Document:

CONSTRUCTION LOAN AGREEMENT

     This  Agreement  made  as of  this  _____  day  of  July,  by  and  between
Thermodynetics,  Inc., a Delaware corporation with a principal place of business
at 651 Day Hill Road, Windsor,  Connecticut 06095, (the "Borrower") and USTrust,
a Massachusetts trust company with a usual place of business at 30 Court Street,
Boston, Massachusetts 02108 ("Bank").

                               W I T N E S E T H :

     WHEREAS,  Borrower  wishes  to  borrow  up to the  aggregate  amount of One
Million Seven Hundred Fifty Thousand  ($1,750,000.00) Dollars to satisfy certain
obligations of the Borrower to the Bank and for the  improvement of certain real
property  located  in  651  Day  Hill  Road,  Windsor,  Connecticut  06095  (the
"Premises"); and

     WHEREAS,  subject  to the terms and  conditions  herein  provided,  Bank is
willing to extend such loan.

     NOW, THEREFORE, the parties hereby agree:

                                    ARTICLE I

                                   Definitions

     For the  purposes  of this  Agreement,  the  capitalized  words and phrases
defined in this Article and in the  introductory  paragraph above shall have the
meanings herein ascribed to them.

     1.01  "Advance(s)"  shall  mean a sum of money  loaned by Bank to  Borrower
pursuant  to  Article  II  of  this  Agreement  for  the   construction  of  the
Improvements on the Premises.

     1.02 "Architect"  shall mean any architect engaged by Borrower and approved
by Bank in connection with construction of the Improvements.

     1.03  "Availability  Period"  shall  mean  the  period  commencing  on  the
Commencement Date and ending on the Conversion Date.

     1.04  "Banking  Day"  shall  mean  any  business  day on  which  banks  are
authorized to be and are open for business in Boston, Massachusetts.

     1.05  "Borrowing  Date"  shall mean and refer to that date  specified  in a
Notice of  Borrowing as the date on which an Advance is to be made and that date
on which Bank shall make an Advance pursuant to Article II.

     1.06 "Closing Date" shall mean the date hereof.

     1.07  "Commencement  Date"  shall  mean  the date  the  Borrower  commences
construction of the Improvements, but not later than _______________, 1999.

     1.08  "Construction  Amount"  shall  mean  up to One  Million  Fifty  Eight
Thousand Four Hundred Thirty-Nine ($1,058,439.00) Dollars.

<PAGE>

     1.09 "Construction Contracts" shall mean all contracts between Borrower and
other persons pursuant to which such other persons will furnish labor, materials
and/or services in connection with the  construction  of the  Improvements,  and
shall  include  contracts  between  Borrower  and  any  Architect.   A  list  of
Construction Contracts is attached hereto as Exhibit D.

     1.10  "Construction  Loans" shall mean the aggregate  unpaid balance of the
principal  amount of all Advances (plus the amount used to payoff the Borrower's
Term  Note to the Bank in the  original  principal  mount of  $875,000,000  (the
"Payoff")).

     1.11  "Construction  Note" shall mean the  Construction  to Permanent  Note
executed  by  Borrower  of even  date in the face  amount of One  Million  Seven
Hundred Fifty Thousand  ($1,750,000.00) Dollars evidencing Borrower's obligation
to repay the Construction Loans, executed and delivered by Borrower to Bank.

     1.12 "Conversion Date" shall mean December 1, 1999.

     1.13 "Cost  Breakdown/Disbursement  Schedule"  shall mean the  construction
budget  and  disbursement  schedule  attached  hereto  as  Exhibit  A which is a
proposed budget relating to the construction of the Improvements.

     1.14 "Events of Default"  shall mean those events set forth in Article X of
this Agreement.

     1.15 "General  Conditions  Precedent" shall mean those conditions set forth
in Article VI of this Agreement.

     1.16 "Improvements"  shall mean the construction of certain improvements on
the Premises pursuant to the Plans.

     1.17 "Independent  Engineer" shall mean an independent engineer,  architect
or contractor  hired by Borrower with Bank approval at Borrower's  sole cost and
expense, to monitor the progress and quality of construction of the Improvements
and perform such other consulting responsibilities as Bank may require.

     1.18  "Interest  Payment  Date"  shall mean the first day of each  calendar
month, commencing with the first of such dates next succeeding the date hereof.

     1.19 "Mortgage"  shall mean the Open-End  Mortgage  executed by Borrower of
even date encumbering the Premises and securing the Obligations.

     1.20 "Notice of Borrowing"  shall mean a written request by Borrower for an
Advance and Independent Engineer's Certificate in the form of Exhibit C attached
hereto.

     1.21   "Obligations"   shall  mean  all  loans,   advances,   indebtedness,
liabilities, indemnity agreements and amounts, liquidated or unliquidated, owing
from  Borrower  to Bank at any time  including  without  limitation  obligations
arising under the Construction  Note, each of every kind, nature and description
arising under this Agreement or arising under any mortgage,  security  agreement
or other  agreement,  instrument  or  document  now or  hereafter  executed  and
delivered to Bank pursuant hereto or in connection herewith, and whether secured
or  unsecured,  direct or indirect  (that is,  whether the same are due directly
from Borrower to Bank, or as an endorser or a guarantor) absolute or contingent,
due or to become due, now existing or hereafter contracted. Said term shall also
include all interest, fees and other charges chargeable to Borrower by Bank from
time  to time  hereunder  and  all  covenants,  agreements  or  undertakings  of
Borrower,  whether  for the  payment of money or  otherwise  arising  under this
Agreement or arising under any mortgage,  security agreement or other agreement,
instrument or document now or hereafter  executed and delivered to Bank pursuant
hereto or in connection herewith.

     1.22  "Permanent  Loan" shall mean the aggregate  principal  balance of the
Construction Loans (on the Conversion Date), plus all accrued interest, fees and
other charges outstanding.

<PAGE>

     1.23 "Permits" shall mean all licenses and permits required by any federal,
state,  municipal  or  other  governmental  authority  in  connection  with  the
construction of the Improvements including all Certificates of Occupancy. A list
of Permits is attached hereto as Exhibit E

     1.24 "Plans" shall mean the plans and specifications relating to the design
and  construction of the  Improvements  which are attached or more  particularly
described on Exhibit F attached hereto.

     1.25 "Specific Conditions  Precedent" shall mean those conditions set forth
in Article V of this Agreement.

                                   ARTICLE II

                               Construction Loans

     2.01 Subject to and upon the terms and  conditions  herein  provided,  Bank
may, in its discretion, make Advances to Borrower during the Availability Period
upon Borrower's  request and provided that each of the following  conditions are
met as of the Borrowing Date:

     (a) After giving effect to such Advance,  the Advances shall not exceed the
Construction Amount.

     (b) Borrower has complied with all General Conditions Precedent.

     (c) Borrower has complied with all Specific Conditions Precedent.

     (d) No Event of Default has  occurred  (which has not been waived or cured)
and no event has occurred which upon the passage of time or the giving of notice
or both would constitute an Event of Default.

     (e) Bank has  received  from  Borrower,  not less than two (2) Banking Days
prior to the  Borrowing  Date, a Notice of  Borrowing,  in the form of Exhibit B
attached  hereto or such other form as Bank may require,  requesting an Advance.
Borrower  may  submit no more than one (1)  Notice of  Borrowing  requesting  an
Advance in any thirty (30) day period.  Advances shall be in minimum  increments
of $50,000.00.  Each Notice of Borrowing  shall be accompanied by the following:
to the  extent  any  portion  of the  requested  Advance is to be paid for costs
incurred in connection with construction of the  Improvements,  a requisition on
the  appropriate  AIA Form together with copies of all invoices  related thereto
and  appropriate  mechanics'  lien  waivers.  Except as  specifically  agreed to
between  Borrower and Bank,  each such  requisition  shall be net of  retainage,
which retainage shall be in the amount of ten (10%) percent of any such Advance.

     2.02 Advances shall be made in accordance  with the provisions of Article V
hereof,  by crediting the amount thereof to Borrower's  loan account  maintained
with  Bank;  provided,  however,  that Bank  retains  the right to issue a check
comprising the Advance made payable directly to the intended payee.

                                   ARTICLE III

                                    Repayment

     3.01 The Construction Loans shall bear interest at the variable rate of the
Bank's Base Lending Rate plus one (1%) percent per annum. Interest only shall be
paid  monthly in  arrears  commencing  on the first day of the first  month next
succeeding the date hereof until the Conversion Date. Interest shall be computed
on the basis of a 360-day year for the actual number of days elapsed.

<PAGE>

     3.02 On the  Conversion  Date,  provided no Event of Default  has  occurred
hereunder which has not been waived or cured, the outstanding  principal balance
of the Construction  Loans,  plus all accrued  interest,  fees and other charges
outstanding  shall be amortized over a twenty  (20)-year  schedule for a term of
five (5) years,  based upon  either (i) a fixed rate equal to the Bank's cost of
funds on that date plus two hundred  twenty-five  basis points or (ii)  interest
shall  continue to be paid at the Base  Lending  Rate plus one (1%)  percent per
annum.  Borrower shall make such election  prior to the Conversion  Date for the
balance of the term of the  Construction  Note.  Interest shall be calculated on
the basis of a 360-day year for the actual number of days elapsed.

     3.03 Interest  payable by the Borrower to the Bank on any Obligation  after
maturity  or upon the  occurrence  of Event of  Default  shall be payable at the
default rate set forth in the Construction Note.

     3.04 The Borrower  shall pay late charges in  accordance  with the terms of
the Construction Note.

     3.05 The  Construction  Loan may be  prepaid  only in  accordance  with and
subject to the prepayment provisions contained in the Construction Note.

     3.06 All  payments  to be made by Borrower  to Bank  hereunder,  whether of
principal,  interest,  premium, fees or of any other kind, shall be paid to Bank
at its offices at the address set forth above,  or at such other  address  which
Bank may request by written notice to Borrower.

     3.07 Borrower hereby authorizes Bank to charge any and all amounts due from
Borrower to Bank  pursuant to this  Agreement or otherwise,  to Borrower's  loan
account maintained with Bank.

                                   ARTICLE IV

              Security, Guarantees and Supplementary Documentation

     4.01 As  security  for the  payment  and  performance  of the  Obligations,
Borrower shall grant to Bank the following  rights and interests,  each of which
shall be more  particularly  described  in certain  instruments  which  shall be
executed   contemporaneously   herewith  or  hereafter  and  in  any  extension,
modification or amendment thereof:

     (a) A mortgage  of  Borrower's  interest  in the  Premises  which  shall be
subject to no prior mortgage, lien, encumbrance or charge of any kind or nature,
except as set forth on Schedule B of the Title Policy.

     (b) An  assignment  of, and  security  interest  in, all rights of Borrower
under all Construction Contracts,  which assignment shall be subject to no prior
assignment,  security  interest,  lien,  encumbrance  or  charge  of any kind or
nature.

     (c) An assignment of, and security  interest in, all rights of Borrower in,
to and  under  all  Permits,  which  assignment  shall  be  subject  to no prior
assignment,  security  interest,  lien,  encumbrance  or  charge  of any kind or
nature.

     (d) An assignment  of, and security  interest in, all rights of Borrower in
and to the Plans,  which  assignment  shall be  subject to no prior  assignment,
security interest, lien, encumbrance or charge of any kind or nature.

     (e) A  security  interest  in all  personal  property  assets  of  Borrower
including all construction materials, fixtures, machinery and equipment.

     (f) An assignment,  security  interest,  and/or mortgage of all proceeds of
the foregoing,  subject to no prior  security  interest,  mortgage,  assignment,
lien, encumbrance or charge of any kind or nature.

     4.02 Any and all deposits or other sums at any time credited by or due from
Bank to Borrower shall,  at all times,  constitute  additional  security for all
Obligations and

<PAGE>

may be set off against any of the  Obligations  at any time after the occurrence
of an Event of Default,  whether or not other security held by Bank is deemed to
be adequate.  Any and all instruments,  documents,  policies and certificates of
insurance,  securities,  goods, accounts receivable,  choses in action,  chattel
paper, cash,  personal property and the proceeds thereof owned by Borrower or in
which  Borrower  has an  interest  which  now or  hereafter  are at any  time in
possession  or  control of Bank or in transit by mail or courier to or from Bank
or in the possession of any third party acting in Bank's behalf,  without regard
to whether  Bank  received  the same in  pledge,  for  safekeeping  as agent for
collection  or  transmission  or  otherwise  or whether  Bank has  conditionally
released the same, shall constitute  additional security for the Obligations and
may be applied at any time, after the occurrence of an Event of Default,  to the
Obligations,  whether  or not  other  security  held  by Bank  is  deemed  to be
adequate.

     4.03 All  Obligations of the Borrower to the Bank shall be guaranteed on an
unlimited,  joint and several basis,  by Turbotec  Products,  Inc., TPI Systems,
Inc. and National Energy Systems,  Inc. (each a "Corporate  Guarantor") pursuant
to a certain Multi-Entity Guaranty dated May 24, 1993 (the "Guaranty").

                                    ARTICLE V

                          Specific Conditions Precedent

     5.01 Prior to making an  Advance,  Bank may  require an  inspection  of the
Premises by its  employees  and/or the  Independent  Engineer for the purpose of
assuring that the progress and quality of the  construction is as represented by
the Notice of Borrowing  requesting  such Advance,  and, until such  inspection,
Bank need not make the  Advances  therein  requested.  The Bank  shall make such
inspection within two (2) Banking Days after receipt of any Notice of Borrowing.
If such inspection does not furnish such assurance to Bank, Bank may reject such
Notice of Borrowing  and need not make the Advance  therein  requested.  If such
inspection is not completed on or before the  Borrowing  Date  specified in said
Notice of  Borrowing,  Bank may defer any action as to that Notice of  Borrowing
for a reasonable  time until such  inspection is completed.  Such inspection and
determination  is solely for the  benefit of Bank,  and the making of an Advance
with or without such  inspection  shall not be a  representation  by Bank of any
kind or  nature  nor a waiver by Bank of any  rights  Bank may have  under  this
Agreement.  Borrower  shall provide Bank or the  Independent  Engineer with such
further information,  certifications, surveys (including foundation surveys) and
other assurances as Bank or the Independent Engineer may require.

     5.02 If at any time during the course of construction of the  Improvements,
Bank, in its sole judgment,  should determine that the unadvanced portion of the
Construction  Amount  is  insufficient  to  complete  the  construction  of  the
Improvements  in accordance  with the Plans,  then, on Bank's  demand,  Borrower
shall  deposit with Bank such amount as Bank shall require so that the aggregate
of such deposited  amount and the then  unadvanced  portion of the  Construction
Amount  shall  equal the amount  necessary,  as  determined  by Bank in its sole
judgment, to complete the construction as aforesaid.  Such deposit shall be held
by Bank as security for the Obligations. Subsequent Notice(s) of Borrowing shall
first request a release of such deposit,  and no Advance shall be made hereunder
until the entirety of such deposit shall have been released. Borrower shall meet
any demand made by Bank under this Section  within ten (10) days, and until such
demand is met, Bank shall have no  obligation to make any Advance  hereunder and
failure to meet such demand will  constitute an Event of Default under Article X
hereof.

     5.03 Advances made by Bank hereunder  shall be used by Borrower  solely for
the  payment  of costs  pursuant  to the Cost  Breakdown/Disbursement  Schedule,
unless otherwise authorized by Bank, in its sole discretion.

     5.04 Subject to the conditions set forth in Article II, Bank shall make the
final Advance  (including  all  retainage  held by Bank) at such time as (a) the
Improvements  are  substantially  completed  to  the  satisfaction  of  Bank  in
accordance  with the terms and  conditions  set forth  herein;  (b) Borrower has
delivered to Bank an as-built survey of the Premises;  (c) a final unconditional
Certificate  of  Occupancy  has  been  issued  by  the  appropriate   government
authority;  (d) the Improvements are free of all liens other than those of Bank,
those  accrued for real estate taxes not yet due and payable and those set forth
on Schedule B of the Title Policy; and (e) all applicable statutory lien periods
have expired or appropriate lien waivers have been delivered to Bank.

<PAGE>

                                   ARTICLE VI

                          General Conditions Precedent

     6.01  Borrower  shall  execute and deliver to Bank on or before the Closing
Date,  all  instruments  and  documents to be executed and delivered by Borrower
pursuant to the terms of this Agreement.

     6.02 Bank's rights in and to all mortgages, security interests, assignments
and pledges shall be perfected.

     6.03 Borrower shall deliver to Bank on or before the Closing Date, evidence
of insurance pertaining to the Premises naming Bank as mortgagee, loss payee and
additional insured.

     6.04  Borrower  shall  furnish to Bank on or before the Closing Date a Cost
Breakdown/Disbursement  Schedule,  a copy of which is attached hereto as Exhibit
A. Such Cost Breakdown/Disbursement  Schedule shall be acceptable to Bank in all
respects  and  shall  contain  a  complete  budget  for the  entire  cost of the
Improvements,   including,   without   limitation:   (i)  the  direct  costs  of
constructing and equipping the Improvements;  (ii) all indirect costs including,
but not limited to, interest, real estate taxes, insurance,  and legal fees; and
(iii) a trade breakdown for all construction costs on an appropriate AIA form.

     6.05  Borrower  shall  deliver to Bank on or before the Closing  Date,  all
Construction  Contracts,  a list of which is  attached  hereto as Exhibit D. All
Construction  Contracts  shall  contain  such  terms  and  provisions  which are
acceptable  to Bank  including,  but not  limited  to,  provisions  relating  to
retainage, performance bonds and insurance.

     6.06  Borrower  shall  deliver to Bank on or before the Closing  Date,  all
permits (except for the  Certificate of Occupancy),  a list of which is attached
hereto  as  Exhibit  E. All such  Permits  shall  be  acceptable  to Bank in all
respects.

     6.07  Borrower  shall  deliver to Bank on or before the Closing  Date,  all
Plans, which Plans are more particularly described on Exhibit F attached hereto.
All such Plans shall be acceptable to Bank in all respects.

     6.08 Borrower shall deliver to Bank on or before the Closing Date, a survey
of the Premises. Such survey shall show the dimensions and area of the Premises,
dimensions  and  locations  of  all  improvements,   utilities,  parking  areas,
driveways,  easements, zoning district zones, adjoining streets, distance to and
name of  nearest  intersecting  street,  whether  the  Premises  is located in a
Federal Flood Hazard Zone and such other  information as Bank may require and as
appropriate under the circumstances.

     6.09  Borrower  shall  furnish to Bank on or before  the  Closing  Date,  a
certificate  of the  architect,  in form  and  substance  satisfactory  to Bank,
stating (as appropriate) that: (i) all utility  facilities,  including,  without
limitation,  electrical, gas, water, sewer, septic, telephone and storm drainage
facilities  are  available at the  Premises,  as a matter of right,  without the
requirement of any governmental approvals;  and (ii) such utilities are adequate
to  serve  the  entire  Premises  upon  completion  of the  construction  of the
Improvements.

     6.10 In the event the  Premises is located in a Federal  Flood Hazard Zone,
Borrower  shall  obtain and furnish to Bank on or before the Closing  Date,  and
thereafter maintain,  flood insurance with respect to the Premises acceptable to
Bank in all respects.

                                   ARTICLE VII

                         Warranties and Representations

<PAGE>

     7.01 To induce Bank to enter into this  Agreement and to provide  financing
to the Borrower  hereunder,  Borrower  makes the following  representations  and
warranties,  each of which  shall be deemed to be newly  made on each  Borrowing
Date:

     (a)  Borrower  has  good  and  clear  record  and  marketable  title to the
Premises,  free and clear of all mortgages,  liens, pledges,  charges,  security
interests  and  encumbrances,  other than those being  granted to Bank  pursuant
hereto,  and those  reflected on Schedule B of the ALTA title  insurance  policy
delivered to Bank (the "Title Policy").

     (b) No event has occurred and no condition exists which, upon the execution
and delivery of this Agreement, would constitute an Event of Default hereunder.

     (c) To the best of Borrower's knowledge, Borrower is not required to obtain
any consent,  approval or authorization  of, or file,  register or qualify with,
any  governmental  authority  in order  to  validly  execute  and  deliver  this
Agreement or any instrument,  agreement or document contemplated  hereunder,  or
perform  Borrower's  obligations  under this  Agreement or any such  instrument,
agreement or document.

     (d) The Cost  Breakdown/Disbursement  Schedule  truly and  accurately  sets
forth the projected budget for construction of the Improvements.

     (e) The  Construction  Contracts  delivered  to Bank are true and  complete
copies of all Construction Contracts available to Borrower and such Construction
Contracts have not been materially altered or amended.

     (f) To the best of  Borrower's  knowledge,  the Permits  delivered  to Bank
constitute all licenses and permits required by any federal, state, municipal or
other  governmental  authority  in  connection  with  the  construction  of  the
Improvements (except a final Certificate of Occupancy).

     (g) The Plans  delivered  to Bank are complete in all respects and have not
been materially altered or amended.

                                  ARTICLE VIII

                              Affirmative Covenants

     8.01 Borrower hereby covenants and agrees that it shall:

     (a) Pay to Bank all Obligations when due.

     (b)  Promptly,  punctually  and  faithfully  perform or observe any and all
terms, covenants and agreements to be performed or observed on its part pursuant
to  this  Agreement  or  any  instrument,  document  or  agreement  executed  in
connection herewith.

     (c) Keep  proper  books of  account  relating  to the  construction  of the
Improvements  and the operation of the Premises in which full,  true and correct
entries will be made of its  transactions in accordance with generally  accepted
accounting principles consistently applied.

     (d) Make its books and records  available  in its  offices for  inspection,
examination  and copying by Bank and Bank's  representatives  at all  reasonable
times,  and  shall  permit  inspection  of  the  Premises  by  Bank  and  Bank's
representatives at all reasonable times.

     (e) Furnish such information and statements as Bank may reasonably request.

<PAGE>

     (f) Comply with all laws and regulations  imposed by the federal,  state or
local  government  or any other  governing  authority  which are  applicable  to
Borrower and/or the Premises.

     (g) Pay all real and personal  property taxes,  assessments and charges and
all franchise, income,  unemployment,  old age benefit,  withholding,  sales and
other taxes assessed  against  Borrower or payable by Borrower at such times and
in such manner to prevent any penalty  from  accruing or any lien or charge from
attaching to  Borrower's  properties.  The  provisions of this Section shall not
preclude  Borrower from contesting in good faith and diligently  prosecuting any
such tax; provided,  however,  that Borrower shall upon request of Bank, deposit
with Bank funds  sufficient  to discharge  such tax in the event such contest is
resolved against  Borrower.  Borrower shall not be in default under this Section
by reason of the existence of a lien for taxes not then due.

     (h) Put and  maintain the  Premises  and the  Improvements  thereon in good
repair, working condition, and order, and, from time to time, make all necessary
and proper repairs, renewals and replacements.

     (i)  Maintain,  at all times,  insurance  relating to the  Premises and the
personal  property  located  thereon  covering such risks and in such amounts as
Bank may reasonably require,  all such insurance to be in such form and for such
periods and written by such companies as shall be acceptable to Bank.

     (j) Pay or reimburse Bank, on demand, for all expenses (including,  without
limitation, reasonable attorneys' fees and expenses) incurred or paid by Bank in
connection  with the  preparation,  interpretation,  amendment,  administration,
enforcement  or defense of this  Agreement,  and any  instrument,  agreement  or
document to be delivered pursuant hereto.

     (k)  Punctually  and  promptly  make all  payments  and  perform  all other
obligations  which may be required of Borrower with respect to any  indebtedness
(whether for money borrowed,  goods purchased,  services  rendered or otherwise)
owing to any persons, firms or corporations other than Bank, including,  without
limitation,  indebtedness  which may be secured by a security interest in assets
of Borrower, or property of Borrower, and all obligations under the terms of any
lease in which Borrower is the lessee.  The provisions of this Section shall not
preclude  Borrower from contesting in good faith and diligently  prosecuting any
such indebtedness or obligation.

     (l) Cause the construction of the Improvements to be completed on or before
the end of the  Availability  Period in accordance with the Plans, in a good and
workmanlike manner, and with materials of the quality called for in the Plans.

     (m) Pay or reimburse  Bank,  on request,  for all costs,  expenses and fees
incurred or paid by Bank in connection  with the retention and employment of the
Independent  Engineer  to review  the  Plans,  Construction  Contracts  and Cost
Breakdown/ Disbursement Schedule, and to inspect and certify the progress at the
construction  of  the   Improvements   and  to  perform  such  other  consulting
responsibilities as Bank may from time to time require.

                                   ARTICLE IX

                               Negative Covenants

     9.01 Borrower shall not:

     (a)  Transfer,  sell or dispose of the  Premises or any legal or  equitable
interest  therein (or in the  Borrower) or any of Borrower's  personal  property
located thereon or used in connection therewith, except as set forth on Schedule
B of the Title Policy.

     (b) Grant or suffer to exist,  without  Bank's prior written  consent,  any
mortgage, pledge, title retention agreement,  security interest, lien, charge or
encumbrance with respect to the Premises, or any of Borrower's personal property
located thereon or used in connection therewith, except as set forth on Schedule
B of the Title Policy.

<PAGE>

     (c) Make any alterations or amendments to the Construction  Contracts which
would,  in the  aggregate,  result in a change of more  than  $20,000.00  in the
projected cost of constructing the Improvements,  unless Borrower obtains Bank's
prior consent.

     (d) Make any  alterations  or amendments  to the Plans which would,  in the
aggregate,  result in a change of more than  $20,000.00 in the projected cost of
constructing the Improvements, unless Borrower obtains Bank's prior consent.

     (e) Use, without Bank's prior written consent,  any portion of the proceeds
of any Advance for any purpose  other than  payment of costs as set forth in the
Cost Breakdown/Disbursement Schedule or as authorized by Bank.

                                    ARTICLE X

                                     Default

     10.01  Upon  the  occurrence  of any one or more  of the  following  events
(herein, "Events of Default"), any and all Obligations of Borrower to Bank shall
become immediately due and payable,  at the option of Bank and without notice or
demand.  The  occurrence  of any such  Event of Default  shall also  constitute,
without notice or demand, a default under all other agreements  between Bank and
Borrower and  instruments  and papers  given to Bank by  Borrower,  whether such
agreements, instruments, or papers now exist or hereafter arise, namely:

     (a) The  failure by Borrower  to pay the  Obligations  within ten (10) days
after the date when due.

     (b) The failure by Borrower to promptly, punctually and faithfully perform,
or observe  any term,  covenant  or  agreement  on its part to be  performed  or
observed pursuant to any of the provisions of this Agreement.

     (c) The failure by Borrower to construct, or cause the construction of, the
Improvements  in a  workmanlike  manner  in  accordance  with the  Plans  and to
complete such construction as evidenced by the issuance of a final unconditional
Certificate of Occupancy on or before the Conversion Date.

     (d) The failure of the Borrower to commence  construction  on or before the
Commencement Date.

     (e)  The  determination  by  Bank  that  any   representation  or  warranty
heretofore,  now or  hereafter  made  by  Borrower  to  Bank,  in any  document,
instrument, agreement, or paper was not materially true or accurate when given.

     (f) The occurrence of any event of default under any agreement between Bank
and  Borrower  or  instrument  or paper  given Bank by  Borrower,  whether  such
agreement,  instrument, or paper now exists or hereafter arises (notwithstanding
that Bank may not have  exercised  its rights upon default  under any such other
agreement, instrument or paper).

     (g) The occurrence of any event such that any  indebtedness  of Borrower to
anyone  other  than  Bank  could  be  accelerated,   notwithstanding  that  such
acceleration has not taken place.

     (h) The  attachment  and failure to have such  attachment  released  within
thirty  (30) days of filing or such  longer  period as agreed to by Bank at that
time so  long  as  Bank  is  satisfied  with  Borrower's  efforts  to have  such
attachment released, levy or seizure of any of Borrower's property.

     (i) The termination of existence, dissolution, or liquidation of Borrower.

<PAGE>

     (j) Any act by,  against,  or  relating  to  Borrower,  or its  property or
assets,  which act constitutes the application for, consent to, or sufferance of
the appointment of a receiver, trustee or other person, pursuant to court action
or otherwise, over all or any part of Borrower's property; provided, however, if
such act is commenced against the Borrower,  the Borrower shall have a period of
thirty (30) days to cause the same to be  dismissed,  unless such act  commenced
against the Borrower  was  commenced  pursuant to Title 11 of the United  States
Code entitled  "Bankruptcy"  (commonly  referred to as the "Bankruptcy Code") in
which event the same shall immediately constitute an Event of Default.

     (k) The granting of any trust  mortgage or execution of an  assignment  for
the  benefit  of the  creditors  of  Borrower,  or the  occurrence  of any other
voluntary  or  involuntary  liquidation  or  extension  of  debt  agreement  for
Borrower; the failure by Borrower to generally pay the debts of Borrower as they
mature; adjudication of bankruptcy or insolvency relative to Borrower; the entry
of an order for  relief  or  similar  order  with  respect  to  Borrower  in any
proceeding pursuant to Title 11 of the United States Code entitled  "Bankruptcy"
(the "Bankruptcy  Code") or any other federal  bankruptcy law; the filing of any
complaint, application, or petition by or against Borrower initiating any matter
in which  Borrower  is or may be granted  any relief  from the debts of Borrower
pursuant to the Bankruptcy  Code or any other  insolvency  statute or procedure;
the calling or sufferance of a meeting of creditors of Borrower;  the meeting by
Borrower of a formal or informal creditor's committee; the offering, or entering
into, by Borrower of any composition, extension or any other arrangement seeking
relief or extension  for the debts of Borrower,  or the  initiation of any other
judicial or  non!judicial  proceeding  or  agreement  by,  against or  including
Borrower  which seeks or intends to accomplish a  reorganization  or arrangement
with creditors.

     (l) The entry of any  judgment  against  Borrower in excess of  $50,000.00,
which  judgment is not  satisfied  or appealed  from (with  execution or similar
process stayed) within thirty (30) days of its entry.

     (m) The entry of any court order  which  enjoins,  restrains  or in any way
prevents Borrower from conducting all or any part of its business affairs in the
ordinary course of business.

     (n) The  occurrence  of any  material  uninsured  loss,  theft,  damage  or
destruction to any material asset(s) of Borrower.

     (o) Any act by or against,  or relating to Borrower or its assets  pursuant
to which any  creditor of Borrower  seeks to reclaim or repossess or reclaims or
repossesses  all or a portion of  Borrower's  assets having a value in excess of
$50,000.00.

     (p) The  occurrence of any event or  circumstance  with respect to Borrower
such that Bank shall  believe in good faith that the  prospect of payment of all
or any  part of the  Obligations  or the  performance  by  Borrower  under  this
Agreement or any other agreement  between Bank and Borrower is impaired or there
shall occur any material  adverse change in the business or financial  condition
of Borrower.

     (q)  The  cessation  of  construction  of the  Improvements  for  ten  (10)
consecutive  business days, except for cessation resulting from impossibility of
performance due to force majeure.

     (r) The failure of the Borrower to deposit any funds required under Section
5.02 hereof upon demand.

     (s) The  occurrence of any of the foregoing  Events of Default with respect
to any guarantor,  endorser,  or surety to Bank of the  Obligations,  as if such
guarantor, endorser or surety, were the "Borrower" described herein.

     (t) The termination of any guaranty by any guarantor of the Obligations.

     (u) The  occurrence  of an Event of Default  under or  termination  for any
reason  of the  Amended  and  Restated  Loan and  Security  Agreement  (Accounts
Receivable and Inventory)  dated October 31, 1994, as amended,  between the Bank
and Turbotec Products, Inc.

<PAGE>

     10.02 Upon the  occurrence  of an Event of  Default,  Bank may  declare any
obligation  Bank may have hereunder to be canceled,  declare all  Obligations of
Borrower to be due and payable and proceed to enforce payment of the Obligations
and to exercise  any and all of the rights and  remedies  afforded to Bank under
the terms of this Agreement or otherwise.

                                   ARTICLE XI

                               Special Provisions

     11.01 In  addition to any and all rights and  remedies  which Bank may have
pursuant  to this  Agreement,  any other  instrument  or  document  executed  in
connection  herewith or  applicable  law, Bank may,  after the  occurrence of an
Event of Default,  in its sole  discretion,  take  immediate  possession  of the
Premises,   manage  and  operate  the  Premises  and  proceed  to  complete  the
Improvements. In connection with the foregoing rights, Bank may do all things it
deems  advisable,  in its sole  discretion,  including,  but not limited to, the
following:  (a) make any payments with respect to any  Obligation of Borrower to
Bank or any  obligation of Borrower to any other person in  connection  with the
construction of the  Improvements;  (b) make additions and changes in the Plans;
(c) employ  contractors,  subcontractors,  architects,  engineers  and others in
connection with construction of the Improvements;  (d) pay, settle or compromise
all existing  bills and claims which are or may be liens against the Premises or
may be  necessary or  desirable  for the  completion  of the  Improvements;  (e)
purchase and maintain insurance, including title insurance; (f) lease or license
the  Premises to others,  in whole or in part;  (g) use and operate the Premises
itself,  or through a subsidiary  or  affiliate,  including the operation of any
business  or  other  activity  similar  to  that  previously  engaged  in on the
Premises;  (h)  prosecute and defend all actions and  proceedings  in connection
with the construction of the Improvements;  (i) discontinue  construction of the
Improvements  and refuse to make  further  payments to any other  person for the
account of Borrower;  and (j) demolish any Improvements on the Premises,  either
in whole or in part.  The foregoing  rights and remedies may be executed by Bank
in its sole discretion, but under no circumstance shall Bank be deemed obligated
to exercise any of such rights or remedies.  Borrower  hereby  appoints  Bank as
Borrower's  irrevocable  attorney in fact coupled  with an  interest,  with full
powers of  substitution,  to act in Borrower's name and on Borrower's  behalf in
connection with any of the foregoing  rights and remedies.  Any expenses paid or
incurred by Bank in connection with exercising the foregoing  rights or remedies
shall be  treated  as an Advance  and added to the  Construction  Loans due from
Borrower  to Bank,  and  Borrower  agrees to repay to Bank all such  amounts  on
demand, with interest as herein provided, notwithstanding that such Construction
Loans may exceed the Construction  Amount.  In addition,  Borrower agrees to pay
Bank for services  rendered in connection with completion of the construction of
the  Improvements  in an amount  equal to ten (10%)  percent of the cost of such
completion.  Any income or other receipts resulting from exercise by Bank of the
foregoing  rights  shall be for the account of Borrower  and shall be applied to
the  Obligations  in  such  manner  as  Bank,  in  its  sole  discretion,  deems
appropriate.  Bank's exercise of any of the foregoing  rights and remedies shall
be  undertaken  by Bank as a  mortgagee-in-possession  for the  maintenance  and
preservation  of its  collateral and not as a successor to any business or other
activities of Borrower.

                                   ARTICLE XII

                                  Miscellaneous

     12.01 All  communications  herein provided shall be in writing and shall be
sufficient if actually  received or if sent by certified  mail,  return  receipt
requested,  or by a recognized overnight carrier and addressed to the respective
parties at the addresses set forth in the beginning of this Agreement or at such
other addresses as the parties hereto may request in writing, with copies to:

<PAGE>

     If to the Bank: USTrust
                    30 Court Street
                    Boston, MA 02108
                    Attn: James H. Herzog, Jr., Vice President

     With copies to: Shapiro, Israel & Weiner, P.C.
                    100 North Washington Street
                    Boston, MA   02114
                    Attn:   Brian T. Garrity, Esq.

     If to the Borrower: Thermodynetics, Inc.
                    Post Office Box 40
                    651 Day Hill Road
                    Windsor, CT 06095
                    Attn:   Robert I. Lieberman
                         Treasurer and Chief Financial Officer

     With copies to: Kenneth B. Lerman, Esquire
                    651 Day Hill Road
                    Windsor, CT 06095-0040

     12.02  Borrower  will,  from time to time,  execute and deliver to Bank all
such other  instruments  and  documents and take or cause to be taken such other
action as Bank may  reasonably  request in order to  effectuate  the  agreements
contemplated herein.

     12.03 Bank shall not be deemed to have  waived any of its rights  hereunder
unless such waiver is in writing and duly executed by an  authorized  officer of
Bank.  No waiver on Bank's part on any one occasion  shall be deemed a waiver on
any other occasion.

     12.04 This  Agreement  may be amended only by an  instrument in writing and
duly executed by Borrower and an authorized officer of Bank.

     12.05 All covenants,  agreements,  representations and warranties contained
in this Agreement shall bind Borrower and its successors and assigns,  and shall
inure to the benefit of Bank and its successors and assigns. Notwithstanding the
foregoing, Borrower may not assign any of its rights hereunder.

     12.06 All rights and remedies of Bank hereunder  shall be  cumulative,  and
may be exercised by Bank, in its sole discretion, at any time, in any manner and
in any order.

     12.07 If any  provisions  of this  Agreement  shall be  deemed  illegal  or
unenforceable for any reason, such illegality or  unenforceability  shall relate
solely to such provision and shall not affect the remainder of this Agreement.

     12.08 This Agreement shall be construed and enforced in accordance with the
laws of the  Commonwealth of  Massachusetts  except with respect to the recorded
real estate documents which will be construed in accordance with the laws of the
State of Connecticut.

     12.09 This Agreement shall take effect as an instrument under seal.

     12.10 The captions herein contained are inserted as a matter of convenience
only and such  captions  do not form a part of this  Agreement  and shall not be
utilized in the construction hereof.

<PAGE>

                                  ARTICLE XIII

                                Jury Trial Waiver

     13.01  BORROWER  WAIVES ANY RIGHT TO TRIAL BY JURY BORROWER MAY HAVE IN ANY
ACTION OR  PROCEEDING,  IN LAW OR EQUITY,  IN  CONNECTION  WITH THIS  AGREEMENT.
BORROWER AND BANK EACH HEREBY KNOWINGLY,  VOLUNTARILY AND  INTENTIONALLY  WAIVES
ANY  RIGHT IT MAY NOW OR  HEREAFTER  HAVE TO A TRIAL BY JURY IN  RESPECT  OF ANY
SUIT,  ACTION OR PROCEEDING  ARISING OUT OF, UNDER,  OR IN CONNECTION  WITH THIS
AGREEMENT. BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF BANK HAS
REPRESENTED,  EXPRESSLY OR  OTHERWISE,  THAT BANK WOULD NOT, IN THE EVENT OF ANY
SUCH SUIT,  ACTION OR  PROCEEDING,  SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION.  BORROWER ACKNOWLEDGES THAT BANK HAS BEEN INDUCED TO ENTER INTO
THIS  AGREEMENT  WITH  BORROWER BY, AMONG OTHER THINGS,  THE  PROVISIONS OF THIS
PARAGRAPH.

     EXECUTED  as an  instrument  under seal as of the day and year first  above
written.

WITNESS:                           USTrust

_________________________          By   _______________________________________
                                        James H. Herzog, Jr.
                                        Vice President

                                                Thermodynetics, Inc.

_________________________          By   _______________________________________
                                        Robert I. Lieberman
                                        Treasurer and Chief Financial Officer<PAGE>   1
                                                                   EXHIBIT 10.13
                              CALICO COMMERCE, INC.
                       2000 NON-OFFICER STOCK OPTION PLAN

     1.   ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

          1.1  ESTABLISHMENT. The Company's 2000 Non-Officer Stock Option Plan
(the "PLAN") is established effective as of March 14, 2000.

          1.2  PURPOSE. The purpose of the Plan is to advance the interests of
the Participating Company Group and its stockholders by providing an incentive
to attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.

          1.3  TERM OF PLAN. The Plan shall continue in effect until the earlier
of its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Options
granted under the Plan have lapsed.

     2.   DEFINITIONS AND CONSTRUCTION.

          2.1  DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:

               (a)  "BOARD" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"BOARD" also means such Committee(s).

               (b)  "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.

               (c)  "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.

               (d)  "COMPANY" means Calico Commerce, Inc., a Delaware
corporation, or any successor corporation thereto.

               (e)  "CONSULTANT" means any person, including an advisor, engaged
by a Participating Company to render services other than as an Employee or a
director.

               (f)  "DISABILITY" means the inability of the Optionee, in the
opinion of a qualified physician acceptable to the Company, to perform the major
duties of the Optionee's position with the Participating Company group because
of the sickness or injury of the Optionee.

                                       1

<PAGE>   2

               (g)  "EMPLOYEE" means any person treated as an employee
(including an officer or a director who is also treated as an employee) in the
records of a Participating Company.

               (h)  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

               (i)  "FAIR MARKET VALUE" means, as of any date, the value of a
share of Stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein, subject to the following:

                    (i)  If, on such date, there is a public market for the
Stock, the Fair Market Value of a share of Stock shall be the closing sale price
of a share of Stock (or the mean of the closing bid and asked prices of a share
of Stock if the Stock is so quoted instead) as quoted on the Nasdaq National
Market, the Nasdaq Small-Cap Market or such other national or regional
securities exchange or market system constituting the primary market for the
Stock, as reported in the Wall Street Journal or such other source as the
Company deems reliable. If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market system, the date on which
the Fair Market Value shall be established shall be the last day on which the
Stock was so traded prior to the relevant date, or such other appropriate day as
shall be determined by the Board, in its sole discretion.

                    (ii) If, on such date, there is no public market for the
Stock, the Fair Market Value of a share of Stock shall be as determined by the
Board without regard to any restriction other than a restriction which, by its
terms, will never lapse.

               (j)  "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan. Options are intended to be nonstatutory stock options and shall not be
treated as incentive stock options within the meaning of Section 422(b) of the
Code.

               (k)  "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee and any shares acquired upon the exercise
thereof.

               (l)  "OPTIONEE" means a person who has been granted one or more
Options.

               (m)  "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

               (n)  "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.

               (o)  "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively which are then Participating Companies.

                                       2

<PAGE>   3

               (p)  "SECURITIES ACT" means the Securities Act of 1933, as
amended.

               (q)  "SERVICE" means an Optionee's employment or service with the
Participating Company Group, whether in the capacity of an Employee or a
Consultant. The Optionee's Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Optionee renders Service to the
Participating Company Group or a change in the Participating Company for which
the Optionee renders such Service, provided that there is no interruption or
termination of the Optionee's Service. Furthermore, an Optionee's Service with
the Participating Company Group shall not be deemed to have terminated if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the ninety-first (91st) day of such leave the
Optionee's Service shall be deemed to have terminated unless the Optionee's
right to return to Service with the Participating Company Group is guaranteed by
statute or contract. Notwithstanding the foregoing, unless otherwise designated
by the Company or required by law, a leave of absence shall not be treated as
Service for purposes of determining vesting under the Optionee's Option
Agreement. The Optionee's Service shall be deemed to have terminated either upon
an actual termination of Service or upon the corporation for which the Optionee
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its sole discretion, shall determine whether the
Optionee's Service has terminated and the effective date of such termination.

               (r)  "STOCK" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.

               (s)  "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

          2.2  CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.

     3.   ADMINISTRATION.

          3.1  ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board. All questions of interpretation of the Plan or of any Option shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan or such Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, determination or election.

          3.2  POWERS OF THE BOARD. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its sole discretion:

                                       3

<PAGE>   4

               (a)  to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares of Stock to be subject
to each Option;

               (b)  to determine the Fair Market Value of shares of Stock or
other property;

               (c)  to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the
Option, (vi) the effect of the Optionee's termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Option or such shares not
inconsistent with the terms of the Plan;

               (d)  to approve one or more forms of Option Agreement;

               (e)  to amend, modify, extend, cancel, renew, reprice or
otherwise adjust the exercise price of, or grant a new Option in substitution
for, any Option or to waive any restrictions or conditions applicable to any
Option or any shares acquired upon the exercise thereof;

               (f)  to accelerate, continue, extend or defer the exercisability
of any Option or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following an Optionee's termination of
Service with the Participating Company Group;

               (g)  to delegate to any proper officer of the Company the
authority to grant one or more Options, without further approval of the Board,
to any person eligible pursuant to Section 5, provided, however, that (i) the
exercise price per share of each such Option shall be equal to the Fair Market
Value per share of the Stock on the effective date of grant, and (ii) each such
Option shall be subject to the terms and conditions of the standard form of
Option Agreement approved by the Board and shall conform to the provisions of
the Plan and such other guidelines as shall be established from time to time by
the Board;

               (h)  to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and

               (i)  to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent consistent with the Plan
and applicable law.

                                       4

<PAGE>   5

     4.   SHARES SUBJECT TO PLAN.

          4.1  MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be 3,000,000 and shall consist of authorized
but unissued or reacquired shares of Stock or any combination thereof. If an
outstanding Option for any reason expires or is terminated or canceled or shares
of Stock acquired, subject to repurchase, upon the exercise of an Option are
repurchased by the Company, the shares of Stock allocable to the unexercised
portion of such Option, or such repurchased shares of Stock, shall again be
available for issuance under the Plan.

          4.2  ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan, and to any outstanding Options and in the exercise price per share
of any outstanding Options. If a majority of the shares which are of the same
class as the shares that are subject to outstanding Options are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event, as defined in Section 8.1) shares of another corporation (the "NEW
SHARES"), the Board may unilaterally amend the outstanding Options to provide
that such Options are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the exercise price per share of,
the outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded up or down to the nearest whole number, as determined by the
Board, and in no event may the exercise price of any Option be decreased to an
amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.

     5.   ELIGIBILITY.

          Options may be granted only to Employees and Consultants; provided,
however, that no Option shall be granted to any person (including any officer or
director) whose eligibility to receive an Option under the Plan at the time of
grant would require the approval of the Company's stockholders pursuant to any
applicable law, regulation or rule, including, without limitation, any rule
applicable to the listing of the Company's securities on the Nasdaq National
Market. For purposes of the foregoing sentence, "EMPLOYEES"and "CONSULTANTS"
shall include prospective Employees and prospective Consultants to whom Options
are granted in connection with written offers of an employment or other service
relationship with the Participating Company Group. Eligible persons may be
granted more than one (1) Option.

     6.   TERMS AND CONDITIONS OF OPTIONS.

          Options shall be evidenced by Option Agreements specifying the number
of shares of Stock covered thereby, in such form as the Board shall from time to
time establish. No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Option Agreement.
Option Agreements may incorporate all or

                                       5

<PAGE>   6

any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:

          6.1  EXERCISE PRICE. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that the
exercise price per share for an Option shall be not less than 85% of the Fair
Market Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option may be granted with an exercise price
lower than the minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a manner
qualifying under the provisions of Section 424(a) of the Code.

          6.2  EXERCISE PERIOD. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, and (b) no Option granted to a
prospective Employee or prospective Consultant may become exercisable prior to
the date on which such person commences Service with a Participating Company.
Subject to the foregoing, unless otherwise specified by the Board in the grant
of an Option, any Option granted hereunder shall have a term of ten (10) years
from the effective date of grant of the Option.

          6.3  PAYMENT OF EXERCISE PRICE.

               (a)  FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company of shares of Stock owned by the
Optionee having a Fair Market Value (as determined by the Company without regard
to any restrictions on transferability applicable to such stock by reason of
federal or state securities laws or agreements with an underwriter for the
Company) not less than the exercise price, (iii) by the assignment of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a
"CASHLESS EXERCISE"), (iv) by the Optionee's promissory note in a form approved
by the Company, (v) by such other consideration as may be approved by the Board
from time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by adoption
of or by amendment to the standard forms of Option Agreement described in
Section 7, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.

               (b)  TENDER OF STOCK. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company of shares of Stock unless such shares either have been

                                       6

<PAGE>   7

owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.

               (c)  CASHLESS EXERCISE. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.

               (d)  PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is granted. The Board shall
have the authority to permit or require the Optionee to secure any promissory
note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject to
the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.

          6.4  TAX WITHHOLDING. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its sole discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Company
shall have no obligation to deliver shares of Stock or to release shares of
Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.

          6.5  EFFECT OF TERMINATION OF SERVICE.

               (a)  OPTION EXERCISABILITY. Subject to earlier termination of the
Option as otherwise provided herein, an Option shall be exercisable after an
Optionee's termination of Service as follows:

                    (i)  DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months (or such other period of time as determined by the
Board, in its sole discretion) after the date on which the Optionee's Service
terminated, but in any event no

                                       7

<PAGE>   8

later than the date of expiration of the Option's term as set forth in the
Option Agreement evidencing such Option (the "OPTION EXPIRATION DATE").

                    (ii) DEATH. If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee's legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee's death at any time prior to the expiration of twelve (12) months (or
such other period of time as determined by the Board, in its sole discretion)
after the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date. The Optionee's Service shall be deemed to
have terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of Service.

                    (iii) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within three (3) months (or such longer period of time
as determined by the Board, in its sole discretion) after the date on which the
Optionee's Service terminated, but in any event no later than the Option
Expiration Date.

               (b)  EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of an Option within the applicable time periods set
forth in Section 6.6(a) is prevented by the provisions of Section 10 below, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Expiration Date.

               (c)  EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.

     7.   STANDARD FORMS OF OPTION AGREEMENT.

          7.1  GENERAL. Unless otherwise provided by the Board at the time the
Option is granted, an Option shall comply with and be subject to the terms and
conditions set forth in the standard form of Option Agreement adopted by the
Board concurrently with its adoption of the Plan and as amended from time to
time.

          7.2  AUTHORITY TO VARY TERMS. The Board shall have the authority from
time to time to vary the terms of the standard form of Option Agreement
described in this Section 7 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and

                                       8

<PAGE>   9

conditions of any such new, revised or amended standard form or forms of Option
Agreement shall be in accordance with the terms of the Plan.

     8.   CHANGE IN CONTROL.

          8.1  DEFINITIONS.

               (a)  An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:

                    (i)  the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;

                    (ii) a merger or consolidation in which the Company is a
party;

                    (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or

                    (iv) a liquidation or dissolution of the Company.

               (b)  A "CHANGE IN CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.

          8.2  EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a Change
in Control, 25% of the unvested shares subject to any Option held by an Optionee
whose Service has not terminated as of the date of the Change in Control shall
become vested and exercisable as of the date 10 days prior to the date of the
Change in Control; after the Change in Control, the shares subject to any such
Option shall vest in accordance with the schedule set forth in the Option
Agreement evidencing such Option. However, if it is determined that the
provisions or operation of the preceding sentence would preclude treatment of a
Change in Control as a "pooling-of-interests" for accounting purposes and
provided further that in the absence of the preceding sentence such Change in
Control would be treated as a "pooling-of-interests" for accounting purposes,
then the preceding sentence shall be void ab initio, and the vesting and
exercisability of each Option shall be determined under any other applicable
provision of the

                                       9

<PAGE>   10

Option Agreement evidencing such Option. Any vesting or exercise that was
permissible solely by reason of this Section 8.2 shall be conditioned upon the
consummation of the Change in Control. In addition, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the "ACQUIRING CORPORATION"), may either assume the Company's rights and
obligations under outstanding Options or substitute for outstanding Options
substantially equivalent options for the Acquiring Corporation's stock. For
purposes of this Section 8.2, an Option shall be deemed assumed if, following
the Change in Control, the Option confers the right to purchase in accordance
with its terms and conditions, for each share of Stock subject to the Option
immediately prior to the Change in Control, the consideration (whether stock,
cash or other securities or property) to which a holder of a share of Stock on
the effective date of the Change in Control was entitled. Any Options which are
neither assumed or substituted for by the Acquiring Corporation in connection
with the Change in Control nor exercised as of the date of the Change in Control
shall terminate and cease to be outstanding effective as of the date of the
Change in Control. Notwithstanding the foregoing, shares acquired upon exercise
of an Option prior to the Change in Control and any consideration received
pursuant to the Change in Control with respect to such shares shall continue to
be subject to all applicable provisions of the Option Agreement evidencing such
Option except as otherwise provided in such Option Agreement. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject
to the outstanding Options immediately prior to an Ownership Change Event
described in Section 8.1(a)(i) constituting a Change in Control is the surviving
or continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the outstanding Options
shall not terminate unless the Board otherwise provides in its sole discretion.

     9.   NONTRANSFERABILITY OF OPTIONS.

          During the lifetime of the Optionee, an Option shall be exercisable
only by the Optionee or the Optionee's guardian or legal representative. No
Option shall be assignable or transferable by the Optionee, except by will or by
the laws of descent and distribution.

     10.  COMPLIANCE WITH SECURITIES LAW.

          The grant of Options and the issuance of shares of Stock upon exercise
of Options shall be subject to compliance with all applicable requirements of
federal, state and foreign law with respect to such securities. Options may not
be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, no Option may be exercised
unless (a) a registration statement under the Securities Act shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (b) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company's legal counsel
to be necessary to the

                                       10

<PAGE>   11

lawful issuance and sale of any shares hereunder shall relieve the Company of
any liability in respect of the failure to issue or sell such shares as to which
such requisite authority shall not have been obtained. As a condition to the
exercise of any Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.

     11.  INDEMNIFICATION.

          In addition to such other rights of indemnification as they may have
as members of the Board or officers or employees of the Participating Company
Group, members of the Board and any officers or employees of the Participating
Company Group to whom authority to act for the Board or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.

     12.  TERMINATION OR AMENDMENT OF PLAN.

          The Board may terminate or amend the Plan at any time. However, no
termination or amendment of the Plan may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such termination or amendment is necessary to comply with any applicable
law, regulation or rule.

                                       11

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