<PAGE>

                                                                Exhibit 10.12

                                FOURTH AND VINE
                                 OFFICE LEASE

          THIS LEASE, made the 10th day of June, 1997, by and between MARTIN
SELIG, whose address is 1000 Second Avenue, Suite 1800, Seattle, Washington,
98104-1046, hereinafter referred to as "Lessor" and Heartstream Inc., a Delaware
Corporation, whose address is 2401 Fourth Avenue, Suite 300, Seattle,
Washington, 98121, hereinafter referred to as "Lessee".

          1. DESCRIPTION. Lessor in consideration of the agreements contained in
            ----------- 
this lease, does hereby lease to Lessee, upon the terms and conditions
hereinafter set forth, that certain space consisting of the agreed upon square
footage of 12,912 (hereinafter referred to as "Premises") comprised of 3,991
square feet on the 2nd floor and 8,921 square feet on the 4th floor levels of
the Fourth & Vine Building, 2601 Fourth Avenue, City of Seattle, State of
Washington 98121, the legal description of which is:

          Lots 5, 6, 7 and 8, Block 33 Bell and Denny's Second Addition to City
          of Seattle, heretofore laid off by A. A. Denny and William N. Bell
          according to plat recorded in Volume 1 of plats, page 137 in King
          County Washington.

          2. TERM. The term of this lease for the 4th floor Premises shall
             ----
commence June 1, 1997 and the term of this lease for the 2nd floor shall
commence October 1, 1997. The lease term for both spaces shall expire July 31,
2001.

          In the event the Premises are not ready for occupancy on the date set
forth above, whether occasioned by Lessor or Lessee, the lease term shall be
extended in such a manner as to reflect the delay occasioned by the failure of
the Premises to be ready for occupancy. In no event shall Lessor or Lessee be
liable for any further damages.

          In the event Lessee exercises its right under paragraph 46, "Lease
Cancellation," in its lease dated May 25, 1994 of premises in Fourth and
Battery, Lessee's lease of premises in Fourth and Vine under the lease contained
herein will also be considered cancelled.

          3. RENT.  Lessee covenants and agrees to pay Lessor rent each month in
             ----
advance on the first day of each calendar month. Rent shall be computed at the
annual base rental rate of $16.00 per square foot. Rent for any fractional
calendar month, at the beginning or end of the term shall be the pro rated 
portion of the rent computed on an annual basis.

          4. USES. Lessee agrees that Lessee will use and occupy said Premises
             ----
for general offices and related purposes and for no other purposes.

          5. RULES AND REGULATIONS. Lessee and their agents, employees, servants
             ---------------------
or those claiming under Lessee will at all times observe, perform and abide by
all of the Rules and Regulations printed on this instrument, or which may be
hereafter promulgated by Lessor, all of which it is covenanted and agreed by the
parties hereto shall be and are hereby made a part of this lease.

          6. CARE AND SURRENDER OF PREMISES. Lessee shall take good care of the
             ------------------------------
Premises and shall promptly make all necessary repairs except those required
herein to be made by Lessor. At the expiration or sooner termination of this
<PAGE>
 
lease, Lessee, without notice, will immediately and peacefully quit and
surrender the Premises in good order, condition and repair (damage by reasonable
wear, the elements, or fire excepted). Lessee shall be responsible for removal 
of all personal property from the Premises, (excepting fixtures being that which
is attached to the Premises, and property of the Lessor) including, but not
limited to, the removal of Lessee's communication cabling, telephone equipment
and signage. Lessee shall be responsible for repairing any damage to the
Premises caused by such removal. If Lessee fails to remove and restore the
Premises at lease expiration, then Lessor shall have the right to remove said
property and restore the Premises and Lessee shall be responsible for all costs
associated therewith. Lessee shall also be responsible for those costs incurred
by Lessor for removing debris Lessee may discard in the process of preparing to
vacate the Premises and for a final cleaning of the Premises, including, but not
limited to, the cleaning, or replacement of carpets if damage is not caused by
reasonable wear, and removal and disposal of Lessee's personal property
remaining in the Premises.

          7. ALTERATIONS. Lessee shall not make any alterations or improvements
             -----------
in, or additions to said Premises without first obtaining the written consent of
Lessor, whose consent shall not be unreasonably withheld. All such alterations,
additions and improvements shall be at the sole cost and expense of Lessee and
shall become the property of Lessor and shall remain in and be surrendered with
the Premises as a part thereof at the termination of this lease, without
disturbance, molestation or injury.

          8. RESTRICTIONS. Lessee will not use or permit to be used in said
             ------------
Premises anything that will increase the rate of insurance on said building or
any part thereof, nor anything that may be dangerous to life or limb; nor in any
manner deface or injure said building or any part thereof; nor overload any
floor or part thereof; nor permit any objectionable noise or odor to escape or
to be emitted from said Premises, or do anything or permit anything to be done
upon said Premises in any way tending to create a nuisance or to disturb any
other tenant or occupant of any part of said building. Lessee, at Lessee's
expense, will comply with all health, fire and police regulations respecting
said Premises. The Premises shall not be used for lodging or sleeping, and no
animals or birds will be allowed in the building.

          9. WEIGHT RESTRICTIONS. Safes, furniture or bulky articles may be
             -------------------
moved in or out of said Premises only at such hours and in such manner as will
least inconvenience other tenants, which hours and manner shall be at the
discretion of Lessor. No safe or other article of over 2,000 pounds shall be
moved into said Premises without the consent of Lessor, whose consent shall not
be unreasonably withheld, and Lessor shall have the right to locate the position
of any article of weight in said Premises if Lessor so desires.

          10. SIGN RESTRICTION. No sign, picture, advertisement or notice shall
              ----------------
be displayed, inscribed, painted or affixed to any of the glass or woodwork of
the building without the prior approval of Lessor.

          11. LOCKS. At the termination of the lease, Lessee shall surrender all
              -----
keys to the Premises whether paid for or not.

          12. KEY. Lessor, his janitor, engineer or other agents may retain a
              ---
pass key to said Premises to enable him to examine the Premises from time to
time with reference to any emergency or to the general maintenance of said
Premises.

          13. TELEPHONE SERVICE. If Lessee desires telephonic or any other
              -----------------  
electric connection, Lessor will direct the electricians as to where and how the
wires are to be introduced, and without such directions no boring or cutting for
wires in installation thereof will be permitted.

          14. SERVICES. Lessor shall maintain Premises and the public and common
              --------
areas of building, such as lobbies, stairs, corridor and restrooms, in

                                      -2-
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reasonably good order and condition except for damage occasioned by act of
Lessee.

          Lessor shall furnish Premises with electricity for lighting and
operation of low power usage office machines, heat, normal office air-
conditioning, and elevator services, during the ordinary business hours of the
building. Air-conditioning units and electricity therefore for special air-
conditioning requirements, such as for computer centers, shall be at Lessee's
expense. Lessor shall also provide lighting replacement for Lessor furnished
lighting, toilet room supplies, window washing with reasonable frequency, and
customary janitor service.

          Lessor shall not be liable to Lessee for any loss or damage caused by
or resulting from any variation, interruption or any failure of said services
due to any cause whatsoever. No temporary interruption or failure of such
services incident to the making of repairs, alterations, or improvements, or due
to accident or strike or conditions or events not under Lessor's control shall
be deemed as an eviction of Lessee or relieve Lessee from any of Lessee's
obligations hereunder.

          In the event of any lack of attention on the part of Lessor and any
dissatisfaction with the service of the building, or any unreasonable annoyance
of any kind, Lessee is requested to make complaints at Lessor's building office
and not to Lessor's employees or agents seen within the building. Lessee is
further requested to remember that Lessor is as anxious as Lessee that a high
grade service be maintained, and that the Premises be kept in a state to enable
Lessee to transact business with the greatest possible ease and comfort. The
rules and regulations are not made to unnecessarily restrict Lessee, but to
enable Lessor to operate the building to the best advantage of both parties
hereto. To this end Lessor shall have the right to waive from time to time such
part or parts of these rules and regulations as in his judgment may not be
necessary for the proper maintenance or operation of the building or consistent
with good service, and may from time to time make such further reasonable rules
and regulations as in his judgment may be needed for the safety, care and
cleanliness of the Premises and the building and for the preservation of order
therein.

          15. SOLICITORS. Lessor will make an effort to keep solicitors out of
              ----------
the building, and Lessee will not oppose Lessor in his attempt to accomplish
this end.

          16. FLOOR PLAN. The floor plan and specifications for Lessee's
              ----------
occupancy shall be attached hereto and marked Exhibit "A" which shall be
approved by both Lessor and Lessee, both of whose approval shall not be
unreasonably withheld.

          17. ASSIGNMENT. Lessee will not assign this lease, or any interest
              ----------
hereunder, and this lease, or any interest hereunder, shall not be assigned by
operation of law. Lessee will not sublet said Premises or any part thereof and
will not permit the use of said Premises by others other than Lessee and the
agents of Lessee without first obtaining the written consent of Lessor, whose
consent shall not be unreasonably withheld. In the event such written consent
shall be given, no other or subsequent assignment or subletting shall be made
without the previous written consent of Lessor, whose consent shall not be
unreasonably withheld. In the event Lessee desires to assign or sublet said
Premises or any part thereof, Lessor shall have the first right, but not the
obligation to re-lease the Premises.

          18. OPERATING SERVICES AND REAL ESTATE TAXES. The annual base rental
              ---------------------------------------- 
rate per rentable square foot in Paragraph 3 includes Lessee's proportionate
share of Operating Services and Real Estate Taxes for the first twelve months of
the lease term, "Base Year Costs". Only actual increases from these Base Year
Costs, if any, will be passed on to Lessee on a proportionate basis.

                                      -3-
<PAGE>
 
                                  DEFINITIONS

Base Year
---------

For computing the Base Year Costs, the base year shall be the calendar year
stated herein or if a specific calendar year is not stated herein then the base
year shall be the calendar year in which the lease term commences. The base year
shall be the calendar year 1997.

Comparison Year
---------------

The Comparison Year(s) shall be the calendar year(s) subsequent to the base 
year.

Operating Services
------------------

"Operating Services" include, but are not limited to, the charges incurred by
Lessor for: building operation salaries, benefits, management fee of five
percent (5%) of gross income for the building, insurance, electricity,
janitorial, supplies, telephone, HVAC, repair and maintenance, window washing,
water and sewer, security, landscaping, disposal, elevator, etc. Operating
Services shall also include the amortization cost of capital investment items
and of the installation thereof, which are primarily for the purpose of safety,
saving energy or reducing operating costs, or which may be required by
governmental authority, (all such costs shall be amortized over the reasonable
life of the capital investment item, with the reasonable life and amortization
schedule being determined in accordance with generally accepted accounting
principles). Notwithstanding anything to the contrary contained herein,
Operating Services shall not include any of the following:

          (i)    real estate taxes

          (ii)   legal fees, auditing fees, brokerage commissions, advertising
costs, or other related expenses incurred by Lessor in an effort to generate
rental income;

          (iii)  repairs, alterations, additions, improvements, or replacements
made to rectify or correct any defect in the original design, materials or
workmanship of the building or common areas (but not including repairs,
alterations, additions, improvements or replacements made as a result of
ordinary wear and tear);

          (iv)   damage and repairs attributable to fire or other casualty;

          (v)    damage and repairs necessitated by the negligence or willful
misconduct of Lessor, Lessor's employees, contractors or agents;

          (vi)   executive salaries to the extent that such services are not in
connection with the management, operation, repair or maintenance of the
building;

          (vii)  Lessor's general overhead expenses not related to the building;

          (viii) legal fees, accountant's fees and other expenses incurred in
connection with disputes with tenants or other occupants of the building or
associated with the enforcement of the terms of any leases with tenants or the
defense of Lessor's title to or interest in the building or any part thereof
unless the outcome is to the financial benefit of all tenants;

          (ix)   costs (including permit, license and inspection fees) incurred
in renovating or otherwise improving, decorating, painting or altering (1) 
vacant space (excluding common areas) in the building or (2) space for tenants
or other occupants in the building and costs incurred in supplying any item or
service to less than all of the tenants in the building;

          (x)    costs incurred due to a violation by Lessor or any other tenant
of the building of the terms and conditions of a lease;

                                      -4-
<PAGE>
 
         (xi)   cost of any specific service provided to Lessee or other
occupants of the building for which Lessor is reimbursed (but not including
Operating Services and Real Estate Tax increases above Base Year Costs to the
extent reimbursed Lessor) or any other expense for which Lessor is or will be
reimbursed by another source (i.e., expenses covered by insurance or
warranties);

         (xii)  costs and expenses which would be capitalized under generally
accepted accounting principles, with the exception of the capital investment
items specified hereinabove;

         (xiii) building management fees in excess of the management fees
specified hereinabove;

         (xiv)  cost incurred with owning and/or operating the parking lots
serving the building by independent parking operator(s);

         (xv)   fees paid to Lessor or any affiliate of Lessor for goods or
services in excess of the fees that would typically be charged by unrelated,
independent persons or entities for similar goods and services;

         (xvi)  rent called for under any ground lease or master lease;

         (xvii) principal and/or interest payments called for under any debt
secured by a mortgage or deed of trust on the building; and

Operating Services shall be adjusted for the Base Year and all Comparison
Year(s) to reflect the greater of actual occupancy or 95% occupancy.


Real Estate Taxes
-----------------

Real Estate Taxes shall be the taxes paid by Lessor in the base year and each
respective Comparison Year. Real Estate Taxes shall be a separate category and
shall be treated as such.

Proportionate Basis
-------------------

Lessee's share of Base Year and Comparison Year(s) Costs shall be a fraction,
the numerator of which shall be the number of rentable square feet contained in
the leased Premises (see Paragraph 1) and the denominator of which shall be the
number of rentable square feet in the building in which the leased Premises are
located (117,299/RSF).

Computation of Adjustments to Base Year Costs
---------------------------------------------

Any adjustment to Base Year Costs will commence to occur in Month 13 of the
lease term with subsequent adjustments commencing every twelve months of the
lease term or in Months 25, 37, 49, etc. as appropriate under the lease term.
Lessee shall be responsible for any increase between Lessee's proportionate
share of Base Year Costs and Lessee's proportionate share of each respective
Comparison Year(s) Costs. The increase shall be the increase to each expense
individually. These costs shall be initially calculated based on estimated
(projected) costs with reconciliation to actual Costs when annual audited
numbers are completed. For the purpose of calculating projected increases to
Base Year Costs, Lessor shall review historical data to predict if any
estimated increases would be anticipated in a Comparison Year(s). If they are,
then commencing in Month 13 and/or every twelve month period thereafter, Lessor
will assess a monthly charge to be paid together with monthly base rent. Once
actual cost data for Comparison Year(s) Real Estate Taxes and Operating Services
for the entire building is formulated in accordance with generally accepted
accounting principles and adjusted to the greater of actual occupancy or 95%
occupancy, then Lessee's estimated pass-through costs shall be corrected with
Lessee or Lessor, as appropriate, reimbursing the other for the difference
between the estimated and actual costs, at that time in a lump sum payment.

                                      -5-
<PAGE>
 
Upon termination of this lease, the amount of any corrected amount between
estimated and actual costs with respect to the final comparison year shall
survive the termination of the lease and shall be paid to Lessee or Lessor as
appropriate within thirty (30) days after final reconciliation.

Computation of or adjustment to Operating Services and/or Real Estate Taxes
pursuant to this paragraph or to rent pursuant to Paragraph 3 shall be computed
based on a three hundred sixty-five (365) day year.

For an example, see Exhibit B attached hereto.

         19. ADDITIONAL TAXES OR ASSESSMENTS. Should there presently be in
             -------------------------------
effect or should there be enacted during the term of this lease, any law,
statute or ordinance levying any assessment or any tax upon rents or the income
from real estate or rental property (other than federal or state income taxes),
Lessee shall reimburse Lessor for Lessee's proportionate share of said expenses
at the same time as rental payments.

         20. LATE PAYMENTS. Any payment, required to be made pursuant to this
             -------------
Lease, not made on the date the same is due shall bear interest at a rate equal
to three percent (3%) above the prime rate of interest charged from time to time
by Seafirst National Bank, or its successor.

         In addition to any interest charged herein, a late charge of five
percent (5%) of the payment amount shall be incurred for payments received more
than five (5) days late.

         21. RISK. All personal property of any kind or description whatsoever
             ----
in the demised Premises shall be at Lessee's sole risk. Lessor shall not be
liable for any damage done to or loss of such personal property or damage or
loss suffered by the business or occupation of the Lessee arising from any acts
or neglect of co-tenants or other occupants of the building, or of Lessor or the
employees of Lessor, or of any other persons, or from bursting, overflowing or
leaking of water, sewer or steam pipes, or from the heating or plumbing or
sprinkling fixtures, or from electric wires, or from gas, or odors, or caused in
any other manner whatsoever except in the case of negligence on the part of
Lessor. Lessee shall keep in force throughout the term of this lease such
casualty, general liability and business interruption insurance as a prudent
tenant occupying and using the Premises would keep in force.

         22. INDEMNIFICATION. Lessee will defend, indemnify and hold harmless
             ---------------
Lessor from any claim, liability or suit including attorney's fees on behalf of
any person, persons, corporations and/or firm for any injuries or damages
occurring in or about the said Premises or on or about the sidewalk, stairs, or
thoroughfares adjacent thereto where said damages or injury was caused or
partially caused by the ordinary or gross negligence or intentional act of
Lessee and/or by Lessee's agents, employees, servants, customers or clients.

         23. WAIVER OF SUBROGATION. Lessee and Lessor do hereby release and
             ---------------------
relieve the other, and waive their entire claim of recovery for loss, damage,
injury, and all liability of every kind and nature which may arise out of, or be
incident to, fire and extended coverage perils, in, on, or about the Premises
herein described, whether due to negligence of either of said parties, their
agents, or employees or otherwise.

         24. SUBORDINATION. This lease and all interest and estate of Lessee
             -------------
hereunder is subject to and is hereby subordinated to all present and future
mortgages and deeds of trust affecting the Premises or the property of which
said Premises are a part. Lessee agrees to execute at no expense to the Lessor,
any instrument which may be deemed necessary or desirable by the Lessor to
further effect the subordination of this lease to any such mortgage or deed of
trust. In the event of a sale or assignment of Lessor's interest in the
Premises, or in the event of any

                                     - 6 -
<PAGE>
 
proceedings brought for the foreclosure of, or in the event of exercise of the
power of sale under any mortgage or deed of trust made by Lessor covering the
Premises, Lessee shall attorn to the purchaser and recognize such purchaser as
Lessor. Lessee agrees to execute, at no expense to Lessor, any estoppel
certificate deemed necessary or desirable by Lessor to further effect the
provisions of this paragraph

         25. CASUALTY. In the event the leased Premises or the said building is
             --------
destroyed or injured by fire, earthquake or other casualty to the extent that
they are untenantable in whole or in part, then Lessor may at Lessor's option,
proceed with reasonable diligence to rebuild and restore the said Premises or
such part thereof as may be injured as aforesaid, provided that within sixty
(60) days after such destruction or injury Lessor will notify Lessee of Lessor's
intention to do so, and during the period of such rebuilding and restoration the
rent shall be abated on the portion of the Premises that is unfit for occupancy.
If necessary, Lessor will provide access to any needed alternative space for
Lessee at the fair market rate not to exceed Lessee's rental rate hereunder.

         26. INSOLVENCY. If Lessee becomes insolvent, or makes an assignment for
             ----------
the benefit of creditors, or a receiver is appointed for the business or
property of Lessee, or a petition is filed in a court of competent jurisdiction
to have Lessee adjudged bankrupt, then Lessor may at Lessor's option terminate
this lease. Said termination shall reserve unto Lessor all of the rights and
remedies available under Paragraph 28 ("Default") hereof, and Lessor may accept
rents from such assignee or receiver without waiving or forfeiting said right of
termination. As an alternative to exercising his right to terminate this lease,
Lessor may require Lessee to provide adequate assurances, including the posting
of a cash bond, of Lessee's ability to perform its obligations under this lease.

         27. DEFAULT. If this lease is terminated in accordance with any of the
             -------
terms herein (with the exception of Paragraph 27), or if Lessee vacates or
abandons the Premises or if Lessee shall fail at any time to keep or perform any
of the covenants or conditions of this lease, i.e. specifically the covenant for
the payment of monthly rent, then, and in any of such events Lessor may with or
without notice or demand, at Lessor's option, and without being deemed guilty of
trespass and/or without prejudicing any remedy or remedies which might otherwise
be used by Lessor for arrearages or preceding breach of covenant or condition of
this lease, enter into and repossess said Premises and expel the Lessee and all
those claiming under Lessee. In such event Lessor may eject and remove from said
Premises all goods and effects (forcibly if necessary). This lease if not
otherwise terminated may immediately be declared by Lessor as terminated. The
termination of this lease pursuant to this Article shall not relieve Lessee of
its obligations to make the payments required herein. In the event this lease is
terminated pursuant to this Article, or if Lessor enters the Premises without
terminating this lease and Lessor relets all or a portion of the Premises,
Lessee shall be liable to Lessor for all the costs of reletting, including
necessary renovation and alteration of the leased Premises. Lessee shall remain
liable for all unpaid rental which has been earned plus late payment charges
pursuant to Paragraph 21 and for the remainder of the term of this lease for any
deficiency between the net amounts received following reletting and the gross
amounts due from Lessee, or if Lessor elects, Lessee shall be immediately
liable for all rent and additional rent (Paragraph 19) that would be owing to
the end of the term, less any rental loss Lessee proves could be reasonably
avoided, which amount shall be discounted by the discount rate of the Federal
Reserve Bank, situated nearest to the Premises, plus one percent (1%).

         28. BINDING EFFECT. The parties hereto further agree with each other
             --------------
that each of the provisions of this lease shall extend to and shall, as the case
may require, bind and inure to the benefit, not only of Lessor and Lessee, but
also of their respective heirs, legal representatives, successors and assigns,
subject, however, to the provisions of Paragraph 18 of this lease.

         It is also understood and agreed that the terms "Lessor" and "Lessee"
and verbs and pronouns in the singular number are uniformly used throughout this
lease regardless of gender, number or fact of incorporation of the parties
hereto. The

                                      -7-
<PAGE>
 
typewritten riders or supplemental provisions, if any, attached or added hereto
are made a part of this lease by reference. It is further mutually agreed that
no waiver by Lessor of a breach by Lessee of any covenant or condition of this
lease shall be construed to be a waiver of any subsequent breach of the same or
any other covenant or condition.

         29. HOLDING OVER. If Lessee holds possession of the Premises after
             ------------
term of this lease, Lessee shall be deemed to be a month-to-month tenant upon
the same terms and conditions as contained herein, except rent which shall be
revised to reflect the then current market rate. During month-to-month tenancy,
Lessee acknowledges Lessor will be attempting to relet the Premises. Lessee
agrees to cooperate with Lessor and Lessee further acknowledges Lessor's
statutory right to terminate the lease with proper notice.

         30. ATTORNEY'S FEES. If any legal action is commenced to enforce any
             ---------------
provision of this lease, the prevailing party shall be entitled to an award of
reasonable attorney's fees and disbursements. The phrase "prevailing Party"
shall include a party who receives substantially the relief desired, whether by
dismissal, summary judgment, judgment or otherwise.

         31. NO REPRESENTATIONS. The Lessor has made no representations or
             ------------------
promises except as contained herein or in some future writings signed by Lessor.

         32. QUIET ENJOYMENT. So long as Lessee pays the rent and performs the
             ---------------
covenants contained in this lease, Lessee shall hold and enjoy the Premises
peaceably and quietly, subject to the provisions of this lease.

         33. RECORDATION. Lessee shall not record this lease without the prior
             -----------
written consent of Lessor. However, at the request of Lessor, both parties shall
execute a memorandum or "short form" of this lease for the purpose of
recordation in a form customarily used for such purpose. Said memorandum or
short form of this lease shall describe the parties, the Premises and the
lease term, and shall incorporate this lease by reference.

         34. MUTUAL PREPARATION OF LEASE. It is acknowledged and agreed that
             ---------------------------
this lease was prepared mutually by both parties. In the event of ambiguity, it
is agreed by both parties that it shall not be construed against either party as
the drafter of this lease.

         35. GOVERNING LAW. This lease shall be governed by, construed and
             -------------
enforced in accordance with the laws of the State of Washington.

         36. FINISH WORK. The Premises are leased in their existing, as-is
             -----------
condition except that Lessor agrees, at Lessor's sole cost, to repaint the
Premises as needed and to shampoo, patch, and restretch the carpets, and repair
peeling window with laminate as needed. All other improvements or modifications
to the Premises shall be at Lessee's expense and with Lessor's prior approval as
to work and contractor.

Lessor shall be responsible for the costs of complying with ADA, including lever
handled hardware for office doors in the premises

         37. EARLY ACCESS. Lessee will be allowed access to the 4th floor space
             ------------
upon full execution of this Lease Agreement and to the 2nd floor space
September 1, 1997 for the purpose of performing tenant improvement work therein.


         38. EARLY TERMINATION. At any time during the lease term for these
             -----------------
Fourth and Vine Premises, should space become available for lease in the Fourth
and Battery Building, Heartstream shall have the option to vacate all or a
reasonably leaseable portion of the Premises herein, and relocate to the Fourth
and

                                      -8-
<PAGE>
 
Battery Building. Upon Lessee's occupancy of the Fourth and Battery space,
Lessee's lease for that portion of the Fourth and Vine Premises shall be
canceled.

         39. PARKING. Lessee will be provided parking for fourteen (14) stalls
             -------
 outside the building. Parking shall be at market rate and paid for by Lessee.

         40. RIGHT OF FIRST REFUSAL. Lessee shall have the right to lease
             ----------------------
additional space on the 1st floor of the Fourth and Vine Building consisting of
3,666 square feet upon the expiration of the existing lease for those premises,
August 31, 1997, under the same terms and conditions as contained herein.

         41. HAZARDOUS WASTE. Except as disclosed in the following reports, true
             ---------------
and correct copies of which have been delivered by Lessor to Lessee, to the best
knowledge of Lessor, (i) no Hazardous Material is present on the Premises or
Building or the soil, surface water or groundwater thereof, (ii) no underground
storage tanks or asbestos containing building materials are present on the
Premises or Building, and (iii) no action, proceeding, or claim is pending or
threatened concerning the Premises or Building concerning any Hazardous Material
or pursuant to any Environmental Law. Lessor has delivered to Lessee all reports
and environmental assessments of the Premises and Building conducted at the
request of or otherwise available to Lessor and Lessor has complied with all
environmental disclosure obligations imposed upon Lessor by applicable law with
respect to this transaction.

Lessor shall indemnify, defend with counsel reasonably acceptable to Lessee,
protect and hold harmless Lessee, its employees, agents, contractors,
stockholders, officers, directors, successors, subtenants, personal
representatives, and assigns from and against all claims, actions, suits,
proceedings, judgments, losses, costs, personal injuries, damages, liabilities,
deficiencies, fines, penalties, damages, attorneys' fees, consultants' fees,
investigations, detoxifications, remediations, removals, and expenses of every
type of nature ("Claims"), directly or indirectly arising out of or in
connection with any Hazardous Material present at any time on or about the
Premises or Building, or the soil, air, improvements, groundwater or surface
water thereof, or the violation of any Environmental Law relating to any such
Hazardous Material, the Premises or Building or the use of the Premises or
Building by any person other than Lessee, its agents or employees, except to the
extent that any of the foregoing actually results from the release, disposal,
discharge, or emissions of Hazardous Material on or about the Premises or
Building during the term of this lease by Lessee or its agents or employees in
violation of applicable Environmental Law.

As used herein "Environmental Law" shall mean all local, state, or federal laws,
statutes, ordinances, rules, regulations, judgments, injunctions, stipulations,
decrees, orders, permits, approvals, treaties, or protocols now or hereafter
enacted, issued or promulgated by any governmental authority which release to
any Hazardous Material or the use, handling, transportation, production,
disposal, discharge, release, emission, sale, or storage of, or the exposure of
any person to a Hazardous Material.

         IN WITNESS WHEREOF, the parties hereof have executed this lease the day
and year first above written.

                                        HEARTSTREAM, INC.

/s/ Martin Selig
-----------------------
Martin Selig                        By:  /s/ Gary Onn
                                        ------------------------------
                                    Its: Vice President, Finance
                                        ------------------------------

   "Lessor"                                      "Lessee"

Attachment

                                      -9-
<PAGE>
 
STATE OF WASHINGTON  )
                     ) ss.
COUNTY OF KING       )

On this 10th day of June, 1997, before me, a Notary Public in and for the State 
of Washington, personally appeared MARTIN SELIG, the individual who executed the
within and foregoing instrument and acknowledged said instrument to be his free 
and voluntary act and deed for the uses and purposes therein mentioned.

                                /s/ JILL M. AREND
                                ------------------------------------------------
                                Notary Public in and for the State of Washington
[NOTARY PUBLIC SEAL]            Residing at: Fall City
                                My commission expires: 6-1-98
(Individual)




STATE OF             )
                     ) ss.
COUNTY OF            )

On this      day of     , 19  , before me, a Notary Public in and for the State 
        ----        ----    --
of           , personally appeared             , the individual(s) who executed
   ----------                      ------------
the within and foregoing instrument, and acknowledged said instrument to be
his/her/their free and voluntary act and deed for the uses and purposes therein
mentioned.


                                ------------------------------------------------
                                Notary Public in and for the State of 
                                                                      ----------
                                Residing at: 
                                             -----------------------------------
                                My commission expires: 
                                                       -------------------------
(Partnership)




STATE OF             )
                     ) ss.
COUNTY OF            )

On this      day of     , 19  , before me, a Notary Public in and for the State 
        ----        ----    --
of           , personally appeared             , to me known to be partner(s) 
   ----------                      ------------
of                            , the partnership that executed the foregoing
   ---------------------------
instrument, and acknowledged said instrument to be the free and voluntary act 
and deed of said partnership, for the uses and purposes therein mentioned, and 
on oath stated that he/she/they is/are authorized to execute said instrument on 
behalf of the partnership.


                                ------------------------------------------------
                                Notary Public in and for the State of 
                                                                      ----------
                                Residing at: 
                                             -----------------------------------
                                My commission expires: 
                                                       -------------------------
(Corporation)




STATE OF             )
                     ) ss.
COUNTY OF            )

On this 10th day of June, 1997, before me, a Notary Public in and for the State 
of Washington, personally appeared Gary Onn, to me known to be the Vice 
President, Finance, respectively, of Heartstream, Inc., the corporation that
executed the within and foregoing instrument, and acknowledged said instrument
to be the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath stated that he/she/they is/are
authorized to execute said instrument and that the seal affixed is the corporate
seal of said corporation.

                                /s/ CHARLENE M. ANDERSON
                                ------------------------------------------------
                                Notary Public in and for the State of Washington
                                Residing at: Bellevue, WA
                                My commission expires: 12-7-98



<PAGE>
 
                                   EXHIBIT B
                                   ---------

                                    EXAMPLE
                                    -------

The intent is to include Lessee's proportionate share of all Base Year Costs in 
Lessee's Annual Base Rental Rate. It is further the intent to limit adjustments
to Lessee's Base Year Costs to actual increases in cost. The Operating Services 
are adjusted to the greater of actual occupancy or 95% occupancy for the base 
year to fairly establish the Base Year Costs at an equitable standard for 
comparison purposes. Comparison Years are similarly adjusted for purposes of 
fairness and equality. To prevent any confusion regarding computation of Base 
Year Costs, Comparison Year Costs and the adjustment of those costs to 95% 
occupancy, if necessary, we have set forth the following example. It is 
important to note that if adjustment to 95% occupancy is necessary, not all 
Operating Services are adjusted.

Expenses requiring adjustment are those which are 100% dependent upon the change
in footage and adjust with the change in occupied footage. This category 
includes electricity, water/sewer, superintendent, disposal, management, 
janitorial supplies, window washing, repair and maintenance, HVAC maintenance, 
and janitorial labor.

Other expenses do not require adjustment nor are they dependent upon occupied 
footage change. These categories are the same whether the building is empty or 
full. They are, insurance, security, elevator, landscaping and telephone.

Real Estate Taxes are dependent upon independent assessment. Real Estate Taxes 
are not adjusted to 95%, but are established for each respective year based on 
the actual tax paid whether for the respective Base Year or each subsequent 
Comparison Year(s).

Please note the expenses noted below which are and are not adjusted and the 
adjustment to each expense to achieve 95% occupancy, if necessary. The method of
adjusting expenses depicted in the example will be followed when adjusting 
actual Operating Service Expenses for both the Base Year and Comparison Year(s).

HYPOTHETICAL FACTS

<TABLE> 
<S>                                                       <C>  
Building Occupancy:                                       80%
Actual Base Year Costs:                                   $375,000
Grossed Base Year Costs to 95%:                           $440,000
Actual Comparison Year Costs: (see below)                 $405,440
Grossed Comparison Year Costs to 95%: (see below)         $463,080
Tenant Premises:                                          10,000 RSF
Building RSF:                                             125,000 RSF
Tenant Proportionate Basis:                               10,000 + 125,000 = 8%

</TABLE> 

                                    EXAMPLE
                                    -------
<TABLE> 
<CAPTION> 
                          Actual           Grossed
Description              Expenses          Expenses
-----------              --------          --------
<S>                      <C>           <C> 
Percent Occupied           80.00%       95.00%  Methodology
                                                -----------
Real Estate Taxes         $54,854      $54,854  Actual Cost
-----------------                                      

Operating Expenses                    
------------------                    
Insurance                 $26,595      $26,595  Actual Cost
Electricity               $69,358      $82,363  Adjusts with occupancy 
Water & Sewer              $4,945       $5,872  Adjusts with occupancy 
Security                   $5,000       $5,000  Actual Cost 
Elevator                   $7,526       $7,526  Actual Cost 
Superintendent            $82,869      $98,407  Adjusts with occupancy 
Landscaping                $2,912       $2,912  Actual Cost 
Disposal                  $15,502      $18,409  Adjusts with occupancy 
Management                $41,680      $49,495  Adjusts with occupancy 
Supplies                   $4,339       $5,153  Adjusts with occupancy 
Window Washing             $1,527       $1,813  Adjusts with occupancy 
Repairs & Maintenance     $24,333      $28,895  Adjusts with occupancy 
Telephone                  $1,144       $1,144  Actual Cost
HVAC Maintenance           $6,208       $7,372  Adjusts with occupancy 
Janitorial                $56,648      $67,270  Adjusts with occupancy 
                         --------     --------
TOTALS:                  $405,440     $463,080

</TABLE>