PROTOCOL SYSTEMS, INC.
                      1994 EMPLOYEE STOCK PURCHASE PLAN


The following provisions constitute the Protocol Systems, Inc. 1994 Employee
Stock Purchase Plan.

1.    PURPOSE.  The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions.  It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended.  The provisions
of the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.

2.    DEFINITIONS.

      2.1   "ACCOUNT" shall mean each separate account maintained for a
Participant under the Plan, collectively or singly as the context requires.
Each Account shall be credited with a Participant's contributions, and shall
be charged for the purchase of Common Stock.  A Participant shall be fully
vested in the cash contributions to his or her account at all times.  The Plan
Administrator may create special types of accounts for administrative reasons,
even though the Accounts are not expressly authorized by the Plan.

      2.2   "BOARD" shall mean the Board of Directors of the Company.

      2.3   "CODE" shall mean the Internal Revenue Code of 1986, as amended.

      2.4   "COMMITTEE" shall mean the Compensation Committee of the Board.

      2.5   "COMMON STOCK" shall mean the Common Stock of the Company.

      2.6   "COMPANY" shall mean Protocol Systems, Inc., an Oregon corporation.

      2.7   "COMPENSATION" shall mean all base straight time gross earnings
plus payments for overtime, shift premiums and sales commissions, but
excluding incentive compensation, incentive payments, bonuses, awards, and
other compensation.

      2.8   "DESIGNATED SUBSIDIARY" shall mean each Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.

      2.9   "EMPLOYEE" shall mean an individual who renders services to the
Company or to a Designated Subsidiary pursuant to a regular-status employment
relationship with such employer.  A person rendering services to the Company or
to a Designated Subsidiary purportedly as an independent consultant or
contractor shall not be an Employee for purposes of the Plan.

      2.10  "ENROLLMENT DATE" shall mean the first day of each Offering Period.

      2.11  "FAIR MARKET VALUE"

2.11.1 The Fair Market Value of the Common Stock on any date shall be equal
to the closing price of such Common Stock on the Valuation Date, as reported
on the NASDAQ.

2.11.2 If 2.11.1 is not applicable, the Fair Market Value of the Common Stock
shall be determined by the Board in good faith.  Such determination shall be
conclusive and binding on all persons.

      2.12  NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System Stock Market's National Market or such other
quotation system that supersedes it.

      2.13  "OFFERING PERIOD" shall mean the period of approximately six (6)
months, commencing on the first Trading Day on or after a date designated in
advance by the Board and terminating on the last Trading Day in the period
ending six months later, during which an option granted pursuant to the Plan may
be exercised.  The duration of Offering Periods may be changed pursuant to
Section 4 of this Plan.

      2.14  "PARTICIPANT" shall mean any Employee who is participating in this
Plan by meeting the eligibility requirements of Section 3 and has completed a
Payroll Participation Form.

      2.15  "PAYROLL PARTICIPATION FORM" shall mean the form provided by the
Company on which a Participant shall elect to participate in the Plan and
designate the percentage of his or her Compensation to be contributed to his
or her Account through payroll deductions.

      2.16  "PLAN" shall mean this Employee Stock Purchase Plan.

      2.17  "PURCHASE DATE" shall mean the last day of each Offering Period.

      2.18  "PURCHASE PRICE" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock (i) on the Enrollment Date or (ii) on
the Purchase Date, whichever is lower.

      2.19  "RESERVES" shall mean the number of shares of Common Stock covered
by each option under the Plan which have not yet been exercised and the number
of shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.

      2.20  "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company of a Subsidiary.

      2.21  "TRADING DAY" shall mean a day on which national stock exchanges
and the National Association of Securities Dealers Automated Quotation (NASDAQ)
System are open for trading.

      2.22  "VALUATION DATE" shall mean the date upon which the Fair Market
Value of Common Stock is to be determined for purposes of setting the price of
Shares of Common Stock under Section 2.18 (that is, the Enrollment Date or the
applicable Purchase Date).  If the Enrollment Date is not a date on which the
Fair Market Value may be determined in accordance with Section 2.11, the
Valuation Date shall be the first day after the Enrollment Date for which such
Fair Market Value may be determined.  If the Purchase Date is not a date on
which the Fair Market Value may be determined in accordance with Section 2 the
Valuation Date shall be the first date prior to the Purchase Date on which
such fair market value may be determined.

3.    ELIGIBILITY.

      3.1   A person shall become eligible to participate in the Plan on the
first Enrollment Date on or after which he or she first meets all of the
following requirements; provided, however, that no one shall become eligible to
participate in the Plan prior to the Enrollment Date of the first Offering
Period provided for in Section 2.13:

3.1.1  The person has been an employee of the Company for a continuous period of
three months;

3.1.2  The person's customary period of employment is for more than twenty (20)
hours per week;

3.1.3  The person's customary period of employment is for more than five (5)
months in any calendar year.

      3.2   Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after
the grant, such Employee (or any other person whose stock would be attributed
to such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any Subsidiary, or (ii) which permits his or her rights to
purchase stock under all employee stock purchase plans  (under Section 423 of
the Code) of the Company and Subsidiaries to accrue at a rate which exceeds
Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair
market value of the shares at the time such option is granted) for each
calendar year in which such option is outstanding at any time.

      3.3   For purposes of the Plan, eligibility shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company.  Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or
by contract, eligibility to participate in the Plan will be deemed to have
terminated on the 91st day of such leave.

4.    OFFERING PERIODS.  The Plan shall be implemented by consecutive Offering
Periods with the first Offering Period commencing on a date designated in
advance by the Board, and continuing for six month periods thereafter until
terminated in accordance with Section 19 hereof.  The Board shall have the
power to change the duration of Offering Periods (including the commencement
dates thereof) with respect to future offerings without shareholder approval if
such change is announced at least fifteen (15) days prior to the scheduled
beginning of the first Offering Period to be affected thereafter.

5.    PARTICIPATION.

      5.1  An eligible Employee may become a Participant in the Plan by
completing a Payroll Participation Form and filing it with the Company's
Administration Department (as set forth in Section 20 below) at least fifteen
(15) days prior to the applicable Enrollment Date, unless a later time for
filing the Payroll Participation Form is set by the Board for all eligible
Employees with respect to a given Offering Period.

      5.2  Payroll deductions for a Participant shall commence on the first
payroll period following the Enrollment Date and shall end on the last payroll
period in the Offering Period, unless sooner terminated by the Participant as
provided in Section 10 hereof.

6.    PAYROLL DEDUCTIONS.

      6.1  At the time a Participant files his or her Payroll Participation
Form, he or she shall elect to have payroll deductions made on each payday
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each payday during the Offering
Period, and the aggregate of such payroll deductions during the Offering Period
shall not exceed ten percent (10%) of the Participant's Compensation during
said Offering Period.

      6.2  A Participant shall specify that he or she desires to make
contributions to the Plan in whole percentages not less than one percent (1%)
and not more than ten percent (10%) of the Participant's Compensation during
each pay period in the Offering Period, or such other minimum or maximum
percentage as the Board shall establish from time to time.

      6.3  All payroll deductions made for a Participant shall be credited to
his or her Account under the Plan and will be withheld in whole percentages
only.  A Participant may not make any additional payments into such Account.

      6.4  A Participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his
or her payroll deductions during the Offering Period by filing with the
Company's Administration Department (as set forth in Section 20 below) a new
Payroll Participation Form authorizing a change in payroll deduction rate.  A
Participant is limited to making one change during an Offering Period.  The
change in rate shall be effective with the first full payroll period following
fifteen (15) days after the Company's receipt of a new Payroll Participation
Form unless the Company elects to process a given change in participation more
quickly.  A Participant's Payroll Participation Form shall remain in effect for
successive Offering Periods unless terminated as provided in Section 10.

      6.5  Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3.2 hereof, a Participant's
payroll deductions shall be decreased to 0% at such time during any Offering
Period which is scheduled to end during the current calendar year (the "Current
Offering Period") that the aggregate of all payroll deductions which were
previously used to purchase stock under the Plan in a prior Offering Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Offering Period equal $21,250 (85% of $25,000).
Payroll deductions shall recommence at the rate provided in such Participant's
Payroll Participation Form at the beginning of the first Offering Period which
is scheduled to end in the following calendar year, unless terminated by the
Participant as provided in Section 10.

      6.6  At the time the option is exercised, or at the time some or all of
the Common Stock issued under the Plan is disposed of, the Participant must
make adequate provision for the Company's federal, state, or other tax
withholding obligations, if any, which arise upon the exercise of the option or
the disposition of the Common Stock.  At any time, the Company may, but will
not be obligated to, withhold from the Participant's compensation the amount
necessary for the Company to meet applicable withholding obligations,
including any withholding required to make available to the Company any tax
deductions or benefit attributable to sale or early disposition of Common
Stock by the Employee.

7.    OPTION TO PURCHASE COMMON STOCK.  On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on the Purchase Date of such Offering Period (at
the applicable Purchase Price) up to a number of shares of the Common Stock
determined by dividing such Employee's payroll deductions accumulated prior to
such Purchase Date and retained in the Participant's account as of the Purchase
Date by the applicable Purchase Price; provided that in no event shall an
Employee be permitted to purchase during each Offering Period more than a number
of shares determined by dividing $12,500 by the fair market value of a share of
the Common Stock on the Enrollment Date, and provided further that such
purchase shall be subject to the limitations set forth in Section 3.2 and 12
hereof.  Purchase of the Common Stock shall occur as provided in Section 8,
unless the Participant has withdrawn pursuant to Section 10, and the option
shall expire on the last day of the Offering Period.

8.    PURCHASE OF COMMON STOCK.  Unless a Participant withdraws from the Plan
as provided in Section 10.1 below, his or her option for the purchase of Common
Stock will be exercised automatically on the Purchase Date, and the maximum
number of full shares subject to option shall be purchased for such Participant
at the applicable Purchase Price with the accumulated payroll deductions in his
or her account.  No fractional shares of Common Stock will be purchased; any
payroll deductions accumulated in a Participant's account which are not
sufficient to purchase a full share shall be retained in the Participant's
account for the subsequent Offering Period, subject to earlier withdrawal by
the Participant as provided in Section 10 hereof.  During a Participant's
life-time, a Participant's option to purchase shares of Common Stock
hereunder is exercisable only by him or her.

9.    DELIVERY.  As promptly as practicable after each Purchase Date, the
Company shall arrange the delivery to each Participant the shares of Common
Stock purchased with his or her payroll deductions.

10.    WITHDRAWAL; TERMINATION OF EMPLOYMENT.

      10.1  A Participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to purchase shares
of Common Stock under the Plan by giving written notice to the Company's
Administration Department (as set forth in Section 20 below) no less than 15
days immediately preceding a Purchase Date.  All of the Participant's payroll
deductions credited to his or her Account will be paid to such Participant as
soon as practicable after receipt of notice of withdrawal and such
Participant's option for the Offering Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made
during the Offering Period.  If a Participant withdraws from an Offering
Period, payroll deductions will not resume at the beginning of the succeeding
Offering Period unless the Participant delivers to the Company a new Payroll
Participation Form.

      10.2  Upon termination of a Participant's employment for any reason,
including death, disability or retirement, the payroll deductions credited to
such Participant's Account shall be returned to the Participant.  A Participant
shall have no right to acquire shares upon termination of his or her employment.

11.   INTEREST.  No interest shall accrue on the payroll deductions of a
Participant in the Plan.

12.   STOCK.

      12.1  The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 600,000 shares,
subject to adjustment upon changes in capitalization of the Company as
provided in Section 18.  If on a given Purchase Date the number of shares of
Common Stock eligible to be purchased exceeds the number of shares then
available under the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.

      12.2  The Participant will have no interest or voting right in shares
covered by his or her option until such shares of Common Stock have been
purchased.

      12.3  Common Stock to be delivered to a Participant under the Plan will
be registered in the name of the Participant or in the name of the Participant
and his or her spouse.

13.    ADMINISTRATION.

      13.1  ADMINISTRATIVE BODY.  The Plan shall be administered by the
Committee. Subject to the terms of the Plan, the Committee 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 administering
the Plan as the Committee deems desirable.

      13.2  RULE 16B-3 LIMITATIONS.  Notwithstanding the provisions of
Subsection 13.1, in the event that Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or any successor provision ("Rule 16b-3")
provides specific requirements for the administrators of plans of this type,
the Plan shall be only administered by such a body and in such a manner as
shall comply with the applicable requirements of Rule 16b-3.

14.   DESIGNATION OF BENEFICIARY.

      14.1  A Participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account
under the Plan in the event of such Participant's death subsequent to a
Purchase Date on which the option is exercised but prior to delivery to such
Participant of such shares and cash.  In addition, a Participant may file a
written designation of a beneficiary who is to receive any cash from the
Participant's account under the Plan in the event of such Participant's death
prior to a Purchase Date.

      14.2  Such designation of beneficiary may be changed by the Participant
at any time by written notice as provided in Section 20 below.  In the event of
the death of a Participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such Participant's
death, the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the Participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such shares and/or cash to the spouse
or to any one or more dependents or relatives of the Participant, or if no
spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

15.   TRANSFERABILITY.  Neither payroll deductions credited to a Participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the Participant.  Any
such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds from an Offering Period in accordance with Section 10.

16.   USE OF FUNDS.  All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.

17.   REPORTS.  Individual accounts will be maintained for each Participant in
the Plan.  Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.

18.   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET
SALE.

      18.1  CHANGES IN CAPITALIZATION.  Subject to any required action by the
stockholders of the Company, the Reserves, as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock 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 issue 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 of Common Stock subject to an option.

The Board may, if it so determines in the exercise of its sole discretion, make
provision for adjusting the Reserves, as well as the price per share of Common
Stock covered by each outstanding option, in the event the Company effects one
or more reorganizations, recapitalizations, rights offerings or other increases
or reductions of shares of its outstanding Common Stock.

      18.2  DISSOLUTION OR LIQUIDATION.  In the event of the proposed
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.

      18.3  CONSOLIDATION OR MERGER.  In the event of the consolidation or
merger of the Company with or into any other business entity, or the sale by
the Company of substantially all of its assets, the successor may continue
the Plan by adopting the same by resolution of its board of directors or
agreement of its partners or proprietors.  If, within 90 days after the
effective date of a consolidation, merger or sale of assets, the successor
corporation, partnership or proprietorship does not adopt the Plan, the Plan
shall be terminated in accordance with Section 19.

19.   AMENDMENT OR TERMINATION.

      19.1  The Board may at any time and for any reason terminate or amend the
Plan.  Except as provided in Section 18, no such termination can affect options
previously granted, provided that an Offering Period may be terminated by the
Board on any Purchase Date if the Board determines that the termination of the
Plan is in the best interests of the Company and its stockholders.  Except as
provided in Section 18, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any Participant.  To
the extent necessary to comply with Section 423 of the Code (or any successor
rule or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.

      19.2  Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the
Committee shall be entitled to change the Offering Periods, limit the frequency
and/or number of changes in the amount withheld during an Offering Period,
establish the exchange ratio applicable to amounts withheld in a currency other
than U.S. dollars, permit payroll withholding in excess of the amount
designated by a Participant in order to adjust for delays or mistakes in the
Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each Participant properly correspond with amounts withheld from the
Participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.

      19.3  If required to qualify the Plan under Rule 16b-3, no amendment
shall be made more than once every six months that would change the amount,
price or timing of the options, other than to comport with changes in the
Code, or the rules and regulations promulgated thereunder; and provided,
further, that if required to qualify the Plan under Rule 16b-3, no amendment
shall be made without the approval of the Company's stockholders that would:

19.3.1  materially increase the number of shares of Common Stock that may be
issued under the Plan;

19.3.2  materially modify the requirements as to eligibility for participation
in the Plan; or

19.3.3  otherwise materially increase the benefits accruing to participants
under the Plan.

20.   NOTICES.  All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company by the Company's
Administration Department at the Company's corporate headquarters.

21.   CONDITIONS.  Upon Issuance of Shares of Common Stock.  Common Stock shall
not be issued with respect to an option unless the exercise of such option and
the issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, 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 purchase of Common Stock, the Company may require the
person purchasing such Common Stock to represent and warrant at the time of any
such purchase 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 applicable provisions of law.

22.   TERM OF PLAN.

      22.1  The Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the stockholders of the
Company.  It shall continue in effect for a term of ten (10) years unless
sooner terminated pursuant to Section 19.

      22.2  Notwithstanding the above, the Plan is expressly made subject (i)
to the approval of the holders of a majority of the outstanding shares of the
Company within 12 months after the date the Plan is adopted and (ii) at its
election, to the receipt by the Company from the Internal Revenue Service of a
ruling in scope and content satisfactory to counsel to the Company, affirming
the qualification of the Plan within the meaning of Section 423 of the Code.
If the Plan is not so approved by the stockholders within 12 months after the
date the Plan is adopted, and if, at the election of the Company a ruling from
the Internal Revenue Service is sought but is not received on or before one
year after the Plan's adoption by the Board, this Plan shall not come into
effect.  In that case, the Account of each Participant shall forthwith be
paid to him or her.

23.   ADDITIONAL RESTRICTIONS OF RULE 16B-3.  The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3.  This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.


ADOPTED by the Board of Directors on January 4, 1994.

AMENDED by the Board of Directors on March 23, 1998.

RATIFIED by the Shareholders on May 19, 1994

RATIFIED by the Shareholders on May 19, 1998.

AMENDED by the Board of Directors on February 10, 1999

RATIFIED by the Shareholders on May 19, 1999.


      PROTOCOL SYSTEMS, INC.

      By:  Craig M. Swanson, Secretary