Document:

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                                                                    EXHIBIT 10.5

                                ENERNETICS, INC.

                       RESTRICTED STOCK PURCHASE AGREEMENT

       THIS AGREEMENT is made this 8th day of January, 1998, between EnerNetics,
Inc., a California corporation (the "Company"), and John Woolard (the
"Purchaser").

       WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to continue as
an employee of the Company, the Company is willing to sell to the Purchaser and
the Purchaser desires to purchase shares of Common Stock according to the terms
and conditions contained herein.

       THEREFORE, the parties agree as follows:

       1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase an aggregate of 1,666,667 shares of the
Company's Common Stock (the "Shares"), at the price of $ 0.003 per share for an
aggregate purchase price of $5,000.00.

       2. Payment of Purchase Price. The purchase price for the Shares shall be
paid by the delivery to the Company at the time of execution of this Agreement
of a check payable to the Company and the assignment to the Company of the
property described on Exhibit A, having a combined value of $5,000.00.

       3. Repurchase Option.

              (a) In the event of any voluntary or involuntary termination of
the Purchaser's employment by or services to the Company for any or no reason
(including death or disability) before all of the Shares are released from the
Company's repurchase option (see Section 4), the Company shall, upon the date of
such termination (as reasonably fixed and determined by the Company) have an
irrevocable, exclusive option for a period of ninety (90) days from such date to
repurchase all (but not less than all) of the Unreleased Shares (as defined in
Section 4) at such time at $ 0.003 per share (the "Repurchase Price"). Said
option shall be exercised by the Company by written notice to the Purchaser or
the Purchaser's executor (with a copy to the Escrow Holder) and, at the
Company's option, (i) by delivery to the Purchaser or the Purchaser's executor
with such notice of a check in the amount of the Repurchase Price for the Shares
being repurchased, or (ii) by cancellation by the Company of an amount of the
Purchaser's indebtedness to the Company equal to the Repurchase Price for the
Shares being repurchased, or (iii) by a combination of (i) and (ii) so that the
combined payment and cancellation of indebtedness equals such Repurchase Price.
Upon delivery of such notice and the payment of the Repurchase Price in any of
the ways described above, the Company shall become the legal and beneficial
owner of the Shares being repurchased and all 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 Shares being repurchased by the Company.

              (b) Whenever the Company shall have the right to repurchase 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 purchase
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rights under this Agreement and purchase all or a part of such Shares; provided
that if the fair market value of the Shares to be repurchased on the date of
such designation or assignment (the "Repurchase FMV") exceeds the Repurchase
Price of the Shares to be repurchased, then each such designee or assignee shall
pay the Company cash equal to the difference between the Repurchase FMV and the
Repurchase Price of the Shares which such designee or assignee shall have the
right to repurchase.

       4. Release of Shares From Repurchase Option.

              (a) One thirty-sixth (1/36) of the Shares shall be released from
the Company's repurchase option on January 31, 1998, and one thirty-sixth (1/36)
of the Shares shall be released from the Company's repurchase option on the last
day of each full calendar month thereafter, provided in each case that the
Purchaser's employment by or services to the Company have not been terminated
prior to the date of any such release.

              (b) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."

              (c) The Shares which have been released from the Company's
repurchase option shall be delivered to the Purchaser at the Purchaser's request
(see Section 6).

              (d) Notwithstanding anything set forth in this Section 4, all of
the Shares shall be released from the Company's repurchase option described in
Section 3 above upon the firmly underwritten initial public offering of the
Company's Common Stock, the merger or reorganization of the Company with or into
another corporation, entity or person or the sale of all of or substantially all
of the Company's assets to another corporation, entity or person, provided that
no release of Shares from the Company's repurchase option shall occur pursuant
to this Section 4(d) if immediately after such merger, reorganization or sale of
assets, at least 51% of the capital stock or equity interests in such other
corporation, entity or person are owned by persons who owned in the aggregate at
least 51% of the capital stock of the Company immediately before such merger,
reorganization or sale of assets.

       5. Restriction on Transfer. Except for the escrow described in Section 6
or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's repurchase option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.

       6. Escrow of Shares.

              (a) The Shares issued under this Agreement shall be held by an
escrow holder designated by the Company (the "Escrow Holder"), along with a
stock assignment executed by the Purchaser in blank, until the expiration of the
Company's option to repurchase such Shares as set forth above.

              (b) The Escrow Holder is hereby directed to permit transfer of the
Shares only in accordance with this Agreement or instructions signed by both
parties. In the event further

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instructions are desired by the Escrow Holder, the Escrow Holder shall be
entitled to rely upon directions executed by a majority of the authorized number
of the Company's Board of Directors. The Escrow Holder shall have no liability
for any act or omission hereunder while acting in good faith in the exercise of
the Escrow Holder's own judgment.

              (c) If the Company or any assignee exercises its repurchase option
hereunder, the Escrow Holder, upon receipt of written notice of such option
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.

              (d) When the repurchase option has been exercised or expires
unexercised or a portion of the Shares has been released from such repurchase
option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Purchaser.

              (e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's repurchase option.

       7. Investment Representations; Restrictions on Transfer.

              (a) In connection with the purchase of the Shares, the Purchaser
represents to the Company the following:

                     (i)The Purchaser is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the Shares.
The Purchaser is purchasing these Shares for investment for the Purchaser's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").

                     (ii) The Purchaser acknowledges and understands that the
Shares constitute "restricted securities" under the Securities Act and must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. The Purchaser further
acknowledges and understands that the Company is under no obligation to register
the Shares. The Purchaser understands that the certificate evidencing the Shares
will be imprinted with a legend which prohibits the transfer of the Shares
unless they are registered or such registration is not required in the opinion
of counsel satisfactory to the Company.

                     (iii) The Purchaser is familiar with the provisions of Rule
701 and Rule 144, each promulgated under the Securities Act, which, in
substance, permit limited public resale of

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"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of issuance of the securities to the Purchaser, such issuance will be
exempt from registration under the Securities Act. In the event the Company
later becomes subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, ninety (90) days thereafter the securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including among other things: (1) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, and the amount of
securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), if applicable. Notwithstanding this
paragraph 7(a)(iii), the Purchaser acknowledges and agrees to the restrictions
set forth in paragraph 7(b).

       In the event that the Company does not qualify under Rule 701 at the time
of issuance of the securities to the Purchaser, then the securities may be
resold in certain limited circumstances subject to the provisions of Rule 144,
which requires among other things: (1) the availability of certain public
information about the Company: (2) the resale occurring not less than one year
after the party has purchased, and made full payment for, within the meaning of
Rule 144, the securities to be sold; and (3) in the case of an affiliate, or of
a non-affiliate who has held the securities less than two years, the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.

              (b) The Purchaser agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by the Purchaser (other than
those shares included in the registration) without the prior written consent of
the Company or the underwriters managing such initial underwritten public
offering of the Company's securities for one hundred eighty (180) days from the
effective date of such registration, (2) further agrees to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering and (3) further agrees that the Company may impose stop transfer
instructions in order to enforce the foregoing covenants.

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

              (a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.

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              (b) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

       9. 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, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.

       10. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. The Purchaser understands that the Purchaser
(and not the Company) shall be responsible for the Purchaser's own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, (the "Code"), taxes as ordinary income both (i) the
difference between the fair market value of the Shares when the Company granted
the Purchaser the right to purchase the Shares and the fair market value of the
Shares on the date of this Agreement and (ii) the difference between the amount
paid for the Shares and the fair market value of the Shares as of the date any
restrictions on the Shares lapse. In this context, "restriction" includes the
right of the Company to buy back the Shares pursuant to its repurchase option.
In the event the Company has registered under the Exchange Act, "restriction"
with respect to officers, directors and 10% shareholders also means the period
after the purchase of the Shares during which such officers, directors and 10%
shareholders could be subject to suit under Section 16(b) of the Exchange Act.
The Purchaser understands that the Purchaser may elect to be taxed at the time
the Shares are purchased rather than when and as the Company's repurchase option
or 16(b) period expires by filing an election under Section 83(b) of the Code
with the I.R.S. within 30 days from the date of purchase.

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

       11. General Provisions.

              (a) This Agreement shall be governed by the laws of the State of
California. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Purchaser and may only be
modified or amended in writing signed by both parties.

              (b) Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage

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prepaid, and addressed to the parties at the addresses of the parties set forth
at the end of this Agreement or such other address as a party may request by
notifying the other in writing.

       Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.

              (c) The rights and benefits of the Company under this Agreement
shall be transferable to any one or more persons or entities, and all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
the Company's successors and assigns. The rights and obligations of the
Purchaser under this Agreement may only be assigned with the prior written
consent of the Company.

              (d) Either party's failure to enforce any provision or provisions
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.

              (e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.

              (f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE
OR CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD,
OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH
OR WITHOUT CAUSE.

              (g) SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT
HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100,
25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES
TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.

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       IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first set forth above.

ENERNETICS, INC.                                   PURCHASER
a California corporation

By:  /s/ DALE M. FONG                         /s/ JOHN WOOLARD
   --------------------------------         ------------------------------------
                                            John Woolard

Title:
      -----------------------------

1 Ross Road                                 ------------------------------------
Alameda, CA  94502                          (Address)

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                                CONSENT OF SPOUSE

       I, ____________________, spouse of John Woolard, have read and approve
the foregoing Agreement. In consideration of granting of the right to my spouse
to purchase 1,666,667 shares of Common Stock of EnerNetics, Inc., as set forth
in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect
to the exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the community property laws of the
State of California or similar laws relating to marital property in effect in
the state of our residence as of the date of the signing of the foregoing
Agreement.

Dated:  January __, 1998

                                        ----------------------------------------
                                        (signature)

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                      ASSIGNMENT SEPARATE FROM CERTIFICATE

       FOR VALUE RECEIVED I, John Woolard, hereby sell, assign and transfer unto
(__________) shares of the Common Stock of EnerNetics, Inc. standing in my name
on the books of said corporation represented by Certificate No. _____ herewith
and do hereby irrevocably constitute and appoint Wilson Sonsini Goodrich &
Rosati, attorney, 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 Stock
Purchase Agreement between EnerNetics, Inc. and the undersigned dated
______________, 19__.

Dated: _______________, 19

                                        ----------------------------------------
                                        Signature:

INSTRUCTION: 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" set forth in the Agreement without requiring additional signatures on
the part of the Purchaser.

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                          ELECTION UNDER SECTION 83(b)
                      OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
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:  1998

2.     The property with respect to which the election is made is described as
       follows: 1,666,667 shares (the "Shares") of the Common Stock of
       EnerNetics, Inc. (the "Company").

3.     The date on which the property was transferred is: January 8, 1998.

4.     The property is subject to the following restrictions:

       The Shares may be repurchased by the Company, or its assignee, on certain
       events. This right lapses with regard to a portion of the Shares over
       time.

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:

       $0.003 per share

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

       $0.003 per share

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:
      ---------------------------------               --------------------------
                                                               Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated:                                       Taxpayer:
      ---------------------------------               --------------------------
                                                          Spouse of Taxpayer

<PAGE>   11

                                    EXHIBIT A

                        PROPERTY ASSIGNED TO THE COMPANY

                PROPERTY                               FAIR MARKET VALUE
----------------------------------------     -----------------------------------<PAGE>   1
                                                                   EXHIBIT 10.11

                              SILICON ENERGY CORP.

                               RETENTION AGREEMENT

        This Retention Agreement (the "Agreement") is made and entered into
effective as of June 8, 2001 (the "Effective Date"), by and between John Preston
(the "Employee") and Silicon Energy Corp., a Delaware corporation (the
"Company"). Certain capitalized terms used in this Agreement are defined in
Section 1 below.

                                 R E C I T A L S

        A. The Board of Directors of the Company (the "Board") believes that it
is in the best interests of the Company and its stockholders to provide the
Employee with an incentive to continue his employment with the Company and to
motivate the Employee to maximize the value of the Company.

        B. The Board believes that it is imperative to provide Employee with
certain benefits upon termination of employment, which benefits are intended to
provide Employee with financial security and sufficient encouragement to remain
with the Company.

        C. The Board believes that it is in the best interests of the Company
and its stockholders to supersede the "Severance Provision" set forth in the
offer letter issued to the Employee on December 15, 2000 (the "Offer Letter").

        D. To accomplish the foregoing objectives, the Board has directed the
Company, upon execution of this Agreement by the Employee, to agree to the terms
provided herein.

                                    AGREEMENT

        In consideration of the mutual covenants herein contained and the
continued employment of Employee by the Company, the parties agree as follows:

        1. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:

            (a) Cause. "Cause" shall mean (i) any commission of an act of fraud,
dishonesty, misappropriation, embezzlement, or other willful or reckless
misconduct with respect to the business or property of the Company which is
intended to result in substantial personal enrichment of the Employee or causes
material harm to the Company, (ii) Employee's conviction of, or plea of guilty
or nolo contendere to, a felony, and (iii) Employee's willful and continued
failure to substantially perform his duties of employment after there has been
delivered to the Employee a written demand for performance from the Company
which describes the basis for the Company's belief that the Employee has not
substantially performed his duties.

<PAGE>   2

            (b) Change of Control. "Change of Control" shall mean the occurrence
of any of the following events:

                (i) the approval by stockholders of the Company of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;

                (ii) the approval by the stockholders of the Company of a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets;

                (iii) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becoming the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities; or

                (iv) a change in the composition of the Board, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are directors of the Company as
of the date hereof, or (B) are elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of those directors whose
election or nomination was not in connection with any transactions described in
subsections (i), (ii), or (iii) or in connection with an actual or threatened
proxy contest relating to the election of directors of the Company.

            (c) Involuntary Termination. "Involuntary Termination" shall mean,
without the Employee's express written consent, (i) a significant reduction of
the Employee's duties, position or responsibilities relative to the Employee's
duties, position or responsibilities in effect immediately prior to such
reduction, or the removal of the Employee from such position, duties and
responsibilities, unless the Employee is provided with comparable duties,
position and responsibilities; provided, however, that a reduction in duties,
position or responsibilities solely by virtue of the Company being acquired and
made part of a larger entity (as, for example, when the Chief Financial Officer
of the Company remains as such following a Change of Control but is not made the
Chief Financial Officer of the acquiring corporation) shall not constitute an
"Involuntary Termination;" (ii) a substantial reduction, without good business
reasons, of the facilities and perquisites (including office space and location)
available to the Employee immediately prior to such reduction; (iii) a reduction
by the Company of the Employee's base salary as in effect immediately prior to
such reduction; (iv) a material reduction by the Company in the kind or level of
employee benefits to which the Employee is entitled immediately prior to such
reduction with the result that the Employee's overall benefits package is
significantly reduced; (v) the relocation of the Employee to a facility or a
location more than fifty (50) miles from his current work location; (vi) any

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<PAGE>   3

purported termination of the Employee by the Company which is not effected for
Cause or for which the grounds relied upon are not valid; or (vii) the failure
of the Company to obtain the assumption of this Agreement by any successors
contemplated in Section 5 below.

            (d) Termination Date. "Termination Date" shall mean the effective
date of any notice of termination delivered by one party to the other hereunder.

        2. Term of Agreement. This Agreement shall terminate upon the date that
all obligations of the parties hereto under this Agreement have been satisfied.

        3. At-Will Employment. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
established under the Company's then existing employee benefit plans or policies
at the time of termination.

        4. Severance Benefits.

            (a) Involuntary Termination. If Employee's employment with the
Company terminates as a result of an Involuntary Termination and Employee signs
and does not revoke a release of claims in the form provided to Employee by the
Company (the "Release"), Employee shall be entitled to the following severance
benefits:

                (i) eight (8) weeks of Employee's base salary as in effect as on
the date of such termination plus one additional week for each full year of
service that Employee has been employed by the Company (up to a maximum of
forty-four (44) additional weeks), less applicable withholding, payable in a
lump sum within thirty (30) days of the effective date of the Release, as
determined under applicable law; and

                (ii) on the effective date of the Release, as determined under
applicable law, the greater of (A) 1/48 of the initial number of shares subject
to Employee's initial stock option grant, as described in the Offer Letter, (the
"Initial Stock Option") will vest for each full month of service that Employee
has been employed by the Company, or (B) twenty-five percent (25%) of the shares
subject to the Initial Stock Option will vest.

            (b) Other Termination. If the Employee's employment with the Company
terminates other than as a result of an Involuntary Termination, then the
Employee shall not be entitled to receive severance or other benefits hereunder,
but may be eligible for those benefits (if any) as may then be established under
the Company's then existing severance and benefits plans and policies at the
time of such termination.

            (c) Accrued Wages and Vacation; Expenses. Without regard to the
reason for, or the timing of, Employee's termination of employment: (i) the
Company shall pay the Employee any unpaid base salary due for periods prior to
the Termination Date; (ii) the Company shall pay the

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<PAGE>   4

Employee all of the Employee's accrued and unused paid time off through the
Termination Date; and (iii) following submission of proper expense reports by
the Employee, the Company shall reimburse the Employee for all expenses
reasonably and necessarily incurred by the Employee in connection with the
business of the Company prior to the Termination Date. These payments shall be
made promptly upon termination and within the period of time mandated by law.

        5. Successors.

            (a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the Company's obligations under this Agreement and
agree expressly to perform the Company's obligations under this Agreement in the
same manner and to the same extent as the Company would be required to perform
such obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and/or assets which executes and delivers the assumption agreement
described in this subsection (a) or which becomes bound by the terms of this
Agreement by operation of law.

            (b) Employee's Successors. Without the written consent of the
Company, Employee shall not assign or transfer this Agreement or any right or
obligation under this Agreement to any other person or entity. Notwithstanding
the foregoing, the terms of this Agreement and all rights of Employee hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

        6. Notices.

            (a) General. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.

            (b) Notice of Termination. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with this Section. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the Termination
Date (which shall be not more than 7 days after the giving of such notice). The
failure by the Employee to include in the notice any fact or circumstance which
contributes to a showing of Involuntary Termination shall not waive any right of
the Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.

                                      -4-
<PAGE>   5

        7. Arbitration.

            (a) Any dispute or controversy arising out of, relating to, or in
connection with this Agreement, or the interpretation, validity, construction,
performance, breach, or termination thereof, shall be settled by binding
arbitration to be held in Alameda County, California, in accordance with the
National Rules for the Resolution of Employment Disputes then in effect of the
American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.

            (b) The arbitrator(s) shall apply California law to the merits of
any dispute or claim, without reference to conflicts of law rules. The
arbitration proceedings shall be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. Employee hereby consents to
the personal jurisdiction of the state and federal courts located in California
for any action or proceeding arising from or relating to this Agreement or
relating to any arbitration in which the parties are participants.

            (c) Employee understands that nothing in this Section modifies
Employee's at-will employment status. Either Employee or the Company can
terminate the employment relationship at any time, with or without Cause.

            (d) EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION,
VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING
ARBITRATION, CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING
CLAIMS:

                (i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT;
BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD
FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL
INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION;
NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC
ADVANTAGE; AND DEFAMATION.

                (ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR
MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS
ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT
ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR
STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE
SECTION 201, et seq;

                                      -5-
<PAGE>   6

                (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

        8. Miscellaneous Provisions.

            (a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source.

            (b) Waiver. No provision of this Agreement may be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.

            (c) Integration. This Agreement represent the entire agreement and
understanding between the parties as to the subject matter herein and supersede
all prior or contemporaneous agreements, whether written or oral, with respect
to this Agreement, including, but not limited to, the "Severance Provision" set
forth in the Offer Letter.

            (d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal substantive
laws, but not the conflicts of law rules, of the State of California.

            (e) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.

            (f) Employment Taxes. All payments made pursuant to this Agreement
shall be subject to withholding of applicable income and employment taxes.

            (g) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.

                                      -6-
<PAGE>   7

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.

COMPANY:                            SILICON ENERGY CORP.

                                    By: /s/ John Woolard
                                       -----------------------------------------

                                    Title: President, CEO
                                           -------------------------------------

EMPLOYEE:
                                    /s/ John G. Preston
                                    --------------------------------------------
                                    Signature

                                    John G. Preston
                                    --------------------------------------------
                                    Printed Name

                                      -7-

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