<PAGE>

                                                                    EXHIBIT 10.5

                                     LEASE



                      METROPOLITAN LIFE INSURANCE COMPANY
                             a New York corporation


                                  as Landlord


                                      and


                              TELEGEN CORPORATION
                            a California corporation


                                   as Tenant



                                 SEAPORT CENTRE
                            REDWOOD CITY, CALIFORNIA
<PAGE>

                               TABLE OF CONTENTS

                                                                         PAGE(S)
                                                                         -------

PARAGRAPH 1 -  LEASE OF PREMISES; TERM...................................     1

PARAGRAPH 2 -  BASIC ANNUAL RENT AND RENT ADJUSTMENTS....................     2

PARAGRAPH 3 -  ADDITIONAL RENT...........................................     3

PARAGRAPH 4 -  SECURITY DEPOSIT..........................................     6

PARAGRAPH 5 -  SUBSTITUTED PREMISES......................................     7

PARAGRAPH 6 -  REPAIRS...................................................     7

PARAGRAPH 7 -  IMPROVEMENTS AND ALTERATIONS..............................     8

PARAGRAPH 8 -  LIENS.....................................................    10

PARAGRAPH 9 -  USE OF PREMISES...........................................    11

PARAGRAPH 10 - UTILITIES AND SERVICES....................................    14

PARAGRAPH 11 - RULES AND REGULATIONS.....................................    15

PARAGRAPH 12 - TAXES ON TENANT'S PROPERTY................................    15

PARAGRAPH 13 - FIRE OR CASUALTY..........................................    16

PARAGRAPH 14 - EMINENT DOMAIN............................................    17

PARAGRAPH 15 - ASSIGNMENT AND SUBLETTING.................................    18

PARAGRAPH 16 - ACCESS....................................................    21

PARAGRAPH 17 - SUBORDINATION; ATTORNMENT; ESTOPPEL
               CERTIFICATES..............................................    22

PARAGRAPH 18 - SALE BY LANDLORD..........................................    23

PARAGRAPH 19 - NON-LIABILITY AND INDEMNIFICATION OF LANDLORD;
               INSURANCE.................................................    23

PARAGRAPH 20 - WAIVER OF SUBROGATION.....................................    26

PARAGRAPH 21 - ATTORNEYS' FEES...........................................    27

PARAGRAPH 22 - WAIVER....................................................    28

PARAGRAPH 23 - NOTICES...................................................    28

                                       i
<PAGE>

                                                                         PAGE(S)
                                                                         -------

PARAGRAPH 24 - INSOLVENCY OR BANKRUPTCY..................................    30

PARAGRAPH 25 - DEFAULT...................................................    30

PARAGRAPH 26 - HOLDING OVER..............................................    33

PARAGRAPH 27 - CONDITION OF PREMISES.....................................    33

PARAGRAPH 28 - QUIET POSSESSION..........................................    34

PARAGRAPH 29 - NOTICE OF DAMAGE..........................................    34

PARAGRAPH 30 - GOVERNING LAW.............................................    34

PARAGRAPH 31 - COMMON FACILITIES; PARKING................................    34

PARAGRAPH 32 - SIGNAGE...................................................    35

PARAGRAPH 33 - SUCCESSORS AND ASSIGNS....................................    36

PARAGRAPH 34 - BROKERS...................................................    36

PARAGRAPH 35 - NAME......................................................    36

PARAGRAPH 36 - EXAMINATION OF LEASE......................................    36

PARAGRAPH 37 - INTEREST ON TENANT'S OBLIGATIONS;
               LATE CHARGE...............................................    37

PARAGRAPH 38 - TIME......................................................    37

PARAGRAPH 39 - DEFINED TERMS AND MARGINAL HEADINGS.......................    37

PARAGRAPH 40 - PRIOR AGREEMENTS; SEVERABILITY............................    38

PARAGRAPH 41 - CORPORATE AUTHORITY.......................................    38

PARAGRAPH 42 - NO LIGHT, AIR OR VIEW EASEMENTS...........................    38

PARAGRAPH 43 - LANDLORD'S APPROVALS......................................    39

PARAGRAPH 44 - EXERCISE FACILITY.........................................    39

PARAGRAPH 45 - MISCELLANEOUS.............................................    39

PARAGRAPH 46 - WAIVER OF JURY TRIAL......................................    40

PARAGRAPH 47 - OPTION TO EXTEND..........................................    40

                                      ii

<PAGE>

CONSTRUCTION ADDENDUM
---------------------


EXHIBIT A      Site Plan of Project

EXHIBIT B      Site Plan of Premises

EXHIBIT C      Confirmation of Lease Term

EXHIBIT D      Permitted Hazardous Materials

EXHIBIT E      Plans

                                      iii
<PAGE>

                                     LEASE

          THIS LEASE is made as of August 1, 1996 by and between
METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation ("Landlord"), and
TELEGEN CORPORATION, a California corporation ("Tenant").


                             BASIC LEASE PROVISIONS

        1.  PREMISES LOCATION:  Building One; Phase I of Seaport Centre; 101
Saginaw Drive, Redwood City, California 94063. (A.P.N. 054-321-010)

        2.  RENTABLE AREA:  Approximately 29,921 square feet.

        3.  INITIAL BASIC ANNUAL RENT: $412,909.80 ($13.80 per rentable square
foot per year)

        4.  INITIAL MONTHLY RENTAL INSTALLMENTS: $34,409.15 ($1.15 per rentable
square foot)

        5. RENT ADJUSTMENT DATES (AND BASIC ANNUAL RENT AND MONTHLY RENTAL
INSTALLMENTS THEREAFTER):

           MONTH                 ANNUAL RENT                MONTHLY INSTALLMENT
           -----                 -----------                -------------------

        Months 01-12             $412,909.80                   $ 34,409.15

        Months 13-24             $430,862.40                   $ 35,905.20

        Months 25-36             $448,815.00                   $ 37,401.25

        Months 37-48             $466,767.60                   $ 38,897.30

        Months 49-60             $484,720.20                   $ 40,393.35

        6.  TENANT'S SHARE OF OPERATING EXPENSES:

            Tenant's Building Share:  48.78%
            Tenant's Phase Share:      9.913%
            Tenant's Project Share:    2.99%

        7.  TERM OF LEASE:  Five (5) Years and Zero (0) Months

        8. COMMENCEMENT DATE: August 1, 1996 (but see Paragraph 1(c) of this
Lease).

        9.  EXPIRATION DATE:  Five (5) years after the Commencement Date.
<PAGE>

        10. SECURITY DEPOSIT: $50,000 due upon execution and delivery of this
Lease by Tenant.

        11.  LISTING BROKER:  Cornish & Carey Commercial

        12.  COOPERATING BROKER:  Dillard Investments

        13.  SOLE PERMITTED USE:  General office, electronics research and
development, laboratory and prototype production of electronics devices,
warehousing and distribution of electronics devices; however, in no event in
violation of any provision of any rules and regulations for the Project.

        14.  PARKING SPACES:  98.


          IN WITNESS WHEREOF, the parties hereto have executed this Lease,
consisting of the foregoing Basic Lease Provisions and Paragraphs 1 through 47
which follow, together with the attached Addendum to Office Lease, Construction
Addendum and Exhibits A through E inclusive, incorporated herein by this
reference, as of the date first above written.  The foregoing Basic Lease
Provisions are an integral part of this Lease; however, in the event of any
conflict between any Basic Lease Provision and the balance of this Lease, the
latter shall control.


LANDLORD:

METROPOLITAN LIFE INSURANCE COMPANY,
a New York corporation

By: _________________________
Its: ________________________


TENANT:

TELEGEN CORPORATION
a California corporation

By: _________________________
Its: ________________________
<PAGE>

                            LEASE OF PREMISES; TERM
                            -----------------------

PARAGRAPH 1

     (a) Seaport Centre.  The real property shown on the map attached hereto as
         --------------
Exhibit A, together with all improvements now or hereafter located on such real
---------
property, is referred to in this Lease as the "Project."  The Project is more
commonly known as Seaport Centre and is located in Redwood City, California.
The Project is comprised of Phase I, Phase II and Phase III, which are generally
designated on Exhibit A, each of which shall individually be referred to in this
              ---------
Lease as a "Phase."  The Phase in which the Premises (as defined in Paragraph
1(b) herein) are located is indicated in Item 1 of the Basic Lease Provisions
and is referred to in this Lease as "Tenant's Phase."  The building in which the
Premises are located is indicated in Item 1 of the Basic Lease Provisions and is
referred to in this Lease as the "Building."  Landlord reserves the right to
amend at any time the definition of "Tenant's Phase" (without additional cost to
Tenant) to include any other buildings located in the Project which are owned by
Landlord, in which event Tenant's Phase Share (as defined in Paragraph 3(a)
below) shall be adjusted to reflect the inclusion of any such additional
buildings in the definition of "Tenant's Phase."

     (b) Lease of Premises.  Landlord hereby leases to Tenant and Tenant hereby
         -----------------
hires from Landlord, subject to all the terms and conditions hereinafter set
forth, those certain premises (the "Premises") described in Items 1 and 2 of the
Basic Lease Provisions above and substantially as shown in the floor plan
attached hereto as Exhibit B.
                   ---------

     (c) Term.  The term of this Lease (the "Term") shall be as shown in Item 7
         ----
of the Basic Lease Provisions and shall commence on the earlier to occur of (i)
the commencement date shown in Item 8 of the Basic Lease Provisions or (ii) the
date of Substantial Completion of the Tenant Improvements (defined in the
Construction Addendum attached hereto) and issuance of a certificate of
occupancy or equivalent document by the City of Redwood City, or (iii) such
earlier date as Tenant takes possession or commences use of all or any portion
of the Premises for any purpose other than the storage of Tenant's equipment and
materials or the construction and installation therein of the Tenant
Improvements (the "Commencement Date") and shall expire, if not sooner
terminated pursuant to the terms of this Lease, as of the date set forth in Item
9 of the Basic Lease Provisions (the "Expiration Date").  As used herein,
"Substantial Completion" of the Tenant Improvements shall mean that the work of
constructing the Tenant Improvements shall be complete, as stated in a notice
prepared by Landlord's architect, notwithstanding that minor details of
construction, mechanical adjustments or decorations which do not materially
interfere with Tenant's use of the Premises (so-called "punchlist" items) remain
to be performed or that Tenant's furniture,
<PAGE>

telephones, telecopiers, photocopiers, computers and other business machines or
equipment have not been installed by Tenant.  The actual Commencement Date and
Expiration Date shall be confirmed by Landlord in the Confirmation of Lease Term
attached hereto as Exhibit C upon such commencement.
                   ---------


                     BASIC ANNUAL RENT AND RENT ADJUSTMENTS
                     --------------------------------------

PARAGRAPH 2

     (a) Basic Annual Rent.  Tenant agrees to pay as Basic Annual Rent for the
         -----------------
Premises the initial sum shown in Item 3 of the Basic Lease Provisions,
increased as set forth in Paragraph 2(b) below.  The Basic Annual Rent shall be
payable in equal monthly installments as shown in Items 4 and 5 of the Basic
Lease Provisions, each payable in advance and without deduction, abatement or
offset.  A monthly installment shall be paid to Landlord on the date of this
Lease in the full amount and, subsequently, monthly installments shall be paid
to Landlord on the first day of the first calendar month commencing after the
Commencement Date and continuing on the first day of each calendar month during
the Term thereafter.  If the Term commences or ends on a day other than the
first or last day, respectively, of a calendar month, then the Basic Annual Rent
for each such partial month shall be prorated in the proportion that the number
of days this Lease is in effect during such partial month bears to the total
number of days in such calendar month, and such Basic Annual Rent shall be
payable at the commencement of such partial month.

     (b) Rent Increases.  The amount of Basic Annual Rent and the Monthly Rental
         --------------
Installments shall be adjusted on each Rent Adjustment Date set forth in Item 5
of the Basic Lease Provisions, to be the amount shown in the Basic Lease
Provisions.

     (c) Rent.  Tenant acknowledges and agrees that Landlord has entered into
         ----
this Lease in reliance upon Tenant's agreement to timely pay all of the Basic
Annual Rent, the Additional Rent (as defined in Paragraph 3 below) and all other
amounts required to be paid under this Lease (including all Addenda and Exhibits
hereto and subsequent amendments hereof) and in no event would Landlord have
agreed to grant any occupancy rights in and to the Premises to Tenant for less
than all such amounts, however described or designated herein.  Accordingly, all
sums payable by Tenant to Landlord hereunder are sometimes collectively referred
to as, and shall collectively constitute, "rent" for all purposes hereunder, at
law and in equity.
<PAGE>

                                 ADDITIONAL RENT
                                 ---------------

PARAGRAPH 3

          (a) Tenant's Share of Costs.  Tenant shall pay as "Additional Rent"
          --- -----------------------
Tenant's proportionate share ("Tenant's Building Share") of the Building
Operating Expenses (as defined below), plus Tenant's proportionate share
("Tenant's Phase Share") of Phase Operating Expenses (as defined below), plus
Tenant's proportionate share ("Tenant's Project Share") of Project Operating
Expenses (as defined below).  Tenant's Building Share shall be the percentage
obtained by dividing the rentable square footage of the Premises by the total
rentable square footage of the Building and Tenant's Phase Share shall be the
percentage obtained by dividing the rentable square footage of the Premises by
the total rentable square footage of the Phase.  Tenant's Project Share shall be
the percentage obtained by dividing the rentable square footage of the Premises
by the total rentable square footage of the Project.  Tenant's Building Share,
Tenant's Phase Share and Tenant's Project Share shall initially be as set forth
in Item 6 of the Basic Lease Provisions.

          (b) Operating Expenses Defined.  "Operating Expenses" shall include
              --------------------------
all costs incurred by Landlord in the management, operation, maintenance and
repair of the Building, Tenant's Phase and the Project.  "Building Operating
Expenses" shall include Operating Expenses that are directly and separately
identifiable to the operation and maintenance of the Building.  "Project
Operating Expenses" shall include all Operating Expenses incurred in the
operation and maintenance of the Project which are neither Building Operating
Expenses nor Operating Expenses directly and separately identifiable to the
operation and maintenance of any other office building in the Project.  "Phase
Operating Expenses" may include Building Operating Expenses that are incurred by
each building, including the Building, in Tenant's Phase, and also may include
Project Operating Expenses that are separately identifiable to Tenant's Phase.
Landlord shall have the right to allocate a particular expense as a Building
Operating Expense, Project Operating Expense or Phase Operating Expense;
however, in no event shall any portion of Building Operating Expenses, Project
Operating Expenses or Phase Operating Expenses be assessed or counted against
Tenant more than once.

          (c) Examples of Operating Expenses.  Operating Expenses shall include
              ------------------------------
the following costs, by way of illustration only and not limitation: (1) all
"Property Taxes" (as defined below), and all costs and expenses to contest the
amount or validity of any of the same; (2) all insurance premiums and other
costs (including deductibles), including the cost of rental insurance; (3) all
license, permit and inspection fees; (4) all costs of utilities, fuels and
related services, including water, sewer, light, telephone, power and steam
connection, service and related charges;
<PAGE>

(5) all costs to repair, maintain and operate heating, ventilating and air
conditioning systems, including, without limitation, preventive maintenance; (6)
all janitorial, landscaping and security services; (7) all wages, salaries,
payroll taxes, fringe benefits and other labor costs, including the cost of
workers' compensation and disability insurance; (8) all costs of operation,
maintenance and repair of all parking facilities and other common areas; (9) all
supplies, materials, equipment and tools; (10) dues of and expenses and
assessments incurred in connection with membership in the Seaport Centre Owners'
Association; (11) modifications to the Building or the Project occasioned by any
applicable laws, statutes, ordinances, orders, requirements, rules or
regulations now or hereafter in effect of any governmental or quasi-governmental
authority; (12) the total charges of any independent contractors employed in the
care, operation, maintenance, repair and cleaning of the Project, including,
without limitation, landscaping, roof maintenance, and repair, maintenance and
monitoring of life-safety systems, plumbing systems, electrical wiring and
Project signage; (13) the cost of accounting services necessary to compute the
rents and charges payable by tenants at the Project; (14) window and exterior
wall cleaning and painting; (15) managerial and administrative expenses; (16)
all costs in connection with the exercise facility at the Project; (17) all
costs and expenses related to Landlord's retention of consultants in connection
with the routine review, inspection, testing, monitoring, analysis, and control
of Hazardous Materials (defined in Paragraph 9(b) below) and retention of
consultants in connection with the clean-up of Hazardous Materials (to the
extent not recoverable from a particular tenant of the Project, and excluding
costs and expenses arising from the clean-up of Hazardous Materials released on
or beneath the Project prior to the Commencement Date hereof), and all costs and
expenses related to the implementation of recommendations made by such
consultants concerning the use, generation, storage, manufacture, production,
storage, release, discharge, disposal or clean-up of Hazardous Materials on,
under or about the Premises or the Project (to the extent not recoverable from a
particular tenant of the Project, and excluding costs and expenses arising from
the clean-up of Hazardous Materials released on or beneath the Project prior to
the Commencement Date hereof); (18) all capital improvements made that reduce
other Operating Expenses, and all other capital expenditures, but only as
amortized over such reasonable period as Landlord shall determine, with a return
on capital at the rate of ten percent (10%) per annum or at such higher rate as
may have been available to Landlord on funds borrowed for the purpose of
constructing such capital improvements; (19) all property management costs and
fees, including, without limitation, all costs incurred in connection with the
Project property management office; and (20) all fees or other charges incurred
in conjunction with voluntary or involuntary membership in any energy
conservation, air quality, environmental, traffic management or similar
organizations.
<PAGE>

          (d) Property Taxes.  "Property Taxes" shall include (1) all real
              --------------
estate taxes, personal property taxes and other taxes, charges and general and
special assessments which are levied with respect to any portion of the Building
or the Project or any improvements, fixtures, equipment or other property of
Landlord, real or personal, located in or about the Building or Project or used
in connection with the operation thereof, (2) any tax, surcharge, assessment or
service or other fee which shall be levied or collected in addition to or in
lieu of real estate or personal property taxes, other than taxes covered by
Paragraph 12 below, (3) any service or other fees collected by governmental
agencies in addition to or in lieu of property taxes for services provided by
such agencies, and (4) any rental, excise, sales, transaction privilege or other
tax or levy, however denominated, imposed upon or measured by any rent reserved
hereunder or on Landlord's business of leasing the Premises, excepting only net
income taxes.

          (e) Statement of Expenses.  Prior to the commencement of the Term and
              ---------------------
of each calendar year thereafter, Landlord shall give Tenant a written estimate
of the amount of Operating Expenses for the applicable year, as well as Tenant's
share thereof, which amount shall be payable by Tenant as Additional Rent for
the ensuing year or portion thereof.  During the calendar year that is the
subject of Landlord's statement of estimated Operating Expenses, Tenant shall
pay such estimated amount to Landlord in twelve (12) equal monthly installments,
in advance, on the first (1st) day of each calendar month.  Within one hundred
twenty (120) days after the end of each calendar year or as soon thereafter as
reasonably possible, Landlord shall furnish to Tenant a statement (the
"Statement") showing in reasonable detail the actual Building Operating
Expenses, Phase Operating Expenses and Project Operating Expenses incurred by
Landlord for such period and Tenant's proportionate share thereof in accordance
with this Paragraph 3, and Tenant shall within thirty (30) days thereafter make
any payment necessary to adjust its previous actual payments to the amount shown
as due from Tenant on such annual statement.  Any actual overpayment by Tenant
shall be credited against installments of Additional Rent next coming due from
Tenant under this Paragraph 3.  Nothing contained in this Paragraph 3(e) shall
be construed to limit the right of Landlord from time to time during any
calendar year to revise its estimates of the Operating Expenses which are the
subject of this Paragraph and to reflect such revision by prospective
adjustments in billings to Tenant for Tenant's monthly installments payable
under this Paragraph over the remainder of such year.  Tenant's share of such
Operating Expenses for any partial year during the Term shall be that proportion
of Tenant's Building Share of Building Operating Expenses, Tenant's Phase Share
of Phase Operating Expenses and Tenant's Project Share of Project Operating
Expenses for the full year which is the same proportion as the number of days in
such partial year is to three hundred sixty-five (365).
<PAGE>

          (f) Adjustment to Operating Expenses.  Notwithstanding anything to the
              --------------------------------
contrary contained in this Paragraph 3, as to each specific category of
Operating Expense which one or more tenants of the Building either pays directly
to third parties or specifically reimburses to Landlord (for example, separately
contracted janitorial services or property taxes directly reimbursed to
Landlord), then, on a category by category basis, the amount of Operating
Expenses for the affected period shall be adjusted as follows: (1) all such
tenant payments with respect to such category of expense and all of Landlord's
costs reimbursed thereby shall be excluded from Operating Expenses and Tenant's
Building Share, Tenant's Phase Share or Tenant's Project Share, as the case may
be, for such category of Operating Expense shall be adjusted by excluding the
square footage of all such tenants, and (2) if Tenant pays or directly
reimburses Landlord for such category of Operating Expense, such category of
Operating Expense shall be excluded from the determination of Operating Expenses
for the purposes of this Lease.

          (g)   Inspection Rights.  (i) Within thirty (30) days after receipt of
                -----------------
the Statement ("Examination Request Period"), Tenant shall be entitled, upon
five (5) days prior written notice (made within the Examination Request Period)
and during normal business hours at Landlord's office in Foster City,
California, or such other place in San Mateo County, California as Landlord
shall designate, to copy (at Tenant's expense), inspect, examine and audit those
books and records of Landlord relating to the determination of Operating
Expenses for the calendar year for which such Statement was prepared.  In no
event shall Tenant have the right to audit any particular year more than once.
If Tenant does not audit any particular year within the time periods set forth
in this Paragraph 3(g), the Statement for that year shall be considered final,
correct and accepted by Tenant.

          (ii) The initial inspection of Landlord's records may be conducted by
a current or former employee of Tenant, a recognized regional accounting firm or
such other person designated by Tenant that is reasonably acceptable to
Landlord.  In connection therewith and in connection with any audit described in
Paragraph 3(g)(iii) hereof, Tenant acknowledges that it shall be reasonable for
Landlord to object to the proposed use by Tenant of any competitors engaged in
the development and ownership of real estate, real estate brokers, or persons
engaged in the business of auditing building owners' books and records on a
contingent fee basis.  If, after inspection and examination of such books and
records, which must be conducted within thirty (30) days of such books and
records being made available to Tenant ("Examination Period"), Tenant disputes
the amounts of Operating Expenses charged by Landlord, Tenant shall have until
ten (10) days after the expiration of the Examination Period (the "Audit Request
Period"), by written notice to Landlord, to request an independent audit of such
books and records, which notice shall specifically describe the item or items
<PAGE>

disputed by Tenant.  Unless Tenant takes written exception to any item or items
of Operating Expenses within the Audit Request Period, such Statement shall be
considered final, correct and accepted by Tenant.

          (iii)  The independent audit of the books and records shall be
conducted by a certified public accountant ("CPA") acceptable to both Landlord
and Tenant, during normal business hours at Landlord's office in Foster City,
California, or such other place in San Mateo County, California as Landlord
shall designate, on a date acceptable to Landlord and Tenant but in any event
within sixty (60) days after Tenant's notice electing an independent audit as
set forth in (ii) above (the "Audit Period").  If, within thirty (30) days after
Landlord's receipt of Tenant's notice requesting an audit, Landlord and Tenant
are unable to agree on the CPA to conduct such audit, then Landlord shall
designate a nationally recognized accounting firm (other than Landlord's then
current accounting firm) to conduct such audit.  The audit shall occur during
the Audit Period and shall not extend beyond five (5) business days.  The audit
shall be limited to the determination of the amount of Operating Expenses for
the subject calendar year.  If the audit determines that the amount of Operating
Expenses for such year was incorrect, a written audit report shall specifically
describe those items of Operating Expenses which are incorrect.

          (iv)  If the audit report determines that the amount of Operating
Expenses billed to Tenant was incorrect, Tenant shall have fifteen (15) business
days after the completion of the audit to send the audit report to Landlord,
which report shall include the specific items of Operating Expenses in dispute.
If Landlord disagrees with any part of the CPA's determination, then Landlord
shall be entitled to meet with the CPA and Tenant to discuss corrections or
revisions in the CPA's report, to attempt to resolve any differences for a
period of sixty (60) business days after Landlord's receipt of the CPA's written
report of its review.  The CPA shall take into consideration any comments of
Landlord or Tenant and shall issue its final written report, with such
corrections or changes as the CPA deems appropriate and consistent with this
Lease, within thirty (30) days after termination of discussions with Landlord.
If Landlord disagrees with any item of Operating Expense on the CPA's final
report, then Landlord may notify Tenant thereof and Tenant may, by written
notice to Landlord within ten (10) business days after Landlord notifies Tenant
of the items disputed by Landlord, either (i) accept Landlord's determination,
in which event such accepted items shall be deemed final, correct and accepted
by Tenant, or (ii) elect to submit the dispute to arbitration in accordance with
Paragraph 3(g)(v) hereof.  If the dispute is submitted to arbitration, only the
disputed items shall be the subject of the arbitration, and the remaining
portion of such Statement shall be considered final, correct and accepted by
Tenant.  Landlord shall also submit to Tenant in writing Landlord's opinion of
the actual amount of the disputed items of
<PAGE>

Operating Expenses for the applicable year, and the CPA's written report shall
be deemed to be Tenant's opinion thereof.  Unless Tenant elects to submit any
particular item to arbitration within the ten-day period set forth above, such
Statement shall be considered as final, correct and accepted by Tenant.

          (v)  A. Within seven (7) days after Tenant elects arbitration pursuant
to Paragraph 3(g) hereof, the parties shall select as an arbitrator a mutually
acceptable partner in a Big 6 accounting firm with at least five (5) years'
experience in reviewing tenants' operating expenses in Northern California.  If
either party has had any other business or contractual relationship with any
proposed arbitrator within the previous five (5) years, it must disclose this
fact in writing.  If the parties cannot agree on an arbitrator within such seven
(7) day period, then within a second period of seven (7) days, each shall select
and inform the other party of an certified public accountant meeting the
aforementioned criteria and within a third period of seven (7) days, the two
arbitrators shall select a third arbitrator meeting the aforementioned criteria
and which does not have an existing business relationship with either party and
the three arbitrators shall determine the amount of the disputed items of
Operating Expenses due pursuant to this Paragraph 3(g)(vi).  If one party shall
fail to make such appointment within said second seven (7) day period, then the
arbitrator chosen by the other party shall be the sole arbitrator, who shall
determine the actual amount of the disputed items of Operating Expenses due
pursuant to this Paragraph.

          B.  Once the arbitrators have been selected as provided for above,
then, as soon thereafter as practicable but in any case within fourteen (14)
days, the arbitrators shall select either the Landlord's opinion or Tenant's
(i.e. the CPA's) opinion of the actual amount of Operating Expenses due, and the
selection must be the one that is closer to the actual amount of Operating
Expenses as determined by the majority of the arbitrators.  The arbitrators'
selection shall be binding upon Landlord and Tenant.  Both Landlord and Tenant
shall be entitled to present evidence supporting their respective positions to
the panel of three arbitrators.  Additionally, if the arbitrators believe that
expert advice would materially assist them, they may retain one or more
qualified persons, including but not limited to accountants, legal counsel,
brokers, architects or engineers, to provide such expert advice.  Each party
shall bear the costs of its counsel, experts and its arbitrator.  The party
whose estimate is not chosen by the arbitrators shall also pay the costs and
expenses of the third arbitrator and any experts retained by the three
arbitrators.

          (vi)  If the CPA's final report, or in the event the matter is
submitted to arbitration, the arbitrators' final determination, reveals that the
amount of Operating Expenses billed to Tenant was incorrect, the appropriate
party shall, within thirty
<PAGE>

(30) days following the date of such determination, pay to the other party the
deficiency or overpayment, as applicable.  All costs and expenses of the audit
shall be paid by Tenant unless the audit shows that Landlord overstated
Operating Expenses for the subject calendar year by more than ten percent (10%),
in which case Landlord shall pay all costs and expenses of the audit.  Tenant
shall keep any information gained from such audit confidential and shall not
disclose it to any party except where Tenant is legally required to do so.  The
exercise by Tenant of its audit rights hereunder shall not relieve Tenant of its
obligation to pay prior to the request for an inspection and examination of
Landlord's books and records or any audit all sums due hereunder, including,
without limitation, the disputed Operating Expenses.  If Tenant does not elect
to inspect or audit during the Examination Period or the Audit Period, as the
case may be, or does not examine the books and records during the Examination
Period, or does not cause the books and records to be audited during the Audit
Period, or does not arbitrate any disputed item or otherwise exercise any of its
rights set forth herein within the time constraints set forth in this Paragraph
3(g), then Landlord's Statement shall conclusively be deemed to be final,
correct and accepted by Tenant, and Tenant shall be bound by Landlord's
determination.

          (h)   Cap on Controllable Operating Expenses.  During the Initial Term
                --------------------------------------
(as defined in Paragraph 47(a) hereof) only, for each calendar year subsequent
to the 1996 calendar year, Controllable Operating Expenses (as hereinafter
defined) shall increase no more than ten percent (10%) on a cumulative,
compounded basis, over the previous calendar year (except that when computing
the cap for the 1997 calendar year, the amount for the 1996 calendar year shall
be re-computed as if Tenant had leased the Premises for the entire 1996 calendar
year).  As used herein, "Controllable Operating Expenses" shall include only (i)
employees' salaries and benefits (other than those required by law or union
contract) and (ii) payments to third party contractors (but only to the extent
comparable services can be obtained from reputable vendors or contractors for
lower total payments, and only to the extent of the difference between the
actual payment and such lower total payments), and Controllable Operating
Expenses shall expressly not include, without limitation, utility payments,
insurance premiums, Taxes, and all other expenses not within the control of
Landlord.

          By way of example only, assume that the Controllable Operating
Expenses (without regard to the application of the cap) for the entire 1996
calendar year is $100, then (1) if actual Controllable Operating Expenses for
the 1997 calendar year equal $105, Tenant would be charged $105 in Controllable
Operating Expenses, and (2) if actual Controllable Operating Expenses for the
1998 calendar year equal $125, Tenant would be charged $121 in Controllable
Operating Expenses, and (3) if actual Controllable Operating Expenses for the
1999 calendar year equal $132, Tenant would be charged $132 in Controllable
Operating Expenses, and (4) if actual
<PAGE>

Controllable Operating Expenses for the 2000 calendar year equal $150, Tenant
would be charged $146.41 in Controllable Operating Expenses.



                                SECURITY DEPOSIT
                                ----------------

PARAGRAPH 4

          Tenant has paid or, upon execution of this Lease, will pay Landlord
the sum set forth in Item 9 of the Basic Lease Provisions (the "Security
Deposit") as security for the performance of the terms of this Lease by Tenant.
Landlord shall not be required to keep the Security Deposit separate from its
general funds, and Tenant shall not be entitled to interest thereon.  If Tenant
defaults with respect to any provision of this Lease, including, without
limitation, the provisions relating to the payment of rent or the condition of
the Premises upon the termination of this Lease, Landlord may, but shall not be
required to, use, apply or retain all or any part of the Security Deposit for
the payment of any rent or other sum in default or any other amount which
Landlord may spend or become obligated to spend by reason of Tenant's default or
to compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default, including, without limitation, costs and attorneys'
fees incurred by Landlord to recover possession of the Premises following a
default by Tenant hereunder.  If any portion of the Security Deposit is so used
or applied, Tenant shall, within ten (10) days following Landlord's demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its original amount, and Tenant's failure to do so within
ten (10) days following Landlord's demand, shall constitute a default hereunder
by Tenant.  If Tenant shall fully and faithfully perform every provision of this
Lease to be performed by it, the Security Deposit or any balance thereof shall
be returned, without interest, to Tenant (or, at Landlord's option, to the last
assignee of Tenant's interest hereunder) within a reasonable time after the
expiration of the Term and surrender of possession of the Premises to Landlord.


                              SUBSTITUTED PREMISES
                              --------------------

PARAGRAPH 5

          Intentionally Omitted.
<PAGE>

                                 REPAIRS
                                 -------

PARAGRAPH 6

          (a) Landlord's Repairs.  Subject to Paragraph 6(b), Landlord shall
              ------------------
maintain the structural portions of the Building, the roof, exterior walls and
exterior doors, foundation, and underslab standard sewer system of the Building
in good, clean and safe condition, and shall use reasonable efforts, through
Landlord's program of regularly scheduled preventive maintenance, to keep the
Building's standard heating, ventilation and air conditioning ("HVAC") equipment
in reasonably good order and condition.  Notwithstanding the foregoing, Landlord
shall have no responsibility to repair the Building's standard heating,
ventilation and air conditioning equipment, and all such repairs shall be
performed by Tenant pursuant to the terms of Paragraph 6(b) below.  Landlord
shall also maintain the landscaping, parking facilities and other common areas
of the Project.  Except as provided in Paragraphs 13 and 14, there shall be no
abatement of rent, no allowance to Tenant for diminution of rental value and no
liability of Landlord by reason of inconvenience, annoyance or any injury to or
interference with Tenant's business arising from the making of or the failure to
make any repairs, alterations or improvements in or to any portion of the
Project or in or to any fixtures, appurtenances or equipment therein.  Tenant
waives the right to make repairs at Landlord's expense under any law, statute or
ordinance now or hereafter in effect.

          (b) Tenant's Repairs.  Tenant shall, at Tenant's sole cost and
              ----------------
expense, make all repairs to the Premises and fixtures therein which Landlord is
not required to make pursuant to Paragraph 6(a) above, including, without
limitation, repairs to the interior walls, ceilings and windows of the Premises,
the interior doors, Tenant's signage, and the electrical, life-safety, plumbing
and heating, ventilation and air conditioning systems located within or serving
the Premises and shall maintain the Premises, the fixtures and utilities systems
therein, and the area immediately surrounding the Premises (including all
garbage enclosures), in a good, clean and safe condition.  Tenant shall deliver
to Landlord a copy of any maintenance contract entered into by Tenant with
respect to the Premises.  Tenant shall also, at Tenant's expense, keep any non-
standard heating, ventilating and air conditioning equipment and other non-
standard equipment in the Building in good condition and repair, using
contractors approved in advance, in writing, by Landlord, which approval shall
not be unreasonably withheld.  Notwithstanding Paragraph 6(a) above, Tenant will
pay for any repairs to the Building or the Project which are caused by any
negligence or carelessness of Tenant or its assignees, subtenants or employees,
or of the respective agents of any of the foregoing persons, or of any other
persons permitted in the Building or elsewhere in the Project by Tenant or any
of them.  Tenant will
<PAGE>

maintain the Premises, and will leave the Premises upon termination of this
Lease, in a safe, clean, neat and sanitary condition.


                          IMPROVEMENTS AND ALTERATIONS
                          ----------------------------

PARAGRAPH 7

          (a) Common Area.  Landlord shall have the right at any time to change
              -----------
the arrangement and location of the common area of the Building or the Project
and, upon giving Tenant reasonable notice thereof, to change any name, number or
designation by which the Premises, the Building, the Phase or the Project is
commonly known.

          (b)  Alterations.
               -----------

          (1) Tenant shall not make any alterations, additions, or improvements
of or to the Premises without the prior written consent of Landlord, which
Landlord may give or deny in its sole and absolute discretion.  At the time such
consent is requested, Tenant shall furnish to Landlord for Landlord's written
approval (which shall not be unreasonably withheld) the names of Tenant's
architect, Tenant's contractor(s) and all subcontractors who will be supplying
materials or performing work in connection with such alterations, additions and
improvements, a copy of all plans for the proposed work, an estimate of the cost
thereof and such other information as shall be requested by Landlord
substantiating Tenant's ability to pay for such work.  No less than ten (10)
days prior to the commencement of any alterations, additions and improvements of
or to the Premises, Tenant shall deliver to Landlord certificates of insurance
from the carrier(s) providing insurance to Tenant's architect and Tenant's
contractor(s) evidencing the following types of coverage in such amounts as are
reasonably determined by Landlord to be necessary:  (i) professional liability
insurance; (ii) commercial general liability insurance; (iii) business
automobile liability insurance; (iv) workers' compensation insurance; and (v)
umbrella liability insurance.  The insurance specified in (i), (ii), (iii) and
(v) above shall name Landlord as an additional insured, and all such policies
shall provide that thirty (30) days' written notice must be given to Landlord
prior to termination or cancellation.  Landlord, at its sole option, may require
as a condition to the granting of such consent to any work costing in excess of
$10,000, that Tenant provide to Landlord, at Tenant's sole cost and expense, a
lien and completion bond in an amount equal to one and one-half (1-1/2) times
any and all estimated costs of the proposed work, to insure Landlord against any
liability for mechanics' and materialmen's liens and to insure completion of the
work.  Landlord may also require as a condition to Landlord's consent to any
alterations, additions or improvements pursuant to this Paragraph 7(b) that,
following completion of any such alterations, additions or improvements, Tenant
shall provide Landlord with
<PAGE>

unconditional waivers of lien in statutory form from all parties performing
labor and/or supplying equipment and/or materials in connection with such
alterations, additions or improvements, including Tenant's architect(s).  Before
commencing any work, Tenant shall give Landlord at least ten (10) days written
notice of the proposed commencement of such work in order to give Landlord an
opportunity to prepare, post and record such notice as may be permitted by law
to protect Landlord's interest in the Premises and the Building from mechanics'
and materialmen's liens.  Within a reasonable period following completion of any
work, Tenant shall furnish to Landlord, at Tenant's cost, "as built" plans
showing the changes made to the Premises including one (1) complete set of
reproducible drawings for the entire Premises (including, but not limited to, a
floor plan, HVAC, plumbing, electrical and reflected ceiling), including such
alterations, additions or improvements.

          (2) All such alterations, additions and improvements shall be made at
Tenant's sole expense (including, without limitation, the reasonable cost of any
review of Tenant's plans by Landlord's architect and/or Landlord's engineer) and
in conformity with plans therefor approved by Landlord in writing prior to the
commencement of such work, and such work shall be performed by a contractor(s)
approved by Landlord.  All work performed by Tenant shall comply with the laws,
rules, orders, directions, regulations and requirements of all governmental
entities having jurisdiction over such work and shall comply with the rules,
orders, directions, regulations and requirements of any nationally recognized
board of insurance underwriters.  Tenant shall use all commercially reasonable
efforts (including, without limitation, scheduling overtime and weekend work)
not to interfere with other tenants in the Building and the Project when
performing any alterations, additions or improvements.  All such alterations,
additions or improvements (except movable furniture, furnishings and trade
fixtures) shall, at Landlord's option, become the property of Landlord and shall
be surrendered with the Premises, as a part thereof, at the expiration or
earlier termination of the Term.  Upon any termination of this Lease, Tenant
shall, upon demand by Landlord and at Tenant's sole expense, immediately remove
any alterations, additions or improvements installed at the Premises and Tenant
shall repair and restore the Premises to their original condition, reasonable
wear and tear excepted.  Any personal property left on the Premises at the
expiration or other termination of this Lease may, at the option of Landlord,
either be deemed abandoned or be placed in storage at a public warehouse in the
name of and for the account of and at the expense and risk of Tenant or
otherwise disposed of by Landlord in the manner provided by law; or,
alternatively, in the event that Tenant leaves personal property on the Premises
following the expiration or other termination of this Lease, Landlord may, in
Landlord's sole and absolute discretion, deem Tenant to be holding over pursuant
to the terms of Paragraph 26 below.  Tenant expressly releases Landlord of and
from any and all claims and liability for damage to or
<PAGE>

destruction or loss of property left by Tenant upon the Premises at the
expiration or other termination of this Lease and, to the extent permitted by
then applicable law, Tenant shall protect, indemnify, defend and hold Landlord
harmless from and against any and all claims and liability with respect thereto.


                                     LIENS
                                     -----

PARAGRAPH 8

          Tenant shall keep the Premises free from any liens arising out of any
work performed, materials furnished or obligations incurred by or for Tenant,
its assignees or sublessees.  In the event that Tenant shall not, within ten
(10) days following the imposition of any such lien, cause such lien to be
released of record by payment or posting of a proper bond, Landlord shall have,
in addition to all other remedies provided herein and by law, the right but not
the obligation to cause such lien to be released by such means as Landlord shall
deem proper, including payment of or defense against the claim giving rise to
such lien.  All sums paid by Landlord and all expenses incurred by it in
connection therewith shall create automatically an obligation of Tenant to pay
an equivalent amount to Landlord as rent on Landlord's demand therefor, together
with interest at the maximum rate per annum then permitted by law until paid to
Landlord.  Nothing herein shall imply any consent by Landlord to subject
Landlord's estate to liability under any mechanics' or other lien law.

          Tenant shall give Landlord adequate opportunity, and Landlord shall
have the right at all times, to post such notices of nonresponsibility as are
provided for in the mechanics' lien laws of California.


                                USE OF PREMISES
                                ---------------

PARAGRAPH 9

          (a) Compliance with Law.  Tenant shall use the Premises only as set
              -------------------
forth in Item 13 of the Basic Lease Provisions and shall not use or permit the
Premises to be used for any other purpose.  Tenant shall not use or occupy the
Premises in violation of any law or of the certificate of occupancy issued for
the Building and shall, upon five (5) days' written notice from Landlord,
discontinue any use of the Premises which is declared by any governmental
authority having jurisdiction to be a violation of law or of such certificate of
occupancy.  Tenant shall comply with any direction of any governmental authority
having jurisdiction which shall, by reason of the nature of Tenant's use or
occupancy of the Premises, impose any duty upon Tenant or Landlord with respect
to the Premises or with respect to the use or occupancy thereof.
<PAGE>

Tenant shall comply with all covenants, conditions and restrictions affecting
the Project, as such may be amended from time to time, and all articles, bylaws
and rules of the Seaport Centre Owners' Association; provided that Landlord
shall not enact amendments to any of the foregoing if such amendments would
prevent Tenant from using the Premises in accordance with this Lease and as
permitted under Item 13 of the Basic Lease Provisions.  Tenant shall be
responsible for obtaining all necessary governmental approvals in connection
with Tenant's use of the Premises.  Tenant shall not do or permit to be done
anything which will invalidate, or increase the cost of, any fire, extended
coverage or other insurance policy covering any part of the Project or any
property located thereon.  Notwithstanding the provisions of Paragraph 3 above,
Tenant shall, within ten (10) days following Landlord's demand, reimburse
Landlord for the full amount of any additional premium charged for any such
policy by reason of Tenant's failure to comply with the provisions of this
Paragraph 9(a), it being understood that such demand for reimbursement shall not
be Landlord's exclusive remedy.  Tenant shall not in any way obstruct or
interfere with the rights of other tenants or occupants of the Building or the
Project, or injure or annoy them, or use or allow the Premises to be used for
any improper, immoral, unlawful or objectionable purpose; nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Premises or commit or
suffer to be committed any waste in or upon the Premises.

          (b) Hazardous Materials.  Tenant shall not use, generate, manufacture,
              -------------------
produce, store, release, discharge, or dispose of, on, under or about the
Premises or any part of the Project, or transport to or from the Premises or any
part of the Project, any Hazardous Material (as defined below) or allow its
employees, agents, contractors, licensees, invitees or any other person or
entity to do so.

          (1) Notwithstanding the foregoing, Tenant shall be permitted to use
and store in, and transport to and from, the Premises the Hazardous Materials
("Permitted Hazardous Materials") identified on Exhibit D hereto and by this
                                                ---------
reference incorporated herein ("Permitted Hazardous Materials List") so long as:
(a) each of the Permitted Hazardous Materials is used or stored in, or
transported to and from, the Premises only to the extent necessary for Tenant's
operation of its business at the Premises; (b) at no time shall any Permitted
Hazardous Material be on, under or about the Premises in excess of the quantity
specified therefor in the Permitted Hazardous Materials List, and (c) the
conditions set forth in this Paragraph 9(b) are strictly complied with.  The
right to use and store in, and transport to and from, the Premises the Permitted
Hazardous Materials is personal to Telegen Corporation, a California
corporation, and any subsidiary corporations of which Telegen Corporation owns
at least a fifty percent (50%) interest, and may not be assigned or otherwise
transferred by Telegen Corporation without the prior written consent of
Landlord, which
<PAGE>

consent may be withheld in Landlord's sole discretion.  Any consent by Landlord
pursuant to Paragraph 15 of this Lease to an assignment, transfer, subletting,
mortgage, pledge, hypothecation or encumbrance of this Lease, and any interest
therein or right or privilege appurtenant thereto, shall not constitute consent
by Landlord to the use or storage in, or transportation to, the Premises of any
Hazardous Material (including a Permitted Hazardous Material) by any such
assignee, sublessee or transferee unless Landlord expressly agrees otherwise in
writing.  Any consent by Landlord to the use or storage in, or transportation to
or from the Premises, of any Hazardous Material (including a Permitted Hazardous
Material) by an assignee, sublessee or transferee of Tenant shall not constitute
a waiver of Landlord's right to refuse such consent as to any subsequent
assignee or transferee.  All amendments to the Permitted Hazardous Materials
List shall be made in accordance with Paragraph 9(b)(17) hereof.

          (2) Tenant shall comply with and shall cause Tenant's employees,
agents, contractors, licensees and invitees (collectively, "Tenant's Agents") to
comply with, and shall keep and maintain the Premises and cause Tenant's Agents
to keep and maintain the Premises, in compliance with all Environmental Laws (as
defined below). Neither Tenant nor Tenant's Agents shall violate, or cause or
permit the Premises to be in violation of, any Environmental Laws.

          Tenant shall, at its own expense prior to Tenant's use and occupancy,
procure, maintain in effect and comply with all conditions of any and all
permits, licenses and other governmental and regulatory approvals required for
Tenant's use of the Premises. Tenant shall cause any and all Hazardous Materials
removed from the Premises to be removed and transported solely by duly licensed
handlers to duly licensed facilities for final disposal of such materials and
wastes. Tenant acknowledges that the sewer piping at the Project is made of ABS
plastic. Accordingly, without Landlord's prior written consent, which may be
given or withheld in Landlord's sole discretion, only ordinary domestic sewage
is permitted to be put into the drains at the Premises. UNDER NO CIRCUMSTANCES
SHALL TENANT EVER DEPOSIT ANY ESTERS OR KETONES (USUALLY FOUND IN SOLVENTS TO
CLEAN UP PETROLEUM PRODUCTS) IN THE DRAINS AT THE PREMISES. If Tenant desires to
put any substances other than ordinary domestic sewage into the drains, it shall
first submit to Landlord a complete description of each such substance,
including its chemical composition, and a sample of such substance suitable for
laboratory testing. Landlord shall promptly determine whether or not the
substance can be deposited into the drains and its determination shall be
absolutely binding on Tenant. Upon demand, Tenant shall reimburse Landlord for
expenses incurred by Landlord in making such determination. If any substances
not so approved hereunder are deposited in the drains in Tenant's Premises,
Tenant shall be liable to Landlord for all damages resulting therefrom,
<PAGE>

including, but not limited to, all costs and expenses incurred by Landlord in
repairing or replacing the piping so damaged.

          Tenant agrees to provide Landlord with: (a) a copy of any hazardous
material management plan or similar document required by any federal, state or
local governmental or regulatory authority to be submitted by Tenant; (b) copies
of all permits, licenses and other governmental and regulatory approvals with
respect to the use of Hazardous Materials; (c) copies of hazardous waste
manifests reflecting the legal and proper disposal of all Hazardous Materials
removed from the Premises; and (d) copies of all reports, studies and written
results of tests or inspections concerning the Premises or any part of the
Project with respect to Hazardous Materials, including, without limitation, the
"Plans" hereinafter defined (collectively "Documents"). Tenant shall deliver all
Documents to Landlord promptly following the earlier of (i) Tenant's submission
of such Documents to the requesting governmental agency, or (ii) Tenant's
receipt of such Documents (Tenant hereby agreeing that it shall exercise
diligent efforts to expeditiously obtain copies of any such Documents known by
Tenant to exist).

          (3) Upon commencing any activity involving Hazardous Materials on the
Premises, and continuing thereafter throughout the term of this Lease, Tenant
shall initiate and maintain the systems set forth in the following
(collectively, "Plans") in order to ensure the routine monitoring of the levels
of Hazardous Materials which may be present on, under or about the Premises or
any part of the Project or properties adjoining or in the vicinity of the
Project as the result of the activities of Tenant or Tenant's Agents and to
ensure continued compliance with the procedures and regulations concerning the
handling, storage, use and disposal of Hazardous Materials:  (a) each permit,
license or other governmental or regulatory approval with respect to the use of
Hazardous Materials, (b) each Hazardous Materials management plan or similar
document required by any federal, state, or local governmental or regulatory
entity, (c) each plan for handling and disposing of Hazardous Materials
necessary to comply with Environmental Laws prepared by or on behalf of Tenant
or Tenant's Agents (whether or not required to be submitted to a governmental
agency). Copies of the foregoing described Plans are listed on Exhibit E hereto
                                                               ---------
and attached to this Lease as Exhibits E-1 through E-   .
                              ------------         -----

          (4) Not less often than once each calendar quarter during the term of
this Lease, Tenant shall provide Landlord with a written report which shall set
forth the results of the monitoring of Hazardous Materials during the previous
calendar quarter. Landlord may elect (but shall not be obligated) to retain an
independent consultant experienced in the use and management of Hazardous
Materials for the purpose of reviewing any information received by Landlord in
connection with Hazardous Materials. Pursuant to such review, Landlord's
consultant may make
<PAGE>

recommendations in connection with Tenant's control of Hazardous Materials on
the Premises, and Tenant shall implement, at Tenant's sole cost, the
recommendations of Landlord's consultant.  Landlord's failure to appoint any
consultant shall not relieve Tenant of any of Tenant's obligations under this
Lease relating to Hazardous Materials nor constitute a waiver of Landlord's
rights under this Lease.

          (5) Landlord may install permanent or other testing wells or devices
at or about the Premises or any part of the Project, and may cause the ground
water to be tested to detect the presence of Hazardous Materials at least once
every twelve (12) months during the term of this Lease by the use of such wells
or devices as are then customarily used for such purposes. If Tenant so requests
in writing, Landlord shall supply Tenant with a copy of any such test results.
The costs of any such tests, and the installation, maintenance, repair, removal,
closure and replacement of such wells or devices shall be an Operating Expense
pursuant to Paragraph 3 of this Lease; provided, however, such costs shall be
borne solely by Tenant if Tenant is in breach of its obligations under this
Paragraph 9(b) or if the presence of Hazardous Materials is detected and Tenant
or Tenant's Agents are responsible therefor.  Tenant's obligations under this
Paragraph 9(b)(5) shall survive the expiration or earlier termination of this
Lease.

          (6) Landlord and its representative shall have the right, at the
following times, to enter the Premises and to: (i) conduct any testing,
monitoring and analysis for Hazardous Materials; (ii) review any documents,
materials, inventory, financial data or notices or correspondence to or from
private parties or governmental or regulatory authorities in connection
therewith; and (iii) review all storage, use, transportation and disposal
facilities and procedures associated with the storage, use, transportation and
disposal of Hazardous Materials (collectively, "Inspection"):

          a.  Once every three months for the first twelve (12) months after the
later of the date Tenant introduces Hazardous Materials to the Premises pursuant
to this Paragraph 9(b) or notifies Landlord of such use, and once every twelve
(12) months thereafter throughout the term of this Lease; and

          b.  At any time during the term of this Lease if, in Landlord's
reasonable judgment, Tenant is breaching its obligation under this Paragraph
9(b) or is not in compliance with any other provision of this Lease.

          All costs and expenses incurred by Landlord in connection with any
Inspection pursuant to this Paragraph 9(b)(6) shall, subject to Paragraph
9(b)(15) below, become due and payable by Tenant as Additional Rent, upon
presentation by Landlord of an invoice therefor.
<PAGE>

          (7) Tenant shall give prompt written notice to Landlord of:

          a.  any proceeding or inquiry by, notice from, or order of any
governmental authority (including, without limitation, the California State
Department of Health Services) with respect to the presence of any Hazardous
Material on, under or about the Premises or any part of the Project or the
migration thereof from or to other property;

          b.  all claims made or threatened by any third party against Tenant,
the Premises or any part of the Project relating to any loss or injury resulting
from any Hazardous Materials; and

          c.  any spill, release, discharge or nonroutine disposal of Hazardous
Materials that occurs with respect to the Premises or operations at the Premises
by Tenant or Tenant's Agents;

          d.  all matters of which Tenant is required to give notice pursuant to
Sections 25249.5 et seq. and 25359.7 of the California Health and Safety Code;
                 -- ---
and

          e.  Tenant's discovery of any occurrence or condition on, under or
about the Premises or any part of the Project or any real property adjoining or
in the vicinity of the Premises or the Project that could cause the Premises or
any part of the Project to be subject to any restrictions on the ownership,
occupancy, transferability or use of the Premises or any part of the Project
under any Environmental Law, including without limitation, Tenant's discovery of
any occurrence or condition on any real property adjoining or in the vicinity of
the Premises or the Project that could cause the Premises or any part of the
Project to be classified as "border zone property" under the provisions of
California Health and Safety Code Sections 25220 et seq. or any regulation
                                                 -- ---
adopted in accordance therewith, or to be otherwise subject to any restrictions
on the ownership, occupancy, transferability or use of the Premises or any part
of the Project under any Environmental Law.

          (8) Landlord shall have the right to join and participate in, as a
party if it so elects, any legal proceedings or actions affecting the Premises
or any part of the Project initiated in connection with any Environmental Law
and have its attorneys' fees in connection therewith paid by Tenant. In
addition, Tenant shall not take any remedial action in response to the presence
of any Hazardous Materials in, under, or about the Premises or the Project
(except in the case where loss of life or substantial property damage is
imminent or immediate action is required by any governmental entity, in which
event Tenant shall take immediate remedial action), nor enter into any
settlement
<PAGE>

agreement, consent decree or other compromise in respect to any claims relating
to any Hazardous Materials in any way connected with the Premises or the
Project, without first notifying Landlord of Tenant's intention to do so and
affording Landlord ample opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest with respect thereto.

          (9) To the fullest extent permitted by law, Tenant shall protect,
defend, indemnify and hold harmless Landlord, its directors, officers, partners,
employees, agents, successors and assigns from and against any and all claims,
fines, judgments, penalties, losses, damages, costs, expenses or liability
(including attorneys' fees and costs) directly or indirectly arising out of or
attributable to the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal, transportation to or from, or presence
of any Hazardous Material on, under or about the Premises or any part of the
Project (collectively a "Release") including, without limitation: (a) all
foreseeable consequential damages, including, without limitation, loss of rental
income and diminution in property value; (b) the costs of any investigation,
monitoring, removal, restoration, abatement, repair, cleanup, detoxification or
other ameliorative work of any kind or nature (collectively "Remedial Work") and
the preparation and implementation of any closure, remedial or other required
plans; (c) any injury to or death of persons or damage to or destruction of
property; and (d) any failure of Tenant or Tenant's Agents to observe the
foregoing covenants. For purposes of this Paragraph 9(b)(9), any acts or
omissions of Tenant or Tenant's Agents (whether or not they are negligent,
intentional, willful or unlawful) shall be strictly attributable to Tenant.
Tenant's obligations under this Paragraph 9(b)(9) shall survive the expiration
or earlier termination of this Lease.

          In no event shall Landlord be responsible to Tenant for the presence
of Hazardous Materials in, on or about the Premises or the Project to the extent
caused or contributed to by any third party.

          (10) Within forty-five (45) days following the end of Tenant's fiscal
year, Tenant shall provide Landlord with consolidated financial statements
prepared in accordance with generally accepted accounting principles
consistently applied and certified as true and correct by Tenant's independent
certified public accountant setting forth Tenant's performance for the
applicable fiscal year. As of the execution of this Lease, Tenant's fiscal year
ends __________.  Tenant shall provide Landlord with prompt written notice of
any change in Tenant's fiscal year. If at any time it reasonably appears to
Landlord that Tenant is not maintaining sufficient insurance or is not otherwise
financially capable of fulfilling its obligations under this Paragraph 9(b),
whether or not such obligations have accrued, become liquidated, conditional or
contingent, Tenant shall procure and thereafter
<PAGE>

maintain in full force and effect such insurance or other form of financial
assurance, with or from companies or persons and in forms reasonably acceptable
to Landlord, as Landlord may from time to time request.

          (11) Upon any Release, Tenant shall, subject to Paragraph 9(b)(8),
promptly notify Landlord of the Release and shall, at its sole expense and
immediately after demand by Landlord, commence to perform and thereafter
diligently prosecute to completion such Remedial Work as is necessary to restore
the Premises, Project or any other property affected by the Release to the
condition existing prior to the use of any Hazardous Materials. All such
Remedial Work shall be performed: (a) in conformance with the requirements of
all applicable Environmental Laws; (b) by one or more contractors, approved in
advance in writing by Landlord; and (c) under the supervision of a consulting
engineer approved in advance in writing by Landlord. All costs and expenses of
such Remedial Work shall be paid by Tenant including, without limita tion, the
charges of such contractor(s) and/or the consulting engineer and Landlord's
reasonable attorneys' fees and costs incurred in connection with the monitoring
or review of such Remedial Work. In the event Tenant shall fail to timely
commence, or cause to be commenced, or fail to diligently prosecute to
completion, such Remedial Work, Landlord may, but shall not be required to,
cause such Remedial Work to be performed and all costs and expenses thereof, or
incurred in connection therewith, shall become immediately due and payable by
Tenant.  Tenant's obligations under this Paragraph 9(b)(11) shall survive the
expiration or sooner termination of this Lease.

          (12) "Hazardous Materials" shall include, without limitation, (i)
those substances included within the definitions of "hazardous substances,"
"hazardous materials," "toxic substances" or "solid waste" under all present and
future federal, state and local laws (whether under common law, statute, rule,
regulation or otherwise) relating to the protection of human health or the
environment, including, without limitation, California Senate Bill 245 (Statutes
of 1987, Chapter 1302), the Safe Drinking Water and Toxic Enforcement Act of
1986 (commonly known as Proposition 65) and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
     -- ---
Section 6901 et seq., and the Hazardous Materials Transportation Act, 49 U.S.C.
             -- ---
Sections 1801, et seq., all as heretofore and hereafter amended, or in any
               -- ---
regulations promulgated pursuant to said laws; (ii) those substances defined as
"hazardous wastes" in Section 25117 of the California Health & Safety Code or as
"hazardous substances" in Section 25316 of the California Health & Safety Code,
or in any regulations promulgated pursuant to said laws; (iii) those substances
listed in the United States Department of Transportation Table (49 CFR 172.101
and amendments thereto) or designated by the Environmental Protection Agency (or
any successor
<PAGE>

agency) as hazardous substances (see, e.g., 40 CFR Part 302 and amendments
                                 ---  ----
thereto); (iv) such other substances, materials and wastes which are or become
regulated under applicable local, state or federal law or by the United States
government or which are or become classified as hazardous or toxic under
federal, state or local laws or regulations, including, without limitation,
California Health & Safety Code, Division 20, and Title 26 of the California
Code of Regulations; and (v) any material, waste or substance which contains
petroleum, asbestos or polychlorinated biphenyls, is designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act of 1977, 33 U.S.C.
Sections 1251, et seq. (33 U.S.C. (S) 1321) or listed pursuant to Section 307 of
               ------
the Clean Water Act of 1977 (33 U.S.C. (S) 1317) or contains any flammable,
explosive or radioactive material.

          (13) "Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, or regulation now in effect or hereafter enacted pertaining
to health, industrial hygiene, or the environmental conditions on, under or
about the Premises or any part of the Project, including without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
("CERCLA") as amended, 42 U.S.C. section 9601 et seq., and the Resource
                                              -- ---
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. sections 6901 et seq.
                                                                        -- ---

          (14) In addition to Tenant's obligations pursuant to Paragraph 27(b)
of this Lease, Tenant shall, on the expiration or sooner termination of this
Lease, surrender the Premises to Landlord free of Hazardous Materials. If Tenant
fails to so surrender the Premises and the Project, the provisions of Paragraph
9(b)(9) shall apply.  Landlord shall have the right, but not the obligation, to
appoint a consultant, at Tenant's expense, to conduct an investigation to
determine whether any Hazardous Materials are located in or about the Premises
or the Project, and to determine the corrective measures required to remove such
Hazardous Materials. Tenant, at its expense, shall comply with all
recommendations of the consultant. A failure by Landlord to appoint such a
consultant shall in no way relieve Tenant of any of Tenant's obligations set
forth in this Lease relating to Hazardous Materials, nor constitute a waiver of
Landlord's rights under this Lease. Tenant's obligations under this Paragraph
9(b)(14) shall survive the expiration or earlier termination of this Lease.

          (15) Except as otherwise provided in Paragraphs 9(b)(4) (concerning
the implementation of consultant recommendations) and 9(b)(11) (concerning the
monitoring and review of Remedial Work), all costs incurred by Landlord in
retaining a consultant for any purpose contained in this Paragraph 9(b) shall be
an Operating Expense under Paragraph 3 of this Lease unless Landlord retains a
consultant pursuant to this Paragraph 9(b), and such consultant reasonably
determines after appropriate review of information and/or inspection that Tenant
is breaching its obligations under
<PAGE>

this Lease to comply with this Paragraph 9(b), in which event all costs and
expenses incurred by Landlord in connection with any such review, inspection,
and/or implementation of recommendations pursuant to this Paragraph 9(b) shall
become due and payable by Tenant as Additional Rent, upon presentation by
Landlord of an invoice therefor.

          (16) Upon any violation of any of the foregoing covenants, Landlord
shall be entitled to exercise all remedies available to a landlord against a
defaulting tenant, including but not limited to those set forth in Paragraph
25(b) of this Lease.  Without limiting the generality of the foregoing, Tenant
expressly agrees that upon any such violation Landlord may, at its option (i)
immediately terminate this Lease, or (ii) continue this Lease in effect until
compliance by Tenant with its clean-up and removal covenant (notwithstanding the
expiration of the Term).  No action by Landlord hereunder shall impair the
obligations of Tenant pursuant to this Paragraph 9(b).

          (17)  Tenant may request permission to use and store in, and transport
to and from the Premises Hazardous Materials not identified on the Permitted
Hazardous Materials List by delivering to Landlord Tenant's written request
containing the following information for each Hazardous Material for which
permission is requested:  (i) disclosure of the Hazardous Materials
classification (i.e., whether toxic, corrosive, combustible, flammable,
poisonous or reactive), as the same may be defined in California Code of
Regulations, Title 23, Division 4; (ii) the chemical name of such Hazardous
Materials; (iii) the maximum amount of such Hazardous Materials which would be
on the Premises at any given time; and (iv) a detailed description of how such
materials will be transported to and from the Premises and the location and
manner in which such Hazardous Materials will be stored on the Premises.
Landlord agrees to promptly commence review of Tenant's written request upon
receipt of all of the information described in the previous sentence, and
Landlord agrees to use commercially reasonable efforts to respond to Tenant's
request within ten (10) business days following receipt of such information.  In
the event Landlord uses a consultant to review Tenant's request, Tenant shall
pay the reasonable fees and costs of such consultant within ten (10) business
days after Landlord's request for payment.  Landlord shall have the right to
reasonably disapprove Tenant's request or to impose reasonable conditions or
restrictions on the use, storage, handling or transportation of the Hazardous
Materials which are the subject of Tenant's request.  Without limiting the
criteria upon which Landlord can disapprove such request, Landlord shall have
the right to disapprove of such request if the use, storage or handling of such
additional Hazardous Materials at the Premises could potentially pose an
increased risk of contamination, explosion or fire danger to any portion of the
Project.
<PAGE>

          (c) ADA.  Tenant acknowledges that the Americans with Disabilities Act
              ---
of 1990 (as amended and as supplemented by further laws from time to time, the
"ADA") imposes certain requirements upon the owners, lessees and operators of
commercial facilities and places of public accommodation, including, without
limitation, prohibitions on discrimination against any individual on the basis
of disability.  Accordingly, but without limiting the generality of and in
addition to all other requirements under this Lease, Tenant agrees to take all
proper and necessary action to cause the Premises to be maintained, used and
occupied in compliance with the ADA and, further, to otherwise assume all
responsibility to ensure the Premises' continued compliance with all provisions
of the ADA throughout the Term.


                             UTILITIES AND SERVICES
                             ----------------------

PARAGRAPH 10

          (a) Payment by Tenant.  Tenant shall be responsible for and shall pay
              -----------------
promptly all charges for gas, electricity, sewer, heat, light, power, telephone,
refuse pickup (to be performed on a regularly scheduled basis so that
accumulated refuse does not exceed the capacity of Tenant's refuse bins),
janitorial service and all other utilities, materials and services furnished
directly to or used by Tenant in, on or about the Premises, together with all
taxes thereon.  Tenant shall contract directly with the providing companies for
such utilities and services.

          (b) No Abatement of Rent.  Landlord shall not be liable for, and
              --------------------
Tenant shall not be entitled to, any abatement or reduction of rent by reason of
any failure or interruption of any utility or other service furnished to the
Premises or the Project.  No such failure, stoppage, or interruption of any such
utility or service shall constitute an eviction of Tenant or relieve Tenant of
the obligation to perform any covenant or agreement of this Lease to be
performed by Tenant.  In the event of any such failure, stoppage or interruption
of the utilities or services to be supplied by Landlord, Landlord shall use good
faith efforts to have service promptly resumed.  Where the cause of any such
failure, stoppage or interruption of such utilities or services is within the
control of a public utility or other public or quasi-public entity outside
Landlord's control, notification to such utility or entity of such failure,
stoppage or interruption and request to remedy the same shall constitute "good
faith efforts" by Landlord to have service promptly resumed.
<PAGE>

                                 RULES AND REGULATIONS
                                 ---------------------

PARAGRAPH 11

          Tenant agrees to abide by all rules and regulations for use of the
Premises, the Building, the Phase and the Project imposed by Landlord, as the
same may be revised from time to time, including, without limitation, the
following:  (a) Tenant shall comply with all of the requirements of Landlord's
emergency response plan, as the same may be amended from time to time; and (b)
Tenant shall not place any furniture, furnishings, fixtures or equipment in the
Premises in a manner so as to obstruct the windows of the Premises to cause the
Building, in Landlord's good faith determination, to appear unsightly from the
exterior.  Such rules and regulations are and shall be imposed for the
cleanliness, good appearance, proper maintenance, good order and reasonable use
of the Premises, the Building, the Phase and the Project and as may be necessary
for the enjoyment of the Building and the Project by all tenants and their
clients, customers, and employees.  Landlord shall not be liable for the failure
of any tenant or of the agents or employees of any tenant to conform to such
rules and regulations.


                           TAXES ON TENANT'S PROPERTY
                           --------------------------

PARAGRAPH 12

          Tenant shall be liable for, and shall pay, at least ten (10) days
before delinquency, all taxes, levies and assessments levied against any
personal property or trade fixtures placed by Tenant in or about the Premises or
against the cost or value of any leasehold improvements made in or to the
Premises by or for Tenant regardless of whether title to such improvements shall
be in Tenant or Landlord.  If any such tax, levy or assessment on Tenant's
personal property, trade fixtures or leasehold improvements is levied against
Landlord or Landlord's property, or if the assessed value of the Building or the
Project is increased by the inclusion therein of a value placed upon such
personal property, trade fixtures or leasehold improvements of Tenant and if
Landlord pays such taxes, levies or assessment based upon such increased
assessment (which Landlord shall have the right to do regardless of the validity
thereof), Tenant shall upon demand repay to Landlord the amount of such taxes,
levies or assessments so levied against Landlord, or the proportion of any
taxes, levies or assessments resulting from such increase in assessment.  Tenant
shall also be liable for and shall upon demand repay to Landlord the amount of
any rental, excise, sales, transaction privilege or other tax or levy, however
denominated, imposed upon or measured by the rent reserved hereunder or on
Landlord's business of leasing the Premises, excepting only net income taxes,
franchise taxes and estate, inheritance or gift taxes.
<PAGE>

                               FIRE OR CASUALTY
                               ----------------

PARAGRAPH 13

          (a) Obligation to Restore.  Except as otherwise provided below, in the
              ---------------------
event the Premises or access thereto is wholly or partially destroyed by fire or
other casualty covered by the form of fire and extended coverage insurance
maintained by Landlord, Landlord shall rebuild, repair or restore the Premises
and access thereto to substantially the same condition as when the same were
furnished to Tenant, excluding any improvements installed by Tenant, and this
Lease shall continue in full force and effect, except that rent shall abate
during the period which, and to the extent to which, any portion of the Premises
is untenantable and is not used by Tenant.  Notwithstanding the foregoing, in no
event shall Landlord be required to expend more than the amount of insurance
proceeds received by Landlord in respect of any such casualty in connection with
Landlord's restoration of the Premises.

          (b) Election Not to Restore.  In the event that the Building is
              -----------------------
damaged or destroyed to the extent of more than twenty-five percent (25%) of its
replacement cost or to any extent by a casualty not so covered, or if the
buildings at the Project shall be damaged to the extent of fifty percent (50%)
or more of the replacement value or to any extent by a casualty not so covered,
and regardless of whether or not the Premises be damaged, Landlord may elect by
written notice to Tenant given within thirty (30) days after the occurrence of
the casualty to terminate this Lease in lieu of so restoring the Premises, in
which event this Lease shall terminate as of the date specified in Landlord's
notice, which date shall be no later than sixty (60) days following the date of
Landlord's notice.

          (c) Restoration.  Upon the occurrence of a casualty as to which
              -----------
Landlord does not elect to terminate this Lease, Landlord shall, within thirty
(30) days after the date of such casualty, or as soon thereafter as reasonably
possible, notify Tenant in writing of the time estimated by Landlord to repair
or restore the damage caused by such casualty.  If Landlord's estimated time to
complete such restoration is more than nine (9) months from the date of the
occurrence and such damage or destruction materially adversely interferes with
Tenant's use of the Premises, Tenant may elect to terminate this Lease by
written notice to Landlord given within fifteen (15) days after receipt of
Landlord's estimate.  If Tenant has the right to terminate this Lease and timely
and properly exercises such right, this Lease shall terminate on the date of
Tenant's notice to Landlord.  If Tenant is not entitled to terminate this Lease
or if Tenant is so entitled but fails to do so in time and in the manner herein
specified, Landlord shall repair or restore the Premises as promptly as
practicable and this Lease shall continue in effect.  Landlord shall in no event
be obligated to make any repairs or replacement of any items other than those
<PAGE>

items installed by and at the expense of Landlord.  If the Premises are rendered
totally untenantable, rent shall abate during the period that the Premises
remain untenantable and Tenant does not use the Premises.  However, in no event
shall Tenant be entitled to any compensation or damages for loss of the use of
the whole or any part of the Premises, for damage to Tenant's personal property
in or improvements to the Premises or for any inconvenience or annoyance
occasioned by any such destruction, rebuilding or restoration of the Premises or
the Building or access thereto.  Tenant waives the provisions of California
Civil Code Sections 1932(2) and 1933(4) and any present or future laws or case
decisions to the same effect.

          (d) Landlord, in repairing the Building and the Premises, shall repair
any damage to the Building itself, including any damage to the shell of the
Premises as existing as of the date hereof, and Tenant shall pay the cost of
repairing or replacing the Tenant Improvements in the Premises existing
immediately prior to the occurrence of any damage, and Tenant shall repair or
replace all of Tenant's trade fixtures, furnishings, equipment and other
personal property.  Landlord shall not be required to repair any injury or
damage to the personal property of Tenant, or to make any repairs to or
replacement of any alterations, additions, improvements or fixtures installed on
the Premises by or for Tenant.


                                 EMINENT DOMAIN
                                 --------------

PARAGRAPH 14

          (a) Termination of Lease.  In case the whole of the Premises, or such
              --------------------
part thereof as shall substantially interfere with Tenant's use and occupancy
thereof, shall be taken by any lawful power or authority by exercise of the
right of eminent domain, or shall be sold to prevent such taking, either Tenant
or Landlord may terminate this Lease effective as of the date possession is
required to be surrendered to such authority.  If at least twenty-five percent
(25%) of the leasable area of Tenant's Phase, or twenty-five percent (25%) of
the leasable area of the Project, is taken by any lawful power or authority by
exercise of the right of eminent domain, or shall be sold to prevent such
taking, Landlord may terminate this Lease effective as of the date possession is
required to be surrendered to such authority.  Landlord may, without any
obligation to Tenant, agree to sell or convey to the taking authority the
Premises, the Building, Tenant's Phase, the Project or any portion thereof
sought by the taking authority, free from this Lease and the right of Tenant
hereunder, without first requiring that any action or proceeding be instituted
or, if instituted, pursued to a judgment.
<PAGE>

          (b) Partial Taking.  In the event the amount of property or the type
              --------------
of estate taken shall not substantially interfere with Tenant's use of the
Premises, and neither Landlord nor Tenant shall have terminated this Lease
pursuant to Paragraph 14(a) above, then Landlord shall promptly restore the
Premises to substantially their condition prior to such partial taking and this
Lease shall continue in full force and effect except that a proportionate
allowance shall be made to Tenant for the rent corresponding to the time during
which, and to the part of the Premises of which, Tenant shall be deprived on
account of such taking and restoration.

          (c) Awards.  Except as expressly provided herein, Tenant shall not
              ------
because of any taking of all or any portion of the Premises assert any claim
against Landlord or the taking authority for any compensation because of such
taking, and Landlord shall be entitled to receive the entire amount of any award
therefor without deduction for any estate or interest of Tenant.  Nothing
contained in this subparagraph, however, shall be deemed to give Landlord any
interest in, or prevent Tenant from seeking any award against the taking
authority independent of Landlord, and without in any manner interfering with or
reducing any claim of Landlord against the taking authority for, the taking of
personal property and fixtures belonging to Tenant or for relocation or business
interruption expenses recoverable from the taking authority.


                           ASSIGNMENT AND SUBLETTING
                           -------------------------

PARAGRAPH 15

          (a) Landlord's Consent.  Tenant shall not voluntarily or involuntarily
              ------------------
assign, sublet, mortgage or otherwise transfer or encumber all or any portion of
its interest in this Lease or in the Premises or permit the use of the Premises
by any party other than Tenant without obtaining the prior written consent of
Landlord, which consent shall not be unreasonably withheld.  Any such attempted
assignment, subletting, mortgaging, transfer or other encumbering without such
consent shall be null and void and of no effect.  Without limiting the
generality of the foregoing, it shall be reasonable for Landlord to deny any
proposed assignment or sublease if (1) the use to be made of the Premises by the
proposed assignee or subtenant is not generally consistent with the character
and nature of all other tenancies in the Project, or (2) the proposed assignee
or subtenant uses Hazardous Materials, or (3) the character, reputation or
financial responsibility of the proposed assignee or subtenant is not
satisfactory to Landlord or in any event is not at least equal to that which was
possessed by Tenant as of the date of execution of this Lease, or (4) the
proposed assignee or subtenant is an existing tenant in the Project or is
negotiating with Landlord or Landlord's representative, or the owner (or the
owner's representative) of any other Phase of the Project, to lease space at the
Project, or (5) Tenant is in default
<PAGE>

hereunder, or a condition exists which, with the passage of time or the giving
of notice or both, would constitute such a default.

          (b) No Relief.  No permitted assignment, subletting, mortgaging or
              ---------
other encumbering of Tenant's interest in this Lease shall relieve Tenant of its
obligation to pay the rent and to perform all of the other obligations to be
performed by Tenant hereunder.  The acceptance of rent by Landlord from any
person other than Tenant shall not be deemed to be a waiver by Landlord of any
provision of this Lease or to be a consent to any subletting, assignment,
mortgaging or other encumbering of the Premises.  Consent to an assignment,
sublease, mortgage or other encumbrance shall not be deemed to constitute
consent to any subsequent attempted assignment, sublease, mortgage or other
encumbrance.

          (c) Notice to Landlord.  If Tenant desires at any time to assign this
              ------------------
Lease or to sublet the Premises or any portion thereof, it shall first notify
Landlord of its desire to do so and shall submit in writing to Landlord (1) the
name of the proposed subtenant or assignee, (2) the nature of the proposed
subtenant's or assignee's business to be carried on in the Premises, (3) copies
of all applicable documentation in connection with the proposed sublease or
assignment, and (4) such financial and other information as Landlord may
reasonably request concerning the proposed subtenant or assignee.

          (d) Condition to Consent.  As a condition to Landlord's consent to
              --------------------
such assignment or subletting, if the net aggregate rental paid or given by any
sublessee or assignee exceeds, on a square foot basis, the amount per square
foot payable by Tenant to Landlord for the Premises, then Tenant shall pay to
Landlord as additional rental hereunder, monthly as received, twenty-five
percent (25%) of such excess rental.  Net aggregate rental as used herein shall
mean gross rental and additional consideration of any kind or type received by
Tenant with respect to the subleased or assigned premises, less the following
actual and documented out-of-pocket costs incurred by Tenant (amortized, in the
case of a sublease, over the term of said sublease, on a straight line basis):
Tenant's actual costs of any commercially reasonable commission paid by Tenant
to a broker independent of Tenant in connection with such sublease or
assignment, reasonable legal fees in processing such assignment or subletting,
reasonable advertising costs and commercially reasonable costs to remodel or
renovate the area subject to such subletting or assignment. "Sublet" and
"sublease" shall include a sublease as to which Tenant is sublessor and any sub-
sublease or other sub-subtenancy, irrespective of the number of tenancies and
tenancy levels between the ultimate occupant and Landlord, as to which Tenant
receives any consideration.  Tenant shall require on any sublease which it
executes that Tenant receive all profit from all sub-subtenancies, irrespective
of the number of levels thereof.  Any rent or other consideration which is to be
passed through to Landlord by Tenant
<PAGE>

pursuant to this Paragraph 15(d) shall be paid to Landlord promptly upon receipt
by Tenant and shall be paid in cash, irrespective of the form in which received
by Tenant from any subtenant or assignee.  In the event that any rent or other
consideration received by Tenant from a subtenant or assignee is in a form other
than cash, Tenant shall pay to Landlord in cash the fair value of such
consideration.

          (e) Landlord's Election.  At any time within thirty (30) days after
              -------------------
Landlord's receipt of the information specified in Para graph 15(c) above,
Landlord may by written notice to Tenant elect to (1) consent to the proposed
sublease or assignment; (2) sublease the Premises or the portion thereof so
proposed to be subleased by Tenant or take an assignment of Tenant's leasehold
estate hereunder or such part thereof as shall be specified in such notice to
Landlord, in each case upon the same terms stated in this Lease, and
concurrently enter into the proposed sublease or assignment to the proposed
subtenant or assignee on the same terms as those offered by Tenant, as the case
may be; (3) terminate this Lease as to the portion (including all) of the
Premises so proposed to be subleased or assigned, with a proportionate abatement
in the rent payable hereunder; or (4) reasonably withhold its consent to the
proposed sublease or assignment.

          (f) No Merger.  The voluntary or other surrender of this Lease by
              ---------
Tenant or a mutual cancellation hereof shall not work a merger but shall, at the
option of Landlord, either terminate all or any existing subleases or
subtenancies or operate as an assignment to Landlord of such subleases or
subtenancies.  If Tenant is a corporation which under the then current
guidelines published by the Commissioner of Corporations of the State of
California, is not deemed to be a public corporation or is an unincorporated
association or partnership, then the transfer, assignment or hypothecation of
any stock or interest in such corporation, association or partnership in the
aggregate in excess of twenty-five percent (25%) shall be deemed to be an
assignment within the meaning and provisions of this Paragraph 15.

          (g) Assignment of Rent.  Tenant immediately and irrevocably assigns to
              ------------------
Landlord, as security for Tenant's obligations under this Lease, all rent from
any subletting of all or a part of the Premises as permitted by this Lease, and
Landlord, as assignee and attorney-in-fact for Tenant, or a receiver for Tenant
appointed on Landlord's application, may collect such rent and apply it toward
Tenant's obligation under this Lease; except that, until the occurrence of an
act of default by Tenant, Tenant shall have the right to collect such rent.

          (h) Landlord's Costs.  Tenant agrees to reimburse Landlord for
              ----------------
Landlord's costs and attorneys' fees incurred in conjunction with the processing
and documentation of any requested assignment, subletting, transfer, change of
ownership or hypothecation of this
<PAGE>

Lease or Tenant's interest in and to the Premises which is submitted for
approval to Landlord, whether or not Landlord approves the same.

          (i)  Assignment to SERC, Inc..  Notwithstanding Paragraph 15(a)
               ------------------------
hereof, in the event that Tenant merges with SERC, Inc., a Colorado corporation,
to create a new corporation entitled Telegen Corporation ("TC"), and provided
that all of the assets of Tenant are assigned to TC and the obligations under
this Lease are assumed by TC, then (1) Tenant shall not be obligated to obtain
Landlord's consent to the assignment of this Lease to TC, and (2) all of the
terms of this Paragraph 15 shall apply to such assignment, other than the
obligation to obtain Landlord's consent thereto, and other than Paragraphs 15(d)
and (e) hereof.

          (j)  Sublease to Affiliates.  Notwithstanding Paragraph 15(a) hereof,
               ----------------------
Tenant shall have the right to sublet the Premises, without obtaining Landlord's
prior written consent, to any any subsidiary corporations of which Telegen
Corporation owns at least a fifty percent (50%) interest; provided that all of
the terms of this Paragraph 15 shall apply to such subleases, other than the
obligation to obtain Landlord's consent thereto, and other than Paragraphs 15(d)
and (e) hereof.


                                     ACCESS
                                     ------

PARAGRAPH 16

          (a)  Access to Premises.  Subject to the provisions of this Paragraph
               ------------------
16, Landlord reserves and shall have the right to enter the Premises upon
twenty-four (24) hours notice (except in case of emergency, when no notice shall
be required) to inspect the same, to supply any service to be provided by
Landlord to Tenant hereunder, to submit the Premises to prospective purchasers
or (during the last six (6) months of the term only) prospective tenants, to
post notices of nonresponsibility, to use and maintain pipes and conduits in and
through the Premises and to alter, improve or repair the Premises or any other
portion of the Building, all without being deemed guilty of an eviction of
Tenant and without abatement of rent.  Tenant shall have the right to have a
representative of Tenant accompany Landlord when Landlord enters the Premises
(except in case of emergency).  Landlord may, for the purpose of altering,
improving or repairing the Premises or any other portion of the Building, erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed.  Landlord shall use commercially
reasonable efforts where practicable to conduct such entries and activities in a
workmanlike manner so as to reasonably minimize interference with Tenant's
ability to conduct its business at the Premises and Tenant hereby waives any
claim for damages for any injury or inconvenience to or interference with
Tenant's business,
<PAGE>

any loss of occupancy or quiet enjoyment of the Premises and any other loss
occasioned thereby or arising therefrom.  No provision of this Paragraph 16
shall be construed as obligating Landlord to perform any repairs, alterations or
decoration not otherwise expressly required of Landlord under this Lease.

          (b)  Restricted Area.  A portion of the Premises may be designated by
               ---------------
Tenant as a "Restricted Area," based upon a commercially reasonable business
purpose, such as safety or confidentiality, for doing so.  Landlord shall not
possess a key to any Restricted Area; provided that (i) Tenant shall cooperate
with Landlord in connection with Landlord's rights of access to the Restricted
Area; (ii) during Tenant's business hours, Tenant shall always have a
representative present to admit Landlord into the Restricted Area, (iii) the
foregoing shall be subject to all federal, state and local laws, rules and
regulations, including without limitation restrictions imposed by the City of
Redwood City or the County of San Mateo Fire Department or other emergency
services department, and Tenant shall be responsible for determining whether the
access limitations set forth herein comply with all such legal requirements, and
(iv) Tenant shall pay all fees and charges imposed by any governmental authority
in connection with the limitations on access set forth herein.

          (c)  Proprietary Area.  A portion of the Premises may be designated by
               ----------------
Tenant as a "Proprietary Area," based upon a commercially reasonable business
purpose, such as safety or confidentiality, for doing so.  Landlord shall have
the right at all times to have and retain a key with which to unlock all of the
doors in, upon and about the Proprietary Area, excluding Tenant's vaults and
safes therein, if any.  Landlord shall not enter any Proprietary Area unless
Landlord is accompanied by a representative of Tenant; provided that (i) Tenant
shall cooperate with Landlord in connection with Landlord's rights of access to
the Proprietary Area; (ii) during Tenant's business hours, Tenant shall always
have a representative present to admit Landlord into the Proprietary Area, (iii)
the foregoing shall be subject to all federal, state and local laws, rules and
regulations, including without limitation restrictions imposed by the City of
Redwood City or the County of San Mateo Fire Department or other emergency
services department, and Tenant shall be responsible for determining whether the
access limitations set forth herein comply with all such legal requirements, and
(iv) Tenant shall pay all fees and charges imposed by any governmental authority
in connection with the limitations on access set forth herein.

          (c)  Unrestricted Area.  All portions of the Premises which are not
               -----------------
Restricted Area or Proprietary Area shall be referred to herein as "Unrestricted
Area."  Landlord shall have the right at all times to have and retain a key with
which to unlock all of the doors in, upon and about the Unrestricted Area,
excluding Tenant's vaults and safes therein, if any.
<PAGE>

          (d)  Emergencies.  Landlord shall have the right to use any and all
               -----------
means which Landlord may deem proper to open doors to the Premises in an
emergency in order to obtain entry to the Premises and any such entry shall not
under any circumstances be construed or deemed to be a forcible or unlawful
entry into, or a detainer of, the Premises or an eviction of Tenant from the
Premises or any portion thereof.

          (e) Indemnification.  To the fullest extent permitted by then
              ---------------
applicable law, Tenant shall protect, indemnify and hold Landlord harmless from,
and defend Landlord against any and all claims, losses, costs, damages,
expenses, or liabilities, including, without limitation, attorneys' fees and
costs of defense, for any injury or damage to any person or property whatsoever
caused in part or in whole by the restrictions on Landlord's access to the
Premises set forth in this Paragraph 16; excluding, however, such damage to the
extent caused solely by the gross active negligence or intentional misconduct of
Landlord.  This indemnity shall not require payment by Landlord as a condition
precedent to recovery from Tenant.
<PAGE>

               SUBORDINATION; ATTORNMENT; ESTOPPEL CERTIFICATES
               ------------------------------------------------

PARAGRAPH 17

          (a) Subordination.  Subject to the last sentence of this Paragraph
              -------------
17(a), this Lease is junior, subject and subordinate to all declarations of
restrictions and all mortgages, deeds of trust and other security instruments of
any kind now covering the Premises, the Project, or any portion of thereof.
Landlord reserves the right to place liens or encumbrances on the Premises, the
Project, or any part of or interest in any of the foregoing, and, subject to the
last sentence of this Paragraph 17(a), this Lease shall be subject and
subordinate to any such liens or encumbrances now or hereafter imposed by
Landlord without the necessity of the execution and delivery of any further
instruments on the part of Tenant to effectuate such subordination.
Notwithstanding the foregoing, Tenant covenants and agrees to execute and
deliver upon demand such further instruments evidencing any such subordination
of this Lease as may be requested by Landlord.  In the event Tenant fails to so
execute any such further instrument within ten (10) business days after demand
therefor, Landlord may execute such instrument on behalf of Tenant as Tenant's
attorney-in-fact (and Tenant hereby makes, constitutes and irrevocably appoints
Landlord as Tenant's attorney-in-fact and in Tenant's name, place and stead to
execute such instruments) and such failure shall constitute a material breach of
this Lease.  In the event of the foreclosure of any such lien or encumbrance,
Tenant shall attorn to the then owner who owns or acquires title to the Premises
or the Project and will recognize such owner as Landlord under this Lease.
Tenant hereby waives any right to terminate this Lease because of any such
foreclosure.  Notwithstanding the foregoing, Tenant agrees that if any holder of
a mortgage, deed of trust or other security instrument covering the Premises or
the Project desires this Lease to be senior to the lien of such mortgage, deed
of trust or security instrument, upon written notice from Landlord or such
holder to Tenant indicating such desire, this Lease shall automatically become
senior to such mortgage, deed of trust or security instrument and Tenant agrees
to execute, promptly upon Landlord's or such holder's demand therefor, such
instruments as Landlord or such holder shall reasonably require confirming the
priority of this Lease, but Tenant's failure to execute such instrument shall
not affect such holder's election to cause this Lease to be superior to such
holder's lien.

          (b) Estoppel Certificates.  Tenant shall at any time and from time to
              ---------------------
time, upon not less than three (3) days' prior notice from Landlord, execute,
acknowledge and deliver to Landlord a statement in writing certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications, that this Lease is in full force and effect as modified and
describing the same), the dates through which the Basic Annual Rent, Additional
Rent and all other charges have been paid in advance, if any, and
<PAGE>

stating whether or not, to the best knowledge of Tenant, Landlord is in default
in the performance of any covenant, agreement or condition contained in this
Lease and, if so, specifying each such default.  Any such statement delivered
pursuant to this Paragraph 17(b) may be relied upon by any prospective purchaser
or encumbrancer (and all successors thereof) of any interest of Landlord in or
to Tenant's Phase or the Project and Tenant shall be liable for all loss, cost
or expense resulting from the failure of any sale or funding of any loan caused
by any material misstatement contained in any such statement or other estoppel
certificate supplied to Landlord by Tenant.  Tenant's failure to timely deliver
any such statement shall be conclusive upon Tenant that (1) this Lease is in
full force and effect, without modification except as may be represented by
Landlord, (2) there are no uncured defaults in Landlord's performance, and (3)
not more than one month's Basic Annual Rent has been paid in advance.


                                SALE BY LANDLORD
                                ----------------

PARAGRAPH 18

          In the event of a sale or conveyance by Landlord of the Premises, such
transfer shall operate to release Landlord from any and all liability under this
Lease.  Subject to the provisions of Paragraph 17 above, Tenant's right to quiet
possession of the Premises shall not, however, be disturbed on account of such
transfer, so long as Tenant shall pay all rent and observe and perform all
provisions of this Lease to be observed and performed by Tenant, unless this
Lease is terminated pursuant to specific provisions relating to termination
contained in this Lease.  If any security deposit has been made by Tenant,
Landlord may transfer the then balance of such deposit to Landlord's transferee
in connection with the sale or conveyance of the Premises, and thereupon
Landlord shall be discharged from any further liability in connection with such
deposit.


            NON-LIABILITY AND INDEMNIFICATION OF LANDLORD; INSURANCE
            --------------------------------------------------------

PARAGRAPH 19

          (a) Landlord's Non-Liability.  Except to the extent caused solely by
              ------------------------
the active negligence or intentional misconduct of Landlord, Landlord shall not
be liable for any injury or damage which may be sustained by any person or any
goods, wares, merchandise or other property of Tenant, of Tenant's employees,
invitees or customers or of any other person in or about the Premises resulting
from any cause whatsoever (including, without limitation, fire, steam,
electricity, gas, water, rain or dampness which may occur, leak or flow from or
into any part of the Premises or any other place, any breakage, leakage,
obstruction or other
<PAGE>

defect in the pipes, sprinklers, wires, appliances, plumbing, air conditioning
or lighting fixtures of the Premises, theft, explosion or falling plaster).  In
no event shall Landlord be liable for any damage arising from any act or neglect
of any other tenant of the Project or any of their officers, employees, agents,
representatives, customers, visitors or invitees, for any damage to Tenant's
property entrusted to employees of Landlord or its agents, for any interference
with light or other incorporeal hereditaments or for any damage arising from any
latent defect in the Premises or the Project.

          (b) Indemnification.  To the fullest extent permitted by then
              ---------------
applicable law, Tenant shall protect, indemnify and hold Landlord harmless from,
and defend Landlord against any and all claims, losses, costs, damages,
expenses, or liabilities, including, without limitation, attorneys' fees and
costs of defense, for any injury or damage to any person or property whatsoever
caused in part or in whole by the act, neglect, fault or omission of Tenant or
its assignees, subtenants or agents, of the respective servants, employees or
invitees of any of the foregoing persons or of any other persons permitted in
the Building or elsewhere in the Project by Tenant or any of such persons;
excluding, however, such damage to the extent caused solely by the active
negligence or intentional misconduct of Landlord.  This indemnity shall not
require payment by Landlord as a condition precedent to recovery from Tenant.
In addition, if any person not a party to this Lease shall institute any other
type of action against Tenant in which Landlord, involuntarily and without
cause, shall be made a party defendant, Tenant shall indemnify Landlord, hold
Landlord harmless from, and defend Landlord against any and all claims, losses,
costs, damages, expenses or liabilities by reason thereof, except to the extent
such claims, losses, costs, damages, expenses or liabilities result directly
from Landlord's active negligence or intentional misconduct.

          (c) Tenant's Insurance.  Tenant hereby agrees to maintain in full
              ------------------
force and effect at all times during the Term and any other period of its
occupancy or possession of the Premises, at its own expense, for the protection
of Tenant and Landlord, as their interests may appear, policies of insurance
which afford the following coverages: (1) Worker's Compensation and Employer's
Liability Insurance to the extent required by then applicable law, (2)
Commercial General Liability Insurance with a Broad Form Liability Endorsement
(including protective liability coverage on operations of independent
contractors engaged in construction, coverage of Tenant's indemnity obligations
under this Lease and blanket contractual liability insurance) on an "occurrence"
basis against claims for "personal injury" liability, including, without
limitation, bodily injury, death and property damage liability, with a limit of
not less than Three Million Dollars ($3,000,000) in the event of "personal
injury" to any number of persons or of damages to property arising out of any
single "occurrence,"
<PAGE>

(3) insurance against loss or damage by fire and such other risks and hazards as
are insurable under then applicable standard forms of "all risk" fire and
extended coverage insurance policies to all of the Tenant Improvements and the
personal property, furniture, furnishings and fixtures belonging to Tenant used
or located in the Premises for not less than one hundred percent (100%) of the
actual replacement value thereof (the proceeds of which insurance, so long as
this Lease remains in effect, shall be used to repair or replace such personal
property, furnishings and fixtures in the Premises; provided, however, that upon
any termination of this Lease pursuant to Paragraph 13 above, all such proceeds
shall be the property of Landlord), and (4) business interruption or loss of
income insurance in an amount equal to the Basic Annual Rent for a period of at
least twelve (12) months commencing with the date of loss (the proceeds of which
insurance shall be paid to Landlord to the extent of any abatement of rent under
the Lease).

          (d) Deductibles.  Tenant may, with the prior written consent of
              -----------
Landlord, elect to have reasonable deductibles in connection with the policies
of insurance required to be maintained by Tenant under Paragraph 19(c)(3) above.

          (e) Certificates of Insurance.  Tenant shall deliver to Landlord at
              -------------------------
least thirty (30) days prior to the time such insurance is first required to be
carried by Tenant, and thereafter at least thirty (30) days prior to expiration
of each such policy, certificates of insurance from the carrier providing such
insurance evidencing the above coverages with limits not less than those
specified above.  Such certificates, with the exception of worker's
compensation, shall designate Landlord, each of its partners, subsidiaries,
affiliates, directors, agents and employees, as additional insureds and shall
expressly provide that the interest of such persons therein shall not be
affected by any breach by Tenant of any policy provision for which such
certificates evidence coverage.  Further, each such certificate shall expressly
provide that no less than thirty (30) days' prior written notice shall be given
to Landlord in the event of a material alteration to or cancellation of the
coverages evidenced by such certificate.  The insurance which Tenant is required
to maintain in force and effect under this Paragraph 19 shall be primary
insurance as respects Landlord (and any other additional insureds designated by
Landlord) and not excess over or contributory with any other available
insurance.  Certificates of insurance evidencing the liability insurance
coverage required under Paragraph 19(c)(2) above shall contain an endorsement
providing, in substance, that such insurance as is afforded thereby for the
benefit of Landlord (and any other additional insureds designated by Landlord)
shall be primary and any insurance carried by Landlord (and any other such
additional insureds) shall be excess and not contributory.

          (f) Increase in Coverage.  Upon demand, Tenant shall provide Landlord,
              --------------------
at Tenant's expense, with such increased amounts of
<PAGE>

existing insurance and such other coverages and insurance as Landlord may
reasonably require.

          (g) No Co-Insurance.  If on account of the failure of Tenant to comply
              ---------------
with the provisions of this Paragraph 19, Landlord or any other person is
adjudged a co-insurer by its insurance carrier, then any loss or damage which
Landlord or such other person shall sustain by reason thereof shall be borne by
Tenant and shall be immediately paid by Tenant upon receipt of a bill therefor
and evidence of such loss.

          (h) Insurance Limits.  Landlord makes no representation that the
              ----------------
limits of liability specified to be carried by Tenant under this Lease are
adequate to protect Tenant against Tenant's undertaking under this Lease.  In
the event Tenant believes that any such required coverage is insufficient,
Tenant shall provide, at its own expense, such additional insurance as Tenant
deems adequate.  In no event shall the limits of any coverage maintained by
Tenant pursuant to this Paragraph 19 be considered as limiting Tenant's
liability under this Lease.

          (i) Consequential Damages.  In no event shall Landlord be liable to
              ---------------------
Tenant for any damage by reason of loss of profits, business interruption or
other consequential damage.

          (j) General Requirements.  All insurance required to be carried by
              --------------------
Tenant hereunder shall be with companies reasonably acceptable to Landlord.  All
policies and certificates delivered by Tenant pursuant to this Paragraph shall
contain liability limits not less than those set forth herein, shall list all
additional insureds and shall specify all endorsements and special coverages
required by this Paragraph.  Any insurance required to be maintained by Tenant
may be maintained pursuant to so-called "blanket" policies of insurance so long
as the Premises are specifically identified therein (by endorsement or
otherwise) as included in the coverage provided and such policies otherwise
comply with the provisions of this Lease.


                             WAIVER OF SUBROGATION
                             ---------------------

PARAGRAPH 20

          (a) Without affecting any other rights or remedies hereunder, at law
or in equity, Landlord and Tenant each hereby waives all rights of recovery
against the other, any other tenant or occupant in the Building or the Project
and all officers, employees, agents, representatives, customers and business
visitors of such persons for loss of or damage to property at the Project
arising from any cause insured against under any policy of all-risk insurance
either required to be carried by such waiving party pursuant to the provisions
of this Lease or actually carried by such waiving party.
<PAGE>

The foregoing waiver shall be effective whether or not such waiving party shall
actually obtain and maintain the "all risk" insurance required pursuant to this
Lease.  Tenant shall, upon obtaining the policies of insurance which it is
required to maintain under this Lease, give notice to its insurance carriers
that the foregoing waiver of subrogation is contained in this Lease.

          (b) In the event either Landlord or Tenant notifies the other that an
insurer under any policy described in Paragraph 20(a) above has refused to
consent to or permit the waiver of subrogation thereunder in any fashion or has
conditioned the same upon the payment of an additional premium, then such waiver
shall be of no force or effect with respect to loss or damage covered by such
policy during the period commencing five (5) business days after such other
party's receipt of such notice and continuing until such insurer reinstates such
consent; provided, however, that if such other party elects to reimburse the
notifying party for any required additional premium, the notifying party shall
obtain such insurer's consent.


                                ATTORNEYS' FEES
                                ---------------

PARAGRAPH 21

          In the event any party to this Lease brings any suit or other
proceeding with respect to the subject matter or enforcement of this Lease
(including all addenda and exhibits hereto), the prevailing party (as determined
by the court, agency or other authority before which such suit or proceeding is
commenced) shall, in addition to such other relief as may be awarded, be
entitled to recover reasonable attorneys' fees, expenses and costs of
investigation as actually incurred (including, without limitation, attorneys'
fees, expenses and costs of investigation incurred in appellate proceedings or
in connection with the enforcement or collection of any judgment obtained in any
suit or other proceeding with respect to the subject matter or enforcement of
this Lease, costs incurred in establishing any right to indemnification, or in
any action or participation, or in connection with, any case or proceeding under
Chapters 7, 11 or 13 of the Bankruptcy Code, 11 United States Code Section 101

et seq., or any successor statutes).  The parties hereto expressly agree that
------
(i) any attorneys' fees incurred in connection with the enforcement or
collection of any judgment obtained in any suit or other proceeding with respect
to the subject matter or enforcement of this Lease shall be recoverable as a
separate item, (ii) the provisions of this Paragraph 21 shall survive the entry
of any judgment with respect to the subject matter or enforcement of this Lease,
and (iii) the provisions of this Paragraph 21 will not merge, or be deemed to
have merged, into any such judgment.
<PAGE>

                                 WAIVER
                                 ------

PARAGRAPH 22

          No waiver by Landlord of any provision of this Lease or of any breach
by Tenant hereunder shall be deemed to be a waiver of any other provision hereof
or of any subsequent breach by Tenant of the same or any other provision.
Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to render unnecessary the obtaining of
Landlord's consent to or approval of any subsequent act of Tenant.  No act or
thing done by Landlord or Landlord's agents during the Term, including, without
limitation, Tenant's delivery of the keys to the Premises to any employee or
agent of Landlord, shall operate as or be deemed to be a termination of this
Lease, a surrender of the Premises or an acceptance of a surrender of the
Premises unless expressly stated in a writing signed by Landlord.  The
acceptance of any rent by Landlord following a breach of this Lease by Tenant
shall not constitute a waiver by Landlord of such breach or any other breach
unless such waiver is expressly stated in a writing signed by Landlord.  The
acceptance of any payment from a debtor-in-possession, a trustee, a receiver or
any other person acting on behalf of Tenant or Tenant's estate shall not
constitute a waiver of or cure a default under Paragraphs 15 or 24 hereof.


                                    NOTICES
                                    -------

PARAGRAPH 23

          (a) Any notice required by law to be given by Landlord to Tenant as a
condition to the filing of an action alleging an unlawful detainer of the
Premises, including, without limitation, any three (3) days' notice under
Section 1161(2) or (3) of the California Code of Civil Procedure, and any
service of process made by Landlord in connection with any action arising out of
or related to this Lease or the Premises shall be effective only if in writing
and either sent by registered or certified mail, return receipt requested, or
delivered personally to Tenant either (1) at the Premises, or (2) at any place
where Tenant or any agent or employee of Tenant may be found.

          (b) Except as otherwise expressly provided in this Lease, any notice,
demand, request or other communication not described in (a) above given or
required to be given by Landlord hereunder shall be effective only if in writing
and either sent by registered or certified mail, return receipt requested, or by
recognized overnight courier or delivered personally to the following:

                         Telegen Corporation
                         101 Saginaw Drive
                         Redwood City, CA 94063
<PAGE>

          (c) Except as otherwise expressly provided in this Lease, any notice,
demand, request or other communication given or required to be given by Tenant
hereunder shall be effective only if in writing and either sent by registered or
certified mail, return receipt requested, or by recognized overnight courier or
delivered personally to each of the following:

                  (1) METROPOLITAN LIFE INSURANCE COMPANY
                  101 Lincoln Centre Drive, Sixth Floor
                  Foster City, California 94404
                  Attention:  Assistant Vice President

                  (2) METROPOLITAN LIFE INSURANCE COMPANY
                  101 Lincoln Centre Drive, Sixth Floor
                  Foster City, California  94404
                  Attention:  Associate General Counsel

                  (3) LINCOLN PROPERTY COMPANY N.C., INC.
                  101 Lincoln Centre Drive, Fourth Floor
                  Foster City, California  94404
                  Attention:  Director of Property Management,
                              Seaport Centre

          (d) Tenant and Landlord may designate new addresses for notice for the
purposes of (b) or (c) above (however, in no event may any party have more than
four (4) separate designations at any one time) by notice given to the other in
accordance with the provisions of this Paragraph 23.

          (e) Any notice hereunder shall be deemed effectively given upon its
delivery or the addressee's refusal to accept delivery as indicated by the
person attempting such personal delivery, by the applicable return receipt, if
sent by registered or certified mail, or by similar advice from the recognized
courier company, as the case may be.


                            INSOLVENCY OR BANKRUPTCY
                            ------------------------

PARAGRAPH 24

          (a) Prior to Term.  If at any time prior to the date herein fixed as
              -------------
the commencement of the Term there shall be filed by or against Tenant in any
court pursuant to any statute either of the United States or of any State a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee or conservator of all or a portion of
Tenant's property, or if Tenant makes an assignment for the benefit of creditors
(collectively, an "Insolvency Event"), this Lease shall ipso facto be canceled
                                                        ---- -----
and terminated and in such event neither
<PAGE>

Tenant nor any person claiming through or under Tenant or by virtue of any
statute or by an order of any court shall be entitled to possession of the
Premises and Landlord, in addition to the other rights and remedies given by
Paragraph 25(b) hereof or by virtue of any other provision in this Lease
contained or by virtue of any statute or rule of law, may retain as damages any
rent, security, deposit or moneys received by it from Tenant or others on behalf
of Tenant.

          (b) No Assignment.  In no event shall this Lease be assigned or
              -------------
assignable by operation of law and in no event shall this Lease be an asset of
Tenant in any receivership, bankruptcy, insolvency or reorganization proceeding.


                                    DEFAULT
                                    -------

PARAGRAPH 25

          (a) Default by Tenant.  The occurrence of any of the following shall
              -----------------
constitute a material default and breach of this Lease by Tenant:

          (1) Any failure by Tenant to pay rent or to make any other payment
required to be made by Tenant hereunder at the time specified for payment.

          (2) Any abandonment or vacation of the Premises by Tenant.

          (3) Any warranty, representation or statement made or furnished by
Tenant to Landlord at any time in connection with this Lease or any other
agreement to which Tenant and Landlord are parties is determined to have been
false or misleading in any material respect when made or furnished.

          (4) Any attempted assignment, sublease, mortgage or encumbrance in
violation of Paragraph 15 above.

          (5) The occurrence of any Insolvency Event filed against Tenant by a
third party other than Landlord which is not dismissed within thirty (30) days
after such occurrence or the occurrence of any other Insolvency Event.

          (6) Any failure by Tenant to observe and perform any other provision
of this Lease (or of the addenda attached hereto) to be observed or performed by
Tenant, where such failure continues for fifteen (15) days (except where a
different period is specified in this Lease or in the addenda) after written
notice thereof by Landlord to Tenant; provided, however, that any such notice
shall be in lieu of, and not in addition to, any notice required under Section
1161 et seq. of the California Code of Civil Procedure, and
     -- ---
<PAGE>

provided, further, that if the nature of such default is such that the same
cannot reasonably be cured within such fifteen (15) day period, Tenant shall not
be deemed to be default if Tenant shall within such period commence such cure
and thereafter diligently prosecute the same to completion; but in no event
shall any such cure period exceed ninety (90) days in the aggregate.

          (b) Remedies.  In the event of any such default by Tenant, then in
              --------
addition to all other remedies available to Landlord at law or in equity:

          (1) Landlord shall have the immediate option to terminate this Lease
and all rights of Tenant hereunder by giving Tenant written notice of such
intention to terminate, in which event Landlord may recover from Tenant all of
the following: (i) the worth at the time of award of any unpaid rent which had
been earned at the time of such termination; plus (ii) the worth at the time of
award of the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss
Tenant proves reasonably could have been avoided; plus (iii) the worth at the
time of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that Tenant
proves reasonably could be avoided; plus (iv) any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant's failure
to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom; plus (v) at Landlord's election,
such other amounts in addition to or in lieu of the foregoing as may be
permitted from time to time by applicable California law.  As used in (i) and
(ii) above, the "worth at the time of award" shall be computed by allowing
interest at the rate specified in Paragraph 36(a) below and as used in (iii)
above, the "worth at the time of award" shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%).

          (2) Landlord shall also have the right, with or without terminating
this Lease, to re-enter the Premises and remove all persons and property from
the Premises.  Such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant.

          (3) In the event Landlord elects to re-enter the Premises under (2)
above or takes possession of the Premises pursuant to any proceeding or notice
provided by law or Tenant vacates or abandons the Premises, but Landlord does
not elect to terminate this Lease as provided in this Paragraph 25, Landlord may
from time to time without terminating this Lease either recover from Tenant all
rent as it becomes due or relet the Premises or any part thereof upon such terms
and conditions as Landlord in its sole discretion may deem advisable, with the
right of Landlord to make
<PAGE>

alterations and repairs to the Premises.  In the event of any such reletting,
rental and other charges received by Landlord therefrom shall be applied in the
following order: (i) to the payment of any indebtedness other than rent due
hereunder from Tenant to Landlord, (ii) to the payment of all costs of such
reletting, (iii) to the payment of the cost of any alterations and repairs to
the Premises, and (iv) to the payment of rent and other charges due and unpaid
hereunder.  The residue, if any, shall be held by Landlord and applied in
payment of future rent and other charges due hereunder, as the same may become
due.  In the event the rental and other charges received by Landlord from such
reletting are at any time less than the then aggregate of (i) through (iv)
above, Tenant shall pay such deficiency to Landlord immediately upon demand
therefor, but not more often than monthly.

          (4) No re-entry or taking possession of the Premises by Landlord
pursuant to this Paragraph 25 shall be construed as an election to terminate
this Lease unless a written notice of such intention shall be given to Tenant or
unless such termination shall be decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
default by Tenant, Landlord may at any time after such reletting elect to
terminate this Lease for any such default.

          (5) In any action for unlawful detainer commenced by Landlord against
Tenant by reason of any default hereunder, the reasonable rental value of the
Premises for the period of the unlawful detainer shall be the amount of rent
reserved in this Lease for such period, unless Landlord or Tenant shall prove to
the contrary by competent evidence.  The rights and remedies reserved to
Landlord herein, including those not specifically described, shall be cumulative
and, except as otherwise provided by then applicable California law, Landlord
may pursue any or all of such rights and remedies at the same time or otherwise.

          (6) Provided that Landlord serves notice in accordance with the
provisions of this Paragraph 25 and Paragraph 23 above, Tenant hereby waives any
notice required by Section 1161 of the California Code of Civil Procedure.

          (c) Default by Landlord.  Landlord shall not be in default or breach
              -------------------
of this Lease unless Landlord fails to observe or perform an obligation required
under this Lease to be observed or performed by Landlord and such failure
continues for thirty (30) days (except where a different period is specified in
this Lease) after written notice thereof by Tenant to Landlord; provided,
however, that if the nature of such default is such that the same cannot
reasonably be cured within such thirty (30) day period, Landlord shall not be
deemed to be default if Landlord shall within such period commence such cure and
thereafter diligently prosecute the same to completion.
<PAGE>

                                 HOLDING OVER
                                 ------------

PARAGRAPH 26

          If Tenant holds over after the expiration or earlier termination of
the Term without the express written consent of Landlord, Tenant shall become a
tenant at sufferance only at either the then prevailing market rate, as
determined by Landlord in its sole and absolute discretion, for the Premises or,
at Landlord's option, one hundred fifty percent (150%) of the Basic Annual
Rental, in each case in effect upon the date of such expiration or earlier
termination (subject to such adjustments as may be provided for in Paragraph 2
above and prorated on a daily basis) and otherwise upon the terms, covenants and
conditions herein specified, so far as applicable.  Acceptance by Landlord of
rent after such expiration or earlier termination shall not constitute a consent
to a holdover hereunder or result in a renewal of this Lease.  The foregoing
provisions of this Paragraph are in addition to and do not affect Landlord's
right of re-entry or any other rights of Landlord hereunder or as otherwise
provided by law, including without limitation Landlord's right to receive
damages, consequential and direct, sustained by reason of Tenant's retention of
possession.


                             CONDITION OF PREMISES
                             ---------------------

PARAGRAPH 27

          (a) Possession of Premises.  Tenant acknowledges that except as may be
              ----------------------
expressly specifically provided herein, if at all, neither Landlord nor any
agent of Landlord has made any representation or warranty with respect to the
Premises, the Building or the Project or with respect to the suitability of any
part of the same for the conduct of Tenant's business.  The taking of possession
of the Premises by Tenant shall conclusively establish that the Premises and the
Building were at such time in a good and sanitary order, condition and repair
acceptable to Tenant.

          (b) Surrender of Premises.  Upon the expiration or early termination
              ---------------------
of this Lease, Tenant shall surrender the Premises to Landlord in safe, clean
and good condition (except for ordinary wear and tear associated with normal
office use) and free of Hazardous Materials.  Tenant shall remove all of its
personal property as of the expiration date or termination date, as the case may
be.  In addition, at Landlord's option, Landlord may require Tenant to remove
all alterations installed by Tenant or for Tenant's benefit at the Premises.  If
Tenant shall remove or restore any such property or alterations, Tenant shall
repair any damage arising from such removal.   The terms of this Paragraph
<PAGE>

27(b) shall survive the expiration or earlier termination of this Lease.


                                QUIET POSSESSION
                                ----------------

PARAGRAPH 28

          Upon Tenant's paying the rent reserved hereunder and observing and
performing all of the covenants, conditions and provisions on Tenant's part to
be observed and performed hereunder, Tenant shall have quiet possession of the
Premises for the entire Term, subject to all the provisions of this Lease.


                                NOTICE OF DAMAGE
                                ----------------

PARAGRAPH 29

          Tenant shall give prompt notice to Landlord in case of fire or
accidents in the Premises or at the Project or of any defects discovered therein
or in their fixtures or equipment.


                                 GOVERNING LAW
                                 -------------

PARAGRAPH 30

                                 This Lease shall be governed by, and construed
in accordance with the laws of the State of California.


                           COMMON FACILITIES; PARKING
                           --------------------------

PARAGRAPH 31

          (a) Right to Use Common Facilities.  Tenant shall have the non-
              ------------------------------
exclusive right, in common with others, to the use of any common entrances,
ramps, drives and similar access and serviceways and other common facilities in
the Project.  The rights of Tenant hereunder in and to the common facilities
shall at all times be subject to the rights of Landlord and other tenants and
owners in the Project who use the same in common with Tenant, and it shall be
the duty of Tenant to keep all the common facilities free and clear of any
obstructions created or permitted by Tenant or resulting from Tenant's
operations.  Tenant shall not use the common areas of the Building or the
Project, including, without limitation, the Building's electrical room, parking
lot or trash enclosures, for storage purposes.  Nothing herein shall affect the
right of Landlord at any time to remove any persons not authorized to use the
common facilities from such facilities or to prevent the use of such facilities
by unauthorized persons.
<PAGE>

          (b) Changes in Common Facilities.  Landlord reserves the right, at any
              ----------------------------
time and from time to time to (i) make alterations in or additions to the common
areas or facilities of the Project, including, without limitation, constructing
new buildings or changing the location, size, shape or number of the driveways,
entrances, parking spaces, parking areas, loading and unloading areas, landscape
areas and walkways, (ii) designate property to be included in or eliminate
property from the common areas or facilities of the Project, (iii) close
temporarily any of the common areas or facilities of the Project for maintenance
purposes, and (4) use the common areas and facilities of the Project while
engaged in making alterations in or additions and repairs to the Project;
provided, however, that reasonable access to the Premises and parking at or near
the Project remains available.

          (c) Parking.  Tenant shall have the right to use the number of parking
              -------
spaces indicated on Item 14 of the Basic Lease Provisions on an unassigned basis
on that portion of the Project designated by Landlord from time to time for
parking.  The parking spaces shall be used for parking only by vehicles no
larger than full-sized passenger automobiles or pick-up trucks, and, except as
provided in the following sentence, Tenant shall park no vehicles at the Project
overnight.  Tenant's employees may park at the Project overnight when such
employees are working, and Tenant shall have the right to store one company-
owned vehicle at the Project overnight.  Landlord shall have the right to impose
rules and regulations on parking at the Project.  Landlord shall also have the
right, in addition to all other rights and remedies that it may have under this
Lease, to remove or tow away a vehicle which is in violation of Landlord's
rules, without prior notice to Tenant, and Tenant shall pay the cost thereof to
Landlord within ten (10) days after notice from Landlord to Tenant.  Upon any
sale by Landlord of any building located at the Project, Landlord shall have the
right to alter the parking area.


                                    SIGNAGE
                                    -------

PARAGRAPH 32

          Tenant shall not install any signage within the Project, the Building
or the Premises without obtaining the prior written approval of Landlord, and
Tenant shall be responsible for the maintenance of any such signage installed by
Tenant.  Any such signage shall comply with Landlord's current Project signage
criteria and all applicable governmental requirements.
<PAGE>

                                 SUCCESSORS AND ASSIGNS
                                 ----------------------

PARAGRAPH 33

          Except as otherwise provided in this Lease, and subject to the terms
of Paragraph 15 above, all of the covenants, conditions, and provisions of this
Lease shall be binding upon and shall inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors, and assigns.


                                    BROKERS
                                    -------

PARAGRAPH 34

          Tenant warrants that it has had no dealings with any real estate
broker or agent in connection with the negotiation of this Lease, excepting only
the broker named in Item 12 of the Basic Lease Provisions as the "Cooperating
Broker", and that it knows of no other real estate broker or agent who is or
might be entitled to a commission or finder's or similar fee in connection with
this Lease.  Tenant agrees to indemnify, protect, defend and hold Landlord
harmless from and against any and all costs, expenses and liabilities for any
compensation claimed by any such broker in excess of the maximum commission
previously disclosed in writing to Landlord or claimed by any other broker,
finder or agent in connection with the negotiation of this Lease other than
brokers claiming solely through Landlord.


                                      NAME
                                      ----

PARAGRAPH 35

          Tenant shall not, without the prior written consent of Landlord, use
the name of the Building or the Project for any purpose other than as the
address of the business to be conducted by Tenant in the Premises and in no
event shall Tenant acquire any rights in or to such names.


                              EXAMINATION OF LEASE
                              --------------------

PARAGRAPH 36

          Submission of this Lease for examination or signature by Tenant does
not constitute a reservation of or option for lease, and it is not effective as
a lease or otherwise until execution by and delivery to both Landlord and
Tenant.
<PAGE>

                 INTEREST ON TENANT'S OBLIGATIONS; LATE CHARGE
                 ---------------------------------------------

PARAGRAPH 37

          (a) Any amount due from Tenant to Landlord which is not paid when due
shall bear interest at the lesser of eighteen percent (18%) per annum or the
maximum rate then permitted by law in this context from the date such payment is
due until paid.  The rate so determined shall continue in effect following any
default by Tenant pursuant to this Lease.  Payment of such interest shall not
excuse or cure any default by Tenant under this Lease.

          (b) In the event Landlord does not receive any installment of rent due
under this Lease on the date such installment is due, Tenant shall pay Landlord
a late charge equal to five percent (5%) of the delinquent installment of rent.
The parties agree that the amount of such late charge represents a reasonable
estimate of the cost and expense that will be incurred by Landlord in processing
each delinquent payment of rent by Tenant and that such late charge shall be
paid to Landlord as liquidated damages for each delinquent payment pursuant to
Section 1671 of the California Civil Code.  The parties further agree that the
payment of late charges and the payment of interest provided for in Paragraph
36(a) above are distinct and separate from one another in that the payment of
interest is to compensate Landlord for its inability to use the money improperly
withheld by Tenant, while the payment of late charges is to compensate Landlord
for its additional administrative expenses in handling and processing delinquent
payments.


                                      TIME
                                      ----

PARAGRAPH 38

                                 Time is and shall be of the essence of this
Lease and each and all of its provisions.


                      DEFINED TERMS AND MARGINAL HEADINGS
                      -----------------------------------

PARAGRAPH 39

          The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular.  If more than one person is named as Tenant
under this Lease, the obligations of such persons shall be joint and several.
Whenever under the provisions of this Lease Landlord is required or agrees to
take certain action, Landlord's obligation to do so shall be deemed fulfilled if
Landlord causes such action to be taken by any other person.  The marginal
headings and titles to the Paragraphs and other divisions of this Lease are not
a part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
<PAGE>

                         PRIOR AGREEMENTS; SEVERABILITY
                         ------------------------------

PARAGRAPH 40

          This Lease, including all of the Addenda and Exhibits attached hereto,
contains all of the agreements of the parties hereto with respect to any matter
covered or mentioned in this Lease, and no prior agreement, understanding or
representation pertaining to any such matter shall be effective for any purpose.
No provision of this Lease may be amended or added to except by an agreement in
writing signed by the parties hereto or their respective successors in interest.
If any term or provision of this Lease the deletion of which would not adversely
affect the receipt of any material benefit by either party hereunder shall be
held invalid or unenforceable to any extent, the remainder of this Lease shall
not be affected thereby and each term and provision of this Lease shall be valid
and enforceable to the fullest extent permitted by law.


                              CORPORATE AUTHORITY
                              -------------------

PARAGRAPH 41

          Each individual executing this Lease on behalf of Landlord and Tenant
represents and warrants that (a) such individual has full power and authority to
execute this Lease on behalf of its party, and (b) the execution and delivery of
this Lease have been duly authorized by such party.  If Tenant is a corporation
Tenant shall, within ten (10) days after execution of this Lease, deliver to
Landlord a certified copy of a resolution of the Board of Directors of Tenant
authorizing or ratifying the execution of this Lease.


                        NO LIGHT, AIR OR VIEW EASEMENTS
                        -------------------------------

PARAGRAPH 42

          Any diminution or shutting off of light, air or view by any structure
which may be erected on lands adjacent to the Building or the Project shall in
no way affect this Lease or impose any liability on Landlord.


                              LANDLORD'S APPROVALS
                              --------------------

PARAGRAPH 43

          In no event shall the review, approval, inspection or examination by
Landlord of any item to be reviewed, approved, inspected or examined by Landlord
under the terms of this Lease be deemed to be an approval of or representation
or warranty as to the
<PAGE>

adequacy, accuracy, sufficiency or soundness of any such item or the quality or
suitability of such item for its intended use.  Any such review, approval,
inspection or examination by Landlord shall be for the sole purpose of
protecting Landlord's interests in the Building and the Project and under this
Lease and no third parties shall have any rights pursuant thereto.


                               EXERCISE FACILITY
                               -----------------

PARAGRAPH 44

          Tenant agrees to inform all employees of Tenant of the following:  (i)
the exercise facility is available for the use of the employees of tenants of
the Project only and for no other person; (ii) use of the facility is at the
risk of Tenant or Tenant's employees, and all users must sign a release; (iii)
the facility is unsupervised; and (iv) users of the facility must report any
needed equipment maintenance or any unsafe conditions to the Landlord
immediately.  Landlord may discontinue providing such facility at Landlord's
sole option at any time without incurring any liability.  As a condition to the
use of the exercise facility, Tenant and each of Tenant's employees that uses
the exercise facility shall first sign a written release in form and substance
acceptable to Landlord.  Landlord may change the rules and/or hours of the
exercise facility at any time, and Landlord reserves the right to deny access to
the exercise facility to anyone due to misuse of the facility or noncompliance
with rules and regulations of the facility.  Tenant will indemnify, defend and
hold harmless Landlord from any claims, liabilities or damages resulting from
use of the exercise facility in the Project by Tenant, Tenant's employees or
invitees.


                                 MISCELLANEOUS
                                 -------------

PARAGRAPH 45

          (a) At the expiration or earlier termination of this Lease, Tenant
shall execute, acknowledge and deliver to Landlord, within five (5) days after
written demand from Landlord to Tenant, any quitclaim deed or other document as
may be reasonably requested by any title insurance company to remove this Lease
as a matter affecting title to the Premises.

          (b) Tenant acknowledges that the liability of Landlord with respect to
its obligations pursuant to this Lease is limited to Landlord's equity interest
in the Building.  Tenant shall look solely to Landlord's equity interest in the
Building to satisfy any claim or judgment against or any liability or obligation
of Landlord to Tenant.  No recourse shall be had by Tenant against Landlord or
the assets of Landlord (other than the equity interest
<PAGE>

of Landlord in the Building) to satisfy any claim or judgment of Tenant against
Landlord or any obligation or liability of Landlord to Tenant.


                              WAIVER OF JURY TRIAL
                              --------------------

PARAGRAPH 46

          Landlord and Tenant (including any assignee, successor or personal
representative of such party) HEREBY WAIVE THEIR RESPECTIVE RIGHT TO TRIAL BY
JURY of any cause of action, claim, counterclaim or cross-complaint in any
action, proceeding and/or hearing brought by either Landlord against Tenant or
Tenant against Landlord on any matter whatsoever arising out of, or in any way
connected with, this Lease, the relationship of Landlord and Tenant, Tenant's
use or occupancy of the Premises, or any claim of injury or damage, or the
enforcement of any remedy under any law, statute, or regulation, emergency or
otherwise, now or hereafter in effect.  Neither party will seek to consolidate
any such action in which a jury has been waived, with any other action in which
a jury trial cannot or has not been waived.  THE PROVISIONS OF THIS PARAGRAPH
HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND EACH PARTY HAS RECEIVED THE
ADVICE OF COUNSEL WITH RESPECT TO SUCH WAIVER.  IT IS THE INTENTION OF THE
PARTIES THAT THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.  BY EXECUTING
THIS LEASE, LANDLORD AND TENANT AGREE THAT THIS PROVISION MAY BE FILED BY ANY
PARTY HERETO WITH THE CLERK OR JUDGE BEFORE WHOM ANY ACTION IS INSTITUTED, WHICH
FILING SHALL CONSTITUTE THE WRITTEN CONSENT TO A WAIVER OF JURY TRIAL REQUIRED
PURSUANT TO AND IN ACCORDANCE WITH SECTION 631 OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE.  NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER
PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.


                                OPTION TO EXTEND
                                ----------------

PARAGRAPH 47

          (a)  Landlord hereby grants to Tenant one (1) option (the "Option") to
extend the initial five-year Term (the "Initial Term") for an additional five
(5) years (the "Option Term"), but only in strict accordance with the terms and
conditions set forth below:

          (1) The Option must be exercised, if at all, by written notice to
Landlord at least nine (9) and not more than twelve (12) months prior to the
Expiration Date of the Initial Term.  All of the terms and conditions of the
Lease applicable as of such Expiration Date shall continue to apply during the
Option Term, except that the Basic Annual Rent during the Option Term shall be
the greater of (i) the Prevailing Market Rental as of the date of
<PAGE>

the Landlord's Notice (both as defined below), or (ii) the Basic Annual Rent in
effect immediately prior to the Expiration Date of the Initial Term.

          (2) The "Prevailing Market Rental" shall mean and include all rental
and other monetary payments, together with all escalations, including, without
limitation, consumer price indexing, which the Landlord could obtain from a
third party desiring to lease the Premises for the Option Term, taking into
account the age of the Building, the size, location and floor level of the
Premises, the quality of construction of the Building and the Premises, the
services provided under the terms of the Lease, the rental then being obtained
for new leases of space comparable to the Premises in the San Mateo County area
and all other factors that would be relevant to such third party; provided,
however, that Prevailing Market Rental shall be stated net of any free rent
concessions included in such market rental and no allowance or credit for the
construction of tenant improvements (or reduction in rental as a result of the
absence of such allowance or credit) shall be taken into account in determining
Prevailing Market Rental.

          (3) In the event Tenant exercises the Option, Landlord shall determine
the Prevailing Market Rental and shall use commercially reasonable efforts to
notify Tenant of the Prevailing Market Rental at least one hundred fifty (150)
days prior to the Expiration Date of the Initial Term (the "Landlord's Notice").
Within thirty (30) days following its receipt of the Landlord's Notice, Tenant
shall deliver written notice ("Tenant's Notice") to Landlord either accepting
the Prevailing Market Rental set forth in the Landlord's Notice or revoking the
Option.  Failure to timely give a proper Tenant's Notice shall be conclusively
deemed to be Tenant's waiver and revocation of the Option.

          (b) Upon the occurrence of any of the following events, Landlord shall
have the option, exercisable at any time prior to the commencement of the Option
Term, to terminate all of the provisions of this Paragraph 47 whereupon no prior
or subsequent exercise of the Option shall be of any force or effect:

          (1) Tenant's failure to timely exercise the Option in strict
accordance with Paragraph 47(a)(1) above or to timely deliver a proper Tenant's
Notice in strict accordance with Paragraph 47(a)(3) above.

          (2) The existence at the time Tenant exercises the Option or as of the
commencement of the Option Term of any default on the part of Tenant under the
Lease or of any state of facts which with the passage of time or the giving of
notice, or both, would constitute such a default.
<PAGE>

          (3) Tenant's third default under the Lease prior to the commencement
of the Option Term, notwithstanding that all such defaults may subsequently be
cured.

          (4) Tenant's assignment or subleasing of all or any portion of the
Premises.

          (c) The Option is personal to Telegen Corporation, a California
corporation, and any Affiliate (as defined below), and may not be exercised by,
and shall not be transferable to, any other person or entity.  As used herein,
"Affiliate" shall mean an entity in which Telegen Corporation has not less than
a fifty-one percent (51%) interest.

          (d)  Without limiting the generality of Paragraph 38 of the Lease,
time shall be of the essence with respect to all of the provisions of this
Paragraph 47.
<PAGE>

                                   EXHIBIT A

                              SITE PLAN OF PROJECT

                              Exhibit A - Page 1
<PAGE>

                                   EXHIBIT B

                             SITE PLAN OF PREMISES

                              Exhibit B - Page 1
<PAGE>

                                   EXHIBIT C

                           CONFIRMATION OF LEASE TERM



          THIS MEMORANDUM is made on ____________________, 19___, between
_____________________________________ ("Landlord"), and
_____________________________________ ("Tenant"), who entered into a lease dated
for reference purposes as of ________________, 19___, covering certain premises
located at Seaport Centre, Redwood City, California, which premises are commonly
known as ________________, California.  All capitalized terms, if not defined
herein, shall be defined as they are defined in the Lease.

          1.  The parties to this Memorandum hereby agree that the date of
_________________, 19___ is the "Commencement Date" of the Term and that
_______________, 19___ is the "Expiration Date" of the Term.

          2.  Tenant hereby confirms the following:

              (a) That it has accepted possession of the Premises pursuant to
the terms of the Lease;

              (b) That Landlord has fulfilled all of its duties of an inducement
nature;

              (c) That the Lease has not been modified, altered or amended,
except as follows:

                   ____________________________________________________________
                   ____________________________________________________________
                   ____________________________________________________________
                   ____________________________________________________________

              (d) That there are no offsets or credits against rentals, nor has
any security deposit been paid except as provided pursuant to the terms of the
Lease; and

              (e) That the Lease is in full force and effect.
<PAGE>

                                   EXHIBIT D

                         PERMITTED HAZARDOUS MATERIALS

                              Exhibit C - Page 2
<PAGE>

                                   EXHIBIT E

                                     PLANS

                              Exhibit D - Page 1