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                                                                 EXHIBIT 99.1

                                 VITALCOM INC.

                             1996 STOCK OPTION PLAN


       1.     Purposes of the Plan.  The purposes of this Stock Option Plan are:

              o      to attract and retain the best available personnel for
                     positions of substantial responsibility,

              o      to provide additional incentive to key Employees and
                     Consultants, and

              o      to promote the success of the Company's business.

       Options granted under the Plan will be Nonstatutory Stock Options.

       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)     "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws,
U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options are, or
will be, granted under the Plan.

              (c)     "Board" means the Board of Directors of the Company.

              (d)     "Code" means the Internal Revenue Code of 1986, as 
amended.

              (e)     "Committee"  means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.

              (f)     "Common Stock" means the Common Stock of the Company.

              (g)     "Company" means VitalCom Inc., a Delaware corporation.

              (h)     "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.

              (i)     "Director" means a member of the Board.

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



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                     (k)     "Employee" means any person, excluding Officers,
employed by the Company or any Parent or Subsidiary of the Company.  A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.

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

                     (m)     "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 Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

                            (ii)  If the Common Stock is 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 bid
and low asked prices for the 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;

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

                     (n)     "Nonstatutory Stock Option" means an Option not
intended to qualify as an incentive stock option within the meaning of Section
422 of the Code and the regulations promulgated thereunder.

                     (o)     "Notice of Grant" means a written or electronic
notice evidencing certain terms and conditions of an individual Option grant.
The Notice of Grant is part of the Option Agreement.

                     (p)     "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

                     (q)     "Option" means a stock option granted pursuant to
the Plan.



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                     (r)     "Option Agreement" means an agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant.  The Option Agreement is subject to the terms and conditions of
the Plan.

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

                     (t)     "Optionee" means the holder of an outstanding
Option granted under the Plan.

                     (u)     "Parent" means a "parent corporation," whether now
or hereafter existing, as defined in Section 424(e) of the Code.

                     (v)     "Plan" means this 1996 Stock Option Plan.

                     (w)     "Service Provider" means an Employee or Consultant
who is not also a Director or Officer.

                     (x)     "Share" means a share of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.

                     (y)     "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.

       3.     Stock Subject to the Plan.  Subject to the provisions of Section
13 of the Plan, the maximum aggregate number of Shares which may be optioned
and sold under the Plan is 100,000 Shares.  The Shares may be authorized, but
unissued, or reacquired Common Stock.

              If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program,
the unpurchased Shares which were subject thereto shall become available for
future grant or sale under the Plan (unless the Plan has terminated).

       4.     Administration of the Plan.

              (a)    The Plan shall be administered by (A) the Board or (B) a
Committee, which committee shall be constituted to satisfy Applicable Laws.

              (b)    Powers of the Administrator.  Subject to the provisions of
the Plan, and in the case of a Committee, subject to 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(m) of the Plan;




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                     (ii)    to select the Service Providers to whom Options
may be granted hereunder;

                     (iii)   to determine whether and to what extent Options
are granted hereunder;

                     (iv)    to determine the number of shares of Common Stock
to be covered by each Option 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.  Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option  or the shares of Common
Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

                     (vii)   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;

                     (viii)  to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;

                     (ix)    to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;

                     (x)     to modify or amend each Option (subject to Section
15(b) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;

                     (xi)    to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option or
previously granted by the Administrator;

                     (xii)   to determine the terms and restrictions applicable
to Options;

                     (xiii)  to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right 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.  All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form
and under such conditions as the Administrator may deem necessary or advisable;
and




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                     (xiv)   to make all other determinations deemed necessary
or advisable for administering the Plan.

              (c)    Effect of Administrator's Decision.  The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

       5.     Eligibility.  Options may be granted to Service Providers;
provided, however, that notwithstanding anything to the contrary contained in
the Plan, Options may not be granted to Officers and Directors.

       6.     Limitation.  Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.

       7.     Term of Plan.  The Plan shall become effective upon its adoption
by the Board.  It shall continue in effect for ten (10) years, unless sooner
terminated under Section 14 of the Plan.

       8.     Term of Option.  The term of each Option shall be stated in the
Option Agreement.

       9.     Option Exercise Price and Consideration.

              (a)    Exercise Price.  The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be the per Share
Fair Market Value.

              (b)    Waiting Period and Exercise Dates.  At the time an Option
is granted, the Administrator shall determine any conditions which must be
satisfied before the Option may be exercised and shall fix the period within
which the Option may be exercised, which may be more favorable (but not less
favorable) to the Optionee than the following vesting schedule:

       25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 6.25% of the Shares subject to the Option
shall vest upon the last day of each quarter thereafter, beginning with the
first full quarter after the one year anniversary of the Vesting Commencement
Date, subject to the Optionee continuing to be a Service Provider on such
dates.

              (c)    Form of Consideration.  The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment.  Such consideration may consist entirely of:

                     (i)     cash;

                     (ii)    check;




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                     (iii)   promissory note;

                     (iv)    other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) 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;

                     (v)     consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;

                     (vi)    a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;

                     (vii)   such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws; or

                     (viii)  any combination of the foregoing methods of
payment.

       10.    Exercise of Option.

              (a)    Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable according to the terms of the
Plan and at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement.  An Option may not be
exercised for a fraction of a Share.

                     An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii)
full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized
by the Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the name of the Optionee and his
or her spouse.  Until the Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option.  The Company shall issue (or cause to be issued) such
Shares promptly after the Option is exercised.  No adjustment will be made for
a dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 13 of the Plan.

                     Exercising an Option in any manner shall decrease the
number of Shares thereafter 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.




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              (b)    Termination of Relationship as a Service Provider.  If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option, but only within
such period of time as is specified in the Option Agreement, and only to the
extent that the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement).  In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for three (3) months following the Optionee's
termination.  If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan.  If, after termination, the Optionee does not
exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

              (c)    Disability of Optionee.  If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement, to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement).  In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination.  If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option shall revert to the Plan.  If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

              (d)    Death of Optionee.  If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is
specified in the Option Agreement (but in no event later than the expiration of
the term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance, but only to the extent that the Option is vested on the date of
death.  In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination.  If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan.  The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the
person(s) entitled to exercise the Option under the Optionee's will or the laws
of descent or distribution.  If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

              (e)    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.

       11.    Non-Transferability of Options.  Unless determined otherwise by
the Administrator, an Option 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



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the lifetime of the Optionee, only by the Optionee.  If the Administrator makes
an Option transferable, such Option shall contain such additional terms and
conditions as the Administrator deems appropriate.

       12.    Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.

              (a)    Changes in Capitalization.  Subject to any required action
by the stockholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, 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 issued 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 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 of Common Stock subject to an Option.

              (b)    Dissolution or Liquidation.  In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction.  The Administrator in its discretion may provide for an Optionee
to have the right to exercise his or her Option until ten (10) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable.  In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the
time and in the manner contemplated.  To the extent it has not been previously
exercised, an Option will terminate immediately prior to the consummation of
such proposed action.

              (c)    Merger or Asset Sale.  In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation.  In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee shall
fully vest in and have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested
or exercisable.  If an Option becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option shall be fully vested and exercisable for a period of fifteen (15) days
from the date of such notice, and the



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Option shall terminate upon the expiration of such period.  For the purposes of
this paragraph, the Option shall be considered assumed if, following the merger
or sale of assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock, 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); provided, however, that 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
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.

       13.    Date of Grant.  The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

       14.    Amendment and Termination of the Plan.

              (a)    Amendment and Termination.  The Board may at any time
amend, alter, suspend or terminate the Plan.

              (b)    Effect of Amendment or Termination.  No amendment,
alteration, suspension or termination of the Plan shall impair the rights of
any Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
and the Company.  Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to options
granted under the Plan prior to the date of such termination.

       15.    Conditions Upon Issuance of Shares.

              (a)    Legal Compliance.  Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

              (b)    Investment Representations.  As a condition to the
exercise of an Option the Company may require the person exercising such Option
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.



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       16.    Inability to Obtain Authority.  The 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 failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

       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.



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                             1996 STOCK OPTION PLAN

                             STOCK OPTION AGREEMENT


       Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

I.  NOTICE OF STOCK OPTION GRANT

[Optionee's Name and Address]

       You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

       Grant Number                        _________________________

       Date of Grant                       _________________________

       Vesting Commencement Date           _________________________

       Exercise Price per Share            $________________________

       Total Number of Shares Granted      _________________________

       Total Exercise Price                $________________________

       Type of Option:                     Nonstatutory Stock Option

       Term/Expiration Date:               _________________________


       Vesting Schedule:

       This Option may be exercised, in whole or in part, in accordance with
the following schedule:

       25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 6.25% of the Shares subject to the Option
shall vest upon the last day of each quarter thereafter, beginning with the
first full quarter after the one year anniversary of the Vesting Commencement
Date, subject to the Optionee continuing to be a Service Provider on such
dates.



                                      (1)
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       Termination Period:

       This Option may be exercised for three (3) months after Optionee ceases
to be a Service Provider.  Upon the death or Disability of the Optionee, this
Option may be exercised for such longer period as provided in the Plan.  In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.


II.  AGREEMENT

       1.     Grant of Option.  The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share
set forth in the Notice of Grant (the "Exercise Price"), subject to the terms
and conditions of the Plan, which is incorporated herein by reference.  Subject
to Section 15(b) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.

       2.     Exercise of Option.

              (a)    Right to Exercise.  This Option is exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.

              (b)    Method of Exercise.  This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A (the
"Exercise Notice"), which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised (the
"Exercised Shares"), and such other representations and agreements as may be
required by the Company pursuant to the provisions of the Plan.  The Exercise
Notice shall be completed by the Optionee and delivered to the Company's Human
Resources Department.  The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares.  This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of this Option unless such
issuance and exercise complies with Applicable Laws.  Assuming such compliance,
for income tax purposes the Exercised Shares shall be considered transferred to
the Optionee on the date the Option is exercised with respect to such Exercised
Shares.

       3.     Method of Payment.  Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of the
Optionee:

              (a)    cash; or

              (b)    check; or



                                      (2)
<PAGE>   13
              (c)    consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or

              (d)    surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares; or

       4.     Non-Transferability of Option.  This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee.  The terms of the Plan and this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.

       5.     Term of Option.  This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option Agreement.

       6.     Tax Consequences.  Some of the federal tax consequences relating
to this Option, as of the date of this Option, are set forth below.  THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.  THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS
OPTION OR DISPOSING OF THE SHARES.

              (a)    Exercising the Option.  The Optionee may incur regular
federal income tax liability upon exercise of an NSO.  The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price.  If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

              (b)    Disposition of Shares.  If the Optionee holds NSO Shares
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes.

       7.     Entire Agreement; Governing Law.  The Plan is incorporated herein
by reference.  The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee.  This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.



                                      (3)
<PAGE>   14
       8.     NO GUARANTEE OF CONTINUED SERVICE.  OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND
NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING
SHARES HEREUNDER).  OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.



                                      (4)
<PAGE>   15
By your signature and the signature of the Company's representative below, you
and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement.  Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option
Agreement.  Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions
relating to the Plan and Option Agreement.  Optionee further agrees to notify
the Company upon any change in the residence address indicated below.


OPTIONEE:                                  VITALCOM INC.



_________________________________          ________________________________
Signature                                  By

_________________________________          ________________________________
Print Name                                 Title

_________________________________
Residence Address

_________________________________



                                      (5)
<PAGE>   16
                                   EXHIBIT A

                               STOCK OPTION PLAN

                                EXERCISE NOTICE


VitalCom Inc.
Del Amo Avenue
Tustin, CA 92780


Attention:  Human Resources Department

       1.     Exercise of Option.  Effective as of today, ________________,
199__, the undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of VitalCom Inc. (the "Company")
under and pursuant to the 1996 Stock Option Plan (the "Plan") and the Stock
Option Agreement dated _____________, 19___ (the "Option Agreement").  The
purchase price for the Shares shall be $_______ per share for total exercise 
price of $_____________, as required by the Option Agreement.

       2.     Delivery of Payment.  Purchaser herewith delivers to the Company
the full purchase price for the Shares.

       3.     Representations of Purchaser.  Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.

       4.     Rights as Stockholder.  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 Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option.  The Shares so acquired
shall be issued to the Optionee as soon as practicable after 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 of issuance, except as provided in Section 12
of the Plan.

       5.     Tax Consultation.  Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares.  Purchaser represents that Purchaser has consulted
with any tax consultants Purchaser deems advisable in connection with the
purchase or disposition of the Shares and that Purchaser is not relying on the
Company for any tax advice.



                                       1


<PAGE>   17
       6.     Entire Agreement; Governing Law.  The Plan and Option Agreement
are incorporated herein by reference.  This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser.  This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.


Submitted by:                                Accepted by:

PURCHASER:                                   VITALCOM INC.


_______________________________              _________________________________
Signature                                    By

_______________________________              _________________________________
Print Name                                   Its


Address:                                     Address:

_________________________________            15222 Del Amo Avenue
                                             Tustin, CA  92780

_________________________________            _________________________________
                                                         Date Received



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