Document:

<PAGE>

                                                                   EXHIBIT 10.11

                            MANUFACTURING AGREEMENT

                                    between

                            CMA INTERNATIONAL, INC.

                                      and

                              NATUS MEDICAL, INC.

                                       1

Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as [***]. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          PAGE
<S>                                                                       <C>
ARTICLE  1 - DEFINITIONS.................................................  3

ARTICLE  2 - MANUFACTURING OF PRODUCT....................................  6

ARTICLE  3 - PRICE; PRICE ADJUSTMENTS.................................... 10

ARTICLE  4 - RECORDS..................................................... 11

ARTICLE  5 - TERM; TERMINATION........................................... 11

ARTICLE  6 - INDEMNIFICATION............................................. 15

ARTICLE  7 - FORCE MAJEURE............................................... 17

ARTICLE  8 - LEGAL COMPLIANCE; AUTHORIZATION............................. 18

ARTICLE  9 - PRESS RELEASES; USE OF NAMES................................ 18

ARTICLE 10 - DISPUTE RESOLUTIONS; VENUE.................................. 19

ARTICLE 11 - CONFIDENTIALITY............................................. 20

ARTICLE 12 - PROTECTION OF INTELLECTUAL PROPERTY......................... 21

ARTICLE 13 - MISCELLANEOUS............................................... 23
</TABLE>

                                       2
<PAGE>

                            MANUFACTURING AGREEMENT
                            -----------------------

     THIS MANUFACTURING AGREEMENT, is made effective as of this 3/rd/ day of
December, 1998, by and between NATUS MEDICAL, INC. a corporation organized under
the laws of the State of California and having a place of business at 1501
Industrial Road, San Carlos, California, 94070 ("Natus") and CMA INTERNATIONAL,
                                                 -----
INC., a corporation organized under the laws of the State of North Carolina and
having a place of business at 100 Europa Drive, Suite 520, Chapel Hill, North
Carolina 27514, on its own behalf and on behalf of any Affiliate entity or
entities as defined herein ("CMA") (each individually a "Party" and collectively
                             ---                         -----
the "Parties").
     -------
                                  WITNESSETH:
                                  ----------

     WHEREAS, Natus wishes to distribute commercially certain products; and

     WHEREAS, CMA wishes to perform manufacturing, testing and quality assurance
services for the manufacturing, of such products for sale to Natus; and

     WHEREAS, Natus desires CMA to perform such services and sell such products
to Natus, and CMA desires to perform such services and sell such product to
Natus, all on the terms and conditions set forth in this Agreement;

     NOW, THEREFORE, in consideration of the mutual covenants and promises set
forth herein, the Parties agree as follows:

                                   ARTICLE 1

                                  DEFINITIONS
                                  -----------

     The following terms, whether used in the singular or plural, shall have the
meanings assigned to them below for purposes of this Agreement:

                                       3
<PAGE>

     1.1 "Affiliate" shall mean any corporation or non-corporate entity which
          ---------
controls, is controlled by, or is under common control with a Party, or with
respect to CMA, which provides any Product-related service or component to CMA
in connection with any activities contemplated by this Agreement to be
performed. A corporation or non-corporate entity shall be regarded as in control
of another corporation if it owns or directly or indirectly controls at least
forty percent (40%) of the voting stock of the other corporation or (a) in the
absence of the ownership of at least forty percent (40%) of the voting stock of
a corporation or (b) in the case of a non-corporate entity, the power to direct
or cause the direction of the management and policies of such corporation or
non-corporate entity, as applicable, as such management and policies may relate
to this Agreement.

     1.2 "Agreement" shall mean this Manufacturing Agreement.
          ---------

     1.3 "Contract Year" shall mean the period of twelve (12) successive
          -------------
calendar months commencing on the Effective Date, and each successive twelve
(12) month period thereafter.

     1.4  "Delivery Date" shall mean a date for which delivery of Product is
           -------------
stated in a purchase order.

     1.5 "Effective Date" shall mean the date appearing at the beginning of this
          --------------
Agreement .

     1.6 "Initial Term" shall have the meaning set forth in Section 5.1 hereof.
          ------------

     1.7 "Product" shall mean the specific item identified for manufacture in
          -------
each Production Proposal, as described by the Product Specifications.

                                       4
<PAGE>

     1.8  "Product Price" shall mean the Product price set forth in the
           -------------
Production Proposals attached hereto and made a part hereof, as such price may
be amended from time to time during the Initial Term or any renewal term.

     1.9 "Product Specification" shall mean the detailed description of the
          ---------------------
Product, including but not limited to specifications, drawings, assembly and
test procedures, quality standards, and material standards, which will be
attached hereto or referenced within Production Proposals and made a part
hereof, as provided by Natus, as such Product Specifications may be amended from
time.

     1.10  "Production Proposal" shall mean an attachment hereto for each
            -------------------
individual item to be manufactured for Natus by CMA. Each Proposal shall be
accepted by both parties as defined in Article 2.

     1.11 "Third Party" shall mean any party other than Natus, CMA and their
           -----------
respective Affiliates.

     1.12 "Unit" shall mean a single Product.
           ----

     1.13  "Transition Costs" shall mean the nonrecurring expenses associated
            ----------------
with the transfer to CMA from Natus or commencement of the manufacture of a
Product by CMA for Natus.

     1.14 "Price Adjustment" shall mean changes to the Product Price as may be
           ----------------
required from time to time as set forth in Section 3.2.

     1.15 "Lead Time" shall mean the number of weeks that will elapse between
           ---------
the date that a Purchase Order is transmitted to CMA and the date that the
Product is delivered by CMA.

                                       5
<PAGE>

                                    ARTICLE 2

                            MANUFACTURING OF PRODUCT
                            ------------------------

     2.1   Submission of Proposals. CMA may submit proposals or Natus may
           -----------------------
request that certain production be undertaken, at which time CMA may then submit
a proposal. As a minimum the proposal shall include reference to the Product
Specifications, the Product Price, the Transition Costs, and Price Adjustments
associated with the specific product. Informal communications regarding draft
proposals are appropriate.

     2.2   Proposal Acceptance. Natus is under no obligation to accept any
           -------------------
proposal in whole or in part. Acceptance of the proposal shall be indicated by
the authorized signature of both parties appearing on the cover sheet of the
proposal.

     2.3   Proposal Tracking . Upon acceptance, Production Proposals shall be
           -----------------
sequentially numbered to uniquely identify each proposal.

     2.4   Proposal Modification. Either party may make suggestions for changes
           ---------------------
to the proposal at any time. The procedure for acceptance of modifications is
the same as for the original proposal.

     2.5   Transition of Production. The Parties have developed a plan for the
           ------------------------
transition of production of the Products to CMA that includes a detailed
schedule of activities (the "Schedule") included in the Production Proposals.
Each Party agrees to use its best, and commercially reasonable efforts to
execute the tasks identified on the Schedule in a timely manner consistent with
the terms of the Schedule .

     2.6   Transition Costs. The Parties have agreed to share the cost of the
           ----------------
transition of production to CMA as described in the Production Proposals.
                                      6
<PAGE>

     2.7   Production. The Parties agree that all work required by this
           ----------
Agreement to be performed by CMA shall be performed solely by CMA or its
Affiliate(s) who are the sole entities permitted and authorized by Natus to
perform such work under this Agreement. CMA agrees to manufacture, assemble, and
package for international shipping the Products in accordance with the Product
Specifications set forth in the Production Proposals. Natus may review CMA's
performance of the work under this Agreement, including development, fabrication
and tests of the Products, the design of the tools used to produce them, and
their operation. To review the work, Natus may visit the sites where CMA or
CMA's Affiliate performs it. CMA shall make available by electronic or other
means any information required by Natus to be obtained or maintained as relates
to Products, including current data regarding status and performance on this
Agreement.

     2.8   Forecast Schedules. Natus shall deliver to CMA a forecast of Natus'
           ------------------
Unit requirements for Products for each month during the first [***] period
after the first Delivery Date. Such forecast shall thereafter be updated as
required so that CMA shall have been provided with a [***] rolling forecast.

     2.9   Forecast Variances. All forecasts under this Agreement and updates
           ------------------
thereof shall be for the sole purpose of assisting CMA in its planning and will
not constitute an obligation of Natus to purchase the quantities of Products
indicated.

     2.10  Purchase Orders. Except to the extent the parties may otherwise agree
           ---------------
with respect to a particular shipment, the Products shall be ordered by Natus
pursuant to written Purchase Orders, which shall be sent to CMA by Natus with
the respective Proposal from Section 2.2 referenced with not less than the "lead
time" prior to the Delivery Dates specified in such Purchase Orders. Upon
receipt of each Purchase Order by CMA hereunder CMA shall

__________
[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

                                      7
<PAGE>

supply the Products, in such quantities and shall deliver such Products to
Natus by the Delivery Dates specified in such purchase order. CMA shall
maintain in its inventory a safety stock of Products in an amount equal to
[***] percent [***] of the forecast set forth in Section 2.8 hereof for the
next month to ensure Product availability.

     2.11  Delivery Terms.  The terms of delivery for the Products  shall be
           --------------
EX WORKS (INCOTERMS 1990) CMA's facility located in the United Kingdom or
Republic of Ireland. Products shall be suitably packaged by CMA in preparation
for international shipment in packaging meeting Natus' requirements. Destination
charges, transportation costs and any tariff associated with the Products shall
be the responsibility of Natus.

     2.12 Lead Time. The lead time shall be as mutually agreed by the Parties in
          ---------
the Production Proposal and modified from time-to-time by mutual written
agreement. CMA shall exert every effort to minimize the lead time.

     2.13  Warranties by CMA. CMA warrants to Natus that the  Products, at the
           -----------------
time of sale and shipment to Natus or its designee by CMA, will conform to the
Product Specifications, as then in effect, and be free from defects in
material and workmanship under normal use and operation for a period of [***]
months from the Delivery Date.

     2.14  Government and Agency Requirements. CMA warrants that the manufacture
           ----------------------------------
of the Products meet all applicable worldwide government and independent agency
requirements, standards and approvals as may be required by the government
entities in the country of destination with respect to any Product. CMA makes no
warranty that the Product Specifications meet all applicable government and
independent agency requirements, standards, and approvals.

     2.15  Disclaimer by CMA. EXCEPT AS SET FORTH IN SECTIONS 2.13 AND 2.14 CMA
           -----------------
MAKES NO WARRANTY THAT THE PRODUCTS WILL BE MERCHANTALBE OR

__________
[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

                                       8

<PAGE>

FIT FOR ANY PARTICULAR PURPOSE, NOR DOES CMA MAKE ANY OTHER WARRANTIES WITH
RESPECT TO THE PRODUCTS, EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY STATED IN THIS
AGREEMENT.

     2.16  Product Specification Changes. In the event Natus changes the Product
           -----------------------------
Specifications, Natus shall promptly advise CMA in writing of such changes, and
CMA shall promptly advise Natus as to any scheduling and/or price adjustments
which may result from such changes. Prior to implementation of such changes, the
Parties agree to negotiate in good faith in an attempt to reach agreement on (a)
the new price for any Product manufactured hereunder by CMA which embodies such
changes, and (b) any other amendments to this Agreement which may be
necessitated by such changes (i.e., an adjustment to the lead time for purchase
                              ----
orders). Natus agrees to reimburse CMA for the reasonable, mutually agreed
expenses incurred by CMA as a result of such changes, including, but not limited
to, reimbursing CMA for its development costs, capital expenditure costs and
costs for any components or other materials rendered unusable as a result of
such changes.

     2.17  Product Repair. Natus, its distributors, customers, or other designee
           --------------
may return Products to CMA that are determined by Natus to be defective in
accordance with Article 2.7 hereof, or that need repair in accordance with this
Article 2.17. Upon determination of any defective Product, Natus may request,
and CMA shall issue, a "return authorization number" enabling Natus or the end-
user to ship such Product on a freight-collect basis to CMA. CMA shall, at CMA's
option, either replace or repair Products found to be defective during the
Warranty period set forth in Article 2.13 with Products which conform to the
Product Specifications which are part of this Agreement and in force at the time
the defective Products were originally delivered. Products returned for defects
in workmanship and/or materials during

                                       9
<PAGE>

the Warranty Period as set forth in Article 2.13 hereof will be repaired and
shipped back to the appropriate destination at no charge to Natus. Repair of
non-warranty and/or post-warranty Products shall be in accordance with Natus'
instruction. Repair and shipping costs for Products returned for defects that
are not the responsibility of CMA, including Products that have been improperly
used and/or handled, non-warranty Products, and post-warranty Products, shall be
paid by Natus. If the Products are returned to CMA, and CMA determines that said
Products are not defective in any way, and Natus agrees with CMA's findings,
Natus agrees to pay CMA a fixed amount to be negotiated between CMA and Natus
(no defects found charge) for each such Product. CMA's warranty shall not apply
to any defects caused by improper use, handling, or transportation, unless
improperly packaged by CMA for delivery to Natus or its designee.

                                    ARTICLE 3

                            PRICE: PRICE ADJUSTMENTS
                            ------------------------

     3.1  Price.  For all Product which is the subject of purchase orders
          -----
submitted by Natus prior to or during the first Contract Year, Natus shall pay
to CMA the Product Price set forth in the Production Proposals attached hereto,
subject to adjustment as set forth in Section 3.2 hereof.

     3.2  Price Adjustments. The Product Price may be adjusted by CMA for each
          -----------------
year subsequent to the Effective Date (the "New Price Year") as set forth in the
                                            --------------
Production Proposals hereof.

     3.3  Method of Payment. All payments due hereunder to CMA shall be sent to
          -----------------
CMA at the times set forth by wire transfer of funds via the Federal Reserve
Wire Transfer System to the account of CMA International, Inc. that CMA may
designate to Natus in writing

                                     10
<PAGE>

from time to time in accordance with Section 13.8 hereof. Natus shall notify the
following person prior to the date of each wire transfer:

                             Richard M. West
                             President
                             CMA International, Inc.
                             100 Europa Drive, Suite 520
                             Chapel Hill, NC 27514
                             Facsimile No.: 919-968-7829

     The wire transfer shall be due net fifteen (15) days from the date of CMA's
invoice during the first Contract Year and net thirty (30) days thereafter,
which invoice will be sent out concurrently with shipment of Product.

                                    ARTICLE 4

                                     RECORDS
                                     -------

     4.1  Records. CMA shall maintain all engineering, manufacturing, and
          -------
inspection records, all records of shipments of the Products from CMA, and all
records related to Product or facility regulations and certifications for the
time periods required by applicable laws and regulations with respect to the
Products. CMA shall make such records and data available for review and copying
by Natus at CMA's (or its Affiliate's) facility upon reasonable prior notice
from Natus to CMA. In addition, upon termination or expiration of this
Agreement, whichever occurs first, CMA will upon Natus' request, make copies of
such records and data for Natus.

                                    ARTICLE 5

                                TERM: TERMINATION

     5.1 Term. Unless sooner terminated pursuant to the terms hereof, the term
         ----
of this Agreement shall commence on the Effective Date and shall expire on the
fifth anniversary of the Effective Date (the "Initial Term"). The Initial Term
                                              ------------
shall extend for one (1) additional year, if
                                              11
<PAGE>

prior to the fifth anniversary of the Effective Date, both Parties agree in
writing that the Initial Term shall be so extended.

     5.2 Termination and Agreement. This Agreement may be terminated at any time
         -------------------------
upon mutual written agreement between the Parties.

     5.3  Termination for Default.  This Agreement may be terminated by either
          -----------------------
Party in the event of the material breach or default by the other Party of the
terms and conditions hereof; provided, however, the other Party shall first give
                             --------  -------
to the defaulting Party, written notice of the proposed termination or
cancellation of this Agreement, specifying the grounds therefor. Upon receipt of
such notice, the defaulting Party shall have [***] to respond by curing such
default (or [***] with respect to a failure by Natus to pay any amounts
hereunder when due) or by delivering to the other Party a certificate that
such breach is not capable of being cured within such time and that the
breaching Party is working diligently to cure such breach, but in no event
shall the time period for curing such breach exceed an additional [***]. If
the breaching Party does not so respond or fails so to work diligently and to
cure such breach within the additional time set forth above, then the other
Party may either suspend the Agreement indefinitely or terminate the
Agreement. Termination of this Agreement pursuant to this Section 5.3 shall
not affect any other rights or remedies which may be available to the
nondefaulting Party.

     5.4   Bankruptcy; Insolvency. Either Party may terminate this Agreement
           ----------------------
upon the occurrence of either of the following:

           (a)  The entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of such Party in an involuntary case
under the Federal Bankruptcy Code, as now constituted or hereafter amended, or
any other applicable federal or state insolvency or

__________
[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

                                     12
<PAGE>

other similar law in any applicable jurisdiction and the continuance of any such
decree or order  unstayed  and in effect for a period of sixty (60)  consecutive
days; or

          (b) The filing by such Party of a petition for relief under the
Federal Bankruptcy Code, as now constituted or hereafter amended, or any other
applicable federal or state insolvency or other similar law.

     5.5  Acquisition of Merger of CMA. The parties agree that Natus is entering
          ----------------------------
into this  agreement  in large part on the basis of the skills and  expertise of
the particular  individuals  who own and manage CMA. If the management of CMA is
substantially  altered or acquired (including any purchase or acquisition of the
majority of CMA assets), or if any person or entity acquires forty-percent (40%)
or more of the voting shares in CMA or otherwise acquires effective control over
the management of CMA, Natus may immediately  terminate this Agreement.  In such
event Natus shall have the rights stated in Section 5.6 of this Agreement.

     5.6 Expiration; Termination; Consequences.
         -------------------------------------

         (a) Upon expiration or termination of this Agreement, whichever is
sooner, (but in the case of termination, only if directed by the terminating
Party in the notice of termination), CMA shall manufacture and ship, and Natus
shall purchase in accordance with the provisions hereof, any and all amounts of
Product ordered by Natus hereunder prior to the date on which such notice is
given.

         (b) Upon expiration or termination of this Agreement for any reason,
(i) Natus shall purchase from CMA and CMA shall sell at CMA's Acquisition Cost
all usable inventories and materials reasonably acquired by CMA hereunder for
the manufacture of or development of Product, (ii) Natus shall purchase from CMA
and CMA shall sell all work-in-progress for the
                                      13
<PAGE>

Product at CMA's cost and (iii) Natus shall purchase and CMA shall sell all
other finished Product then in CMA's possession.

                (c) Upon expiration or termination of this agreement for any
reason, CMA shall immediately and without delay release to the custody of Natus
or Natus' designee all Product Specifications (in whatever form occurring,
whether hard copy, magnetic or optical disk, etc.), all Natus-owned tooling,
dies, molds, testing or manufacturing or other Natus equipment, together with
either originals or validated copies of all testing, inspection, or other data
regarding the performance or regulatory compliance of any Product sold to Natus
hereunder, as well as any other property of Natus that is on the premises of CMA
or any Affiliate, it being understood that all such items constitute Natus
property that has been created by, or for the benefit of, Natus or, in the case
of Natus-owned equipment, that a bailment has been created for such equipment,
obligating CMA to return such equipment to Natus. In addition, CMA shall sell to
Natus, at Natus' option, for a reasonable and mutually-agreeable price, any
property or equipment owned by CMA or its Affiliates specifically and solely for
the production of Natus' Products.
                                     14
<PAGE>

                                   ARTICLE 6

                                INDEMNIFICATION
                                ---------------

     6.1  Indemnification by Natus. Except as otherwise provided in Section 6.2
          ------------------------
below, Natus shall indemnify, defend and hold CMA, its Affiliates and their
respective directors, officers, employees, agents, successors and assigns
harmless from and against any damages, judgments, claims, suits, actions,
liabilities, costs and expenses (including, but not limited to, reasonable
attorneys' fees) arising out of or connected with (a) the design, use, handling,
distribution, marketing or sale of the Products (except to the extent caused by
CMA's negligent acts or omissions or willful misconduct in the procurement of
components or in the manufacturing of the Products) or from any accident
resulting from the use of the Products, (b) negligent acts, omissions, willful
misconduct or any breach or default of any representation of Natus or any
obligation on the part of Natus to be performed pursuant to this Agreement or
any of its agents, contractors, employees or licensees, or (c) any proceeding
instituted by or on behalf of a Third Party based upon a claim that the
manufacture, use or sale of the Products infringes a United States patent or any
other proprietary rights.

     6.2  Indemnification by CMA. Except as otherwise provided in Section 6.1
          ----------------------
above, CMA shall indemnify, defend and hold Natus, its Affiliates and their
respective directors, officers, employees, agents, successors and assigns
harmless from and against any damages, judgements, claims, suits, actions,
liabilities, costs and expenses (including, but not limited to, reasonable
attorneys' fees) resulting from (a) any Third Party claims or suits arising out
of CMA's negligent acts or omissions or willful misconduct in the procurement of
components or in the manufacture of the Products; or, (b) negligent acts,
omissions, willful misconduct or any

                                      15
<PAGE>

breach or default of any representation of CMA or any obligation on the part of
CMA to be performed pursuant to this Agreement or any of its agents,
contractors, employees or licensees, provided, however, CMA's total liability
                                     --------  -------
under this Section 6.2 shall not exceed, in the aggregate, [***]

     6.3  Indemnification Procedures. A Party (the "Indemnitee") which intends
          --------------------------                ----------
to claim indemnification under this Article 6 shall promptly notify the other
Party (the "Indemnitor") in writing of any action, claim or other matter in
            ----------
respect of which the Indemnitee or any of its Affiliates, or any of their
respective directors, officers, employees or agents intend to claim such
indemnification; provided, however, the failure to provide such notice within a
                 --------  -------
reasonable period of time shall not relieve the Indemnitor of any of its
obligations hereunder except to the extent the Indemnitor is prejudiced by such
failure. The Indemnitee shall permit, and shall cause its Affiliates, and their
respective directors, officers, employees and agents to permit, the Indemnitor,
at its discretion, to settle any such action, claim or other matter. The
Indemnitee agrees to the complete control of such defense or settlement by the
Indemnitor; provided, however, such settlement does not adversely affect the
            --------  -------
Indemnitee's rights hereunder or impose any obligations on the Indemnitee in
addition to those set forth herein in order for it to exercise such rights. No
such action, claim or other matter shall be settled without the prior written
consent of the Indemnitor, and the Indemnitor shall not be responsible for any
attorneys' fees or other costs incurred other than as provided herein. The
Indemnitee, its Affiliates, and their respective directors, officers, employees
and agents shall cooperate fully with the Indemnitor and its legal
representatives in the investigation and defense of any action, claim or other
matter covered by this indemnification. The Indemnitee shall have the right, but
not the obligation, to be represented by counsel of its own selection and at its
own expense.

__________
[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

                                      16
<PAGE>

     6.4  Survival of Indemnification Obligations. The provisions of this
          ---------------------------------------
Article 6 shall survive the expiration or termination of this Agreement.

     6.5  Disclaimer of Consequential Damages. IN NO EVENT SHALL EITHER PARTY BE
          -----------------------------------
LIABLE TO THE OTHER PARTY FOR INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES,
INCLUDING, BUT NOT LIMITED TO, ANY CLAIM FOR DAMAGES BASED UPON LOST PROFITS.

     6.6  Insurance. Each Party shall maintain (a) general liability, and (b)
          ---------
product liability insurance coverage of at least [***] in each category to
protect against such hazards as may or may not be anticipated. Proof of such
insurance shall be produced upon request. CMA shall name Natus as an additional
named insured under CMA's product liability insurance policy required under this
Agreement to be maintained by CMA.

                                   ARTICLE 7

                                 FORCE MAJEURE
                                 -------------

     7.1  Effects of Force Majeure. Neither Party shall be held liable or
          ------------------------
responsible for failure or delay in fulfilling or performing any of its
obligations under this Agreement in case such failure or delay is due to any
condition beyond the reasonable control of the affected party including, without
limitation, acts of God, strikes or other labor disputes, governmental
regulations or actions, but excluding failure or delay caused by the affected
Party's negligence or financial condition (a "Force Majeure Event). Such Party
                                              -------------------
shall promptly resume performance hereunder as soon as practicable.

     7.2  Notice of Force Majeure Event. Each Party agrees to give the other
          -----------------------------
Party prompt written notice of the occurrence of any Force Majeure Event, the
nature thereof, and the extent to which the affected Party will be unable fully
to perform its obligations hereunder. Each Party

__________
[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

                                     17
<PAGE>

further agrees to use commercially reasonable efforts to correct the Force
Majeure Event as quickly as possible and to give the other Party prompt written
notice when it is again fully able to perform such obligations.

                                   ARTICLE 8

                        LEGAL COMPLIANCE: AUTHORIZATION
                        -------------------------------

     8.1  Legal Compliance. Each Party shall comply in all material respects
          ----------------
with all federal, state, and local laws and regulations applicable to the
conduct of its business pursuant to this Agreement.

     8.2  Authorization. CMA hereby represents and warrants to Natus that all
          -------------
corporate action on the part of CMA and its officers and directors and
Affiliates necessary for the authorization, execution and delivery of this
Agreement and the performance of all obligations of CMA hereunder has been
taken. Natus hereby represents and warrants to CMA that all requisite action on
the part of Natus and its officers and directors necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations of Natus hereunder has been taken.

                                   ARTICLE 9

                         PRESS RELEASES: USE OF NAMES
                         ----------------------------

     9.1  Press Releases. Any press release, publicity or other form of public
          --------------
written disclosure related to this Agreement prepared by one Party shall be
submitted to the other Party prior to release for approval.

     9.2  Use of Names. Except as otherwise required by law or by the terms of
          ------------
this Agreement or mutually agreed upon by the Parties, neither Party shall make
any use of the name

                                      18
<PAGE>

of the other Party or any trade name or trademark belonging to the other Party
in any advertising or promotional material without the prior consent of the
other Party, and no right or license to use, register or claim any other right
in respect thereto is created by or implied by this Agreement.

                                  ARTICLE 10

                           DISPUTE RESOLUTION: VENUE
                           -------------------------

     10.1  Exclusions. Section 10.2 below shall not apply to any disputes
           ----------
arising under Article 6 hereof.

     10.2  Dispute Resolution. The Parties recognize that a bona fide dispute as
           ------------------                               ---- ----
to certain matters may from time to time arise during the term of this Agreement
which relates to either Party's rights and/or obligations hereunder. In the
event of the occurrence of such a dispute, either Party may, by notice to the
other Party, have such dispute referred to their respective officers designated
below, or their successors, for attempted resolution by good faith negotiations
within ten (10) days after such notice is received. Such designated officers are
as follows:

     For Natus - President

     For CMA - President

In the event the designated officers are not able to resolve such dispute within
such ten (10) day period, or such other period of time as the Parties may
mutually agree in writing, each Party shall have the right to pursue any and all
remedies available at law or in equity.

     10.3  Venue. Any court proceeding initiated by one Party against the other
           -----
Party with respect to this Agreement shall be commenced in a United States
District Court in California and CMA consents to the personal and subject matter
jurisdiction of such Court; provided, however,
                            --------  -------

                                      19
<PAGE>

if the court proceeding is brought as a third party action as part of a pending
proceeding in a different venue, either Party may initiate such third party
action against the other Party in such other venue.

                                  ARTICLE 11

                                CONFIDENTIALITY
                                ---------------

     11.1 Definition. "Confidential Information" shall mean that information
          ----------
disclosed to CMA by Natus in the course of the term of this Agreement which
relates to Natus' past, present, and future research, development, and business
activities, and which has been identified to CMA as being the Confidential
Information of Natus. The term "Confidential Information" shall not mean any
information that is:

          A.   already in the possession of CMA and not furnished in confidence
               by Natus;

          B.   rightfully received from a third party without obligation of
               confidence;

          C.   independently developed by CMA;

          D.   now, or hereafter, becomes publicly available without breach of
               this Agreement; or

          E.   approved for release by written agreement of Natus.

     11.3 Notice. When disclosed in writing, the information will be labeled as
          ------
Confidential. When disclosed orally, such information will be identified as
Confidential at the time of disclosure, with subsequent confirmation in writing
referencing the date and type of information disclosed. CMA agrees to clearly
label as Natus Confidential all information reduced to writing by CMA as a
result of such oral disclosures. CMA also agrees to clearly label as

                                      20
<PAGE>

Natus Confidential all information prepared or developed by CMA for Natus and
reduced to writing by CMA which is deliverable to Natus hereunder.

     11.4 Duration. During the term of this agreement, and for a period of five
          --------
years thereafter, CMA agrees to hold all such Confidential Information in trust
and confidence for Natus and not to use such Confidential Information other than
for the benefit of Natus. Except as may be authorized by Natus in writing, for
such period of time, CMA agrees not to disclose any such Confidential
Information, by publication or otherwise, to any person other than those persons
whose services CMA requires who have a need to know such Confidential
Information for purposes of carrying out the conditions of this Agreement, and
who agree in writing to be bound by, and comply with the conditions of this
Section. CMA shall return to Natus all Confidential Information upon request by
Natus or upon termination or expiration of this Agreement.

     11.5 Affiliates. The obligations and limitations of this Article 11 apply
          ----------
equally to any CMA Affiliates.

                                   ARTICLE 12

                       PROTECTION OF INTELLECTUAL PROPERTY
                       -----------------------------------

     12.1 Product Specifications. The Product Specifications which are a part of
          ----------------------
this  Agreement are the sole and exclusive  property of Natus and are to be used
by CMA for the sole benefit of Natus in the performance of this Agreement.

     12.2 Natus Property. It is acknowledged by the parties that the design of
          --------------
the Products

                                      21
<PAGE>

was developed under Natus' direction and at Natus' expense. Those features and
processes as well as any other features and processess which may be subsequently
developed under Natus' direction and at Natus' expense, are the proprietary and
confidential designs of Natus, and are the sole and exclusive property of Natus.
CMA agrees that all right, title and interest therein shall at all times vest in
and remain in Natus. Nothing in this Agreement shall be construed as
establishing, transferring, or otherwise conveying to CMA any rights, interest
or license in such features and processes, whether by implication, estoppel or
otherwise.

     12.3  Identification. CMA will promptly identify any of its background
           --------------
Patents or applications which would be infringed by the manufacture, use or sale
of any Product or process delivered to Natus in fulfillment of this Agreement.

     12.4  Usage. All Natus drawings, documents and Product Specifications
           -----
submitted, including but not limited to the Product design, shall remain the
property of Natus. Their usage is authorized only for the performance of work
for Natus.

     12.5  Deliverables. All of the deliverable items arising out of work
           ------------
performed pursuant to this Agreement, and prepared for and submitted to Natus by
CMA under this Agreement, shall belong exclusively to Natus and shall be
prepared so as to be works made for hire according to Title 17 USC and CMA
hereby assigns to Natus the ownership of copyright in the deliverable works
and/or items and Natus shall have the right to obtain and hold in its own name
copyrights, registrations and similar protection which may be available in the
deliverable items. At Natus' request and expense, CMA shall execute assignments
of ownership rights as required.

     12.6  CMA Rights. CMA shall have no license or right, either expressly or
           ----------
by implication, estoppel or otherwise, to reproduce, display publish, prepare
derivative works, use, sell, lease or otherwise transfer copies of the
deliverable items arising out of work performed

                                      22
<PAGE>

pursuant to this Agreement, and prepared for and submitted to Natus by CMA under
this Agreement and CMA shall deliver all copies of such works and/or items to
Natus upon termination of this Agreement or before said termination upon Natus'
written request.

     12.7  Non-Compete. For as long as CMA manufactures the Products for Natus
           -----------
and for [***] thereafter CMA agrees not to design, develop, manufacture,
engineer, consign, advise, supply, or consult on the manufacture of competing
products for companies other than Natus or its assigns other than as agreed by
Natus.
                                  ARTICLE 13

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

     13.1  Independent Contractors. The relationship between Natus and CMA is
           -----------------------
that of independent contractors and nothing herein shall be deemed to constitute
the relationship of partners, joint venturers, nor of principal and agent
between Natus and CMA. Neither Party shall have any express or implied right or
authority to assume or create any obligations on behalf of or in the name of the
other Party or to bind the other Party to any contract, agreement or undertaking
with any Third Party.

     13.2  Assignment. This Agreement may not be assigned or otherwise
           ----------
transferred by either party without the prior written consent of the other
Party. Any purported assignment in violation of the preceding sentence shall be
void. No assignment shall relieve either Party of responsibility for the
performance of any obligation which accrued prior to the effective date of such
assignment.

     13.3  Continuing Obligations. Termination, assignment or expiration of this
           ----------------------
Agreement shall not relieve either Party from full performance of any
obligations incurred prior thereto.

__________
[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

                                      23
<PAGE>

     13.4  Waiver. Neither Party's waiver of any breach or failure to enforce
           ------
any of the terms and conditions of this Agreement, at any time, shall in any way
affect, limit or waive such Party's right thereafter to enforce and compel
strict compliance with every term and condition of this Agreement.

     13.5  Severability. Each Party hereby expressly agrees that it has no
           ------------
intention to violate any public policy, statutory or common laws, rules,
regulations, treaty or decision of any government agency or executive body
thereof of any country or community or association of countries; that if any
word, sentence, paragraph, clause or combination thereof in this Agreement is
found by a court or executive body with judicial powers having jurisdiction over
this Agreement or either Party hereto, in a final unappealed order, to be in
violation of any such provisions in any country or community or association of
countries, such words, sentences, paragraphs, clauses or combination shall be
inoperative in such country or community or association of countries and the
remainder of this Agreement shall remain binding upon the Parties, so long as
enforcement of the remainder does not violate the Parties' overall intentions in
this transaction.

     13.6  Headings. The headings in this Agreement are for convenience of
           --------
reference only and shall not affect its interpretation.

     13.7  Exhibits. All exhibits, Production Proposals, and Purchase Orders
           --------
referred to herein form an integral part of this Agreement and are incorporated
into this Agreement by such reference.

     13.8  Notices. All notices and other communications required or permitted
           -------
to be given under this Agreement shall be in writing and shall be delivered
personally or sent by (a) registered or certified mail, return receipt
requested, (b) a nationally-recognized courier

                                       24
<PAGE>

service guaranteeing next-day delivery, charges prepaid or (c) facsimile (with
the original promptly sent by any of the foregoing manners), and shall be deemed
to have been given upon mailing or upon transmission by facsimile, as the case
may be. Any such notices shall be addressed to the receiving Party at such
Party's address set forth below, or at such other address as may from time to
time be furnished by similar notice by either Party:

         If to CMA:                 CMA International, Inc.
                                    100 Europe Drive, Suite 520
                                    Chapel Hill, NC 27514
                                    Attn: Richard M. West
                                    Facsimile No.: 919-968-7829

                                    With a copy of legal notices to:
                                    Byron B. Kirkland, Esq.
                                    Smith, Anderson, Blount, Dorsett,
                                     Mitchell & Jernigan, L.L.P.
                                    P.O. Box 2611
                                    Raleigh, NC 27602-2611
                                    Facsimile No. 919-821-6800

         If to Natus:               Natus Medical, Inc.
                                    1501 Industrial Road
                                    San Carlos, California 94070
                                    Attn:  President
                                    Facsimile No. 650-802-0401

                                    With a copy of legal notices to:
                                    Corporate Secretary

     13.9  Authorization. Production Proposals must be signed by the President
           -------------
of both Parties or their designee as mutually agreed by the Parties.

     13.10 Counterparts. This Agreement and any amendment or supplement hereto
           ------------
may be executed in any number of counterparts and any Party hereto may execute
any such counterpart, each of which when executed and delivered shall be deemed
to be an original and all of which counterparts taken together shall constitute
but one and the same instrument. The

                                      25
<PAGE>

execution of this Agreement and any such amendment or supplement by any Party
hereto will not become effective until counterparts hereof have been executed by
both Parties hereto.

     13.11 Governing Law: Entire Agreement. The validity, interpretation and
           -------------------------------
performance of this Agreement shall be governed and construed in accordance with
the laws of the State of California without regard to the conflicts of laws
provisions thereof. This document constitutes the full understanding of the
Parties and a complete and exclusive statement of the terms of their agreement.
No terms, conditions, understanding, or agreement purporting to modify or vary
the terms of this Agreement shall be binding unless hereafter made in writing
and signed by the party to be bound. No modification to this Agreement shall be
effected by the acknowledgment or acceptance of any purchase order or shipping
instruction forms or similar documents containing terms or conditions at
variance with or in addition to those set forth herein.

     13.12 Time of the Essence. Time is of the essence in respect to all
           -------------------
provisions of this Agreement in which a time for performance is specified.

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective duly authorized representatives as of the day and year first
above written.

                                CMA INTERNATIONAL, INC.

                                By:  /s/ Richard M. West
                                     -----------------------------
                                     Name:   Richard M. West
                                     Title:  President

                                Date: /s/ December 3, 1998
                                     -----------------------------

                                NATUS MEDICAL, INC.

                                By:  /s/  Tim C. Johnson
                                     -----------------------------
                                     Name:   Tim C. Johnson
                                     Title:  President

                                Date:  December 3, 1998
                                     -----------------------------

                                      26<PAGE>

                                                                   EXHIBIT 10.13

                              Lease                            Unit 5

     This lease is effective as of November 1, 2000 between Media Lofts, LLC, a
California limited liability company ("Landlord"), and Natus ("Tenant").

     1. PREMISES: Landlord hereby leases to Tenant, and Tenant hereby leases
        --------
from Landlord, on the terms and conditions set forth in this Lease, the space
known as Unit 5 (the "Premises"). Located at 370 7th Street, San Francisco,
California. The Building, the parcel(s) of land (the "Land") on which the
Building is located and the other improvements on the Land are referred to
herein as the "Real Property".

     Tenant's lease of the Premises shall include the right to use, in common
with others, the lobbies, entrances, stairs and other public portions of the
Building. All of the windows and outside walls of the Premises and any space in
the Premises used for shafts, stacks, pipes, conduits, ducts, electrical
equipment or other utilities or Building facilities are reserved solely to
Landlord and Landlord shall have rights of access through the Premises for the
purpose of operating, maintaining and repairing the same.

     2. DEFINITIONS: As used in this Lease, the following terms shall have the
        -----------
meanings specified below:

        a. Floor on which the Premises are located: (2nd Floor).
           ---------------------------------------

        b. Initial Lease Term: One Year (12) months, commencing on November 1,
           ------------------
2000 (the "Commencement Date"). And ending midnight November 1, 2001 (the
"Expiration Date").

        c. Initial Monthly Rent: $6,500.00 - Six Thousand Five Hundred Dollars
and No Cents

        d. Security Deposit: $13,000.00 - Thirteen Thousand Dollars and No Cents
           ----------------

        e. Tenant's Share of Expenses: $ Phone, PG&E, Garbage
           --------------------------

        f. Base Year: N/A.
           ---------

        g. Business of Tenant: live/work residential use only as permitted
           -----------------
under applicable provisions of the San Francisco Planning Code.

     3. TERM; DELIVERY OF POSSESSION OF PREMISES:
        ----------------------------------------

        a. Term. The Initial Lease Term shall commence on the Commencement Date
           ----
and shall expire on the Expiration Date.

        b. Delivery of Premises. The Premises shall be delivered to Tenant on
           --------------------
the Commencement Date, provided Tenant shall have paid to Landlord the Monthly
Rent for the first
<PAGE>

month of the Lease Term and the Security Deposit. Except as otherwise provided
in this Paragraph 3, no delay in delivery of possession of the Premises to
Tenant shall operate to extend the Lease Term or amend Tenant's obligations
under this Lease.

     4. CONDITION OF PREMISES: Except as provided herein below, Tenant accepts
        ---------------------
the Premises on the Commencement Date in "as-is, where is" condition. In the
event Tenant desires additional improvements, Tenant shall proceed pursuant to
Paragraph 9 below.

     5. MONTHLY RENT:
        ------------

        a. On or before the first day of each calendar month during the Lease
Term, Tenant shall pay to Landlord, as monthly rent for the Premises, the
Monthly Rent specified in Paragraph 2 above and in subparagraph (b) below. If
the Lease Term commences on a day other than the first day of a calendar month,
or terminates on a day other than the last day of a calendar month, then the
Monthly Rent payable for such partial month shall be appropriately prorated on
the basis of a thirty (30) day month. Monthly Rent shall be paid by Tenant to
Landlord, in advance, without deduction, offset, prior notice or demand, in
lawful money of the United States of America at Landlord's office specified in
the Basic Lease Information, or to such other person or at such other place as
Landlord may from time to time designate in writing. Payments made by check must
be drawn either on a California institution or in a financial institution that
is a member of the Federal Reserve system.

        b. The monthly rent for year one of the Lease Term shall be $6,500.00.
Tenant will have 1 option year at 15%. Year Two will be $7,475.00. Tenant must
give 30 days notice to execute option year.

        c. All amounts payable by Tenant to Landlord under this Lease in
addition to the Monthly Rent hereunder shall constitute rent owed by Tenant to
Landlord hereunder.

        d. Tenant acknowledges that late payment of any installment of Monthly
Rent will cause Landlord to incur costs not contemplated by this Lease and that
the exact amount of such costs would be extremely difficult and impracticable to
fix. Such costs include, without limitation, processing and accounting charges,
late charges that may be imposed on Landlord by the terms of any encumbrance or
note secured by the Real Property and the loss of the use of the delinquent
funds. Therefore, if any installment of Monthly Rent due from Tenant is not
received when due, Tenant shall pay to Landlord on demand an additional sum of
three percent (3%) of the overdue installment, which sum represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of late
payment by Tenant. Acceptance of any late charge shall not constitute a waiver
of Tenant's default with respect to the overdue amount, nor prevent Landlord
from exercising any of the other rights and remedies available to Landlord. Any
rent not paid by Tenant to Landlord within thirty (30) days of the date due
shall bear interest from the date due to the date of payment by Tenant at an
annual rate of interest (the "Interest Rate") equal to the lesser of (i) the
maximum annual interest rate allowed by law on such due date, or (ii) the rate
of twelve percent (12%) per annum. Failure by Tenant to pay rent when due,
including any interest accrued under this subparagraph, shall constitute an
Event of Default (as defined in Paragraph 25 below) by Tenant under this Lease
giving rise to all the remedies afforded Landlord under this Lease for non-
payment of rent.

                                      -2-
<PAGE>

        e. No security or guaranty which may now or hereafter be furnished to
Landlord for the payment of rent due under this Lease or for the performance by
Tenant of the other terms of this Lease shall in any way be a bar or defense to
any of Landlord's remedies set forth in Paragraph 25 below.

     6. SECURITY DEPOSIT: Upon execution of this Lease, Tenant shall pay to
        ----------------
Landlord the Security Deposit specified in Paragraph 2(d) hereof as security for
Tenant's performance of all of the provisions of this Lease. Landlord shall not
be required to segregate the Security Deposit from Landlord's other funds and no
interest shall accrue or be payable to Tenant with respect thereto. Landlord may
(but shall not be required to) use the Security Deposit or any portion thereof
to cure any Event of Default under this Lease or to compensate Landlord for any
damage Landlord incurs as a result of Tenant's failure to perform any of its
obligations hereunder. In such event and upon written notice from Landlord to
Tenant specifying the amount of the Security Deposit so utilized by Landlord and
the particular use for which such amount was used, Tenant shall immediately
deposit with Landlord an amount sufficient to return the Security Deposit to the
amount specified in Paragraph 2(d). Tenant's failure to make such payment to
Landlord within five (5) days of Landlord's notice shall constitute an Event of
Default under this Lease. If Tenant is not in default at the expiration or
termination of this Lease, Landlord shall return to Tenant the Security Deposit
or the balance thereof then held by Landlord; provided, however, that in no
event shall any such return be construed as an admission by Landlord that Tenant
has performed all of Tenant's obligations under this Lease. No holder of a
Superior Interest (as defined in Paragraph 21), nor any purchaser of any
judicial or private foreclosure sale of the Real Property or any portion
thereof, shall be responsible to Tenant for such Security Deposit unless such
holder or purchaser shall have actually received the same.

     7. ADDITIONAL RENT; INSURANCE EXPENSES AND TAX EXPENSES: Intentionally
        ----------------------------------------------------
omitted. See (S) 7 for utilities and other building services.

     8. USE OF PREMISES; COMPLIANCE WITH LAW:
        ------------------------------------

        a. Use of Premises. The Premises shall be used solely for residential
           ---------------
live/work purposes as defined and permitted in the San Francisco Planning Code
as described in Paragraph 2(g) hereof and for no other use or purpose without
the prior written consent of Landlord.

        Tenant shall not do or suffer or permit anything to be done in or about
the Premises or the Real Property, nor bring or keep anything therein, which
would in any way subject Landlord, Landlord's agents or the holder of any
Superior Interest to any liability, increase the premium rate of or affect any
fire, casualty, liability, rent or other insurance relating to the Real Property
or any of the contents of the Building, or cause a cancellation of, or give rise
to any defense by the insurer to any claim under, or conflict with, any policies
for such insurance. If any act or omission of Tenant results in any such
increase in premium rates, Tenant shall pay to Landlord upon demand the amount
of such increase. Tenant shall not do or suffer or permit anything to be done in
or about the Premises which will in any way obstruct or interfere with the
rights of other tenants or occupants of the Building or injure or annoy them, or
use or suffer or permit the Premises to be used for any immoral, unlawful or
objectionable purpose, nor shall Tenant cause, maintain, suffer or permit any
nuisance in, on or about the Premises. Tenant agrees not to handle, store or
dispose of any substance

                                      -3-
<PAGE>

on the Premises which is prohibited by federal, state or local law or
regulation. Without limiting the foregoing, no loudspeakers or other similar
device which can be heard outside the Premises shall, without the prior written
approval of Landlord, be used in or about the Premises. Tenant shall not commit
or suffer to be committed any waste in, to or about the Premises.

        Tenant agrees not to employ any person, entity or contractor for any
work in the Premises (including moving Tenant's equipment and furnishings in,
out or around the Premises) whose presence may give rise to a labor or other
disturbance in the Building and, if necessary to prevent such a disturbance in a
particular situation, Landlord may require Tenant to employ union labor for the
work.

        b. Compliance with Law. Tenant shall not do or permit anything to be
           -------------------
done in or about the Premises which will in any way conflict with any law,
ordinance or governmental requirement now in force or which may hereafter be
enacted. Tenant, at its sole cost and expense, shall promptly comply with all
such laws, ordinances and governmental requirements and with the requirements of
any board of fire underwriters or other similar body now or hereafter
constituted relating to the condition, use or occupancy of the Premises
(excluding structural changes to the Building not related to or affected by
Tenant's Alterations (as defined in Paragraph 9 below and any changes to the
Building required by the Americans Disability Act and any regulations
promulgated thereunder), or Tenant's particular use of the Premises). The
judgment of any court of competent jurisdiction or the admission of Tenant in an
action against Tenant, whether or not Landlord is a party thereto, that Tenant
has violated any law, ordinance or governmental requirement shall be conclusive
of that fact as between Landlord and Tenant. Tenant shall immediately furnish
Landlord with any notices received from any insurance company or governmental
agency or inspection bureau regarding any unsafe or unlawful conditions within
the Premises.

        c.  Hazardous Substances. No Hazardous Substance as defined by any
            --------------------
local, state or federal law or regulation shall be used or stored upon the
Premises without Landlord's prior written consent and Tenant's compliance with
any applicable law. In the event Landlord permits Tenant to use or store a
Hazardous Substance in the Premises, Tenant indemnifies and holds Landlord
harmless from all liabilities, administrative orders, lawsuits, awards,
judgments or claims of whatsoever kind, including any attorneys' fees and costs
incurred by Landlord in connection therewith ("Actions") arising from the use,
storage, release or presence of any such Hazardous Substance(s) in or upon the
Premises or Building, and shall defend Landlord at Tenant's sole expense in any
such Action with counsel acceptable to Landlord in Landlord's sole judgment.

        d. Applicability of Paragraph. The provisions of this Paragraph 8 are
           --------------------------
for the benefit of Landlord only and are not nor shall they be construed to be
for the benefit of any tenant or occupant of the Building.

     9. ALTERATIONS AND RESTORATION:
        ---------------------------

        a. Alterations. Tenant shall not make or suffer to be made any
           -----------
alterations, additions or improvements to the Premises ("Alterations"), except
as expressly provided in this Paragraph 9. If Tenant desires any Alteration,
Tenant must obtain Landlord's prior written approval of such Alteration, which
approval shall not be unreasonably withheld or delayed. The Alteration

                                      -4-
<PAGE>

shall be made at Tenant's sole cost and expense by a general contractor approved
in writing by Landlord in advance and Tenant shall pay Landlord on demand or
prior to or during the course of such construction a reasonable amount
determined by Landlord to compensate Landlord for its review of the proposed
Alteration (which shall not exceed $500.00) and for other reasonable direct and
indirect expenses incurred by Landlord or Landlord's agents in connection with
the Alteration (e.g., freight elevator operation, additional cleaning expenses
and additional security expenses). All such work shall be performed diligently
and in a first-class workmanlike manner and in accordance with plans and
specifications approved by Landlord, and shall comply with all applicable laws
and Landlord's construction procedures for the Building. In no event shall
Tenant employ any person, entity or contractor to perform work in the Premises
whose presence may give rise to a labor or other disturbance in the Building.
Default by Tenant in the payment of any sums agreed to be paid by Tenant for or
in connection with an Alteration (regardless of whether such agreement is
pursuant to this Paragraph 9 or separate instrument) shall entitle Landlord to
all the same remedies as for non-payment of rent under this Lease. Any
Alterations, including, without limitation, movable partitions that are affixed
to the Premises (but excluding movable, free standing partitions) and all
carpeting, shall at once become part of the Building and the property of
Landlord. Tenant shall give Landlord not less than five (5) days' prior written
notice of the date the construction of the Alteration is to commence. Landlord
may post and record an appropriate notice of non-responsibility with respect to
any Alteration and Tenant shall maintain any such notices posted by Landlord in
or on the Premises.

        b. Restoration. All Alterations constructed by Tenant shall be removed
           -----------
from the Premises at the expiration or sooner termination of this Lease and the
Premises shall be restored to their condition prior to the making of the
Alterations, ordinary wear and tear excepted, provided Landlord informs Tenant
in writing of its intent to have Tenant restore the Premises not less than three
(3) days prior to the start of Tenant's Alterations. The removal of the
Alterations and the restoration of the Premises shall be performed by a general
contractor selected by Tenant and approved by Landlord, and Tenant shall pay the
general contractor's fees and costs in connection with such work. Any separate
work letter or other agreement hereafter entered into between Landlord and
Tenant pertaining to Alterations shall be automatically incorporated into this
Lease without the necessity for further reference thereto.

    10. REPAIR: By taking possession of the Premises, Tenant agrees that the
        ------
Premises are in good condition and repair. Tenant, at Tenant's sole cost and
expense, shall keep the Premises and every part thereof (excepting load bearing
walls and any plumbing and electrical facilities located outside the Premises)
in good condition and repair, damage by fire, earthquake, act of God or the
elements excepted. Tenant waives all rights to make repairs at the expense of
Landlord as provided by any law, statute or ordinance now or hereinafter in
effect. It is specifically understood and agreed that, except as specifically
set forth in this Lease, Landlord has no obligation and has made no promises to
alter, remodel, improve, repair, decorate or paint the Premises or any part
thereof. Tenant hereby waives the provisions of California Civil Code Sections
1932(1), 1941 and 1942 and of any similar law, statute or ordinance now or
hereafter in effect. Landlord, at Landlord's sole cost and expense, shall keep
the load bearing walls and the exterior walls and roof in good condition.
Landlord intends to perform required seismic upgrading during the term of the
Lease. Such work will be scheduled and executed in a fashion so as to minimize
disruption; if any, to Tenant's business.

                                      -5-
<PAGE>

    11. INTENTIONALLY OMITTED
        ---------------------

    12. LIENS: Tenant shall not permit any mechanic's, materialman's or other
        -----
liens arising out of work performed at the Premises by or on behalf of Tenant to
be filed against the fee of the Real Property nor against Tenant's interest in
the Premises. Landlord shall have the right to post and keep posted on the
Premises any notices which it deems necessary for protection from such liens. If
any such liens are filed, Landlord may, upon thirty (30) days' written notice to
Tenant, without waiving its rights based on such breach by Tenant and without
releasing Tenant from any obligations hereunder, pay and satisfy the same and in
such event the sums so paid by Landlord shall be due and payable by Tenant
immediately without notice or demand, with interest from the date paid by
Landlord through the date Tenant pays Landlord, at the Interest Rate, as defined
in Paragraph 5(c).

    13. ASSIGNMENT AND SUBLETTING: Tenant shall not assign or sublet all or a
        -------------------------
portion of the premises during the initial or any extended lease term.

    14. INDEMNIFICATION OF LANDLORD:
        ---------------------------

        a. Landlord and the holders of any Superior Interests (as defined in
Paragraph 21 hereof) shall not be liable to Tenant and Tenant hereby waives all
claims against such parties for any loss, injury or other damage to person or
property in or about the Premises or the Real Property from any cause
whatsoever, including, without limitation, water leakage of any character from
the roof, walls, basement or other portion of the Premises or the Real Property,
or gas, fire, explosion or electricity within the Premises or the Real Property,
or acts of other tenants of the Building; provided, however, that the foregoing
waiver shall be inapplicable to any loss, injury or damage resulting directly or
indirectly from Landlord's negligence, gross negligence or willful misconduct.

        b. Tenant shall hold Landlord and the holders of any Superior Interest,
and the constituent shareholders, partners or other owners thereof, and all of
their agents, contractors, servants, officers, directors, employees and
licensees (hereinafter collectively called the "Indemnities") harmless from and
indemnify the Indemnities against any claims, liability, damages, costs or
expenses, including reasonable attorneys' fees and costs incurred in defending
against the same, to the extent arising from (a) the acts or omissions of
Tenant, Tenant's employees, agents, contractors, licensees, subtenants,
customers, guests or invitees in or about the Real Property, (b) any
construction or other work undertaken by Tenant on the Premises, whether prior
to or during the term of this Lease, (c) any breach or Event of Default under
this Lease by Tenant, or (d) any accident, injury or damage, to any person or
property, occurring in or about the Premises caused by the intentional acts,
negligence, gross negligence or willful misconduct of Tenant, its employees and
others; except to the extent such claims, liability, damages, costs or expenses
are caused directly or indirectly by the negligence, gross negligence or willful
acts or omissions of Landlord or its authorized representatives or agents. In
case any action or proceeding be brought against any of the Indemnities by
reason of any such claim or liability, Tenant, upon notice from Landlord,
covenants to resist and defend at Tenant's sole expense such action or
proceeding by counsel reasonably satisfactory to Landlord. The provisions of
this Paragraph 14(b) shall survive the termination of this Lease with respect to
any injury, illness, death or damage occurring prior to such termination.

                                      -6-
<PAGE>

    15. INSURANCE:
        ---------

        a. Tenant's Insurance.  To the extent Tenant operates a business in the
           ------------------
premises, Tenant shall, at Tenant's expense, maintain during the Lease Term
(and, if Tenant shall occupy or conduct activities in or about the Premises
prior to or after the Lease Term, then also during such pre-term or post-term
period): (i) comprehensive general liability insurance including contractual
liability coverage, with a minimum coverage of Five Hundred Thousand Dollars
($500,000) per occurrence/One Million Dollars ($1,000,000) general aggregate,
for injuries to, or illness or death of, persons and damage to property
occurring in or about the Premises or otherwise resulting from Tenant's
operations in the Building, (ii) property insurance protecting Tenant against
loss or damage by fire and such other risks as are insurable under then-
available standard forms of "all risk" insurance policies (excluding earthquake
and flood but including water damage), covering Tenant's property in or about
the Premises or the Real Property and also covering any fixtures that may belong
to Tenant and any Alterations not in the nature of ordinary office improvements,
but excluding the improvements existing in the Premises as of the date of
Tenant's initial occupancy of the Premises, for not less than eighty percent
(80%) of the full replacement value thereof without deduction for depreciation;
and (iii) workers' compensation insurance in statutory limits. The above-
described comprehensive general liability insurance shall protect Tenant, as
named insured, and Landlord and all the Indemnities, as defined in Paragraph 14,
and any other parties designated by Landlord, as additional insurers; shall
insure Landlord's and such other parties' contingent liability with regard to
acts or omissions of Tenant; and shall specifically include all liability
assumed by Tenant under this Lease (provided, however, that such contractual
liability coverage shall not limit or be deemed to satisfy Tenant's indemnity
obligations under this Lease). Landlord reserves the right to reasonably
increase the foregoing amount of liability coverage from time to time as
Landlord's insurance consultant determines is required to adequately protect
Landlord and the other parties designated by Landlord from the matters insured
thereby.

        b. Policy Form. Each insurance policy required pursuant to this
           -----------
Paragraph 15 shall be issued by an insurance company licensed to do business in
the State of California and approved by Landlord. Each insurance policy, other
than Tenant's workers' compensation insurance, shall (i) provide that it may not
be materially changed, canceled or allowed to lapse unless thirty (30) days'
prior written notice to Landlord and any other insured designated by Landlord is
first given, and (ii) provide that no act or omission of Tenant shall affect or
limit the obligations of the insurer with respect to any other insured. Each
such insurance policy or a certificate thereof shall be delivered to Landlord by
Tenant on or before the effective date of such policy and thereafter Tenant
shall deliver to Landlord renewal policies or certificates prior to the
expiration dates of expiring policies. If Tenant fails to procure such insurance
or to deliver such policies or certificates, Landlord may, at its option and
after written notice to Tenant, procure the same for Tenant's account, and the
cost thereof shall be paid to Landlord by Tenant upon demand.

        c.  Nothing in this Paragraph 15 shall be construed as creating or
implying the existence of (i) any ownership by Tenant of any fixtures,
additions, Alterations, or improvements in or to the Premises or (ii) any right
on Tenant's part to make any addition, Alteration or improvement in or to the
Premises.

                                      -7-
<PAGE>

    16. MUTUAL WAIVER OF SUBROGATION RIGHTS: Each party hereto hereby releases
        -----------------------------------
other respective party and, in the case of Tenant as the releasing party, the
other Indemnities identified in Paragraph 14 hereof, and the respective
partners, shareholders, agents, employees, officers, directors and authorized
representatives of such released party, from any claims such releasing party may
have for damage to the Building, the Premises or any of such releasing party's
fixtures, personal property, improvements and alterations in or about the
Premises, the Building or the Real Property that is caused by or results from
risks insured against under any fire and extended coverage insurance policies
actually carried by such releasing party or deemed to be carried by such
releasing party; provided, however, that such waiver shall be limited to the
extent of the net insurance proceeds payable by the relevant insurance company
with respect to such loss or damage. For purposes of this Paragraph 16, Tenant
shall be deemed to be carrying any of the insurance policies required pursuant
to Paragraph 15 even if not actually carried by Tenant, and Landlord shall be
deemed to carry standard fire and extended coverage policies on the Real
Property. Each party hereto shall cause each such fire and extended coverage
insurance policy obtained by it to provide that the insurance company waives all
rights of recovery by way of subrogation against the other respective party and
the other aforesaid released parties in connection with any matter covered by
such policy.

    17. UTILITIES AND OTHER BUILDING SERVICES:
        -------------------------------------

        a. Description of Utilities and Services. Landlord shall furnish water,
           -------------------------------------
gas, electricity, telephone, and cable lines to the Premises.

        b. Payment for Utilities and Services. Tenant shall pay directly to PG&E
           ----------------------------------
for gas and electricity provided to Tenants unit. Tenant shall pay to Pacific
Bell and its long distance carrier for telephone service and to TCI Cable
service to the premises.

        c. Temperature Balance. Intentionally Omitted.
           -------------------

        d. Interruption of Services. In the event of an interruption in, or
           ------------------------
failure or inability to provide any of the above-described services or utilities
due to causes beyond Landlord's control, such interruption, failure or inability
shall not constitute an eviction of Tenant, constructive or otherwise, or impose
upon Landlord any liability whatsoever, including, but not limited to, liability
for consequential damages or loss of business by Tenant. Tenant hereby waives
the provisions of California Civil Code Section 1932(1) or any other applicable
existing or future law, ordinance or governmental regulation permitting the
termination of this Lease due to such interruption, failure or inability.

    18. PERSONAL PROPERTY AND OTHER TAXES: Tenant shall pay before delinquency
        ---------------------------------
any and all taxes, fees, charges or other governmental impositions levied or
assessed against Landlord or Tenant (a) upon Tenant's equipment, furniture,
fixtures, improvements and other personal property (including carpeting
installed by Tenant) located in the Premises, (b) by virtue of any Alterations
made by Tenant to the Premises, and (c) upon this transaction or any document to
which Tenant is a party creating or transferring an interest or an estate in the
Premises. If any such fee, charge or other governmental imposition is paid by
Landlord, Tenant shall reimburse Landlord for Landlord's payment upon demand.

                                      -8-
<PAGE>

    19. RULES AND REGULATIONS: Tenant shall comply with the Rules and
        ---------------------
Regulations may be established, modified or amended by Landlord from time to
time. If Tenant's Premises are on the second floor of the building, Tenant shall
cover not less than 70% of the concrete floors with floor coverings such as area
rugs, carpets or other sound reducing coverings approved by Landlord. Landlord
shall not be responsible to Tenant for the non-performance by any other tenant
or occupant of the Building of any of the Rules and Regulations. The initial
Rules and Regulations for the Building are attached hereto as Exhibit B hereto.

    20. SURRENDER; HOLDING OVER:
        -----------------------

        a. Surrender. Upon the expiration or other termination of this Lease,
           ---------
Tenant shall surrender the Premises and all improvements and Alterations to
Landlord broom-clean and in their original condition, except for reasonable wear
and tear and damage from casualty, and Tenant shall remove from the Premises all
of Tenant's personal property and trade fixtures. If such removal is not
completed at the expiration or other termination of this Lease, Landlord may
remove the same at Tenant's expense. Any damage to the Premises or the Building
caused by such removal shall be repaired promptly by Tenant or, if Tenant fails
to do so, Landlord may do so at Tenant's expense. The removal of Alterations
from the Premises shall be governed by Paragraph 9 hereof. Tenant's obligations
under this Paragraph shall survive the expiration or other termination of this
Lease. Upon expiration or termination of this Lease or of Tenant's possession,
Tenant shall surrender all keys to the Premises or any other part of the
Building and shall make known to Landlord the combination of locks on all safes,
cabinets and vaults that may be located in the Premises.

        b. Holding Over. If Tenant remains in possession of the Premises after
           ------------
the expiration or earlier termination of this Lease, Tenant's continued
possession shall be on the basis of a tenancy at sufferance and Tenant shall pay
as Monthly Rent during the holdover period an amount equal to the greater of (i)
one hundred fifty percent (150%) of the fair market rental (as reasonably
determined by Landlord) for the Premises or (ii) two hundred percent (200%) of
the Monthly Rent and Additional Rent payable under this Lease for the last full
month prior to the date of such expiration, unless Landlord and Tenant have
agreed in writing to a new Base Rent for an Extended Term.

    21. INTENTIONALLY OMITTED
        ---------------------

    22. FINANCING CONDITION: If any lender which intends to make a loan to
        -------------------
Landlord and take a mortgage or deed of trust encumbering the Real Property
should require, as a condition to such financing, execution by Tenant of an
agreement requiring Tenant to send such lender written notice of any default by
Landlord under this Lease, giving such lender the right to cure such default
until such lender has completed foreclosure, and preventing Tenant from
terminating this Lease unless such default remains uncured after foreclosure has
been completed, then Tenant agrees to execute and deliver such agreement as
required by such lender. Tenant acknowledges and agrees that its failure to
execute any such agreement required by such lender may cause Landlord serious
financial damage by causing the failure of a financing transaction and such
failure shall give Landlord all of its rights and remedies under Paragraph 25
hereof, including its right to damages caused by the loss of said financing.

                                      -9-
<PAGE>

    23. ENTRY BY LANDLORD: Landlord may, upon 24 hours notice to Tenant, except
        -----------------
in the case of emergency, enter the Premises to (a) inspect the same and to
determine whether Tenant is in compliance with its obligations hereunder, (b)
supply janitorial and any other service Landlord is required to provide
hereunder, (c) show the Premises to prospective purchasers or tenants, (d) post
notices of non-responsibility, and (e) alter, improve or repair the Premises or
any portion of the Real Property. In connection with any such alteration,
improvement or repair, Landlord may erect in the Premises or elsewhere in the
Real Property scaffolding and other structures reasonably required for the work
to be performed. In no event shall Tenant's rent abate as a result of any such
entry or work; provided, however, that all such work shall be done in such a
manner as to cause as little interference to Tenant as reasonably possible.
Except in the event of Landlord's gross negligence or willful misconduct,
Landlord shall not be liable in any manner for any inconvenience, loss of
business or other damage to Tenant or other persons arising out of Landlord's
entry on the Premises as provided in this Paragraph 23. Landlord shall at all
times retain a key with which to unlock all of the doors in the Premises, except
Tenant's vaults and safes. If an emergency necessitates immediate access to the
Premises, Landlord may use whatever force is necessary to enter the Premises and
any such entry to the Premises shall not constitute a forcible or unlawful entry
into the Premises, a detainer of the Premises, or an eviction of Tenant from the
Premises, or any portion thereof.

    24. INSOLVENCY OR BANKRUPTCY: The occurrence of any of the following shall
        ------------------------
constitute an Event of Default under Paragraph 25 hereof:

        a. Tenant ceases doing business as a going concern, makes an assignment
for the benefit of creditors, is adjudicated an insolvent, files a petition (or
files an answer admitting the material allegations of such petition) seeking for
Tenant any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any state or federal bankruptcy or other
law, or Tenant consents to or acquiesces in the appointment, pursuant to any
state or federal bankruptcy or other law, of a trustee, receiver or liquidator
for the Premises, for Tenant or for all or any substantial part of Tenant's
assets;

        b. Tenant fails within sixty (60) days after the commencement of any
proceedings against Tenant seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any state or
federal bankruptcy or other law, to have such proceedings dismissed, or Tenant
fails, within sixty (60) days after an appointment pursuant to any state or
federal bankruptcy or other law without Tenant's consent or acquiescence, of any
trustee, receiver or liquidator for the Premises, for Tenant or for all or any
substantial part of Tenant's assets, to have such appointment vacated;

        c. Tenant is unable, or admits in writing its inability, to pay its
debts as they mature; or

        d. Tenant gives notice to any governmental body of its insolvency or
pending insolvency, or of its suspension or pending suspension of operations.

     In no event shall this Lease be assigned or assignable by reason of any
voluntary or involuntary bankruptcy proceedings, nor shall any rights or
privileges hereunder be an asset of Tenant, the trustee, debtor-in-possession,
or the debtor's estate in any bankruptcy, insolvency or reorganization
proceedings.

                                      -10-
<PAGE>

Tenant, the trustee, debtor-in-possession, or the debtor's estate in any
bankruptcy, insolvency or reorganization proceedings.

     25.  DEFAULT AND REMEDIES:
          --------------------

          a.  Events of Default.  The occurrence of any of the following shall
              -----------------
constitute an "Event of Default" by Tenant:

              (i)    Tenant fails to pay rent or other sums as and when due
hereunder.

              (ii)   Tenant fails to comply with any other provision of this
Lease in the manner and within the time required after ten (10) days written
notice from Landlord to Tenant.

              (iii)  Tenant fails to occupy and use the Premises for fifteen
(15) consecutive days, which failure shall be deemed an abandonment of the
Premises by Tenant.

              (iv)  Tenant violates the bankruptcy and insolvency provisions of
Paragraph 24 hereof.

          b.  Remedies.  Upon the occurrence of an Event of Default, Landlord
              --------
shall have the following remedies, which shall not be exclusive but shall be
cumulative and shall be in addition to any other remedies now or hereafter
allowed by law or equity:

              (i)  Landlord may terminate Tenant's right to possession of the
Premises at any time by written notice to Tenant. Tenant expressly acknowledges
that in the absence of such written notice from Landlord, no other act of
Landlord, including, but not limited to, its re-entry into the Premises, its
reletting of the Premises for Tenant's account, or its exercise of any other
rights and remedies under this Paragraph 25, shall constitute an acceptance of
Tenant's surrender of the Premises or constitute a termination of this Lease or
of Tenant's right to possession of the Premises.

     Upon such termination in writing of Tenant's right to possession of the
Premises, this Lease shall terminate and Landlord shall be entitled to recover
damages from Tenant as provided in California Civil Code Section 1951.2 or any
other applicable existing or future law, ordinance or regulation providing for
recovery of damages for such breach, including but not limited to the following:

                   (A)  the reasonable cost of recovering the Premises; plus

                   (B)  the reasonable cost of removing Tenant's Alterations,
trade fixtures and improvements; plus

                   (C)  all unpaid rent due or earned hereunder prior to the
date of termination, less the proceeds of any reletting or any rental received
from subtenants prior to the date of termination applied as provided in
Paragraph 25(b)(ii) below, together with interest at the Interest Rate specified
in Paragraph 5(c) of this Lease, on such sums from the date such rent is due and
payable until the date of the reward of damages; plus

                                      -11-
<PAGE>

                   (D)  the amount by which the rent which would be payable by
Tenant hereunder, as reasonably estimated by Landlord, from the date of
termination until the date of the award of damages, exceeds the amount of such
rental loss as Tenant proves could have been reasonably avoided together with
interest at the Interest Rate specified in Paragraph 5 hereof on such sums from
the date such rent is due and payable until the date of the award of damages;
plus
                   (E)  the amount by which the rent which would be payable by
Tenant hereunder, as reasonably estimated by Landlord, for the remainder of the
then term, after the date of the award of damages exceeds the amount such rental
loss as Tenant proves could have been reasonably avoided, discounted at the
discount rate published by the Federal Reserve Bank of San Francisco for member
banks at the time of the award plus one percent (1%); plus

                   (F)  such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.

              (ii) Landlord may continue this Lease in full force and effect and
may enforce all of its rights and remedies under this Lease, including, but not
limited to, the right to recover rent as it becomes due. During the continuance
of an Event of Default, Landlord may enter the Premises without terminating this
Lease and sublet all or any part of the Premises for Tenant's account to any
person, for such term (which may be a period beyond the remaining term of this
Lease), at such rents and on such other terms and conditions as Landlord deems
advisable. In the event of any such subletting, rents received by Landlord from
such subletting shall be applied (A) first, to the payment of the costs of
maintaining, preserving, altering and preparing the Premises for subletting, the
other costs of subletting, including but not limited to brokers' commissions,
attorneys' fees and expenses of removal of Tenant's personal property, trade
fixtures and Alterations; (B) second, to the payment of rent then due and
payable hereunder; (C) third, to the payment of future rent as the same may
become due and payable hereunder; (D) fourth, the balance, if any, shall be paid
to Tenant upon (but not before) expiration of the Lease Term. If the rents
received by Landlord from such subletting, after application as provided above,
are insufficient in any month to pay the rent due and payable hereunder for such
month, Tenant shall pay such deficiency to Landlord monthly upon demand.
Notwithstanding any such subletting for Tenant's account without termination,
Landlord may at any time thereafter, by written notice to Tenant, elect to
terminate this Lease by virtue of a previous Event of Default.

     During the continuance of an Event of Default, for so long as Landlord does
not terminate Tenant's right to possession of the Premises and subject to
Paragraph 13, entitled Assignment and Subletting, and the options granted to
Landlord thereunder, Landlord shall not unreasonably withhold its consent to an
assignment or sublease of Tenant's interest in the Premises or in this Lease.

              (iii)  During the continuance of an Event of Default, Landlord may
enter the Premises without terminating this Lease and remove all of Tenant's
personal property, Alterations and trade fixtures from the Premises and store
them at Tenant's risk and expense. If Landlord removes such property from the
Premises and stores it at Tenant's risk and expense, and if Tenant fails to pay
the cost of such removal and storage after written demand therefor and/or to pay
any rent then due, then after the property has been stored for a period of
thirty (30) days or more Landlord

                                      -12-
<PAGE>

may sell such property at public or private sale, in the manner and at such
times and places as Landlord deems commercially reasonable following reasonable
notice to Tenant of the time and place of such sale. The proceeds of any such
sale shall be applied first to the payment of the expenses for removal and
storage of the property, the preparation for and the conducting of such sale,
and for attorneys' fees and other legal expenses incurred by Landlord in
connection therewith, and the balance shall be applied as provided in Paragraph
25(b)(ii) above.

     Tenant hereby waives all claims for damages that may be caused by
Landlord's reentering and taking possession of the Premises or removing and
storing Tenant's personal property pursuant to this Paragraph 25, and Tenant
shall hold Landlord harmless from and against any loss, cost or damage resulting
from any such act.  No reentry by Landlord shall constitute or be construed as a
forcible entry by Landlord.

               (iv) Landlord may require Tenant to remove any and all
Alterations from the Premises or, if Tenant fails to do so within thirty (30)
days after Landlord's request, Landlord may do so at Tenant's expense.

               (v)  Landlord may cure the Event of Default at Tenant's expense.
If Landlord pays any sum or incurs any expense in curing the Event of Default,
Tenant shall reimburse Landlord upon demand for the amount of such payment or
expense with interest at the Interest Rate specified in Paragraph 5 from the
date the sum is paid or the expense is incurred until Landlord is reimbursed by
Tenant. Any amount due Landlord under this subsection shall constitute
additional rent hereunder.

     26.  INTENTIONALLY OMITTED
          ---------------------

     27.  INTENTIONALLY OMITTED
          ---------------------

     28.  LANDLORD'S LIABILITY:  Notwithstanding any other provision of this
          --------------------
Lease, Landlord shall not be liable for any consequential damages, nor shall
Landlord be liable for loss of or damage to artwork, currency, jewelry, bullion,
unique or valuable documents, securities or other valuables, or for other
property not in the nature of ordinary fixtures, furnishings and equipment used
in general administrative and executive office activities and functions.
Wherever in this Lease Tenant (a) releases Landlord from any claim or liability,
(b) waives or limits any right of Tenant to assert any claim against Landlord or
to seek recourse against any property of Landlord or (c) agrees to indemnify
Landlord against any matters, the relevant release, waiver, limitation of
indemnity shall run in favor of and apply to Landlord, the constituent
shareholders, partners or other owners of Landlord, and the directors, officers,
employees and agents of Landlord.

     29.  ESTOPPEL CERTIFICATES. At any time and from time to time, upon ten
          ---------------------
(10) days' prior notice from Landlord, Tenant shall execute, acknowledge and
deliver to Landlord a statement certifying to the best of Tenant's knowledge the
Commencement Date of this Lease, stating that this Lease is unmodified and in
full force and effect (or if there have been modifications, that this Lease is
in full force and effect as modified and the date and nature of each such
modification), that Landlord is not in default under this Lease (or, if Landlord
is in default, specifying the nature of such default), that Tenant is not in
default under this Lease (or if Tenant is in

                                      -13-
<PAGE>

default, specifying the nature of such default), the current amounts of and the
dates to which the Monthly Rent and Additional Rent has been paid, and setting
forth such other matters as may be reasonably requested by Landlord. Any such
statement may be conclusively relied upon by a prospective purchaser of the Real
Property or by a lender obtaining a lien on the Real Property as security.

     30.  ATTORNEYS' FEES: In the event of any action or proceeding between
          ---------------
Landlord and Tenant (including an action or proceeding between Landlord and the
trustee or debtor-in-possession while Tenant is a debtor in a proceeding under
any bankruptcy law) to enforce any provision of this Lease, the losing party
shall pay to the prevailing party all costs and expenses, including, without
limitation, reasonable attorneys' fees and expenses, incurred in such action and
in any appeal in connection therewith by such prevailing party.

     31.  WAIVER:  No provisions of this Lease shall be deemed waived by
          ------
Landlord unless such waiver is in a writing signed by landlord . The waiver by
Landlord of any breach of any provision of this Lease shall not be deemed a
waiver of any subsequent breach of same or any other provision of this Lease. No
delay or omission in exercise of any right or remedy of Landlord upon any
default by Tenant shall impair such right or remedy or be construed as a waiver.
Landlord's acceptance of any payments of rent due under this Lease shall not be
deemed a waiver of any default by Tenant under this Lease (including Tenant's
recurrent failure to timely pay rent) other that Tenant's non-payment of the
accepted sums , and no endorsement or statement accompanying or upon any check
or payment shall be deemed and accord and satisfaction. Landlord's consent ot or
approval of any act by Tenant requiring Landlord's consent or approval shall not
be deemed to waive or render unnecessary Landlord's consent to or approval of
any subsequent act by Tenant.

     32.  NOTICES:  All notices and demands which are required or permitted to
          -------
be given by either party hereunder shall be in writing. All notices and demands
by Landlord to Tenant shall be delivered personally or sent by United States
mail, postage prepaid, addressed to Tenant at the Premises, or to such other
place as Tenant may from time to time designate by notice to Landlord hereunder.
All notices and demands by Tenant to Landlord shall be sent by United States
mail, postage prepaid, addressed to Landlord at the address set forth in the
Basic Lease Information, or to such other place as Landlord may from time to
time designate by notice to Tenant hereunder.

     33.  DEFINED TERMS AND PARAGRAPH HEADINGS: When required by the contents of
          ------------------------------------
this Lease, the singular includes the plural. The headings and titles to the
paragraphs of this Lease are for convenience only and are not to be used to
interpret or construe this Lease. Wherever the term "including" or "includes" is
used in this Lease it shall be construed as if followed by the phrase "without
limitation".

     34.  TIME AND APPLICABLE LAW: Time is of the essence of this Lease and of
          -----------------------
each and all of its provisions. This Lease shall be governed by and construed in
accordance with the laws of the State of California.

     35.  SUCCESSORS: Subject to the provisions of Paragraphs 13 and 28 hereof,
          ----------
the covenants and conditions hereof shall be binding upon and inure to the
benefit of the heirs, successors, executors, administrators and assigns of the
parties hereto.

                                      -14-
<PAGE>

     36.  ENTIRE AGREEMENT; MODIFICATIONS: This Lease (including any exhibit,
          -------------------------------
rider or attachment hereto) constitutes the entire agreement between Landlord
and Tenant with respect to Tenant's lease of the Premises. Neither Landlord nor
Landlord's agents have made any representations or warranties with respect to
the Premises or the Real Property or this Lease except as expressly set forth
herein, and no rights, easements or licenses shall be acquired by Tenant by
implication or otherwise unless expressly set forth herein.

     37.  LIGHT AND AIR: Tenant agrees that no diminution of light, air or view
          -------------
by any structure which may hereafter be erected (whether or not by Landlord)
shall entitle Tenant to any reduction of rent hereunder, result in any liability
of Landlord to Tenant, or in any other way affect this Lease.

     38.  NAME OF BUILDING: Tenant shall not use the name or address of the
          ----------------
Building for any purpose other than as the address of the business conducted by
Tenant in the Premises without the written consent of Landlord. Landlord
reserves the right to change the name or street address of the Building at any
time by written notice to Tenant and Landlord shall not be liable to Tenant for
any loss, cost or expense on account of any such change of name or street
address.

     39.  SEVERABILITY: If any provision of this Lease or the application
          ------------
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.

     40.  AUTHORITY:  If Tenant is a corporation, partnership, trust,
          ---------
association or other entity, Tenant and each person executing this Lease on
behalf of Tenant, hereby covenants and warrants that (a) Tenant is duly
incorporated or otherwise established or formed and validly existing under the
laws of its state of incorporation, establishment or formation, (b) Tenant has
and is duly qualified to do business in California, (c) Tenant has full
corporate, partnership, trust, association or other appropriate power and
authority to enter into this Lease and to perform all Tenant's obligations
hereunder, and (d) each person (and all of the persons if more than one signs)
signing this Lease on behalf of Tenant is duly and validly authorized to do so.

     41.  NO OFFER: Submission of this instrument for examination and signature
          --------
by Tenant does not constitute a reservation of or option for lease, and is not
effective as a lease or otherwise until execution and delivery by both Landlord
and Tenant.

     42.  HAZARDOUS SUBSTANCE DISCLOSURE:  California law requires landlords to
          ------------------------------
disclose to tenants the existence of certain hazardous substances.  Accordingly,
the existence of tobacco smoke and asbestos containing materials ("ACM") must be
disclosed.  Although smoking is prohibited in public areas of the Building,
these areas may, from time to time, be exposed to tobacco smoke.  Landlord
covenants to comply, at Landlord's sole cost and expense, during the Lease Term
with all local, state and federal laws and regulations requiring disclosure to
tenants regarding the existence of hazardous substances within the Building.
Tenant may obtain a copy of the Landlord's written procedures for handling ACM
from the Building office.

                                      -15-
<PAGE>

     43.  REAL ESTATE BROKERS: Each party shall hold the other harmless from and
          -------------------
indemnify and defend the other against any and all claims by any real estate
broker or salesman other than the Real Estate Broker identified in the Basic
Lease Information for a commission, finder's fee or other compensation as a
result of Tenant's entering into this Lease.

     44.  COUNTERPARTS; EXHIBITS, RIDERS AND OTHER ATTACHMENTS:
          ----------------------------------------------------
          a.  This Lease may be executed in two or more counterparts, but all of
such counterparts taken together shall constitute one and the same instrument.

          b.  All Exhibits, Riders and other attachments hereto are hereby
incorporated herein and made a part hereof. Such Exhibits, Riders and other
attachments, if any, affixed to this Lease are a part hereof, and in the event
of variation or discrepancy the duplicate original hereof including such
Exhibits, Riders and attachments, if any, held by Landlord shall control.

     45.  JOINT AND SEVERAL LIABILITY:  If Tenant is composed of more than one
          ---------------------------
signatory to this Lease, each signatory shall be jointly and severally liable
with each other signatory for payment and performance according to this Lease.

     46.  SIGNAGE: Tenant shall not place a sign(s) on any portion of the
          -------
Building or Premises without first obtaining Landlord's prior written approval.
Landlord will list Tenant in the Building directory at the entrance to the
Building.

     47.  CONDOMINIUM CONVERSION: Tenant understands and acknowledges that it is
          ----------------------
Landlord's intention to convert the Building to a Live/Work Residential
Condominium during the term of this Lease.

     THIS LEASE IS EXECUTED by Landlord and Tenant as of the date first set
forth above.

TENANT:   /s/ W. H. Lawrenson           Date   October 25, 2000
       ---------------------------          -------------------------

PRINT:   W. H. Lawrenson, CFO           Date
      ----------------------------          _________________________

                                    LANDLORD:

                                    Media Lofts, LLC, a California Limited
                                    Liability Company

                                    By:          (Signature illegible)
                                         -------------------------------------
                                             Jim Keighran, Leasing Manager

                                      -16-
<PAGE>

                                   EXHIBIT A
                                   ---------

                             INTENTIONALLY OMITTED

                                   EXHIBIT B
                                   ---------

                     RULES AND REGULATIONS FOR THE BUILDING
                   ATTACHED TO AND MADE A PART OF THIS LEASE

                                 370 7/th/ Street
                                 San Francisco, CA

     1.  Except as provided or required by Landlord in accordance with building
standards, no sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed, printed, painted or affixed by Tenant on or to any part of
the Building or exterior of the premises leased to tenants or to the door or
doors thereof without the written consent of Landlord first obtained and
Landlord shall have the right to remove any such sign, placard, picture,
advertisement, name or notice without notice to and at the expense of Tenant.

     2.  Except as provided or required by Landlord in accordance with Building
standards, no draperies, curtains, blinds, shades, screens or other devices
shall be hung at or used in connection with any window or exterior door or doors
of the premises.

     3.  The bulletin board or directory of the Building shall be used primarily
for display of the name and location of Tenants and Landlord reserves the right
to exclude any other names therefrom, to limit the number of names associated
with Tenants to be placed thereon and to charge for names associated with
Tenants to be placed thereon at rates applicable to all Tenants.

     4.  The sidewalks, halls, passages, exits, entrances, elevators and
stairways of the Building shall not be obstructed by Tenants or used by them for
any purpose other than for ingress and egress from their respective premises.
The halls, passages, exits, entrances, elevators, stairways, balconies and roof
of the Building are not for the use of the general public and Landlord in all
cases reserves the right to control the same and prevent access thereto by all
persons whose presence, in the judgment of the Landlord, is or may be
prejudicial to the safety, character, reputation or interests of the Building
and its Tenants; provided however, that Landlord shall not prevent such access
to persons with whom Tenants deal in the ordinary course of business unless such
persons are engaged in illegal activities. No person shall go upon the roof of
the Building unless expressly so authorized by Landlord.

     5.  Tenants shall not alter any lock nor install any new or additional
locks or any bolts on any interior or exterior door of any premises leased to
Tenant.

     6.  The doors, windows, light fixtures and any lights or skylights that
reflect or admit light into halls or other places of the Building shall not be
covered or obstructed. The toilet rooms, toilets, urinals, wash bowls or other
apparatus shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown or

                                      -17-
<PAGE>

placed therein. The expense of any breakage, stoppage or damage resulting from
the violation of this rule shall be borne by the Tenant who, or whose employees
or invitees, cause such expense.

     7.  Tenants shall not mark, drive nails, screw or drill into the walls,
woodwork or plaster or in any way deface the Building or any premises leased
Tenant.

     8.  Furniture, freight or equipment of every kind shall be moved into or
out of the Building only at such times and in such manner as Landlord shall
designate. Landlord may prescribe and limit the weight, size and position of all
equipment to be used by Tenants, other than standard office desks, chairs and
tables and portable office machines. Safes and other heavy equipment shall, if
considered necessary by Landlord, stand on wood strips of such thickness as
Landlord deems necessary to distribute properly the weight thereof. All damage
to the Building or premises occupied by Tenants caused by moving or maintaining
any property of a Tenant shall be repaired at the expense of such Tenant.

     9.  Tenants shall not cause any unnecessary labor by carelessness or
indifference in the preservation of good order and cleanliness. Landlord shall
not be responsible to any Tenant for loss of property on the premises, however
occurring, or for any damage to the property of any Tenant caused by the
employees or independent contractors of Landlord or by any other person. Window
cleaning shall be done only at the regular and customary times determined by
Landlord for such services.

     10. No Tenant shall sweep or throw or permit to be swept or thrown any
dirt or other substance into any of the corridors, halls or elevators or out of
the doors or stairways of the Building; use or keep or permit to be used or kept
any foul or noxious gas or substance; permit or suffer the premises occupied by
such Tenant to be occupied or used in a manner offensive or objectionable to
Landlord or other Tenants by reason of noise, odors or vibrations; interfere in
any way with other Tenants or persons having business in the Building; or bring
or keep or permit to be brought or kept in the Building any animal life form,
other than human, except seeing-eye dogs when in the company of their masters.

     11. No Tenant shall use or keep in the premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material other than
limited quantities thereof reasonably necessary for the operation or maintenance
of customary office equipment, or, without Landlord's prior written approval,
use any method of heating or air-conditioning other than that supplied by
Landlord. No Tenant shall use or keep or permit to be used or kept any foul or
noxious gas or substance in the premises, or permit or suffer the premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors or vibrations, or interfere
in any way with other Tenants or those having business therein. Tenant must
comply with any government imposed codes and regulations concerning the use or
storage of any substances on the premises.

     12. No boring or cutting for telephone or electric wires shall be allowed
without the consent of Landlord and any such wires permitted shall be introduced
at the place and in the manner described by Landlord. The location of
telephones, speakers, fire extinguisher and all other office equipment affixed
to premises occupied by Tenants shall be subject to the approval of Landlord.

                                      -18-
<PAGE>

Each Tenant shall pay all expenses incurred in connection with the installation
of its equipment, including any telephone and electricity distribution
equipment.

     13.  Upon termination of occupancy of the Building, each Tenant shall
deliver to Landlord all keys furnished by Landlord, and any reproductions
thereof made by or at the direction of such Tenant, and in the event of loss of
any keys furnished shall pay Landlord therefor.

     14.  No Tenant shall affix any floor covering in any manner except as
approved by the Landlord. The expense of repairing any damage caused by removal
of any such floor covering shall be borne by the Tenant by whom, or by whose
contractors, employees or invitees, the damage shall have been caused.

     15.  No mail, furniture, packages, supplies, equipment, merchandise or
deliveries of any kind will be received in the building or carried up or down in
the elevators except between such hours and in such elevators as shall be
designated by Landlord.

     16.  In no case shall Landlord be liable for any loss or damage for any
loss or damage for any error with respect to the admission to or exclusion from
the Building of any person. At such times as Landlord deems necessary for the
safety and protection of the Building, its Tenants and all property located
therein, Landlord may prohibit and prevent access to the Building by all persons
by any means Landlord deems appropriate.

     17.  Each Tenant shall see that the exterior doors of its premises are
closed and securely locked on Sundays and legal holidays and not later than 6:00
p.m. of each other day each Tenant shall exercise extraordinary care and caution
that all water faucets or water apparatus are entirely shut off each day before
its premises are left unoccupied and that all electricity or gas shall likewise
be carefully shut off so as to prevent waste or damage to Landlord or to other
Tenants of the Building.

     18.  Landlord may exclude or expel from the Building any person who, in the
judgment of Landlord, is intoxicated or under the influence of liquor or drugs,
or who shall in any manner do any act in violation of any of the rules and
regulations of the Building.

     19.  The requirements of Tenants will be attended to only upon application
to Landlord at the office of the Building. Employees of Landlord shall not
perform any work outside of their regular duties unless under special
instructions from Landlord, and no employee of Landlord shall be required to
admit any person (Tenant or otherwise) to any premises in the Building.

     20.  No vending or food or beverage dispensing machine or machines of any
description shall be installed, maintained or operated upon any premise in the
Building without the written permission of the Landlord.

     21.  Landlord, without notice and without liability to any Tenant, at any
time may change the name or the street address of the Building.

     22.  The word "Building" as used in these rules and regulations means the
Building of which a part of the premises are leased pursuant to the Lease to
which these rules and regulations are attached. Each Tenant shall be liable to
Landlord and to each other Tenant of the Building for any

                                      -19-
<PAGE>

loss, cost, expense, damage or liability, including attorneys' fees, caused or
occasioned by the failure of such first named Tenant to comply with these rules,
but Landlord shall have no liability for such failure or for failing or being
unable to enforce compliance therewith by any Tenant and such failure by
Landlord or non-compliance by any other Tenant shall not be a ground for
termination of the Lease to which these rules and regulations are attached by
the Tenant thereunder.

     23.  Each Tenant shall maintain the portions of its premises which are
visible from outside of the Building or from hallways or other public areas of
the Building, in a neat, clean and orderly condition.

     24.  Intentionally Omitted.

     25.  No Tenant shall place any items whatsoever on the roof or balcony
areas of the Building without prior written consent of Landlord.

     26.  No curtains, draperies, blinds, shutters, shades, screens or other
coverings, hangings or decorations shall be attached to, hung, or placed in, or
used in connection with any window of the Building without prior written consent
of Landlord. In any event, with the prior written consent of Landlord, such
items shall be installed on the office side of the Landlord's standard window
covering and shall in no way be visible from the exterior of the Building.

     27.  Intentionally Omitted.

     28.  No Tenant shall install any radio or television antenna, loudspeaker
or other device on the roof or exterior walls of the Building.

     29.  There shall not be used in any space, or in the public halls of the
Building, either by any Tenant or others, any hand trucks except those equipped
with rubber tires and side guards or such other material handling equipment as
Landlord may approve. No other vehicles of any kind shall be brought by any
Tenant into the Building or kept in or about the premises.

     30.  Each Tenant shall store all its trash and garbage within its premises.
No material shall be placed in the trash boxes or receptacles if such material
is of such nature that it may not be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage in the City of San
Francisco without being in violation of any law or ordinance governing such
disposal. All garbage and refuse disposal shall be made only through entryways
and elevators provided for such purpose and at such times as Landlord shall
designate.

     31.  Canvassing, peddling, soliciting, and distribution of handbills or any
other written materials in or about the Building are prohibited, and each Tenant
shall cooperate to prevent same.

     32.  Intentionally Omitted.

     33.  Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular Tenant or Tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations against any or all
of the Tenants of the Building.

                                      -20-
<PAGE>

     34.  These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of premises in the Building.

     35.  Landlord reserves the right to make such other reasonable rules and
regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building and for the preservation of good order
therein.

Sign: /s/ W. H. Lawrenson                      Date October 25, 2000
      --------------------------------------        ---------------------

Print: W. H. Lawrenson, CFO                    Date
       -------------------------------------        _____________________

       LANDLORD:

     Media Lofts, LLC

     By:       (Signature illegible)
          --------------------------------
             Jim Keighran, Leasing Manager

                                      -21-

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