<PAGE>   1

                                                                   EXHIBIT 10.26

                              EMPLOYMENT AGREEMENT

       This Employment Agreement ("Agreement") is entered into this 28th day of
April, 1998, by and between Violet Shaffer (the "Executive") and APACHE MEDICAL
SYSTEMS, INC., a Delaware corporation (the "Company").

       WHEREAS, the Company considers Executive to be a valued employee with
significant expertise; and

       WHEREAS, the Company desires to extend certain stock options and
establish severance pay provisions applicable to Executive in consideration for
Executive's agreement to the terms and conditions set forth herein; and

       WHEREAS, Executive desires to continue to be an employee of the Company
on the terms and conditions set forth herein;

       NOW, THEREFORE, in consideration of the promises and mutual agreements
made herein, and intending to be legally bound hereby, the Company and Executive
agree as follows:

       1. Employment Term. The Company will continue to employ Executive for a
term commencing on January 1, 1998 and ending on December 31, 1998 ("Employment
Term"). The Employment Term shall be automatically extended for additional
one-year terms unless Executive or the Company provides ninety (90) days'
advance written notice to the other of its intention not to renew.

       2. Employment Duties. Executive will continue to serve as Vice President
- Marketing of the Company and shall perform such duties as may be assigned from
time to time by the Company. Executive shall, on a full-time basis, serve the
Company faithfully, diligently and competently and to the best of her ability
and in accordance with this Agreement and applicable law.

       3. Compensation. In exchange for Executive's services under this
Agreement, the Company shall pay Executive as salary One Hundred Twenty-Eight
Thousand Seven Hundred Fifty dollars ($128,750.00) per annum. Salary shall be
payable in twenty four (24) equal bimonthly installments and otherwise in
accordance with the Company's ordinary pay practices. Any payments made to
Executive pursuant to this Section 3 shall be treated as wages for withholding
and employment tax purposes.

       4. Benefits.

          (a) Executive shall be entitled during the Employment Term to
participate in such employee benefit plans and programs as are offered from time
to time to employees of the Company to the extent that her position, tenure,
compensation, age, health and other qualifications make her eligible to
participate. The Company does not promise the adoption or continuance of any
particular plan or program during the Employment Term, and Executive's (and her

<PAGE>   2

dependents') participation in any such plan or program shall be subject to the
provisions, rules, regulations and laws applicable thereto.

          (b) Executive shall be entitled to three (3) weeks paid vacation or in
accordance with the Company's vacation policy applicable to Executive Staff,
whichever is greater.

       5. Stock Options. All stock options currently extended to Executive are
hereby cancelled. Executive is eligible for new stock options pursuant to the
Incentive Stock Option Agreement, attached as Exhibit 1 to this Agreement, and
the Nonstatutory Stock Option Agreement, attached as Exhibit 2 to this
Agreement.

       6. Reimbursement of Expenses. Executive shall be entitled to
reimbursement for ordinary, necessary and reasonable out-of-pocket business
expenses which she incurs in connection with performing her duties hereunder.
The reimbursement of all such expenses shall be made upon presentation of
satisfactory evidence of the amounts and nature of such expenses and shall be
subject to the Company's policies regarding business expenses and to the
reasonable approval of the Company's Chief Executive Officer.

       7. Non-Competition. Non-Solicitation. Executive agrees that throughout
the duration of her employment with the Company and for the duration of the
Severance Period, as defined herein, regardless of the reason for her
termination, she shall not, either directly or indirectly: (a) solicit or
attempt to secure the Company's existing clients or customers at the time of
Executive's termination; and (b) the Executive shall not hire, contract with or
solicit for employment any employee of the Company. For purposes of this
Agreement, "Severance Period" shall be defined as the period of time for which
Executive receives a continuation of her salary and Company provided health
insurance benefits or, in the case of Executive's resignation that is not
occasioned by a Material Change in Responsibility or by a Change in Control as
defined by Sections 8(c) and 9, six months.

       8. Termination.

          (a) For Cause. Notwithstanding any other provision of this Agreement,
Executive's employment with the Company and this Agreement may be terminated by
the Company at any time and without notice for cause. For purposes of this
Agreement, "cause" shall mean the Executive's (i) commission of an action
against or in derogation of the interests of the Corporation which constitutes
an act of fraud, dishonesty or moral turpitude or which, if proven in a court of
law, would constitute a violation of a criminal code or similar law; (ii)
material breach of any material duty or obligation imposed upon the Executive by
the Corporation; (iii) divulging the Corporation's confidential information; or
(iv) performance of any similar action that the Compensation Committee of the
Board of Directors, in its sole discretion, may deem to be sufficiently
injurious to the interests of the Corporation so as to constitute substantial
cause for termination. In the event of termination under this Section 8(a), the
Company's obligations under this Agreement shall cease and, except as required
by applicable law, Executive shall forfeit all rights to receive any other
compensation or benefits under this Agreement, except that she shall be entitled
to her Salary for services performed through the date of such termination and
any vested stock options. Termination of Executive pursuant to this Section 8(a)
shall not relieve her of her obligations under Section 7.


                                      -2-
<PAGE>   3

          (b) Without Cause. Notwithstanding any other provision of this
Agreement, Executive's employment with the Company and this Agreement may be
terminated by the Company for any reason or for no reason, provided that in the
event of such termination, Executive shall be entitled to all vested stock
options, which may be exercised during the Severance Period as defined in this
Agreement, and continuation of her salary and Company-provided health insurance
benefits for six (6) months and, at the sole discretion of the Board of
Directors, may be provided a continuation of such benefits and salary for up to
an additional six (6) months. If the Company notifies Executive of its intention
not to renew this Agreement as provided in Section 1, Executive shall be deemed
to be terminated by the Company as of the last day of the Employment Term and
Executive shall be entitled to salary and benefits as provided in this Section
8(b). Termination of Executive pursuant to this Section 8(b) shall not relieve
her of her obligations under Section 7.

          (c) Material Change in Responsibility. During the term of this
Agreement, Executive may terminate her employment with the Company and this
Agreement upon thirty (30) days' advance written notice in the event of any
"material change in responsibility." For purposes of this Agreement, a "material
change in responsibility" shall mean a material change in her duties or
authority. Should Executive provide written notice to the Company pursuant to
this Section, the Company may cure the "material change in responsibility"
during the 30-day notice period which cure may not be unreasonably rejected by
Executive. Notice of termination under this Section 8(c) shall be valid only if
received by the Company within 120 days after the "material change in
responsibility" occurred. In the event of termination under this Section 8(c),
Executive shall be entitled to all vested stock options, which may be exercised
during the Severance Period as defined in this Agreement, and continuation of
her salary and Company-provided health insurance benefits for six (6) months
and, at the sole discretion of the Board of Directors, may be provided a
continuation of such benefits and salary for up to an additional six (6) months.
Termination of Executive pursuant to this Section 8(c) shall not relieve
Executive of her obligations under Section 7.

       9. Termination Due to Change in Control.

          (a) Defined. For purposes of this Agreement, a "change in control" is:
(1) the purchase or other acquisition by any person, entity or group of persons,
within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934 or any comparable successor provisions, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under such Act) of thirty percent (30%) or
more of either the outstanding shares of common stock or the combined voting
power of the Company's then outstanding voting securities entitled to vote
generally; (2) the approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than thirty percent (30%) of the combined ironing power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated Company's then outstanding securities; (3) a liquidation or
dissolution of the Company; or (4) the sale of all or substantially all of the
Company's assets.

          (b) In the event that a change in control results in either an
involuntary termination of Executive through elimination of her position or a
voluntary termination as a result of a


                                      -3-
<PAGE>   4

material change in responsibility pursuant to Section 8(c) or transfer of
Executive to a location outside of a 50-mile radius of her permanent residence,
Executive shad be entitled to all vested stock options, which may be exercised
during the Severance Period as defined in this Agreement, and continuation of
her salary and Company-provided health insurance benefits for twelve (12)
months.

          (c) A "change in control" will not effect or diminish Executive's
rights and obligations under any provision of this Agreement, including, without
limitation, Section 8, 9, 10, 11, and 12. Termination pursuant to this Section 9
shall not relieve Executive of her obligations under Section 7.

       10. Disability. If, prior to expiration or termination of the Employment
Term, Executive becomes unable to perform her duties by reason disability, the
Company shall have the right to terminate this Agreement by giving written
notice to Executive to that effect. After giving such notice, the Employment
Term shall terminate with the payment of six months salary to Executive. As used
in this Section, "disability" means the inability of the Executive to engage in
also substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or has
lasted or can be expected to last for a continuous period of not less than 12
months.

       11. Notices.

          (a) All notices hereunder shall be in writing and shall be deemed
given when delivered in person or when telecopied with hard copy to follow, or
three business days after being deposited in the United States mail, postage
prepaid, registered or certified mail, or two business days after delivery to a
nationally recognized express courier, expenses prepaid, addressed as follows:

          If to Executive:

          -------------------

          -------------------

          -------------------

          -------------------

          If to the Company:

          Counsel
          APACHE Medical Systems, Inc.
          1650 Tysons Boulevard
          Suite 300
          McLean, VA 22102-3915
          Telecopy: (703) 749-7963

and/or at such other addresses as may be designated by notice given in
accordance with the provisions hereof.


                                      -4-
<PAGE>   5

       12. Confidentiality. In the course of performing duties under this
Agreement, Executive may have access to "Confidential Information," including
but not limited to contracts, contract proposals, proprietary information, trade
secrets, inventions, procedures, processes, financial information, business
records, business plans, and other information of a confidential and proprietary
nature owned by the Company. Executive acknowledges that protection of this
Confidential Information is of critical importance to the Company. To ensure
that such Confidential Information is not disclosed or divulged to other
persons, Executive agrees as follows:

          (a) that said Confidential Information is the property of the Company
and is to be held by Executive in trust and solely for the benefit of the
Company;

          (b) that Executive shall not disclose or otherwise make available such
Confidential Information to any person or entity without the prior written
consent of the Company, except as necessary for the performance of Executive's
services under this Agreement;

          (c) that Executive shall not in any way utilize such Confidential
Information for the gain or advantage of Executive or others or to the detriment
of the Company; and

          (d) that upon termination of this Agreement, Executive shall promptly
return any and all such Confidential Information to the Company and shall
continue to abide by the confidentiality provisions of this Section Twelve (12).

       13. Assignment of Agreement. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective heirs, successors and
permitted assigns. No party shall assign this Agreement or its rights hereunder
without the prior written consent of the other party; provided, however, that
the Company shall assign this Agreement to any person or entity acquiring all or
substantially all of the business of the Company (whether by sale of stock, sale
of assets, merger, consolidation or otherwise.)

       14. Entire Agreement/Modification of Agreement. This Agreement contains
all of the agreements between the parties with respect to the subject matter
hereof, and this Agreement supersedes all other agreements, oral or written,
between the parties with respect to the subject matter hereof. No change or
modification of this Agreement shall be valid unless the same shall be in
writing and signed by both parties. No waiver of any provision of this Agreement
shall be valid unless in writing and signed by the waiving party. No waiver of
any of the provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver, unless so provided in the waiver.

       15. Severability. If any provisions of this Agreement or portions thereof
shall, for any reason, be considered invalid or unenforceable by any court of
competent jurisdiction, such provisions or portions thereof shall be ineffective
only to the extent of such invalidity or unenforceability, and the remaining
provisions of this Agreement or portions thereof shall nevertheless be valid,
enforceable and of full force and effect. The Company's rights under this
Agreement shall not be exclusive and shall be in addition to all other rights
and remedies available at law or in equity.


                                      -5-
<PAGE>   6

       16. Headings. The section headings or titles herein are for convenience
of reference only, shall not be deemed a part of this Agreement, and shall not
in any way affect the meaning or interpretation of this Agreement.

       17. Resolution of Disputes. In the event of a dispute between Executive
and the Company that is not resolved after a good faith effort by the parties,
such dispute will be submitted to arbitration. The arbitration will be conducted
in accordance with the rules of the American Arbitration Association in effect
at the time of the demand for arbitration and will be held in Washington, D.C.
The arbitrator will be selected from an appropriate list of qualified
arbitrators, permit reasonable discovery, and make written findings of fact and
conclusions of law reflecting the appropriate substantive law. Either party must
deliver a request for arbitration in writing to the other party within sixty
(60) days of the date the aggrieved party first has knowledge of the event
giving rise to the claim or sixty (60) days following the 120-day period in the
case of a "Material Change in Responsibility" as defined in Section 7, otherwise
the claim will be considered void and waived. The decision of the arbitrator
will be exclusive, final and binding on Executive and the Company, and Executive
is hereby waiving any right she may have to have any dispute decided in court
and by a jury. The losing party will bear the cost of the arbitrator.

       18. Applicable Law. This Agreement shall be governed and construed
according to the laws of the Commonwealth of Virginia. Executive expressly
submits and consents in advance to the jurisdiction of the federal and state
courts of the Commonwealth of Virginia for all purposes is connection with any
action or proceeding arising out of or relating to this Agreement for all
disputes not resolved pursuant to Section 17.

       IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.


                                             ------------------------------
                                             Violet Shaffer

                                             APACHE MEDICAL SYSTEMS, INC

                                             By:
                                                ---------------------------
                                                Name:
                                                     ----------------------
                                                Title:
                                                      ---------------------


                                      -6-
<PAGE>   7

                                                                       Exhibit 1

                          APACHE MEDICAL SYSTEMS, INC.
                        INCENTIVE STOCK OPTION AGREEMENT

       This Incentive Stock Option Agreement (this "Agreement"), dated as of
January 2, 1998 (the "Grant Date"), is by and between APACHE Medical Systems,
Inc., a Delaware corporation (the "Corporation"), and Violet L. Shaffer (the
"Optionee"), a key employee of the Corporation.

       1. Grant of Option. Subject to the provisions of the APACHE Medical
Systems, Inc. Employee Stock Option Plan (the "Plan") and this Agreement, the
Corporation hereby grants to the Optionee the right and option (the "Option") to
purchase from the Corporation an aggregate of 20,000 shares of the Corporation's
common stock, par value $0.01 per share (the "Shares"), at an exercise price of
$1.28 per Share.

       2. Vesting and Expiration. The option rights of the Optionee will be
exercisable until January 2, 2008, provided that they have vested. The Option
shall vest as provided on Exhibit A hereto.

       3. Exercise Following Termination of Employment. If the Optionee ceases
to be an employee of the Corporation, the outstanding portion of the Option
shall be exercisable only in accordance with the following provisions:

          (a) If the Optionee's employment with the Corporation is terminated
for "cause" (as defined below), the outstanding portion of the Option (to the
extent vested prior to the notice of termination) shall be and remain
exercisable until the first to occur of (i) the expiration date referred to in
Section 2, and (ii) the expiration of three months from the date Optionee
receives notice of termination. As used herein, "cause" means the Optionee's (i)
commission of an action against or in derogation of the interests of the
Corporation which constitutes an act of fraud, dishonesty or moral turpitude or
which, if proven in a court of law, would constitute a violation of a criminal
code or similar law; (ii) material breach of any material duty or obligation
imposed upon the Optionee by the Corporation; (iii) divulging the Corporation's
confidential information; or (iv) performance of any similar action that the
Compensation Committee of the Board of Directors, in its sole discretion, may
deem to be sufficiently injurious to the interests of the Corporation so as to
constitute substantial cause for termination.

          (b) If the Optionee's employment with the Corporation is terminated
for any reason other than for cause, death or disability (as defined below), the
outstanding portion of the Option (to the extent vested prior to such
termination) shall become fully exercisable and shall remain exercisable until
the first to occur of (i) the expiration date referred to in Section 2, and (ii)
the expiration of the Severance Period (as defined below), provided that if the
Optionee ceases to be employed by the Corporation by reason of death or
disability, the period referred to in this clause (ii) shall be one year
following the date the Optionee ceases to be an employee of the Corporation. If
the Optionee dies during such Severance Period referred to in clause (ii), his
or her estate may exercise the Option (to the extent such Option was vested and
exercisable prior to death), but not later than the earlier of one year after
the date of death or the expiration of the


<PAGE>   8

term of the Option. As used herein, "disability" means the inability of the
Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or has lasted or can be expected to last for a continuous period
of not less than 12 months. For purposes of this Section 3, "Severance Period"
shall be defined as the period of time for which Optionee receives a
continuation of his or her salary and Corporation-provided health insurance
benefits or, in the case of Optionee's resignation that is not occasioned by a
Material Change in Responsibility which for purposes of this Agreement means a
material change in his or her duties or authority or by a Change in Control as
defined by Section 9, six months. Notwithstanding the foregoing, to retain
favorable treatment as incentive stock options (the "Incentive Stock Options")
under Section 422 of the Internal Revenue Code of 1986, as amended from time to
time, or subsequent comparable statute (the "Code"), Incentive Stock Options
must be exercised within three months of the Optionee's termination of
employment.

       4. Limitation on Exercisability. Notwithstanding any other provision
hereof (including, without limitation, Sections 8 and 9, the Shares that may be
purchased for the first time during any calendar year pursuant to the Option,
together with any other options issued to the Optionee by the Corporation
intended to be Incentive Stock Options, shall not have a fair market value
(determined as of the respective Grant Dates of such options) in excess of
$100,000.

       5. Exercise. The Option may be exercised by delivering to the Corporation
at its principal offices a written notice, signed by a person entitled to
exercise the Option, of the election to exercise the Option and stating the
number of Shares to be purchased. Such notice shall be accompanied by the
payment of the full exercise price of the Shares to be purchased. Upon payment
in accordance with the Plan and within the time period specified by the
Corporation of the amount, if any, required to be withheld for Federal, state
and local tax purposes on account of the exercise of the Option, the Option
shall be deemed exercised as of the date the Corporation received such notice.
The Corporation may withhold, or allow the Optionee to remit to the Corporation,
any Federal, state or local taxes required by law to be withheld with respect to
any event giving rise to income tax liability with respect to the Option. In
order to satisfy all or any portion of such income tax liability, the Optionee
may elect to surrender Shares previously acquired by the Optionee or to have the
Corporation withhold Shares that would otherwise have been issued to the
Optionee pursuant to the exercise of the Option, the number of such withheld or
surrendered Shares to be sufficient to satisfy all or a portion of the income
tax liability that arises upon the event giving rise to income tax liability
with respect to the Option. Payment of the full exercise price shall be in the
form of cash, shares of capital stock of the Corporation having a fair market
value (as defined in the Plan) on the date of exercise equal to the full
exercise price, or by any combination of cash and shares of such capital stock.
Upon the proper exercise of the Option, subject to the other provisions of this
Agreement, the Corporation shall issue in the name of the person exercising the
Option, and deliver to such person, a certificate or certificates for the Shares
purchased.

       6. Nontransferability of Option. The Option shall not be transferable by
the Optionee except by will or the laws of descent and distribution. Without
limiting the generality of the foregoing, the Option shall not be sold,
transferred except as aforesaid, assigned, pledged or otherwise encumbered or
disposed of, shall not be assignable by operation of law, and shall not be
subject to execution, attachment or similar process. Any attempted sale,
transfer, pledge, as-


                                      -2-
<PAGE>   9

signment or other encumbrance or disposition of the Option contrary to the
provisions hereof, or the levy of any execution, attachment or similar process
upon the Option, shall be null and void and without effect. During the lifetime
of the Optionee, the Option may be exercised only by the Optionee or the
Optionee's agent, attorney-in-fact or guardian. Following the death of the
Optionee, the Option may be exercised by the Optionee's beneficiary or estate to
the extent permitted by Section 3.

       7. Notice of Transfer of Shares. The Optionee may not transfer or
otherwise dispose of any Shares purchased upon the exercise of the Option before
the expiration of (a) two years from the Grant Date or (b) one year after the
exercise of the Option with respect to such Shares, whichever occurs later,
without first giving written notice to the Secretary of the Corporation.

       8. Adjustments Upon Reorganization or Changes in Capitalization. In the
event of a stock split, stock dividend, recapitalization, reclassification or
combination of shares, merger, sale of assets or similar event, the Compensation
Committee of the Board of Directors shall adjust equitably (a) the number and
class of Shares or other securities that are reserved for issuance under the
Option, (b) the number and class of Shares or other securities that are subject
to the Option, and (c) the appropriate Fair Market Value and other price
determinations applicable to the Option. The Compensation Committee of the Board
of Directors shall make all determinations under this Section 8, and all such
determinations shall be conclusive and binding. As used herein, "Fair Market
Value" means the amount determined by the Compensation Committee of the Board of
Directors from time to time, using such good faith valuation methods as it deems
appropriate, except that as long as the Shares are traded on NASDAQ or a
recognized stock exchange, it shall mean the average of the highest and lowest
quoted selling prices for the Shares on the relevant date, or, if there were no
sales on such date, the weighted average of the means between the highest and
the lowest quoted selling prices on the nearest day before and the nearest day
after the relevant date, as prescribed by Treasury Regulation Section
20.2031-2(b)(2), as reported in The Wall Street Journal or a similar publication
selected by the Compensation Committee of the Board of Directors.

       9. Acceleration of Exercisability. Notwithstanding the provisions of
Section 2, the Option shall become, and until the expiration dates specified in
Section 2 shall remain, exercisable as to all of the Shares forthwith upon the
occurrence of any Change in Control of the Corporation. As used herein, "Change
in Control" means the purchase or other acquisition by any person, entity or
group of persons, within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") or any comparable successor
provisions, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either the outstanding
Shares or the combined voting power of the Corporation's then outstanding voting
securities entitled to vote generally; the approval by the stockholders of the
Corporation of a reorganization, merger, or consolidation, in each case, with
respect to which persons who were stockholders of the Corporation immediately
prior to such reorganization, merger or consolidation do not, immediately
thereafter, own more than 30% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated Corporation's then outstanding securities; a liquidation or
dissolution of the Corporation; or of the sale of all or substantially all of
the Corporation's assets.


                                      -3-
<PAGE>   10

       10. Miscellaneous.

          (a) Notices. Any notice hereunder shall be in writing, and delivered
or sent by first-class U.S. mail, postage prepaid, addressed to:


              (i)        if to the Corporation, at:

                         1650 Tysons Boulevard, Suite 300
                         McLean, Virginia 22102, and

              (ii)       if to Optionee, at:

                         -------------------

                         -------------------

                         -------------------

subject to the right of either party, by written notice hereunder, to designate
at any time hereafter some other address.

          (b) Compliance with Law and Regulations. The Option and the obligation
of the Corporation to sell and deliver Shares hereunder shall be subject to all
applicable Federal and state laws, rules and regulations and to such approvals
by any government or regulatory agency as may be required. Notwithstanding any
other provision of this Agreement, the Option may not be exercised if its
exercise, or the receipt of Shares pursuant thereto, would be contrary to
applicable law.

          (c) No Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to any Shares subject to the Option prior to the date
of issuance to the Optionee of a certificate or certificates for such Shares.

          (d) No Employment Rights. Nothing in the Plan, this Agreement or the
grant of an Option shall confer upon the Optionee any rights to continued
employment with the Corporation or shall interfere with the right of the
Corporation to terminate the Optionee's employment with the Corporation.

          (e) Section 83(b) Election. If the Optionee elects, in accordance with
Section 83(b) of the Code, to recognize ordinary income in the year in which the
Option is granted, the Optionee shall furnish to the Corporation a copy of a
completed and signed election form and shall pay (or make arrangements
satisfactory to the Corporation to pay) to the Corporation, within sixty (60)
days after the Grant Date, any federal, state and local taxes required to be
withheld with respect to the Option.

          (f) Withholding. The Corporation shall, to the extent permitted by
law, have the right to deduct from any payment of any kind otherwise due to the
Optionee any Federal, state and local taxes required by law to be withheld or
collected with respect to the Option.

          (g) Reservation of Shares; Certain Costs. The Corporation shall keep
available sufficient authorized but unissued Shares needed to satisfy the
requirements of this Agree-


                                      -4-
<PAGE>   11

ment. The Corporation shall pay any original issue tax that may be due upon the
issuance of Shares pursuant to the Option and all other costs incurred by the
Corporation in issuing such Shares

          (h) Employment by Affiliates. For the purpose of this Agreement,
employment by a parent or subsidiary of, or a successor to, the Corporation
shall be considered employment by the Corporation. "Parent" and "subsidiary" as
used herein shall have the meaning of "parent" and "subsidiary corporation,"
respectively, as defined in Section 424 of the Code.

          (i) Plan Governs. The Optionee hereby acknowledges receipt of a copy
of the Plan and agrees to be bound by its terms, all of which are incorporated
herein by reference. The Plan shall govern in the event of any conflict between
this Agreement and the Plan.

          (j) Choice of Law. This Agreement shall be construed in accordance
with and be governed by the laws of the State of Delaware.

          (k) Counterparts. This Agreement may be executed in two counterparts
each of which shall constitute one and the same instrument.

       IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.

                                             APACHE MEDICAL SYSTEMS, INC.


                                             ----------------------------------
                                             By:    Thomas W. Hodson
                                             Title: Acting Chief Executive
                                                    Officer and Chairman of the
                                                    Board of Directors


                                             ----------------------------------
                                             Violet L. Shaffer


                                      -5-
<PAGE>   12

                                                                       EXHIBIT A

                                     Vesting

       The Option shall vest subject to the Corporation's performance and with
the passage of time as follows:

       1. Quarterly Performance During 1998. The Option shall vest as to as many
as 25% of the Shares purchasable under the Option depending on satisfaction of
revenue and net income (loss) targets as follows:

<TABLE>
<CAPTION>
                                   Number of Shares Vesting               Number of Shares Vesting if
  Vesting Date/End of               if Revenue Target for                 Net Income/(Loss) Target for
        Quarter                        Quarter is Met                            Quarter is Met
----------------------           ----------------------------           --------------------------------
<S>                              <C>                                    <C>
March 31, 1998                   The first 2,500 Shares                 The first 2,500 Shares
                                 (12.5% of total grant)                 (12.5% of total grant)

June 30, 1998                    An additional 2,500                    An additional 2,500 Shares
                                 Shares (12.5% of total                 (12.5% of total grant)
                                 grant)

September 30, 1998               An additional 2,500 Shares             An additional 2,500 Shares
                                 (12.5% of total                        (12.5% of total grant)
                                 grant)

December 31, 1998                An additional 2,500 Shares             An additional 2,500 Shares
                                 (12.5% of total                        (12.5% of total grant)
                                 grant)
</TABLE>


The quarterly revenue and net income (loss) targets referred to above as
follows:

<TABLE>
<CAPTION>

                        First             Second            Third             Fourth
                     Quarter 1998      Quarter 1998      Quarter 1998      Quarter 1998
                     ------------      ------------      ------------      ------------
<S>                   <C>               <C>               <C>               <C>
Revenue               $3,609,687        $4,263,156        $3,934,372        $4,194,427
Net Income/Loss       ($433,412)          $50,717         ($212,457)         $117,446
</TABLE>

       2. Annual Performance for 1998. To the extent the Option does not vest in
its entirety as provided in paragraph 1 above, the Option shall vest if 1998
revenues are at least $12.0 million and the Corporation reports a loss of not
more than $500,000 for 1998.

       3. Five-Year Vesting. To the extent the Option does not vest as provided
in paragraphs 1 and 2 above, the Option shall vest on January 2, 2003 if the
Optionee is continuously employed by the Corporation until that date.