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FAX TRANSMISSION-3 PAGES
ORIGINAL DELIVERED BY U.S. MAIL


June 30, 2000


Mr. James A. Richman
Chief Financial Officer
SpaceLabs Medical
15220 N.E. 40th Street
P.O. Box 97013
Redmond, WA  98073-9713
FAX: 425-885-4877

Dear Jim:

We are pleased to propose the following terms associated with the requested
restructure of the financial covenants and extension of the revolving periods.
With the exception of the specific items listed below, all of the terms and
conditions of the existing loan agreement dated July 16, 1997, as subsequently
amended, will remain in full force and effect.

Amendment
of Financial Covenants:      The requirement to comply with Sections 5.11
                             (Funded Debt to EBITDA Ratio) and 5.12 (EBITDA to
                             Debt Service Ratio) will not be measured as of June
                             30, 2000 and September 30, 2000. With respect to
                             the forgoing covenants, the calculation of EBITDA
                             for ensuing quarters will be amended as follows:
                             for the quarter ended December 31, 2000, EBITDA
                             shall be computed using four times the EBITDA for
                             such quarter; for the quarter ended March 31, 2001,
                             EBITDA shall be computed using three times the
                             EBITDA for the quarter ended March 31, 2001 plus
                             the EBITDA for the quarter ended December 31, 2000;
                             for the quarter ended June 30, 2001, EBITDA shall
                             be computed using two times the EBITDA for the
                             quarter ended June 30, 2001 plus the EBITDAs for
                             the quarters ended December 31, 2000 and March 31,
                             2001. As of September 30, 2001, a trailing four
                             quarters calculation of EBITDA shall resume.

                             For purposes of calculating compliance with Section
                             5.12, the CPLTD that is associated with the balloon
                             payment due on the Term Loan (see below) during
                             December 2003, and which will first appear as a
                             part of CPLTD on March 31, 2003, will not be
                             included in the determination of the Debt Service
                             Ratio.

                             With respect to Section 5.13 (Tangible Net Worth),
                             the initial required TNW shall be $135,000,000 as
                             of the quarter ended June 30, 2000, with all other
                             terms under Section 5.13 (required step-ups in the
                             required TNW, etc.) remaining unchanged.

                             Section 6.5 shall be revised to introduce the
                             requirement that SpaceLabs earn at least one dollar
                             of net income in each fiscal year. For the year
                             ended December 31, 2000, the requirement to earn
                             one dollar of net income will only pertain to the
                             fourth quarter ended December 31, 2000. Any
                             existing language that is contrary to this new
                             requirement will be either eliminated or amended.

New Financial Covenant:      Fixed Charge Coverage Ratio no lower than 1.10:1.
                             For the quarter ended September 30, 2000, EBITDA
                             shall be computed using four times the EBITDA for
                             such quarter. Beginning with the quarter ended
                             December 31, 2000, EBITDA will be calculated in a
                             manner consistent with that pertaining to


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Mr. Jim Richman
SpaceLabs Medical
June 30, 2000

                             Sections 5.11 and 5.12 as described in the second
                             paragraph of this letter. The definition of Fixed
                             Charge Coverage shall mean EBITDA less Cash Taxes
                             less unfinanced CAPEX less Cash Dividends divided
                             by Interest plus MDR.

Maturity:                    The revolving commitment maturity of the Revolving
                             Note will be extended from July 16, 2000 to July
                             16, 2005. The Revolving Note will not include a
                             term-out option. The maturity of the revolving
                             commitment of the Burdick Note will be extended
                             from July 16, 2000 to July 16, 2001. Per the terms
                             of the Burdick Note, the term repayment period will
                             commence on July 16, 2001 and extend for five years
                             beyond July 16, 2001. Principal repayment terms
                             will remain as scheduled, except that principal
                             repayment in the first four quarters of the
                             term-out period will total $3MM (paid in equal
                             amounts each quarter), while the principal payments
                             due in the last four quarters of the term-out
                             period will total $9MM (paid in equal amounts each
                             quarter).

                             In addition to the aforementioned, the final
                             maturity of the existing Term Loan (loan
                             outstanding equal to approximately $11.5MM) will be
                             extended for one year to December 2003. Principal
                             amortization during the "extension year" will equal
                             the amount paid historically.

Collateral:                  A first security interest in the A/Rs, and
                             Inventory of Borrower and its principal
                             subsidiaries will be granted. In addition, a first
                             deed of trust in the Redmond, headquarters real
                             estate (headquarters building and manufacturing
                             site) will be granted; but the loan documentation
                             shall contain a proviso which will permit SpaceLabs
                             to convey the property to a wholly-owned subsidiary
                             subject to all of the conditions of the deed of
                             trust.

Up-front Fee:                45 basis points on the $75,000,000 cumulative
                             commitment for the Revolving and Burdick Notes.

Pricing Grid:                For the Revolving and Burdick Notes, all of the
                             existing borrowing spreads will be replaced by the
                             following grid:


<TABLE>
<CAPTION>
                                    Funded Debt/   Borrowing     Fee on
                                    EBITDA*        Spread        Unused
                                    -------        ------        ------
<S>                                 <C>            <C>           <C>
                                    >= 4.0X         250bp         60bp
                                    >= 3.5X         225           60
                                    >= 3.0X         200           60
                                     < 3.0X         150           60
</TABLE>


                             *Measured in a manner consistent with the covenant
                             calculation described above.

                             For the quarters ended September 30 and December
                             31, 2000, the Borrowing Spread will be 250bp. With
                             respect to the Term Loan, the borrowing spread will
                             be increased to LIBOR + 150bp for the life of the
                             loan.

Final Execution:             Final credit approval for this proposal has been
                             obtained at both, Bank of America and U.S. Bank.
                             Therefore, the foregoing is a binding commitment
                             that extends to both Banks and Borrower subject to
                             the successful negotiation and execution of final
                             loan documents reflecting the conditions addressed
                             herein.

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
FROM ENFORCING PAYMENT OF THE DEBT ARE NOT ENFORCEABLE UNDER


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Mr. Jim Richman
SpaceLabs Medical
June 30, 2000



WASHINGTON LAW R.C.W. 19.26.

Jim, we look forward to working with you on this request. Please call me with
any questions and/or comments you might have.

Sincerely,


Dora Brown


cc:
 Scott Stewart, SpaceLabs Medical
 Hank Knottnerus, Bank of America
 Larry Davis, Bank of America
 Jim Lawrence, U.S. Bank
 Wilfred Jack, U.S. Bank




ACCEPTED BY:

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