<PAGE>
 
                                                                   EXHIBIT 10.21

                                  STOCK OPTION
                                  ------------


          This Stock Option is granted as of June 24, 1997 by MARQUETTE MEDICAL
     SYSTEMS, INC., a Wisconsin corporation ("Company"), to MICHAEL J. CUDAHY
     ("Cudahy"), pursuant to resolutions adopted by the Board of Directors of
     the Company on May 28, 1997.

               In order to give Cudahy an incentive and to induce Cudahy to
     remain in the employ of the Company, and as an active member of its Board
     of Directors,  the Company hereby grants to Cudahy an option to purchase,
     from time to time, all or any part of a total of Two Hundred Fifty Thousand
     (250,000) Class A Common Shares, Ten Cent ($.10) par value, at a price of
     $20.63 per share, upon the following terms and conditions:

          1.   The term of the option shall be for ten (10) years from the date
     hereof, and it shall expire on May 27, 2007 unless sooner terminated as
     hereinafter provided.

          2.   At any time or times (but in no event after the above expiration
     date or prior termination of this option), Cudahy may exercise this option,
     in whole or in part.

               (a) Exercise may only be made in multiples of one thousand
     (1,000) shares.

               (b) This option shall be exercised only by timely signed written
     notice delivered to the Company's Secretary or his office, in terms of the
     prescribed "Exercise of Option" form attached as Exhibit "A", specifying
     the number of shares and accompanied by payment, in cash or by check, of
     the full option purchase price therefor and any amount required to be
     withheld by the Company for Federal, state and/or local tax purposes.

               (c) The obligation of the Company to sell and deliver shares upon
     the due exercise of this option shall be subject to: (I) all applicable
     laws, rules and regulations and to such approvals of any governmental
     agencies as may be required, including but not by way of limitation, the
     effectiveness of a Registration Statement under The Securities Act of 1933,
     as amended, or the availability of an exemption from registration under the
     said Act, whichever may be deemed necessary or appro priate by counsel for
     the Company; and (ii) the satisfaction of all stock exchange or NASDAQ
     requirements, if any, necessary to accomplish the listing, complete the
     listing or qualify for trading upon which the shares of the Company may be
     listed, or NASDAQ as the case may be.
<PAGE>
 
          3.   This option, to the extent not then already exercised or
     otherwise terminated or expired, shall terminate on the one hundred
     eightieth (180th) day following  the effective date of the last to occur of
     (i) Cudahy's death or termination of employment with the Company and (ii)
     such time as he no longer serves as a Director of the Company.
<PAGE>
 
          4.   This option is not transferable other than by Will or the laws of
     descent and distribution, may be exercised during the life of Cudahy only
     by Cudahy personally, and after Cudahy's death, only to the extent, if any,
     as provided in Paragraph 3 hereof.  Any attempted transfer by Cudahy
     (voluntarily or by operation of law) shall be null and void, and this
     option shall then become null and void.

          5.   Neither this option, shares of stock issued upon the exercise of
     it, any excess of market value over option price, nor any other rights,
     profits, values or interests resulting from the granting of this option
     shall be considered as "compensation" for purposes of any present or future
     benefit plan of the Company.

          6.   In the event of any stock split, stock dividend, combination of
     shares or other capital reorganization or reclassi fication of the Company,
     which materially affects the value of the Class A Common Shares,
     appropriate adjustment in the number of shares subsequent to this option or
     to the option price per share, or both, shall be made; provided that a
     stock dividend in the amount equal to five percent (5%) or less shall not
     be deemed to materially affect the value of shares subject to this option.
     If the Company shall propose to merge into or consolidate with any other
     corporation or to enter into an agreement to sell substantially all of its
     assets, the extent not previously exercised within thirty (30) days
     following execution of the Agreement. To the extent that the option remains
     unexercised after such thirty (30) day period, the option shall be void and
     without further force or effect.

          7.   The Company hereby represents and warrants to Cudahy, that it has
     reserved and will at all times while this option is in force, have
     available sufficient shares to fulfill this option.



                              MARQUETTE MEDICAL SYSTEMS, INC.


                              By: /s/ Timothy C. Mickelson
                                  -------------------------------------  
                                    President
<PAGE>
 
                                                                     EXHIBIT "A"


     President
     MARQUETTE MEDICAL SYSTEMS, INC.
     8200 West Tower Avenue
     Milwaukee, WI 53223

          RE:  Option Dated June 24, 1997
 
     Dear Sir:

          I hereby exercise the above Option to the extent of _____ Class A
     Common Shares of MARQUETTE MEDICAL SYSTEMS, INC., at the option price of
     $________________ per share, in accordance with the terms and conditions of
     the aforesaid Option.

          I hereby certify that I intend by this exercise of such Option to
     acquire such shares for purchase of investment and that I have no intention
     of reselling them after I have acquired them or upon the acquisition of
     such shares, to dispose of other shares of the Company held by me;
     provided, however, that this representation shall expire upon the
     registration of such shares so acquired or to be acquired under The
     Securities Act of 1933.



          Dated:__________________, ______.


                        _______________________________________
                                  Michael J. Cudahy
<PAGE>
 
                                   ACCEPTANCE
                                   ----------


          I hereby accept the above "Stock Option" upon the terms and conditions
     therein stated.

          In consideration thereof, I hereby covenant and agree:

          1)   That except as otherwise provided in the above Option, my rights,
               interests and benefits thereunder are personal to me and may not
               be assigned, transferred or pledged by me in any way, voluntarily
               or by operation of law.

          2)   That this agreement shall be binding upon me, my heirs, legatees,
               executors and administrators, and shall inure to the benefit of
               and be binding upon the Company, its successors and assigns.

          3)   That as to any shares acquired by me under the above Option, I
               hereby irrevocably waive and relinquish any rights that I may
               have, as a shareholder of the Company, under The Business
               Corporation Act of Wisconsin, to examine, review, obtain or make
               copies of books or records of the Company.

          4)   That except to the extent set forth below, if at all, there are
               no agreements, commitments or understandings with respect to my
               continued employment by the Company, verbal or written, nor shall
               any be implied from the terms of the above Option.



          Dated this 24th day of June, 1997.


                                      /s/ Michael J. Cudahy 
                                      ----------------------------------------
                                      Michael J. Cudahy