Document:

<PAGE>

Ex-10.26
Note and Warrant Agreement issued in May 1998

                                  EXHIBIT 10.26

                               TELEGEN CORPORATION

                       NOTE AND WARRANT PURCHASE AGREEMENT

     This NOTE AND WARRANT PURCHASE AGREEMENT is made as of May 7, 1998, by and
between TELEGEN CORPORATION, a California corporation (the "Company"), and STOCK
ACQUISITION LLC, a Nevada limited liability company (the "Purchaser") for the
purchase of (i) a Convertible Promissory Note evidencing US$515,532 in
indebtedness, convertible to the Company's Common Stock at US$0.38 per share
(the "Note") and (ii) a warrant to purchase 1,356,663 shares of the Company's
Common Stock at a US$0.38 per share exercise price (the "Warrant").

     NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein set forth, the parties hereby agree as follows:

1.   SALE OF NOTE AND WARRANT

     1.1 AUTHORIZATION. The Company has authorized the sale and issuance of up
to US$515,532 in aggregate principal amount of indebtedness, which shall be
represented by a promissory note in substantially the form attached hereto as
EXHIBIT A. The Company has further authorized the issuance to the Purchasers of
a warrant in substantially the form attached hereto as EXHIBIT B to acquire up
to an aggregate maximum of 1,356,663 shares of the Company's Common Stock,
subject to adjustment of the exercise price and number of shares as set forth
therein.

     1.2 SALE OF THE NOTE. Subject to the terms and conditions of this
Agreement, the Purchaser agrees to lend to the Company US$515,532 and the
Company agrees to issue to the Purchaser upon delivery by the Purchaser to the
Company of the aggregate consideration therefore, a Note in such principal
amount. The shares of the Company's Common Stock issued or issuable upon
exercise of the Notes are referred to herein as the "Note Stock."

     1.3 SALE OF THE WARRANT. In consideration of the Purchaser entering into
this Agreement and purchasing a Note hereunder, the Company agrees to sell and
issue to the Purchaser a Warrant exercisable for 1,356,663 shares of the
Company's Common Stock subject to adjustment of the exercise price and number of
shares as set forth in the Warrant. The shares of the Company's Common Stock
issued or issuable upon exercise of the Warrant are referred to herein as the
"Warrant Stock."

     1.4 DELIVERY. Upon execution of this Agreement and delivery by the
Purchaser of the US$515,532 by cashier's check made payable to the Company or a
wire transfer according to the Company's instructions, the Company will deliver
to the Purchaser the Note and Warrant substantially in the forms attached
hereto.

2.   REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.

     The undersigned Purchaser hereby represents and warrants to and agrees with
the Company as follows:

     2.1 AUTHORIZATION; RESIDENCE ADDRESS. This Agreement constitutes the
undersigned's valid and legally binding obligation, enforceable in accordance
with its terms. The undersigned's residence address is as set forth in Section
5.5 herein.

     2.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with the
undersigned in reliance upon the undersigned's representation to the Company,
which by the undersigned's execution of this Agreement the undersigned hereby
confirms, that the Note, Warrant, Note Stock, and Warrant Stock will be acquired
for investment for the undersigned's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, the undersigned
further represents that the undersigned does not presently have any contract,
undertaking, agreement, or arrangement with any person to sell, transfer, or
grant

<PAGE>

participations to such person or to any third person, with respect to any
portion of the Note, Warrant, Note Stock, and Warrant Stock. The undersigned
represents that it has full power and authority to enter into this Agreement.

     2.3 QUALIFIED INVESTOR. The undersigned represents and warrants that it is
an "Accredited Investor" as that term is defined in Rule 501(a) promulgated
pursuant to the Securities Act of 1933, as amended (the "Act"). The undersigned
also represents and warrants that it either has a pre-existing business or
personal relationship with the Company or any of its officers, directors, or
controlling persons, or by reason of the undersigned's business or financial
experience or the business or financial experience of the undersigned's
professional advisors who are unaffiliated with and who are not compensated by
the Company, directly or indirectly could be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in the Company and to
protect the undersigned's own interests in connection with these transactions.

     2.4 DISCLOSURE OF INFORMATION. The undersigned understands that the Company
is a public reporting Company under the 1934 Act and that it is current on its
reporting requirements and that such reports represent all the information the
undersigned considers necessary or appropriate for deciding whether to acquire
the Note, Warrant, Note Stock, and Warrant Stock, and that in particular, the
undersigned has been furnished with and has carefully read the Company's Annual
Report on Form 10-K dated March 31, 1998, amended on April 30, 1998, the
Quarterly Report on Form 10-Q dated May 15, 1998, and the Current Reports on
Form 8-K dated January 15, 1998, March 24, 1998 and April 7, 1998 (the
"Disclosure Documents").

     2.5 INVESTMENT EXPERIENCE. The undersigned is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has directly, or
indirectly through its agents, advisors or other persons on which it relies,
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Stock. The
undersigned also represents it has not been organized for the purpose of
acquiring the Note, Warrant, Note Stock, and Warrant Stock. The undersigned
further represents that it has had an opportunity to review the Note, the
Warrant, and this Agreement (the "Note and Warrant Agreements") and ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Note, Warrant, Note Stock, and Warrant Stock.

     2.6 RESTRICTED SECURITIES. The undersigned understands that the Note, the
Warrant, and the shares of Common Stock issuable upon conversion thereof will be
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such shares may be resold without registration under the Act, only in certain
limited circumstances.

     2.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, the undersigned further agrees not to make any
disposition of all or any portion of the Note, Warrant, Note Stock, and Warrant
Stock unless and until:

          (a) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or

          (b) The undersigned shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) the undersigned
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
under the Act.

     2.8 RESPONSIBILITY FOR TAX CONSEQUENCES. The undersigned has had an
opportunity to review the federal, state, local, and foreign tax consequences of
this investment and the transactions contemplated by the Note and Warrant
Agreements (including any tax consequences that may result now or in the future
under recently enacted tax legislation) and has had the opportunity to consult
with his tax advisors, if any, regarding such consequences. The undersigned
acknowledges that he is not relying on any statements or representations of the
Company or any of its agents in regard to such tax consequences and understands
that he (and not the Company) shall be responsible for his own tax liability
that may arise as a result of this investment or the transactions contemplated
by the Note and Warrant Agreements. The undersigned acknowledges that the
Company has no obligation in regard to the future conduct of its business to act
or refrain from acting in any manner, regardless of the loss of any tax benefit
to the undersigned in connection with the purchase, ownership, or sale of the
Note, Warrant, Note Stock, and Warrant Stock which may result from such action
or inaction.

<PAGE>

     2.9  LEGENDS. It is understood that the Note, Warrant, and the shares of
Common Stock issuable upon conversion thereof and any securities issued in
respect thereof or exchange therefor may bear one or all of the following
legends:

          (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED."

          (b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations or by
the laws of any other state or jurisdiction.

     2.10 NON-AFFILIATE STATUS. The undersigned represents and warrants that it
is not an affiliate, officer, director, or employee of the Company or its
agents, including but not limited to its securities placement agents.

3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     3.1  SEC DOCUMENTS. The Company has made available to the undersigned a
true and complete copy of the Disclosure Documents. As of their respective
filing dates, the Company has made all necessary filings with the Securities and
Exchange Commission ("SEC"), the Company's SEC Documents (as defined below)
comply in all material respects with the requirements of the Securities Exchange
Act of 1934 or the Securities Act of 1933, as amended, and none of the Company's
SEC Documents contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. For purposes of this section, the SEC Documents shall mean the
Disclosure Documents.

     3.2  ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has all requisite corporate power and authority to carry on its
respective businesses as now conducted. The Company is qualified as a foreign
corporation in any jurisdiction in which a failure to so qualify would have a
material adverse effect on the Company.

     3.3  POWER, AUTHORIZATION AND VALIDITY.

          (a) The Company has the corporate power and authority to execute and
deliver, and to consummate the transactions contemplated by the Note and Warrant
Agreements to which it is or will be a party and to perform its obligations
under each of them. The execution and delivery of, and the consummation of the
transactions contemplated by each of the Note and Warrant Agreements to which
the Company is or will be a party has been duly authorized by all necessary
corporate action on the part of the Company.

          (b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental entity, is required by or with
respect to the Company in connection with the execution and delivery of, and the
consummation by it of the transactions contemplated by any of the Note and
Warrant Agreements to which the Company is or will be a party, except for
causing the Registration Statement (as defined below) to be declared effective
by the SEC.

          (c) Each of the Note and Warrant Agreements to which the Company is or
will be a party has been, or upon its execution and delivery by the Company will
have been, duly executed and delivered by it, and constitutes or will constitute
upon its execution and delivery, a valid and binding obligation of the Company,
enforceable in accordance with its terms.

     3.4 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution and delivery
of the Note and Warrant Agreements nor the consummation of the transactions
contemplated hereby or thereby will conflict with, or result in a material
breach or violation of, any provision of the Articles of Incorporation or Bylaws
of the Company, as currently in effect, any material instrument or contract to
which the Company is a party or by which any such party is bound, or any
federal, state or local judgment, writ, decree, order, statute, rule or
regulation applicable to any such person. Neither the execution and delivery of
the Note and Warrant Agreements, nor the consummation of the transactions
contemplated hereby or thereby will directly have a material adverse effect on
the Company.

<PAGE>

     3.5 EXEMPTION. Subject to the accuracy of the Purchaser's representations
in Section 2 herein, the offer, sale, and issuance of the Note and Warrant in
conformity with the terms of this Agreement constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act of 1933, as
amended.

     3.6 SAME OFFER TO OTHER INVESTORS. The Company may, subject to applicable
securities laws, offer the Note and Warrant offer to other investors on the same
terms and subject to the same conditions as offered to the Purchaser hereof with
a maximum offering of (i) Notes with a total face value of $1,500,000 and (ii)
Warrants for the issuance of 3,947,370 shares of the Company's Common Stock.

     3.7 CERTAIN WARRANTIES OF THE COMPANY. Until the Registration Statement (as
defined below) is declared effective by the Commission (as defined below), the
Company will use its best efforts to continue to (i) comply with Rule 144
reporting requirements, (ii) cooperate with Rule 144A prospective purchasers,
and (iii) to the extent economically reasonable, become listed on an automated
quotation system.

4.   REGISTRATION RIGHTS.

     The undersigned will be entitled to registration rights as follows: the
Company shall prepare and file as early as practicable after sixty (60) days
from the date hereof, a registration statement on Form S-3 or any other Form
that is available to the Company at that time (the "Registration Statement")
covering the issuance of the Common Stock issued upon conversion of the Note and
upon exercise of the Warrant. To the extent the Warrant is exercised for Common
Stock prior to the effective date of the Registration Statement, as soon as the
Company resumes trading on an automated quotation system, the company shall file
a registration statement covering the resale of such Common Stock. The Company
further agrees to use its best efforts to cause either registration statement
described above to be declared effective by the Securities and Exchange
Commission (the "Commission") after the initial filing of such Registration
Statement. The Company shall pay all expenses of such registration and shall
maintain the effectiveness of such registration statement for so long as the
Common Stock sold hereunder and Common Stock issuable under the Warrants cannot
be freely resold pursuant to Rule 144.

5.   MISCELLANEOUS

     5.1 IN MAKING AN INVESTMENT DECISION, THE PURCHASER MUST RELY ON HIS OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THIS AGREEMENT, THE NOTE AND THE
WARRANT, INCLUDING THE MERITS AND RISKS INVOLVED. THE SHARES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

     5.2 ENTIRE AGREEMENT. This Agreement, the Note, and the Warrant constitute
the full and entire understanding and agreement among the parties with regard to
the subjects hereof and thereof, and supersede any prior or contemporaneous
understandings, agreements, or representations among them that relate to the
subject matter hereof or thereof.

     5.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto;
PROVIDED, HOWEVER, that the rights of a Purchaser to purchase the Note and the
Warrant shall not be assignable without the consent of the Company.

     5.4 AMENDMENT BY AGREEMENT. Except as expressly provided herein, neither
this Agreement nor any term hereof may be amended, waived, discharged, or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge, or termination is sought;
PROVIDED, HOWEVER, that any provision of this Agreement may be waived, modified,
or amended with the written consent of the Company and the Purchaser.

     5.5 NOTICES. Any request, communication, or other notice required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if sent by facsimile, or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery at the
respective addresses or facsimile number of the parties as set forth below. Any
party hereto may be notice so given change its address for future notice
hereunder.

<PAGE>

All such notices will be deemed to have been given (i) upon confirmation of
delivery, if sent by facsimile, or (ii) upon delivery, if sent by courier or
personal delivery.

               If to Purchaser:            Stock Acquisition LLC
                                           c/o Knapp, Petersen & Clarke
                                           500 North Brand Boulevard, 20th Floor
                                           Glendale, California  91203-1904
                                           Attention:  Greg Hrncir, Esq.
                                           Tel:      (818) 547-5104
                                           Fax:      (818) 547-5329

               If to Company:              Telegen Corporation
                                           101 Saginaw Drive
                                           Redwood City, California 94063
                                           Attention:  Chief Executive Officer
                                           Tel:      (650) 261-9400
                                           Fax:      (650) 261-9468

               with a copy (which          Wilson Sonsini Goodrich & Rosati
               will not constitute         650 Page Mill Road
               notice) to:                 Palo Alto, California 94304
                                           Attention:  Thomas C. DeFilipps, Esq.
                                           Tel:      (650) 493-9300
                                           Fax:      (650) 493-6811

     5.6 SEVERABILITY. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision(s) shall be severed from
this Agreement as if such provision(s) were not included, and the balance of
this Agreement shall be enforceable in accordance with its terms.

     5.7 EXPENSES. The Company and the Purchaser shall bear their own expenses
and legal fees incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby, except that the Company will pay certain
attorney expenses as described in Section 12 of the Note.

     5.8 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION, OR EXEMPTION THEREFROM, IS UNLAWFUL. THE RIGHTS OF ALL
PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION, OR
EXEMPTION THEREFROM, BEING OBTAINED.

     5.9 GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of California as applied to agreements entered and to be
performed entirely within California by California residents.

     5.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     5.11 TITLE AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and not to be considered in construing or
interpreting this Agreement.

     IN WITNESS WHEREOF, the parties have executed this Note and Warrant
Purchase Agreement as of the date first above written.

THE COMPANY:

TELEGEN CORPORATION

<PAGE>

By:      /S/ FRED KASHKOOLI
    ----------------------------------------------------------
      Fred Kashkooli, Chief Executive Officer

THE PURCHASER:

STOCK ACQUISITION LLC,
a Nevada limited liability company

By:     /S/ GREGORY HRNCIR
    ----------------------------------------------------------

Name:   Gregory Hrncir
      --------------------------------------------------------

Title:  ATTORNEY-IN FACT
       -------------------------------------------------------

<PAGE>

                                    EXHIBIT A

                       FORM OF CONVERTIBLE PROMISSORY NOTE

                     (SEE EXHIBIT 10.27 TO THIS FORM 10-KSB)

<PAGE>

                                    EXHIBIT B

                                 FORM OF WARRANT

                     (SEE EXHIBIT 10.28 TO THIS FORM 10-KSB)<PAGE>

Ex-10.27
Form of Convertible Promissory Note issued May 1998

                                  EXHIBIT 10.27

                       FORM OF CONVERTIBLE PROMISSORY NOTE

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT IS IN
EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE.

THIS CONVERTIBLE PROMISSORY NOTE IS SUBJECT TO TRANSFERABILITY RESTRICTIONS
PURSUANT TO SECTION 7 HEREIN AND SHALL NOT BE TRANSFERRED BY THE COMPANY UNLESS
THE HOLDER HEREOF COMPLIES THEREWITH. ANY ATTEMPTED TRANSFER OF SECURITIES NOT
IN COMPLIANCE WITH SUCH SECTION 7 SHALL BE NULL AND VOID.

                               TELEGEN CORPORATION

                           Convertible Promissory Note

US$515,532                                              Redwood City, California
                                                                     May 7, 1998

     FOR VALUE RECEIVED, TELEGEN CORPORATION, a California corporation (together
with its successors and assigns, the "Company"), promises to pay to the order of
Stock Acquisition LLC, a Nevada limited liability company (the "Holder"), (i) an
amount (the "Face Value") of US$515,532 plus (ii) simple interest on the unpaid
balance at the time such interest is due. Interest on this Note shall be paid at
a rate equal to Six Percent (6%) per annum and shall be payable one year from
the date hereof. Payment of all amounts due hereunder shall be made by wire
transfer, subject to adjustment in certain events as more fully set forth in
Section 2 herein.

     This Note is issued pursuant to that Certain Note and Warrant Purchase
Agreement dated as of May 7, 1998 (the "Agreement"), between the Company and the
Holder.

     The following is a statement of the rights of the Holder and the conditions
to which this Note is subject, to which the Holder, by acceptance of this Note,
hereby agrees:

     1. REPAYMENT OBLIGATION.

          (a) REPAYMENT. The Company shall be required to repay all principal
and any outstanding interest on this Note in full one (1) year from the date
hereof (the "Repayment Obligation"). The Company shall be entitled to prepay any
portion of the principal or interest at any time before this Note is due in full
after giving the Holder fifteen (15) days written notice. During such period,
the Holder shall be entitled to convert this note in accordance with Section 2
herein.

          (b) ADJUSTMENT IN NOTE'S FACE VALUE. Upon any prepayment by the
Company of this Note, the Company will on its books and records reduce the face
value of this Note and send notice of such change to the Holder hereof. To the
extent the Note 's face value is greater than zero on the Company's books and
records, the Company will upon request by the Holder hereof, deliver, a new Note
of like tenor in the principal amount remaining on such Note.

<PAGE>

     2. CONVERSION.

          (a) CONVERSION. Holder shall have the right to convert at any time, in
whole or in part, any portion of outstanding principal or interest on the Note
(a "Portion") to the Company's Common Stock by (i) surrender of this Note,
together with (ii) an executed Notice of Conversion, substantially in the form
of EXHIBIT A attached hereto, at the Company's Principal Executive Office. The
number of shares of Common Stock into which any Portion may be converted shall
be determined by dividing the dollar amount of such Portion by $0.38 (the
"Conversion Price"). No fractional shares or scrip representing fractions of
shares will be issued on conversion, and the number of shares issuable shall be
rounded down to the nearest whole share. The shares of Common Stock issued or
issuable upon conversion of this Note are referred to herein as the "Shares."

          (b) ISSUANCE OF SECURITIES ON CONVERSION. Conversion of this Note, in
whole or in part, shall occur if the Holder elects to convert under Section 2(a)
above. Upon exercise of all or part of this Note by the Holder, and unless a
registration statement covering the issuance of the underlying Common Stock is
on file with the Commission and currently effective, the Holder shall confirm in
writing, by executing the form attached hereto as EXHIBIT B, that the shares of
Common Stock purchased thereby are being acquired for investment, solely for the
Holder's own account and not as a nominee for any other Person, and not with a
view toward distribution or resale. As soon as practicable after conversion of
all or part of this Note, the Company at its expense will cause to be issued, in
the name of and delivered to the Holder at the Holder's registered address, a
certificate for the number of shares of the Company's capital stock to which the
Holder shall be entitled on such conversion and a note with identical terms and
conditions as this Note except that the face value of such note shall be for the
outstanding face value of this Note, if any, after conversion hereof. Such
certificate and such note will bear such legends as may be required by
applicable state and federal securities laws in the opinion of legal counsel for
the Company.

          (c) ADJUSTMENT IN CONVERSION PRICE. The Conversion Price shall be
proportionately adjusted upon a reorganization, reclassification, which
substantially affects the Company's entire capital stock, or a stock split or
similar transaction (an "Adjustment Transaction"). The issuance of additional
capital stock, securities which are convertible to the Company's capital stock
(including but not limited to warrants and convertible notes) or the issuance of
capital stock upon conversion of any such convertible securities shall not
constitute an Adjustment Transaction.

     3. RESTRICTIONS ON TRANSFER.

          (a) LEGENDS. Each certificate representing the Shares may be endorsed
with the following legends, and the Holder may not make any transfer of any of
the Shares without first complying with the restrictions on transfer described
in all such legends:

                    (i) The 1933 Securities Act legend set forth on the face of
this Note.

                    (ii) Any other legends required by applicable state
securities laws.

The Company need not register a transfer of any Shares, and may also instruct
its transfer agent not to register the transfer of such Shares, unless the
conditions specified in this Section 3 are satisfied.

          (b) REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS.

                    (i) Any legend endorsed on a certificate pursuant to Section
3(a)(i) and any stop transfer instructions with respect to the Shares evidenced
by such certificate shall be removed and the Company shall issue a certificate
without such legend to the holder thereof if such Shares are registered upon
issuance under the Securities Act, and if such legend may be properly removed
under the terms of Rule 144 promulgated under the Securities Act, or if such
holder provides the Company with an opinion of counsel for such holder
reasonably satisfactory to legal counsel for the Company, to the effect that a
sale, transfer or assignment of such shares may be made without registration.

                    (ii) Any legend endorsed on a certificate pursuant to
Section 3(a)(ii) and the stop transfer instructions with respect to the Shares
evidenced by such certificate shall be removed upon receipt by the Company of an
order of the appropriate state securities authority authorizing such removal.

     4. PREPAYMENT. The Company may prepay this Note, in whole or in part, in
accordance with Section 1(a) herein.

<PAGE>

     5. EVENTS OF DEFAULT; ACCELERATION.

          (a) So long as this Note is unpaid, each of the following events will
constitute an "Event of Default":

                    (i) default in the payment of the principal or interest of
this Note as and when the same shall become due and payable at maturity, by
declaration or otherwise, and continuance of such default for a period of 5
days; or

                    (ii) an involuntary case or other proceeding shall be
commenced against the Company seeking liquidation, reorganization or other
relief with respect to it or its debts under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or seeking the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for any substantial part of
the property of the Company or the winding up or liquidation of the affairs of
the Company, and such case or proceeding shall remain unstayed and undismissed
for a period of 60 days, or an order for relief shall be entered against the
Company under the federal bankruptcy laws as now or hereafter in effect; or

                    (iii) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary case
under any such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or for any substantial part of the property of the
Company, or the Company shall make any general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they come due, or shall
take any corporate action to authorize any of the foregoing; or

                    (iv) failure on the part of the Company to observe or
perform any of the covenants contained in this Note (other than a failure to
make a payment specified in clause (i) above) or in the Agreement and the
continuance of such failure for a period of 30 days following receipt of notice
from the Holder specifying such covenant and the nature of the Company's
non-performance.

          (b) If an Event of Default shall occur, then the Holder may by notice
to the Company (a "Default Notice"), so long as the Event of Default exists, (i)
declare the unpaid principal and accrued interest, if any, of this Note
immediately due and payable without further presentment, demand, protest, or
notice, all of which are hereby waived, and (ii) be entitled from the date of
Event of Default to an additional 2% simple interest on outstanding principal of
this Note.

     6. NOTICES. Any notice, request, or other communications required or
permitted hereunder shall be in writing and shall deemed to have been duly given
if sent by facsimile, or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery, addressed (a)
if to the Holder, to it at the last known address appearing on the books of the
Company maintained for such purpose, or (b) if to the Company, to it at 101
Saginaw Drive, Redwood City, California 94063, attention: Chief Executive
Officer, telephone (650) 261-9400, facsimile (650) 261-9468, with a copy (which
will not constitute notice) to Thomas C. DeFilipps, Esq., Wilson Sonsini
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, telephone
(650) 493-9300, facsimile (650) 493-6811. Any party hereto may by notice so
given change its address for future notice hereunder. All such notices will be
deemed to have been given (i) upon confirmation of delivery, if sent by
facsimile or (ii) upon delivery, if sent by courier or personal delivery.

     7. TRANSFERABILITY. With respect to any offer, sale or other disposition of
any of this Note or the Shares (collectively, the "Securities"), the Holder will
give written notice to the Company prior thereto, describing briefly the manner
thereof, and, if requested by the Company, a written opinion of the Holder's
counsel to the effect that such offer, sale or other distribution may be
effected without registration or qualification under any federal or state law
then in effect or necessary compliance with any other transferability
restrictions relating thereto . Promptly upon receiving such written notice and
reasonably satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify the Holder that the Holder may sell or otherwise
dispose of such Securities. Subject to compliance with applicable state and
federal law and the terms of the notice delivered to the Company, the Holder may
transfer such Securities only by surrendering them to the Company with a duly
executed Assignment Form, substantially in the form attached hereto as EXHIBIT C
and funds sufficient to pay any transfer tax, whereupon the Company will cancel
such Securities and execute and deliver one or more new Securities in the names
and amounts specified in such instrument and, if the Holder's entire interest in
such Securities is not being assigned, in the name of the Holder for the balance
of such interest, unless otherwise specified in the Assignment Form. Any Note
issued upon transfer of this Note shall bear the legends on the face of this
Note. All certificates representing Shares delivered upon transfer of Securities
shall bear the legends required by Section 3. If a determination has been made
pursuant to this Section 7 that the opinion of counsel for the

<PAGE>

Holder is not reasonably satisfactory to the Company, the Company shall so
notify the Holder promptly after such determination has been made. Any attempted
transfer of Securities not in compliance with this Section 7 shall be null and
void.

     8. ASSIGNMENT. The rights and obligations of the Company and the Holder
shall be binding upon and benefit the successors, assigns, heirs,
administrators, and transferees of the parties. The Holder may assign his rights
and obligations hereunder subject to Sections 3 and 7 of this Note. This
provision shall in no way affect the restrictions on transfer contained in
Sections 3 and 7 of this Note. The Company may not assign its rights and
obligations hereunder without the written consent of the Holder unless the
Company enters into a merger, acquisition, sale of substantially all of the
Company's assets or similar change of control transaction.

     9. AMENDMENT AND WAIVER. The rights of the Holder may be amended or waived
upon the written consent of the Company and the Holder.

     10. INTEGRATION: NO SHAREHOLDER RIGHTS. The Agreement, this Note, and a
Warrant to Purchase Common Stock issued to the Holder constitute the full and
entire understanding and agreement between the parties hereto and thereto with
regard to the subject matter hereof and thereof, and supersede any prior or
contemporaneous understandings, agreements or representations between them that
relate to the subject matter hereof or thereof. Nothing contained in this Note
shall be construed as conferring upon the Holder or any other person the right
to vote or to consent or to receive notice as a shareholder in respect of
meetings of shareholders for the election of directors of the Company or any
other matters or any rights whatsoever as a shareholder of the Company; and no
dividends or interest shall be payable or accrued in respect of this Note or the
interest represented hereby or the Shares obtainable hereunder until, and only
to the extent that, this Note shall have been converted.

     11. CALIFORNIA LAW. This Note and the obligations of the Company and the
Holder hereunder shall be governed by and construed in accordance with the laws
of the State of California, as such laws are applied to contracts between
California residents entered into and to be performed entirely within
California.

     12. EXPENSES. The Company shall reimburse reasonable attorney fees incurred
by the Holder in connection with the enforcement of his rights under this Note.

     IN WITNESS WHEREOF, the Company has caused this Note to be executed by its
duly authorized representative on the date first above written.

                               TELEGEN CORPORATION

                               By:     /S/ FRED Y. KASHKOOLI
                                      ------------------------------------------
                                      Fred Y. Kashkooli, Chief Executive Officer

<PAGE>

                              SCHEDULE OF EXHIBITS

           EXHIBIT A -   Notice of Conversion (Section 2(a))

           EXHIBIT B -   Investment Representation Certificate (Section 2(b))

           EXHIBIT C -   Assignment Form (Section 7)

<PAGE>

                                    EXHIBIT A

                             NOTICE OF EXERCISE FORM

                    (To be executed only upon partial or full
                        conversion of the attached Note)

     The undersigned registered Holder of the attached Note hereby irrevocably
converts $515,532 in face value to Common Stock of Telegen Corporation at the
Conversion Price and on the terms and conditions specified in the attached Note.

     The undersigned requests that a certificate (or ___________ certificates in
denominations of ___________ shares) for the shares of Common Stock of Telegen
Corporation hereby received be issued in the name of and delivered to (circle
one) (a) the undersigned or (b) _______________, whose address is ______________
and, if such shares of Common Stock shall not include all the shares of Common
Stock issuable as provided in the attached Note, that a new Note of like tenor
for the number of shares of Common Stock of Telegen Corporation not being
purchased hereunder be issued in the name of and delivered to (circle one) (a)
the undersigned or (b) _______________, whose address is _____________________.

Dated: June 4, 1998

Signature Guaranteed
                                          --------------------------------------

                                          --------------------------------------

                                      By:
                                          --------------------------------------

                                      By:
                                          --------------------------------------
                                          (Signature of Registered Holder)

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

NOTICE:              The signature to this Notice of Exercise must correspond
                     with the name as written upon the face of the attached Note
                     in every particular, without alteration or enlargement or
                     any change whatever.

<PAGE>

                                    EXHIBIT B

                      INVESTMENT REPRESENTATION CERTIFICATE

Purchaser:
           ---------------------------------------------------------------------

Company:   Telegen Corporation, a California corporation

Security:  Common Stock

Amount:
           ---------------------------------------------------------------------

Date:
           ---------------------------------------------------------------------

     In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:

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

     (b) The Purchaser understands that the Securities may have not been
registered under the Securities Act in reliance upon a specific exemption
therefore, which exemption depends upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein. In this
connection, the Purchaser understands that, in the view of the Securities and
Exchange Commission (the "Commission"), the statutory basis for such exemption
may be unavailable if the Purchaser's representation was predicated solely upon
a present intention to hold these Securities for the minimum capital gains
period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future;

     (c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased unless there exists an effective registration statement for
such securities;

     (d) The Purchaser is aware of the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about the Company;
(ii) the resale occurring not less than one (1) year after the party has
purchased and paid for the securities to be sold; (iii) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any
three-month period not exceeding the specified limitations stated therein;

     (e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market upon which to make such a sale then exists,
the Company may not be satisfying the current public information requirements of
Rule 144, and that, in such event, the Purchaser may be precluded from selling
the Securities under Rule 144 even if the one-year minimum holding period had
been satisfied; and

<PAGE>

     (f) The Purchaser further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
staff of the Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.

Date: ______________________, 199__

                                      PURCHASER:
                                                --------------------------------

<PAGE>

                                    EXHIBIT C

                                 ASSIGNMENT FORM

      (To be executed only upon the assignment of the attached securities)

     FOR VALUE RECEIVED, the undersigned registered Holder of the attached
securities hereby sells, assigns and transfers unto __________________________,
whose address is _________________________________, all of the rights of the
undersigned under the attached securities, with respect to _____________ shares
of Common Stock of Telegen Corporation and, if applicable, if such shares of
Common Stock shall not include all the shares of Common Stock issuable as
provided in the attached Note then a new Note of like tenor for the number of
shares of Common Stock of Telegen Corporation not being transferred hereunder be
issued in the name of and delivered to the undersigned, and does hereby
irrevocably constitute and appoint ______________ attorney to register such
transfer on the books of Telegen Corporation maintained for the purpose, with
full power of substitution in the premises.

Dated: _______________, ______

Signature Guaranteed
                                      ------------------------------------------

                                      ------------------------------------------

                                      By:
                                         ---------------------------------------
                                         (Signature of Registered Holder)

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

NOTICE:              The signature to this Assignment must correspond with the
                     name upon the face of the attached certificate of Common
                     Stock or Note being surrendered herewith in every
                     particular, without alteration or enlargement or any change
                     whatever.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}]]