor shall

be entitled to price protection on its inventory of OEM Products

according to Echelon's policies and procedures set forth in Exhibit A.

Echelon may amend the price protection policies and procedures set

forth in Exhibit A from time to time in its sole discretion, including

eliminating the price protection program. Any such change shall be

effective upon notice to Distributor.



(e) Taxes. All prices described herein are exclusive of any excise, sales,

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use, value added (VAT), withholding and similar taxes. Distributor

shall be liable for a ...