<PAGE>   1
                             SPACELABS MEDICAL, INC.

                              AMENDED AND RESTATED

            STOCK OPTION AND DEFERRAL PLAN FOR NONEMPLOYEE DIRECTORS



                               ARTICLE I PURPOSES

        The purposes of the Spacelabs Medical, Inc. Stock Option and Deferral
Plan for Nonemployee Directors, as amended and restated (the "Plan"), are to
attract and retain the services of experienced and knowledgeable nonemployee
directors of Spacelabs Medical, Inc. (the "Corporation") and to provide an
incentive for such directors to increase their proprietary interests in the
Corporation's long-term success and progress.

                      ARTICLE II SHARES SUBJECT TO THE PLAN

        Subject to adjustment in accordance with Article VI, the total number of
shares of the Corporation's common stock, $.01 par value per share (the "Common
Stock"), that may be issued pursuant to the Plan is 150,000 (the "Shares"). The
Shares shall be shares presently authorized but unissued or subsequently
acquired by the Corporation and shall include shares representing the
unexercised portion of any option granted under the Plan which expires or
terminates without being exercised in full.

                     ARTICLE III ADMINISTRATION OF THE PLAN

        The administrator of the Plan (the "Plan Administrator") shall be the
Board of Directors of the Corporation (the "Board"). Subject to the terms of the
Plan, the Plan Administrator shall have the power to construe the provisions of
the Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable. No member of the Plan Administrator shall participate in any vote by
the Plan Administrator on any matter materially affecting the rights of any such
member under the Plan.

                      ARTICLE IV PARTICIPATION IN THE PLAN

        1. OPTION GRANTS

               (a) INITIAL GRANTS. Commencing on January 1, 1999, each member of
the Board who is not otherwise an employee of the Corporation or any parent or
subsidiary corporation (an "Eligible Director") and who is first elected or
appointed after January 1, 1999 on a date other than the date of an Annual
General Meeting of Stockholders (as described in the Corporation's By-laws, an
"Annual Meeting"), shall automatically receive the grant of an option to
purchase the number of Shares set forth below on February 26, 1999 or, if first
elected or


                                       


<PAGE>   2
appointed after that date, on the date of such Eligible Director's initial
election or appointment (the "Initial Grant"). The amount of Shares included in
the Initial Grant shall be 5,000 shares. All grants made prior to stockholder
approval of this Section 4(a) shall be subject to such approval. 


               (b) ANNUAL GRANTS. Each Eligible Director shall automatically
receive the grant of an option to purchase 4,000 Shares at the first regularly
scheduled meeting of the Board at the beginning of each calendar year.

        2. DEFERRAL OF RETAINER AND/OR FEES

               (a) DEFERRAL ELECTIONS.

                      (i) Commencing on January 1, 1999, an Eligible Director
may make an election to defer payment of all or part of such Eligible Director's
retainer and/or fees payable for serving as Chairman of a Board Committee (but
not fees payable for attending Board or Board Committee meetings) or for
extraordinary services (an "Election"). The date on which a deferred cash amount
would have been paid but for the Election with respect to such cash amount shall
be the "Normal Payment Date."

                      (ii) Except as otherwise provided herein, each Election
must be made in writing by June 30 of the calendar year prior to the calendar
year for which the retainer and/or fees will be paid and must be irrevocable for
the affected calendar year. Notwithstanding the foregoing, if the requirements
of Rule 16b-3(d) promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act") are hereafter amended such that the Election does not need to
precede the Normal Payment Date by six months, then "June 30" in the first
sentence of this subsection 2(a)(ii) shall be changed to "December 31".

                      (iii) The Election made by the Eligible Director shall
specify the date (the "Deferred Payment Date") on which the Eligible Director
wishes to receive payment for the Stock Units (as defined in Section 4.2(b));
provided, however, that the Deferred Payment Date with respect to any Election
must be at least three years after the beginning of the calendar year during
which the Stock Unit was credited to an Account (as defined in Section 4.2(b)).

               (b) CREDITING STOCK UNITS TO ACCOUNTS. Amounts deferred pursuant
to Section 2(a) shall be credited as of the Normal Payment Date to a bookkeeping
reserve account maintained by the Corporation (an "Account") in units that are
equivalent in value to shares of Common Stock ("Stock Units"). The number of
Stock Units credited to an Account with respect to any Eligible Director shall
be equal to any deferred cash amount divided by the "fair market value" (as
defined in Section 4.3) of the Common Stock on the Normal Payment Date.

               (c) FULLY VESTED STOCK UNITS. All Stock Units credited to an
Eligible Director's Account pursuant to this Section 4.2 shall be at all times
fully vested and nonforfeitable.


                                       


<PAGE>   3
               (d) PAYMENT OF STOCK UNITS. Stock Units credited to an Eligible
Directors Account pursuant to this Section 4.2 shall be payable in an equal
number of Shares in a single distribution made on the Deferred Payment Date
specified by the Eligible Director in the applicable Election. 

        3. FAIR MARKET VALUE

        For purposes of the Plan, "fair market value" shall be the average of
the high and low per share sales prices of the Common Stock as of any trading
day as reported on such trading day by the Nasdaq National Market (or any
national stock exchange on which the Common Stock is at the time listed or
admitted to trading) or, if no Common Stock was traded on such date, on the next
preceding date on which Common Stock was so traded.

                             ARTICLE V OPTION TERMS

        Each option granted to an Eligible Director under the Plan and the
issuance of Shares thereunder shall be subject to the following terms:

        1. OPTION AGREEMENT

        Each option granted under the Plan shall be evidenced by an option
agreement (an "Agreement") duly executed on behalf of the Corporation. Each
Agreement shall comply with and be subject to the terms and conditions of the
Plan. Any Agreement may contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Plan Administrator.

        2. OPTION EXERCISE PRICE

        The option exercise price for an option granted under the Plan shall be
the fair market value of the Shares covered by the option at the time the option
is granted.

        3. VESTING AND EXERCISABILITY

        An option shall become fully vested and exercisable and become
nonforfeitable on the date of grant.

        4. TIME AND MANNER OF EXERCISE OF OPTION

        Each option may be exercised in whole or in part at any time and from
time to time; provided, however, that no fewer than 100 Shares (or the remaining
Shares then purchasable under the option, if less than 100 Shares) may be
purchased upon any exercise of option rights hereunder and that only whole
Shares will be issued pursuant to the exercise of any option.

        Any option may be exercised by giving written notice, signed by the
person exercising the option, to the Corporation stating the number of Shares
with respect to which the option is being exercised, accompanied by payment in
full for such Shares, which payment may be in whole or in part (a) in cash or by
check or (b) in shares of Common Stock already owned for the


                                       


<PAGE>   4
last three (3) months by the person exercising the option, valued at fair market
value at the time of such exercise.

        5. TERM OF OPTIONS

        Each option shall expire ten (10) years from the date of the granting
thereof, but shall be subject to earlier termination as follows:

                (a) In the event that an optionee ceases to be a director of the
                Corporation for any reason other than the death or retirement of
                the optionee on or after the mandatory retirement age for
                directors, the options granted to such optionee may be exercised
                by him or her only within one (1) year after the date such
                optionee ceases to be a director of the Corporation.

                (b) In the event of the death of an optionee, whether during the
                optionee's service as a director or during the one (1) year
                period referred to in Section 5.5(a), the options granted to
                such optionee shall be exercisable, and such options shall
                expire unless exercised within one (1) year after the date of
                the optionee's death, by the legal representatives or the estate
                of such optionee, by any person or persons whom the optionee
                shall have designated in writing on forms prescribed by and
                filed with the Corporation or, if no such designation has been
                made, by the person or persons to whom the optionee's fights
                have passed by will or the laws of descent and distribution. '

                (c) In the event of the retirement of an optionee on or after
                the mandatory retirement age for directors, such options shall
                expire unless exercised within three (3) years after the date of
                such retirement.

        6. TRANSFERABILITY

        Options and Stock Units shall not be transferable or assignable other
than by (a) will or the laws of descent and distribution; or, with respect to
options, (b) pursuant to a qualified domestic relations order, or (c) to the
extent permissible under Rule 16b-3 under the Exchange Act as then applicable to
the Corporation's employee benefit plans, by gift or other transfer to either
(i) any trust or estate in which the original award recipient or such person's
spouse or other immediate family member has a substantial beneficial interest or
(ii) a spouse or other immediate family member. Also, to the extent permissible
under Rule 16b-3 under the Exchange Act, the recipient of an option may
designate in writing during the optionee's lifetime a beneficiary to receive and
exercise options in the event of the optionee's death (as provided in Section
5.5(b)). Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any option or Stock Unit under the Plan or of any fight or privilege
conferred thereby, contrary to the provisions of the Plan, or the sale or levy
or any attachment or similar process upon the rights and privileges


                                       


<PAGE>   5
conferred hereby, shall be null and void.

        7. PARTICIPANT'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDER

        Neither the recipient of an option or Stock Unit under the Plan nor the
optionee's successor(s) in interest shall have any rights as a stockholder of
the Corporation with respect to any Shares subject to an option or Stock Unit
held by such person until such person becomes a holder of record of such Shares.

        8. LIMITATION AS TO DIRECTORSHIP

        Neither the Plan nor the receipt of an option or Stock Unit nor any
other action taken pursuant to the Plan shall constitute or be evidence of any
agreement or understanding, express or implied, that a recipient has a right to
continue as a director for any period of time or at any particular rate of
compensation.

        9. REGULATORY APPROVAL AND COMPLIANCE

        The Corporation shall not be required to issue any certificate or
certificates for Shares upon the exercise of an option or the payment of a Stock
Unit received under the Plan, or record as a holder of record of Shares the name
of the individual exercising an option or receiving payment of a Stock Unit
under the Plan, without obtaining to the complete satisfaction of the Plan
Administrator the approval of all regulatory bodies deemed necessary by the Plan
Administrator, and without complying, to the Plan Administrator's complete
satisfaction, with all rules and regulations under federal, state or local law
deemed applicable by the Plan Administrator.

                         ARTICLE VI CAPITAL ADJUSTMENTS

        The aggregate number and class of Shares to be issued under the Plan and
the number and class of Shares covered by (a) each automatic option grant, (b)
each outstanding Stock Unit, and (c) each outstanding option and the exercise
price per Share thereof (but not the total price), shall all be proportionately
adjusted for any stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, split-ups, split-offs,
spin-offs, liquidations or other similar changes in capitalization, or any
distribution to stockholders other than cash dividends, changes in the
outstanding stock of the Corporation by reason of any increase or decrease in
the number of issued shares of Common Stock resulting from the split-up or
consolidation of shares or any similar capital adjustment or the payment of any
stock dividend, or other increase or decrease in the number of such shares,
provided that counsel to the Corporation has determined that such adjustment
will meet the requirements of Rule 16b-3(c)(2)(ii) of the Exchange Act.

        In the event of any adjustment in the number of Shares covered by any
award, any fractional Shares resulting from such adjustment shall be disregarded
and each such award shall cover only the number of full Shares resulting from
such adjustment.


                                       


<PAGE>   6
                        ARTICLE VII EXPENSES OF THE PLAN

        All costs and expenses of the adoption and administration of the Plan
shall be borne by the Corporation; none of such expenses shall be charged to any
optionee.

              ARTICLE VIII EFFECTIVE DATE AND DURATION OF THE PLAN

        The Plan became effective on June 26, 1992 and was amended and restated
in October 1998, with such amendment and restatement becoming effective on
January 1, 1999. The Plan shall continue in effect until it is terminated by
action of the Board or the Corporation's stockholders, but such termination
shall not affect the then-outstanding terms of any options or Stock Units.

                ARTICLE IX TERMINATION AND AMENDMENT OF THE PLAN

        The Board may amend, terminate or suspend the Plan at any time, in its
sole and absolute discretion; provided, however, that if required to qualify the
Plan under Rule 16b-3 promulgated under Section 16(b) of the Exchange Act, no
amendment may be made more than once every six (6) months that would change the
amount, price, timing or vesting of the options or Stock Units, other than to
comport with changes in the Internal Revenue Code of 1986, as amended, or the
rules and regulations promulgated thereunder, and provided, further, that if
required to qualify the Plan under Rule 16b-3, no amendment that would

            (a) materially increase the number of Shares that may be
            issued under the Plan,

            (b) materially modify the requirements as to eligibility
            for participation in the Plan, or

            (c) otherwise materially increase the benefits accruing
            to participants under the Plan

shall be made without the approval of the Corporation's stockholders.

                      ARTICLE X COMPLIANCE WITH RULE 16B-3

        It is the intention of the Corporation that the Plan comply in all
respects with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and
that Plan participants remain disinterested persons ("disinterested persons")
for purposes of administering other employee benefit plans of the Corporation
and having such other plans be exempt from Section 16(b) of the Exchange Act.
Therefore, if any Plan provision is later found not to be in compliance with
Rule 16b-3 or if any Plan provision would disqualify Plan participants from
remaining disinterested persons, that provision shall be deemed null and void,
and in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3.