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                                                                    EXHIBIT 10.1

                          NATUS MEDICAL INCORPORATED

                           INDEMNIFICATION AGREEMENT

     This Indemnification Agreement ("Agreement") is effective as of
___________, 2000 by and between Natus Medical Incorporated, a Delaware
corporation (the "Company"), and ______________ ("Indemnitee").

     WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;

     WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;

     WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;

     WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited;

     WHEREAS, the Company is the successor to Natus Medical Incorporated, a
California corporation; and

     WHEREAS, in connection with the Company's initial public offering, the
Company and Indemnitee desire to continue to have in place the additional
protection provided by an indemnification agreement, with such changes as are
required to conform the existing agreement to Delaware law and to provide
indemnification and advancement of expenses to the Indemnitee to the maximum
extent permitted by Delaware law;

     WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as set
forth herein;

     NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.

     1.   Certain Definitions.
          -------------------

          a.  "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
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owned directly or indirectly by the Shareholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the total
voting power represented by the Company's then outstanding Voting Securities,
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company and
any new director whose election by the Board of Directors or nomination for
election by the Company's Shareholders was approved by a vote of at least two
thirds (2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof,
(iii) the Shareholders of the Company approve a merger or consolidation of the
Company with any other corporation other than a merger or consolidation which
would result in the Voting Securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (iv) the Shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of (in one transaction or a series of related transactions) all
or substantially all of the Company's assets.

          b.  "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.

          c.  References to the "Company" shall include, in addition to Natus
Medical Incorporated, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger to which Natus Medical
Incorporated (or any of its wholly owned subsidiaries) is a party which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, agents or fiduciaries, so that if
Indemnitee is or was a director, officer, employee, agent or fiduciary of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, Indemnitee shall stand in the same position under the provisions of
this Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.

          d.  "Covered Event" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.

          e.  "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to

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participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) of any Claim and any
federal, state, local or foreign taxes imposed on the Indemnitee as a result of
the actual or deemed receipt of any payments under this Agreement.

          f.  "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.

          g.  "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other Indemnitees under similar
indemnity agreements).

          h.  References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.

          i.  "Reviewing Party" shall mean, subject to the provisions of Section
2(d), any person or body appointed by the Board of Directors in accordance with
applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Company's Board of
Directors, Independent Legal Counsel or any other person or body not a party to
the particular Claim for which Indemnitee is seeking indemnification.

          j.  "Section" refers to a section of this Agreement unless otherwise
indicated.

          k.  "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.

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     2.   Indemnification.
          ---------------

          a.   Indemnification of Expenses.  Subject to the provisions of
               ---------------------------
Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the
fullest extent permitted by law if Indemnitee was or is or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, any Claim (whether by reason of or arising in
part out of a Covered Event), including all interest, assessments and other
charges paid or payable in connection with or in respect of such Expenses.

          b.   Review of Indemnification Obligations.  Notwithstanding the
               -------------------------------------
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all Expenses
theretofore paid to Indemnitee to which Indemnitee is not entitled hereunder
under applicable law; provided, however, that if Indemnitee has commenced or
                      --------  -------
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee is entitled to be indemnified hereunder
under applicable law, any determination made by any Reviewing Party that
Indemnitee is not entitled to be indemnified hereunder under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expenses theretofore paid in indemnifying Indemnitee until a
final judicial determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed). Indemnitee's
obligation to reimburse the Company for any Expenses shall be unsecured and no
interest shall be charged thereon.

          c.  Indemnitee Rights on Unfavorable Determination; Binding Effect.
               --------------------------------------------------------------
If any Reviewing Party determines that Indemnitee substantively is not entitled
to be indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.

          d.   Selection of Reviewing Party; Change in Control.  If there has
               -----------------------------------------------
not been a Change in Control, any Reviewing Party shall be selected by the Board
of Directors, and if there has been such a Change in Control (other than a
Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to such Change in Control),
any Reviewing Party with respect to all matters thereafter arising concerning
the rights of Indemnitee to indemnification of Expenses under this Agreement or
any other agreement or under the Company's Articles of Incorporation or Bylaws
as now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law

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and the Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to
indemnify fully such counsel against any and all expenses (including attorneys'
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto. Notwithstanding any other provision
of this Agreement, the Company shall not be required to pay Expenses of more
than one Independent Legal Counsel in connection with all matters concerning a
single Indemnitee, and such Independent Legal Counsel shall be the Independent
Legal Counsel for any or all other Indemnitees unless (i) the employment of
separate counsel by one or more Indemnitees has been previously authorized by
the Company in writing, or (ii) an Indemnitee shall have provided to the Company
a written statement that such Indemnitee has reasonably concluded that there may
be a conflict of interest between such Indemnitee and the other Indemnitees with
respect to the matters arising under this Agreement.

          e.   Mandatory Payment of Expenses.  Notwithstanding any other
               -----------------------------
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.

     3.   Expense Advances.
          ----------------

          a.   Obligation to Make Expense Advances.  Upon receipt of a written
               -----------------------------------
undertaking by or on behalf of the Indemnitee to repay such amounts if it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
therefore by the Company hereunder under applicable law, the Company shall make
Expense Advances to Indemnitee.

          b.   Form of Undertaking.  Any obligation to repay any Expense
               -------------------
Advances hereunder pursuant to a written undertaking by the Indemnitee shall be
unsecured and no interest shall be charged thereon.

          c.   Determination of Reasonable Expense Advances.  The parties agree
               --------------------------------------------
that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.

     4.   Procedures for Indemnification and Expense Advances.
          ---------------------------------------------------

          a.   Timing of Payments.  All payments of Expenses (including without
               ------------------
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than thirty (30) business days after such written
demand by Indemnitee is presented to the Company, except in the case of Expense
Advances, which shall be made no later than ten (10) business days after such
written demand by Indemnitee is presented to the Company.

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          b.  Notice/Cooperation by Indemnitee.  Indemnitee shall, as a
              --------------------------------
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.

          c.  No Presumptions; Burden of Proof.  For purposes of this
              --------------------------------
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
                                                                 ----
contendere, or its equivalent, shall not create a presumption  that Indemnitee
----------
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by this
Agreement or applicable law. In addition, neither the failure of any Reviewing
Party to have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an actual
determination by any Reviewing Party that Indemnitee has not met such standard
of conduct or did not have such belief, prior to the commencement of legal
proceedings by Indemnitee to secure a judicial determination that Indemnitee
should be indemnified under this Agreement under applicable law, shall be a
defense to Indemnitee's claim or create a presumption that Indemnitee has not
met any particular standard of conduct or did not have any particular belief. In
connection with any determination by any Reviewing Party or otherwise as to
whether the Indemnitee is entitled to be indemnified hereunder under applicable
law, the burden of proof shall be on the Company to establish that Indemnitee is
not so entitled.

          d.  Notice to Insurers.  If, at the time of the receipt by the
              ------------------
Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.

          e.  Selection of Counsel.  In the event the Company shall be
              --------------------
obligated hereunder to provide indemnification for or make any Expense Advances
with respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently retained by
or on behalf of Indemnitee with respect to the same Claim; provided that, (i)
Indemnitee shall have the right to employ Indemnitee's separate counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of separate
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend

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such Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.

     5.   Additional Indemnification Rights; Nonexclusivity.
          -------------------------------------------------

          a.  Scope.  The Company hereby agrees to indemnify the Indemnitee to
              -----
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Articles of Incorporation, the Company's Bylaws or by statute. In the
event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a California corporation to indemnify
a member of its board of directors or an officer, employee, agent or fiduciary,
it is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
California corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, such change, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder except as set forth in Section 10(a) hereof.

          b.  Nonexclusivity.  The indemnification and the payment of Expense
              --------------
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's Articles of Incorporation, its
Bylaws, any other agreement, any vote of Shareholders or disinterested
directors, the Corporation Law of the State of California, or otherwise.  The
indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.

     6.  No Duplication of Payments.  The Company shall not be liable under this
         --------------------------
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Articles of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.

     7.  Partial Indemnification.  If Indemnitee is entitled under any
         -----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

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     8.  Mutual Acknowledgment.  Both the Company and Indemnitee acknowledge
         ---------------------
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.

     9.  Liability Insurance.  To the extent the Company maintains liability
         -------------------
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.

     10. Exceptions.  Notwithstanding any other provision of this Agreement, the
         ----------
Company shall not be obligated pursuant to the terms of this Agreement:

          a.  Excluded Action or Omissions.  To indemnify or make Expense
              ----------------------------
Advances to Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving indemnification
under applicable law.

          b.  Claims Initiated by Indemnitee.  To indemnify or make Expense
              ------------------------------
Advances to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or cross-claim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's Articles of Incorporation or Bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the California
General Corporation Law, regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification, Expense Advances, or
insurance recovery, as the case may be.

          c.  Lack of Good Faith.  To indemnify Indemnitee for any Expenses
              ------------------
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.

          d.  Claims Under Section 16(b).  To indemnify Indemnitee for Expenses
              --------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.

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     11.  Counterparts.  This Agreement may be executed in one or more
          ------------
counterparts, each of which shall constitute an original.

     12.  Binding Effect; Successors and Assigns.  This Agreement shall be
          --------------------------------------
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.

     13.  Expenses Incurred in Action Relating to Enforcement or
          ------------------------------------------------------
Interpretation.  In the event that any action is instituted by Indemnitee under
---------------
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee with
respect to such action (including without limitation attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action, unless
as a part of such action a court having jurisdiction over such action makes a
final judicial determination (as to which all rights of appeal therefrom have
been exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous; provided, however, that until such final judicial determination is
made, Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee in defense of such action
(including without limitation costs and expenses incurred with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action a court having jurisdiction over such action makes a final
judicial determination (as to which all rights of appeal therefrom have been
exhausted or lapsed) that each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was frivolous; provided, however, that
until such final judicial determination is made, Indemnitee shall be entitled
under Section 3 to receive payment of Expense Advances hereunder with respect to
such action.

     14.  Period of Limitations.  No legal action shall be brought and no cause
          ---------------------
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two year period; provided, however, that if any shorter
                                    --------  -------
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.

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     15.  Notice.  All notices, requests, demands and other communications
          ------
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.

     16.  Consent to Jurisdiction.  The Company and Indemnitee each hereby
          -----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the state courts
of the State of Delaware, which shall be the exclusive and only proper forum for
adjudicating such a claim.

     17.  Severability.  The provisions of this Agreement shall be severable in
          ------------
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.

     18.  Choice of Law.  This Agreement, and all rights, remedies, liabilities,
          -------------
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and to be performed entirely
in the State of Delaware without regard to principles of conflicts of laws.

     19.  Subrogation.  In the event of payment under this Agreement, the
          -----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.

     20.  Amendment and Termination.  No amendment, modification, termination or
          -------------------------
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto.  No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.

     21.  Integration and Entire Agreement.  This Agreement sets forth the
          --------------------------------
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.

                                      -10-
<PAGE>

     22.  No Construction as Employment Agreement.  Nothing contained in this
          ---------------------------------------
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.

                 [Remainder of Page Intentionally Left Blank]

                                      -11-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.

NATUS MEDICAL INCORPORATED

By: ______________________________

Name: ____________________________

Title: ___________________________

Address:  1501 Industrial Road
          San Carlos, CA 94070

                                                 AGREED TO AND ACCEPTED
                                                 INDEMNITEE:

                                                 _____________________________
                                                 (signature)

                                                 _____________________________
                                                 Name

                                                 _____________________________
                                                 Address
                                                 _____________________________

                                      -12-<PAGE>

                                                                    EXHIBIT 10.2

                          NATUS MEDICAL INCORPORATED
                                1991 STOCK PLAN

                         Amended through July 18, 2000

     1.   Purposes of the Plan.  The purposes of this Stock Plan are to
          --------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422A of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422A of the Code, as amended, and the
regulations promulgated thereunder.

     2.   Definitions.  As used herein, the following definitions shall apply:
          -----------

          (a)  "Administrator" means the Board or any of its Committees as
                -------------
shall be administering the Plan, in accordance with Section 4 of the Plan.

          (b)  "Board" means the Board of Directors of the Company.
                -----

          (c)  "Code" means the Internal Revenue Code of 1986, as amended from
                ----
time to time, and any successor thereto.

          (d)  "Committee" means any Committee, if any, appointed by the Board
                ---------
in accordance with paragraph (a) of Section 4 of the Plan.

          (e)  "Common Stock" means the Common Stock of the Company.
                ------------

          (f)  "Company" means Natus Medical Incorporated, a California
                -------
corporation.

          (g)  "Consultant" means any person, including an advisor, who is
                ----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.

          (h)  "Continuous Status as an Employee or Consultant" means the
                ----------------------------------------------
absence of any interruption or termination of the employment or consulting
relationship with the Company or any Subsidiary. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case of: (i)
sick leave; (ii) military leave; (iii) any other leave of absence approved by
the Board, provided that such leave is for a period of not more than ninety (90)
days, unless reemployment upon the expiration of such leave is guaranteed by
contract or statute, or unless provided otherwise pursuant to Company policy
adopted from time to time; or (iv) in the case of transfers between locations of
the Company or between the Company, its Subsidiaries or its successor.
<PAGE>

          (i)  "Disability" means total and permanent disability, as defined
                ----------
in Section 22(e)(3) of the Code.

          (j)  "Employee" means any person, including officers and directors,
                --------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of directors' fees by the Company shall not be sufficient to constitute
"employment" by the Company.

          (k)  "Exchange Act" means the Securities Exchange Act of 1934, as
                ------------
amended.

          (l)  "Fair Market Value" means, as of any date, the value of Common
                -----------------
Stock determined as follows:

               (i)  If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Administrator deems reliable;

               (ii)  If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high and low asked prices
for the Common Stock or on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Administrator deems reliable;

               (iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (m)  "Incentive Stock Option" means an Option that satisfies the
                ----------------------
provisions of Section 422A of the Code.

          (n)  "Nonstatutory Stock Option" means an Option that is not an
                -------------------------
Incentive Stock Option.

          (o)  "Option" means an Option granted pursuant to the Plan.
                ------

          (p)  "Optioned Stock" means the Common Stock subject to an Option.
                --------------

          (q)  "Optionee" means an Employee or Consultant who receives an
                --------
Option or Stock Purchase Right.

          (r)  "Parent" corporation shall have the meaning defined in Section
                ------
425(e) of the Code.
<PAGE>

          (s)  "Plan" means this 1991 Stock Plan.
                ----

          (t)  "Restricted Stock" means shares of Common Stock acquired
                ----------------
pursuant to a grant of Stock Purchase Rights under Section 10 below.

          (u)  "Share" means the Common Stock, as adjusted in accordance with
                -----
Section 13 of the Plan.

          (v)  "Stock Purchase Right" means the right to purchase Common Stock
                --------------------
pursuant to Section 10.

          (w)  "Subsidiary" corporation shall have the meaning defined in
                ----------
Section 425(f) of the Code.

     In addition, the terms "Rule 16b-3" and "Applicable Laws," the term
"Insiders," and the term "Tax Date," shall have the meanings set forth,
respectively, in Sections 4, 9, and 11 below.

     3.   Stock Subject to the Plan.  Subject to the provisions of Section 13
          -------------------------
of the Plan, the total number of Shares reserved and available for distribution
pursuant to awards made under the Plan shall be 2,393,482 (post two-for-five
reverse split).  The Shares may be authorized, but unissued or reacquired Common
Stock.

          If an Option should expire or become unexercisable for any reason
without having been exercised in full, or in the case of a Stock Purchase Right,
if shares of common Stock are repurchased by the Company, the unpurchased or
repurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant or sale under the Plan.
Notwithstanding the foregoing, however, if Shares are issued upon exercise of an
Option and later repurchased by the Company, such Shares shall not become
available for future grant or sale under the Plan.

     4.   Administration of the Plan.
          --------------------------

          (a)  Procedure.
               ---------

               (i)  Administration With Respect to Directors and Officers.
                    -----------------------------------------------------
With respect to grants of Options or Stock Purchase Rights to Employees who are
also officers or directors of the Company, the Plan shall be administered by (A)
the Board if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor rule ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a discretionary plan, or (B)
a Committee designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as to permit the Plan to comply with Rule
16b-3 with respect to a plan intended to qualify thereunder as a discretionary
plan. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the
<PAGE>

extent permitted by Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan.

               (ii)  Administration With Respect to Consultants and Other
                     ----------------------------------------------------
Employees. With respect to grants of Options or Stock Purchase Rights to
----------
Employees or Consultants who are neither directors nor officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which Committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws and of the Code (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.

               (iii) Multiple Administrative Bodies.  If permitted by Rule
                     ------------------------------
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers and Consultants who are not directors.

          (b)  Powers of the Administrator.  Subject to the provisions of the
               ---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:

               (i)   to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;

               (ii)  to select the officers, Consultants and Employees to whom
Options and Stock Purchase Rights may from time to time be granted hereunder;

               (iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;

               (iv)  to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;

               (v)   to approve forms of agreement for use under the Plan;

               (vi)  to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation or waiver of
forfeiture restrictions regarding any Option, Stock Purchase Right or other
award and/or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator shall determine, in its sole discretion);

               (vii) to determine whether and under what circumstances an Option
may be settled in cash under subSection 9(f) instead of Common Stock;
<PAGE>

               (viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted; and

               (ix)   to determine the terms and restrictions applicable to
Options and Stock Purchase Rights and any Restricted Stock acquired pursuant to
Stock Purchase Rights.

          (c)  Effect of Committee's Decision.  All decisions, determinations
               ------------------------------
and interpretations of the Administrator shall be final and binding.

     5.   Eligibility.
          -----------

          (a)  Nonstatutory Stock Options and Stock Purchase Rights may be
granted only to Employees and Consultants. Incentive Stock Options may be
granted only to Employees. An Employee or Consultant who has been granted an
Option or Stock Purchase Right may, if he or she is otherwise eligible, be
granted additional Options or Stock Purchase Rights.

          (b)  Each Option shall be evidenced by a written Option agreement,
which shall expressly identify the Options as Incentive Stock Options or as
Nonstatutory Stock Options, and which shall be in such form and contain such
provisions as the Administrator shall from time to time deem appropriate.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.

          (c)  For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.

          (d)  Neither the Plan nor any Option or Stock Purchase Right agreement
shall confer upon any Optionee any right with respect to continuation of
employment or consulting relationship with the Company, nor shall it interfere
in any way with the Optionee's right or the Company's right to terminate the
Optionee's employment or consulting relationship at any time, with or without
cause.

     6.   Term of Plan.  Subject to Section 19 of this Plan, the Plan shall
          ------------
become effective upon the earlier to occur of its adoption by the Board or its
approval by the shareholders of the Company as described in Section 19. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of this Plan.

     7.  Term of Option.  The term of each Option shall be the term stated in
         --------------
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five
<PAGE>

(5) years from the date of grant thereof or such shorter term as may be provided
in the Option Agreement.

     8.  Option Exercise Price and Consideration.
         ---------------------------------------

          (a)  The per Share exercise price for the Shares issuable pursuant to
an Option shall be such price as is determined by the Administrator, but shall
be subject to the following:

               (i)  In the case of an Incentive Stock Option

                    (A)  granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power or value of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.

                    (B)  granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.

               (ii) In the case of a Nonstatutory Stock Option

                    (A)  granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power or value of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.

                    (B)  granted to any person, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.

          (b)  The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, or (9) such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws. In making
its determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company (Section 315(b) of the California Corporation Law).
<PAGE>

     9.   Exercise of Option.
          ------------------

          (a)  Procedure for Exercise; Rights as a Shareholder.  Any Option
               -----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator and as shall be permissible under the terms
of the Plan.

               An Option may not be exercised for a fraction of a Share.

               An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator (and, in the case
of an Incentive Stock Option, determined at the time of grant) and permitted by
the Option Agreement consist of any consideration and method of payment
allowable under subSection 8(b) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 13 of the Plan.

               Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter shall be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

          (b)  Rule 16b-3.  Options granted to persons who are subject to
               ----------
Section 16 of the Exchange Act ("Insiders") must comply with the applicable
provisions of Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions.

          (c)  Termination of Employment.  Upon termination of an Optionee's
               -------------------------
Continuous Status as an Employee or Consultant (other than upon the Optionee's
death), the Optionee may, but only within thirty (30) days (or such other period
of time not exceeding six (6) months (three (3) months in the case of an
Incentive Stock Option) as is determined by the Administrator at the time of
grant) after the date of such termination, exercise his or her Option to the
extent that it was exercisable at the date of such termination.

          (d)  Disability of Optionee.  In the event of termination of an
               ----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of the
Optionee's Disability, the Optionee may, but only within six (6) months from the
date of such termination (but in no event later than the expiration of the term
of such Option as set forth in the Option Agreement), exercise the Option to the
extent that the Optionee was entitled to exercise it at the date of such
termination.

          (e)  Death of Optionee.  In the event of an Optionee's death, the
               -----------------
Option may be exercised at any time within six (6) months following the date of
death by the Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the
<PAGE>

extent of the right to exercise that had accrued at the date of the Optionee's
death (but in no event later than the expiration of the term of such Option as
set forth in the Option Agreement).

          (f)  Buyout Provisions.  The Administrator may at any time offer to
               -----------------
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

     10.  Stock Purchase Rights.
          ---------------------

          (a)  Rights to Purchase.  Stock Purchase Rights may be issued either
               ------------------
alone, in addition to, or in tandem with outer awards granted under the Plan
and/or cash awards made outside of the Plan. After Administrator determines that
it will offer Stock Purchase Rights under the Plan, it shall advise the offeree
in writing of the terms, conditions and restrictions related to the offer,
including the number of Shares that such person shall be entitled to purchase,
the price to be paid (which price shall not be less than 100% of the Fair Market
Value of the Shares as of the date of the offer), and the time within which such
person must accept such offer, which shall in no event exceed thirty (30) days
from the date upon which the Administrator made the determination to grant the
Stock Purchase Right. The offer shall be accepted by execution of a Restricted
Stock purchase agreement in the form determined by the Administrator. Shares
purchased pursuant to the grant of Stock Purchase Right shall be referred to
herein as "Restricted Stock."

          (b)  Repurchase Option.  Unless the Administrator determines
               -----------------
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.

          (c)  Other Provisions.  The Restricted Stock purchase agreement shall
               ----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.

          (d)  Section 16 Restrictions.  Stock Purchase Rights granted to
               -----------------------
Insiders, and Shares purchased by Insiders in connection with Stock Purchase
Rights, shall be subject to any restrictions applicable thereto in compliance
with Rule 16-3. An Insider may only purchase Shares pursuant to the grant of a
Stock Purchase Right, and may only sell Shares purchased pursuant to the grant
of a Stock Purchase Right, during such time or times as are permitted by Rule
16b-3.

          (e)  Rights as a Shareholder.  Once the Stock Purchase Right is
               -----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
<PAGE>

     11.  Stock Withholding to Satisfy Withholding Tax Obligations.  At the
          --------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this Section 11.  When an Optionee incurs tax liability in
connection with the an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold from the Shares to be issued upon exercise of the
Option, or the Shares to be issued in connection with the Stock Purchase Right,
if any, that number of Shares having a Fair Market Value equal to the amount
required to be withheld.  The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").

     All elections by an Optionee to have Shares withheld for this purpose shall
be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:

          (a)  the election must be made on or prior to the applicable Tax Date;

          (b)  once made, the election shall be irrevocable as to the particular
Shares of the Option or Stock Purchase Right as to which the election is made;

          (c)  all elections shall be subject to the consent or disapproval of
the Administrator;

          (d)  if the Optionee is an Insider, the election must comply with the
applicable provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.

     In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option or Stock Purchase Right is
exercised but such Optionee shall be unconditionally obligated to tender back to
the Company the proper number of Shares on the Tax Date.

     12.  Non-Transferability of Options and Stock Purchase Rights.  Options and
          --------------------------------------------------------
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.

     13.  Adjustments Upon Changes in Capitalization or Merger.
          ----------------------------------------------------

          (a)  Subject to any required action by the shareholders of the
Company, the number of Shares covered by each outstanding Option and Stock
Purchase Right, and the number of Shares which have been authorized for issuance
under the Plan but as to which no Options or Stock Purchase Rights have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option or Stock Purchase Right, as well as the price per Share covered by
each such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued Shares resulting
from a stock split, reverse stock split, stock
<PAGE>

dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the aggregate number of issued Shares effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
Shares of stock of any class, or securities convertible into Shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Option or Stock Purchase
Right.

          (b)  In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.

          (c)  In the event of a merger of the Company with or into another
corporation or the sale of all or substantially all of the assets of the Company
pursuant to which the shareholders of the Company prior to such transaction hold
less than 50% of the outstanding capital stock of the surviving corporation
immediately after the closing of such transaction (a "Change in Control
Transaction") within four years after the date the Securities and Exchange
Commission declares effective a registration statement filed by the Company for
the initial public offering of the Company's Common Stock pursuant to the
Securities Act (the "IPO Effective Time"), outstanding Options may be assumed or
equivalent options may be substituted by the successor corporation or a Parent
or Subsidiary thereof (the "Successor Corporation"). Following such assumption
or substitution, if the Optionee's status as an employee of the Company or
employee of the Successor Corporation, as applicable, is terminated within 12
months of the Change in Control Transaction other than upon a voluntary
resignation by the Optionee or the termination of Optionee for cause, the Option
or option shall become fully exercisable, including as to Shares for which it
would not otherwise be exercisable. Thereafter, the Option or option shall
remain exercisable in accordance with Sections 9(c) through (e) above. If the
Successor Corporation does not assume an outstanding Option or substitute for it
an equivalent option, the Option shall become fully vested and exercisable,
including as to Shares for which it would not otherwise be exercisable. In such
event the Board shall notify the Optionee that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
upon the expiration of such period, the Option shall terminate.

               In the event of a Change in Control Transaction after four years
after the IPO Effective Time, outstanding Options may be assumed or equivalent
options may be substituted by the Successor Corporation at the Administrator's
discretion. The Administrator also shall have the discretion to terminate the
Plan and permit the Optionee to exercise the Option to the extent already vested
and the discretion to make a determination to accelerate vesting of any portion
of or all of the outstanding Options. The Administrator may provide at the
Administrator's discretion that following an assumption or substitution, if the
Optionee's status as an employee of the Company or employee of the Successor
Corporation, as applicable, is terminated within 12 months of the Change in
Control Transaction other than upon a voluntary resignation by the Optionee or
the termination of Optionee for cause, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 9(b) through (d) above. In such event the Board shall
notify the Optionee
<PAGE>

that the Option shall be fully exercisable for a period of fifteen (15) days
from the date of such notice, and upon the expiration of such period the Option
shall terminate.

               Notwithstanding the foregoing, until such time as the Company is
no longer subject to Section 2115 of the California Corporations Code, in the
event of a Change in Control Transaction, each outstanding Option shall be
assumed or an equivalent option or right substituted by the Successor
Corporation. In the event that the Successor Corporation refuses to assume or
substitute for the Option, the Option shall terminate upon the closing of the
merger or sale of assets.

               In the event of the merger of the Company with or into another
corporation or the sale of substantially all of the assets of the Company in a
transaction that is not a Change in Control Transaction, each outstanding option
shall be assumed or an equivalent option shall be substituted by the Successor
Corporation.  In the event the Successor Corporation refuses to assume or
substitute for the Option, each outstanding Option shall terminate upon the
closing of such merger or sale of assets.

               For the purposes of this Section 13(c), an Option shall be
considered assumed if, following the merger or sale of assets, the Option
confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares). If such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.

     14.  Time of Granting Options and Stock Purchase Rights.  The date of
          --------------------------------------------------
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.

     15.  Amendment and Termination of the Plan.
          -------------------------------------

          (a)  Amendment and Termination.  The Board may at any time amend,
               -------------------------
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or under Section 422A of the Code (or any other applicable law
or regulation), the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.
<PAGE>

          (b)  Effect of Amendment or Termination.  Any such amendment or
               ----------------------------------
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated.

     16.  Conditions Upon Issuance of Shares. Shares shall not be issued with
          ----------------------------------
respect to an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

          As a condition to the exercise of an Option or the issuance of Shares
on exercise of an Option or Stock Purchase Right, the Company may require the
person exercising such Option or Stock Purchase Right to represent and warrant
at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned relevant provisions of law.

     17.  Reservation of Shares.  The Company, during the term of this Plan,
          ---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

          Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the non-issuance or sale of such
Shares as to which such requisite authority shall not have been obtained.

     18.  Agreements.  Options shall be evidenced by written agreements in such
          ----------
form as the Board shall approve from time to time.

     19.  Shareholder Approval.  Continuance of the Plan shall be subject to
          --------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted as provided in Section 6. Such shareholder
approval shall be obtained in the degree and manner required under applicable
state and federal law.

     20.  Information to Optionees.  The Company shall provide to each Optionee,
          ------------------------
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company.  The Company shall not be required to provide such
information to key employees whose duties in connection with the Company assure
their access to equivalent information.

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