NUTRAMAX PRODUCTS INC /DE/, DEFS14A, 1996-11-22

NUTRAMAX PRODUCTS INC /DE/
DEFS14A, 1996-11-22
PHARMACEUTICAL PREPARATIONS

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the registrant [X]
Filed by a party other than the registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

NUTRAMAX PRODUCTS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of filing fee (Check the appropriate box):

[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.

(1) Amount previously paid:

(2) Form, schedule or registration statement no.:

(3) Filing party:

(4) Date filed:

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NUTRAMAX PRODUCTS, INC.
9 BLACKBURN DRIVE
GLOUCESTER, MASSACHUSETTS 01930

November 22, 1996

Dear Stockholder:

You are cordially invited to attend the Special Meeting in Lieu of the
Annual Meeting of Stockholders of NutraMax Products, Inc. (the "Company") to
be held on Friday, December 20, 1996, at 10:00 a.m., local time, at the Ocean
View Inn, 171 Atlantic Road, Gloucester, Massachusetts 01930 (the "Annual
Meeting").

The Annual Meeting has been called for the purpose of (i) electing five
Directors each to hold office until the next annual meeting of stockholders,
(ii) approving the NutraMax Products, Inc. 1996 Stock Option Plan (the "1996
Option Plan"), (iii) approving amendments to the Company's 1988 Stock Option
Plan (the "1988 Option Plan") authorizing the issuance under the 1988 Option
Plan of an additional 500,000 shares of the common stock of the Company (the
"1988 Plan Amendments"), (iv) approving the purchase by the Company from MEDIQ
Investment Services, Inc. of up to an aggregate of 4,037,258 shares of common
stock of the Company pursuant to the Amended and Restated Stock Purchase
Agreement dated November 20, 1996 among the Company, MEDIQ Incorporated and
MEDIQ Investment Services, Inc. (the "MEDIQ Stock Repurchase") and (v) voting
upon such other business as may properly come before the Annual Meeting or any
adjournments or postponements thereof.

The Board of Directors has fixed the close of business on November 21, 1996
as the record date for determining stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournments or postponements thereof.

The Board of Directors of the Company recommends that you vote "FOR" the
election of the five nominees of the Board of Directors of the Company, "FOR"
the approval of the 1996 Option Plan, "FOR" the approval of the 1988 Plan
Amendments and "FOR" the approval of the MEDIQ Stock Repurchase.

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.

Very truly yours,

Donald E. Lepone
Chief Executive Officer and
President
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NUTRAMAX PRODUCTS, INC.
9 BLACKBURN DRIVE
GLOUCESTER, MASSACHUSETTS 01930
(508) 283-1800

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NOTICE OF SPECIAL MEETING IN LIEU OF THE
ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON FRIDAY, DECEMBER 20, 1996

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NOTICE IS HEREBY GIVEN that the Special Meeting in Lieu of the Annual
Meeting of Stockholders of NutraMax Products, Inc. (the "Company") will be
held on Friday, December 20, 1996, at 10:00 a.m., local time, at the Ocean
View Inn, 171 Atlantic Road, Gloucester, Massachusetts 01930 (the "Annual
Meeting") for the purpose of considering and voting upon:

1. The election of five Directors each to hold office until the next
annual meeting of stockholders and until their successors are elected and
qualified;

2. The approval of the NutraMax Products, Inc. 1996 Stock Option Plan;

3. The approval of amendments to the Company's 1988 Stock Option Plan
(the "1988 Option Plan") authorizing the issuance under the 1988 Option
Plan of an additional 500,000 shares of the Company's common stock;

4. The approval of the purchase by the Company from MEDIQ Investment
Services, Inc. of up to an aggregate of 4,037,258 shares of common stock of
the Company pursuant to the Amended and Restated Stock Purchase Agreement
dated November 20, 1996 among the Company, MEDIQ Incorporated and MEDIQ
Investment Services, Inc., relating thereto and the transactions
contemplated thereby; and

5. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.

The Board of Directors has fixed the close of business on November 21, 1996
as the record date for determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournments or postponements thereof.
Only holders of common stock of record at the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.

In the event there are not sufficient votes with respect to the foregoing
proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies.

By Order of the Board of Directors

Eugene M. Schloss, Jr.
Secretary

Gloucester, Massachusetts
November 22, 1996

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
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NUTRAMAX PRODUCTS, INC.
9 BLACKBURN DRIVE
GLOUCESTER, MASSACHUSETTS 01930
(508) 283-1800

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PROXY STATEMENT

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SPECIAL MEETING IN LIEU OF THE ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON FRIDAY, DECEMBER 20, 1996

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of NutraMax Products, Inc., a Delaware
corporation (the "Company"), for use at the Special Meeting in Lieu of the
Annual Meeting of Stockholders of the Company to be held on Friday, December
20, 1996, at 10:00 a.m., local time, at the Ocean View Inn, 171 Atlantic Road,
Gloucester, Massachusetts 01930, and any adjournments or postponements thereof
(the "Annual Meeting").

At the Annual Meeting, all of the stockholders of the Company will be asked
to consider and vote upon the following matters:

1. The election of five Directors each to hold office until the next
annual meeting of stockholders and until their successors are elected and
qualified;

2. The approval of the NutraMax Products, Inc. 1996 Stock Option Plan
(the "1996 Option Plan");

4. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.

At the Annual Meeting, the stockholders other than MEDIQ Incorporated
("MEDIQ") and MEDIQ Investment Services, Inc. ("MIS") will be asked to
consider and vote upon the following matter:

1. The approval of the purchase by the Company from MIS of up to an
aggregate of 4,037,258 shares of Common Stock of the Company pursuant to
the Amended and Restated Stock Purchase Agreement dated November 20, 1996
(the "Stock Purchase Agreement") among the Company, MEDIQ and MIS, relating
thereto and the transactions contemplated thereby (the "MEDIQ Stock
Repurchase").

The Notice of Special Meeting in Lieu of the Annual Meeting, Proxy Statement
and Proxy Card are first being mailed to stockholders of the Company on or
about November 22, 1996 in connection with the solicitation of proxies for the
Annual Meeting. The Board of Directors has fixed the close of business on
November 21, 1996 as the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting (the "Record Date").
Only holders of Common Stock of record at the close of business on the Record
Date will be entitled to notice of and to vote at the Annual Meeting. As of
the Record Date, there were 8,699,272 shares of the Company's Common Stock
outstanding and entitled to vote at the Annual Meeting and 421 stockholders of
record. Each holder of a share of Common Stock outstanding as of the close of
business on the Record Date will be entitled to one vote for each share held
of record for each matter properly submitted at the Annual Meeting. Unless
otherwise indicated, references to the Company in this Proxy Statement include
its various subsidiaries.
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The presence, in person or by proxy, of one-third of the total number of
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. A quorum being present, the
affirmative vote of a plurality of the votes cast is necessary to elect a
nominee as a Director of the Company. To approve the 1996 Option Plan and the
1988 Plan Amendments, the affirmative vote of the holders of a majority of the
votes cast by stockholders on such proposals at the Annual Meeting is
required. To approve the MEDIQ Stock Repurchase, the affirmative vote of the
holders of a majority of the votes cast by stockholders other than MEDIQ and
MIS at the Annual Meeting is required. Shares that reflect abstentions or
"broker non-votes" (i.e., shares represented at the meeting held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote such shares and with respect to which the
broker or nominee does not have discretionary voting power to vote such
shares) will be counted for purposes of determining whether a quorum is
present for the transaction of business at the meeting. However, abstentions
and broker non-votes will have no effect on the outcome of the approval of the
1996 Option Plan, the approval of the 1988 Plan Amendments or the approval of
the MEDIQ Stock Repurchase. With respect to the election of Directors, votes
may only be cast in favor of or withheld from each nominee; votes that are
withheld will be excluded entirely from the vote and will have no effect.

STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE. COMMON STOCK REPRESENTED
BY PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY AND NOT REVOKED WILL BE
VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED
THEREIN. IF INSTRUCTIONS ARE NOT GIVEN THEREIN, PROPERLY EXECUTED PROXIES WILL
BE VOTED "FOR" THE ELECTION OF THE FIVE NOMINEES FOR DIRECTOR LISTED IN THIS
PROXY STATEMENT, "FOR" THE APPROVAL OF THE 1996 OPTION PLAN, "FOR" THE
APPROVAL OF THE 1988 PLAN AMENDMENTS AND "FOR" THE APPROVAL OF THE MEDIQ STOCK
REPURCHASE. IT IS NOT ANTICIPATED THAT ANY OTHER MATTERS WILL BE PRESENTED AT
THE ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN
ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS.

Any properly completed proxy may be revoked at any time before it is voted
on any matter (without, however, affecting any vote taken prior to such
revocation) by giving written notice of such revocation to the Secretary of
the Company, or by signing and duly delivering a proxy bearing a later date,
or by attending the Annual Meeting and voting in person.

The Annual Report of the Company (the "1996 Annual Report"), including
financial statements for the fiscal year ended September 28, 1996 ("Fiscal
1996"), and the Annual Report of the Company (the "1995 Annual Report"),
including financial statements for the fiscal year ended September 30, 1995
("Fiscal 1995"), are being mailed to stockholders of the Company concurrently
with this Proxy Statement. The 1996 Annual Report and 1995 Annual Report,
however, are not a part of the proxy solicitation material.

2
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TABLE OF CONTENTS

<TABLE>
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PAGE
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PROPOSAL NUMBER 1
ELECTION OF DIRECTORS............... 4
PROPOSAL NUMBER 2
APPROVAL OF THE 1996 STOCK OPTION
PLAN............................... 4
Proposal........................... 4
Recommendation..................... 5
Summary of the 1996 Option Plan.... 5
Effective Date of the 1996 Option
Plan.............................. 6
Tax Aspects Under the U.S. Internal
Revenue Code...................... 7
Incentive Options.................. 7
Non-Qualified Options.............. 7
Parachute Payments................. 8
Limitation on Company's
Deductions........................ 8
PROPOSAL NUMBER 3
APPROVAL OF AMENDMENTS TO THE 1988
STOCK OPTION PLAN.................. 8
Proposal........................... 8
Recommendation..................... 8
Summary of the 1988 Option Plan.... 8
Tax Aspects Under the U.S. Internal
Revenue Code...................... 11
PROPOSAL NUMBER 4
APPROVAL OF THE MEDIQ STOCK
REPURCHASE......................... 11
Proposal........................... 11
Recommendation..................... 11
Background......................... 12
Financing.......................... 15
Fairness Opinion................... 18
Information Concerning the
Financial Advisor................. 19
Pro Forma Financial Information.... 20
PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET...................... 21
PRO FORMA CONDENSED CONSOLIDATED
INCOME STATEMENT................... 22
The Stock Purchase Agreement....... 23
Certain Factors Affecting Future
Operating Results................. 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
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INTERESTS OF CERTAIN PERSONS IN
MATTERS TO BE ACTED UPON........... 25
INFORMATION REGARDING DIRECTORS..... 25
EXECUTIVE OFFICERS.................. 28
OTHER KEY EMPLOYEES................. 28
EXECUTIVE COMPENSATION.............. 29
Summary Compensation Table......... 29
Aggregate Option Exercises in Last
Fiscal Year and Fiscal Year End
Values............................ 30
Report of the Compensation
Committee of the Board of
Directors on Executive
Compensation...................... 30
Compensation Committee Interlocks
and Insider Participation......... 32
Stockholder Return Performance
Graph............................. 33
Employment Agreements.............. 33
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS....................... 34
PRINCIPAL AND MANAGEMENT
STOCKHOLDERS....................... 35
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934.... 37
EXPENSES OF SOLICITATION............ 37
SUBMISSION OF STOCKHOLDER PROPOSALS
FOR 1997 ANNUAL MEETING............ 37
INDEPENDENT ACCOUNTANTS............. 37
OTHER MATTERS....................... 37
</TABLE>

EXHIBITS

<TABLE>
<S> <C>
A. NutraMax Products, Inc. 1996 Stock
Option Plan
B. Opinion Letter of Wasserstein
Perella & Co., Inc., dated
November 20, 1996
C. Amended and Restated Stock
Purchase Agreement dated as of
November 20, 1996, among MEDIQ,
MIS and NutraMax
</TABLE>

3
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PROPOSAL NUMBER 1

Election of Directors

The Board of Directors of the Company currently consists of six members. All
Directors are elected annually and serve until the next annual meeting of
stockholders and until the election and qualification of their successors. At
the Annual Meeting, five Directors will be elected to serve until the 1997
annual meeting. The Board of Directors has nominated Donald M. Gleklen,
Bernard J. Korman, Donald E. Lepone, Dennis M. Newnham and Michael F. Sandler
for re-election. Unless otherwise specified in the proxy, it is the intention
of the persons named in the proxy to vote the shares represented by each
properly executed proxy for the re-election of Messrs. Gleklen, Korman,
Lepone, Newnham and Sandler as Directors. Each of the nominees has agreed to
stand for re-election and to serve if re-elected as a Director, provided,
however, that it is the intention of Mr. Sandler to resign from the Board of
Directors effective upon the closing of the MEDIQ Stock Repurchase. However,
if any of the persons nominated by the Board of Directors fails to stand for
re-election or is unable to accept re-election, the proxies will be voted for
the election of such other person or persons as the Board of Directors may
recommend. Mr. Frederick W. McCarthy, a Director of the Company since 1991, is
not standing for re-election at the Annual Meeting. The vacancy created by Mr.
McCarthy's departure will not be filled.

A quorum being present, the affirmative vote of a plurality of the votes
cast is necessary to elect a nominee as a Director of the Company. THE BOARD
OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
FOR THE RE-ELECTION OF THE FIVE NOMINEES OF THE BOARD OF DIRECTORS AS
DIRECTORS OF THE COMPANY.

PROPOSAL NUMBER 2

Approval of the 1996 Stock Option Plan

PROPOSAL

The Board of Directors has adopted the 1996 Option Plan for Directors,
officers, employees and other key persons of the Company and its subsidiaries,
subject to the approval of the 1996 Option Plan by the stockholders.
Historically, the Company has granted stock options pursuant to the 1988
Option Plan. However, there are currently no shares of Common Stock available
under the 1988 Option Plan and the 1988 Option Plan terminates in 1998.

The 1996 Option Plan is administered by the Stock Option Committee of the
Board of Directors (the "Stock Option Committee"). Pursuant to the 1996 Option
Plan, the Stock Option Committee, at its discretion, may grant a variety of
stock incentive awards based on the Common Stock of the Company. Awards under
the 1996 Option Plan include stock options (both incentive options and non-
qualified options), stock appreciation rights, restricted stock and
unrestricted stock. These awards are described in greater detail below.

Subject to adjustment for stock splits, stock dividends and similar events,
the total number of shares of Common Stock that can be issued under the 1996
Option Plan is 470,000 shares. The closing price of a share of Common Stock as
reported by the NASDAQ SmallCap Market on November 14, 1996 was $9.75. In
order to satisfy the performance-based compensation exception to the $1
million cap on the Company's tax deduction imposed by Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), the 1996 Option Plan
also provides that stock options or stock appreciation rights with respect to
no more than 150,000 shares of Common Stock may be granted to any one
individual in any twelve-month period. The shares issued by the Company under
the 1996 Option Plan may be authorized but unissued shares, or shares
reacquired by the Company. To the extent that awards under the 1996 Option
Plan do not vest or otherwise revert to the Company, the shares of Common
Stock represented by such awards may be the subject of subsequent awards.

4
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RECOMMENDATION

The Board of Directors believes that stock options and other stock-based
incentive awards can play an important role in the success of the Company by
encouraging and enabling the officers and other employees of the Company upon
whose judgment, initiative and efforts the Company largely depends for the
successful conduct of its business to acquire a proprietary interest in the
Company. The Board of Directors anticipates that providing such persons with a
direct stake in the Company will assure a closer identification of the
interests of participants in the 1996 Option Plan with those of the Company,
thereby stimulating their efforts on the Company's behalf and strengthening
their desire to remain with the Company. See "Report of the Compensation
Committee of the Board of Directors on Executive Compensation." Accordingly,
the Board of Directors believes that the 1996 Option Plan is in the best
interests of the Company and its stockholders and recommends that the
stockholders approve the 1996 Option Plan.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE 1996 OPTION PLAN BE APPROVED, AND
THEREFORE RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

SUMMARY OF THE 1996 OPTION PLAN

The following description of certain features of the 1996 Option Plan is
intended to be a summary only. The summary is qualified in its entirety by the
full text of the 1996 Option Plan which is attached hereto as Exhibit A.

Plan Administration; Eligibility. The 1996 Option Plan is administered by
the Stock Option Committee. All members of the Stock Option Committee must be
"disinterested persons" as that term is defined under the rules promulgated by
the Securities and Exchange Commission (the "SEC") and "outside directors" as
defined in Section 162 of the Code and the regulations promulgated thereunder.

The Stock Option Committee has full power to select, from among the
employees eligible for awards, the individuals to whom awards will be granted,
to make any combination of awards to participants, and to determine the
specific terms and conditions of each award, subject to the provisions of the
1996 Option Plan. The Stock Option Committee may permit Common Stock, and
other amounts payable pursuant to an award, to be deferred. In such instances,
the Stock Option Committee may permit interest, dividend or deemed dividends
to be credited to the amount of deferrals.

Persons eligible to participate in the 1996 Option Plan will be those
employees and other key persons, such as consultants, of the Company and its
subsidiaries who are responsible for or contribute to the management, growth
or profitability of the Company and its subsidiaries, as selected from time to
time by the Stock Option Committee. Directors of the Company who are not
employed by the Company or its subsidiaries ("Independent Directors") will
also be eligible for awards under the 1996 Option Plan.

Stock Options. The 1996 Option Plan permits the granting of (i) options to
purchase Common Stock intended to qualify as incentive stock options
("Incentive Options") under Section 422 of the Code and (ii) options that do
not so qualify ("Non-Qualified Options"). The option exercise price of each
option will be determined by the Stock Option Committee but may not be less
than 100% of the fair market value of the Common Stock on the date of grant in
the case of Incentive Options, and may not be less than 85% of the fair market
value of the Common Stock on the date of grant in the case of Non-Qualified
Options.

The term of each option will be fixed by the Stock Option Committee and may
not exceed ten years from the date of grant in the case of an Incentive
Option. The Stock Option Committee will determine at what time or times each
option may be exercised and, subject to the provisions of the 1996 Option
Plan, the period of time, if any, after retirement, death, disability or
termination of employment during which options may be exercised. Options may
be made exercisable in installments, and the exercisability of options may be
accelerated by the Stock Option Committee.

Upon the exercise of options, the option exercise price must be paid in full
either in cash or by certified or bank check or other instrument acceptable to
the Stock Option Committee (including by way of a promissory note, if approved
in advance by the Board of Directors) or, if the Stock Option Committee so
permits, by delivery of shares of Common Stock already owned by the optionee.
The exercise price may also be delivered to the Company by a broker pursuant
to irrevocable instructions to the broker from the optionee.

5
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Stock Appreciation Rights. The Stock Option Committee may award a stock
appreciation right ("SAR") either as a freestanding award or in tandem with a
stock option. Upon exercise of the SAR, the holder will be entitled to receive
an amount equal to the excess of the fair market value on the date of exercise
of one share of Common Stock over the exercise price per share specified in
the related stock option (or, in the case of a freestanding SAR, the price per
share specified in such right, which price may not be less than 85% of the
fair market value of the Common Stock on the date of grant) times the number
of shares of Common Stock with respect to which the SAR is exercised. This
amount may be paid in cash, Common Stock, or a combination thereof, as
determined by the Stock Option Committee. If the SAR is granted in tandem with
a stock option, exercise of the SAR cancels the related option to the extent
of such exercise.

Restricted Stock. The Stock Option Committee may also award shares of Common
Stock to officers, other employees and key persons subject to such conditions
and restrictions as the Stock Option Committee may determine ("Restricted
Stock"). These conditions and restrictions may include the achievement of
certain performance goals and/or continued employment with the Company through
a specified period. The purchase price of shares of Restricted Stock will be
determined by the Stock Option Committee. If the performance goals and other
restrictions are not attained, the employees will forfeit their awards of
Restricted Stock.

Unrestricted Stock. The Stock Option Committee may also grant shares (at no
cost or for a purchase price determined by the Stock Option Committee) which
are free from any restrictions under the 1996 Option Plan ("Unrestricted
Stock"). Unrestricted Stock may be issued to participants in the 1996 Option
Plan in recognition of past services or other valid consideration, and may be
issued in lieu of cash bonuses to be paid to such participants.

Adjustments for Stock Dividends, Mergers, Etc. The Stock Option Committee
will make appropriate adjustments in outstanding awards to reflect stock
dividends, stock splits and similar events. In the event of a merger,
liquidation, sale of the Company or similar event, the Stock Option Committee,
in its discretion, may provide for substitution or adjustments of outstanding
options and SARs, or may terminate all unexercised options and SARs with or
without payment of cash consideration.

Amendments and Termination. The Board of Directors may at any time amend or
discontinue the 1996 Option Plan and the Stock Option Committee may at any
time amend or cancel outstanding awards for the purpose of satisfying changes
in the law or for any other lawful purpose. However, no such action may be
taken which adversely affects any rights under outstanding awards without the
holder's consent. Further, amendments to the 1996 Option Plan shall be subject
to approval by the Company's stockholders if and to the extent required by the
Code to preserve the qualified status of Incentive Options.

Change of Control Provisions. The 1996 Option Plan provides that in the
event of a "Change of Control" (as defined in the 1996 Option Plan) of the
Company, all stock options and SARs shall automatically become fully
exercisable and each award of Restricted Stock shall be subject to such terms,
if any, with respect to a Change of Control as have been provided by the Stock
Option Committee in connection with such award. In addition, at any time prior
to or after a Change of Control, the Stock Option Committee may accelerate
awards and waive conditions and restrictions on any awards to the extent it
may determine appropriate.

EFFECTIVE DATE OF THE 1996 OPTION PLAN

The 1996 Option Plan will become effective upon the approval of the 1996
Option Plan by the affirmative vote of the holders of a majority of the votes
cast by stockholders at the Annual Meeting. Awards of Incentive Stock Options
may be granted under the 1996 Option Plan until November 20, 2006.

6
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TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE

The following is a summary of the principal Federal income tax consequences
of option grants under the 1996 Option Plan. It does not describe all Federal
tax consequences under the 1996 Option Plan, nor does it describe state or
local tax consequences.

INCENTIVE OPTIONS

Under the Code, an employee will not realize taxable income by reason of the
grant or the exercise of an Incentive Option. If an employee exercises an
Incentive Option and does not dispose of the shares until the later of (a) two
years from the date the option was granted or (b) one year from the date the
shares were transferred to the employee, the entire gain, if any, realized
upon the disposition of such shares will be taxable to the employee as long-
term capital gain, and the Company will not be entitled to any deduction. If
an employee disposes of the shares within such one-year or two-year period in
a manner so as to violate the holding period requirements (a "disqualifying
disposition"), the employee generally will realize ordinary income in the year
of disposition, and, provided the Company complies with applicable withholding
requirements, the Company will receive a corresponding deduction, in an amount
equal to the excess of (1) the lesser of (x) the amount, if any, realized on
the disposition and (y) the fair market value of the shares on the date the
option was exercised over (2) the option exercise price. Any additional gain
realized on the disposition of the shares acquired upon exercise of the option
will be long-term or short-term capital gain and any loss will be long-term or
short-term capital loss depending upon the holding period for such shares. The
employee will be considered to have disposed of his shares if he sells,
exchanges, makes a gift of or transfers legal title to the shares (except by
pledge or by transfer on death). If the disposition of shares is by gift and
violates the holding period requirements, the amount of the employee's
ordinary income (and the Company's deduction) will equal the fair market value
of the shares on the date of exercise less the option exercise price. If the
disposition is by sale or exchange, the employee's tax basis will equal the
amount paid for the shares plus any ordinary income realized as a result of
the disqualifying disposition. The exercise of an Incentive Option may subject
the employee to the alternative minimum tax.

Special rules apply if an employee surrenders shares of Common Stock in
payment of the exercise price of his Incentive Option.

An Incentive Option that is exercised by an employee more than three months
after an employee's employment terminates will be treated as a Non-Qualified
Option for Federal income tax purposes. In the case of an employee who is
disabled, the three-month period is extended to one year and in the case of an
employee who dies, the three-month employment rule does not apply.

NON-QUALIFIED OPTIONS

There are no Federal income tax consequences to either the optionee or the
Company upon the grant of a Non-Qualified Option. Upon the exercise of a Non-
Qualified Option, the optionee (except as described below) has taxable
ordinary income equal to the excess of the fair market value of the Common
Stock received on the exercise date over the option exercise price. The
optionee's tax basis for the shares acquired upon exercise of a Non-Qualified
Option is increased by the amount of such taxable income. The Company will be
entitled to a Federal income tax deduction in an amount equal to such excess,
provided the Company complies with applicable withholding rules. Upon the sale
of the shares acquired by exercise of a Non-Qualified Option, the optionee
will realize long-term or short-term capital gain or loss depending upon his
or her holding period for such shares.

The date for recognition of ordinary income (and the Company's equivalent
deduction) upon exercise of a Non-Qualified Option and for the commencement of
the holding period of the shares thereby acquired by a person who is subject
to Section 16 of the Exchange Act will be delayed until the date that is the
earlier of (i) six months after the date of the exercise and (ii) such time as
the shares received upon exercise could be sold at a gain without the person
being subject to such potential liability.

Special rules apply if an optionee surrenders shares of Common Stock in
payment of the exercise price of a Non-Qualified Option.

7
<PAGE>

PARACHUTE PAYMENTS

The exercise of any portion of any option that is accelerated due to the
occurrence of a Change of Control may cause a portion of the payments with
respect to such accelerated option to be treated as "parachute payments" as
defined in the Code. Any such parachute payments may be non-deductible to the
Company, in whole or in part, and may subject the recipient to a non-
deductible 20% Federal excise tax on all or a portion of such payment (in
addition to other taxes ordinarily payable).

LIMITATION ON COMPANY'S DEDUCTIONS

As a result of Section 162(m) of the Code, the Company's deduction for
certain awards under the 1996 Option Plan may be limited to the extent that
the Chief Executive Officer or other executive officers whose compensation is
required to be reported in the summary compensation table receives
compensation (other than performance-based compensation) in excess of $1
million per year. See "Report of the Compensation Committee of the Board of
Directors on Executive Compensation--Federal Tax Regulations Limiting
Deductibility of Certain Compensation."

PROPOSAL NUMBER 3

Approval of Amendments to the 1988 Stock Option Plan

PROPOSAL

The Board of Directors has unanimously approved the 1988 Plan Amendments to
the Company's 1988 Option Plan, subject to stockholder approval, which
increase the aggregate number of shares of Common Stock available for grants
under the Plan from 500,000 to 1,000,000 (subject to adjustment for certain
changes in the Company's capitalization). The purpose of the 1988 Plan
Amendments is to authorize additional shares of Common Stock for issuance upon
the exercise of stock options previously granted to certain executive officers
of the Company, as set forth below under "Plan Benefits." Accordingly, the
1988 Plan Amendments authorize only such number of shares of Common Stock
which are required to permit these executive officers to exercise options
previously granted to them. If the 1988 Plan Amendments are not approved by
the stockholders at the Annual Meeting, the stock options previously granted
to these executive officers will immediately become null and void. The Company
intends the 1996 Option Plan, if approved by the stockholders at the Annual
Meeting, to achieve the Company's executive compensation policy objective of
providing long-term incentives to executive officers. See "Proposal Number 2--
Approval of the 1996 Stock Option Plan."

RECOMMENDATION

The Board of Directors believes that the adoption of the 1988 Plan
Amendments will promote the interests of the Company and its stockholders by
motivating and helping to retain the executive officers of the Company who
have received the stock options contingent upon stockholder approval of the
1988 Plan Amendments. THE BOARD OF DIRECTORS RECOMMENDS THAT THE 1988 PLAN
AMENDMENTS BE APPROVED, AND THEREFORE RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

SUMMARY OF THE 1988 OPTION PLAN

The following description is a summary of the principal features of the 1988
Option Plan. The summary is qualified in its entirety by the full text of the
1988 Option Plan which will be delivered to stockholders upon request made to
the Secretary of the Company. The 1988 Option Plan also has been filed as an
exhibit to the Company's periodic reports filed with the SEC pursuant to the
Exchange Act.

Plan Administration; Eligibility. The 1988 Option Plan is administered by
the Stock Option Committee or any other Committee appointed by the Board of
Directors. Subject to the terms of the 1988 Option Plan, the Stock Option
Committee has the authority to (a) grant options at such times as it may
choose, (b) determine the

8
<PAGE>

types of options granted (whether Incentive Options or Non-Qualified Options),
(c) determine the size, terms and conditions of each option, (d) authorize the
modification, extension or renewal of any outstanding option, (e) accept the
exchange of outstanding options for the granting of new options in
substitution therefore, (f) determine the nature and extent of restrictions,
if any, to be imposed on the exercise of an option and/or the shares of Common
Stock which may be purchased under each option, (g) interpret and construe the
1988 Option Plan, and (h) prescribe, amend or rescind rules and regulations
relating to the 1988 Option Plan and make all other determinations necessary
or advisable for the administration of the 1988 Option Plan. Any
interpretation, determination, or other action made or taken by the Stock
Option Committee in accordance with the 1988 Option Plan is final, binding and
conclusive.

Persons eligible to participate in the 1988 Option Plan are those employees
and other key persons, such as consultants, of the Company and its
subsidiaries who are responsible for or contribute to the management, growth
or profitability of the Company or its subsidiaries, as selected from time to
time by the Stock Option Committee. Independent Directors are also eligible
for certain awards under the 1988 Option Plan.

Stock Options. The 1988 Option Plan permits the granting of Incentive
Options and Non-Qualified Options. The option price per share of an Incentive
Option or Non-Qualified Option is determined by the Stock Option Committee at
the time of grant. The exercise price of an Incentive Option under the 1988
Option Plan may not be less than 100% of the fair market value of the Common
Stock at the time of grant.

The terms of each option will be fixed by the Stock Option Committee at the
time of grant. The Stock Option Committee will determine at what time or times
each option may be exercised, but in no case will such period be greater than
five years from the date of grant (the "Exercise Period"). In the event an
optionee's employment is terminated for cause, then all rights of any kind
under an Incentive Option or Non-Qualified Option immediately terminate. In
the event an optionee's employment is terminated for any reason other than for
cause, or the death, retirement or disability of the optionee, the term of
each Incentive Option or Non-Qualified Option held by such optionee expires on
the earlier of the expiration of the Exercise Period or thirty days after the
date on which employment was terminated. During such period, the option is
exercisable only to the extent it was exercisable at the time of termination
of employment. In the event of the death of an optionee, any Incentive Option
or Non-Qualified Option then held by such optionee which has not lapsed or
terminated prior to such optionee's death is exercisable by such optionee's
estate or heirs for a period of three months after the date of death to the
extent the optionee was entitled to exercise such option at the time of his
death and provided that any exercise must occur within the Exercise Period. In
the event of the retirement of an optionee, the term of each Incentive Option
or Non-Qualified Option held by such optionee will expire on the earlier of
the end of the Exercise Period or three months from the date of retirement. In
the event an optionee becomes disabled, each Incentive Option or Non-Qualified
Option held by such optionee will expire on the earlier of the expiration of
the Exercise Period or one year from the date of disability.

To qualify as Incentive Options, options must meet additional Federal tax
requirements, including limits on the value of shares subject to Incentive
Options which first become exercisable in any one calendar year, and a shorter
term and higher minimum exercise price in the case of certain large
stockholders. See the discussion of the Federal tax requirements applicable to
Incentive Options and Non-Qualified Options above under "Proposal Number 2--
Approval of the 1996 Stock Option Plan--Tax Aspects Under the U.S. Internal
Revenue Code."

Stock Options Granted to Independent Directors. The 1988 Option Plan
provided for the grant of Non-Qualified Options to purchase 25,000 shares of
Common Stock at an exercise price of $6.00 per share to each Independent
Director serving on the Board of Directors on September 3, 1991. The options
vested over five years with one-fifth vesting in each of the five years
following the date of grant, and the final installment vested on September 3,
1996.

Limited Rights. Limited stock appreciation rights ("Limited Rights") may be
granted at the discretion of the Stock Option Committee in connection with any
Incentive Option or Non-Qualified Option. Subject to the terms and conditions
set forth in the agreement evidencing a Limited Right, such Limited Right
enables the

9
<PAGE>

holder thereof, in lieu of the number of shares of Common Stock subject to the
related Incentive Option, to receive a cash payment equal to the number of
such shares of Common Stock multiplied by the excess of the fair market value
of each such share on the date of exercise of the Limited Right, over the
option exercise price per share set forth in the related Incentive Option. In
the case of a Limited Right with respect to an Non-Qualified Option, the
holder thereof is entitled to receive a cash payment equal to the number of
shares of Common Stock subject to the Non-Qualified Option, multiplied by the
excess of the higher of: (i) the fair market value per share of Common Stock
on the exercise date; (ii) the highest fair market value per share during the
period commencing ninety days prior to the exercise date and terminating on
the exercise date; or (iii) in the event of a Change of Control (as defined
below), the highest price per share set forth in any Schedule 13D, or any
amendment thereto, filed pursuant to Section 13(d) of the Exchange Act, over
the option exercise price per share set forth in the related Non-Qualified
Option.

A Limited Right may only be exercised to the extent that the related
Incentive Option or Non-Qualified Option, as the case may be, is exercisable.
In the event of a Change of Control, no Limited Rights granted less than 60
days prior to the Change of Control will be exercisable. A Limited Right
granted more than 60 days before the Change of Control will expire 60 days
after the Change of Control. No Limited Rights have been granted by the
Company to date.

Adjustments for Stock Dividends, Mergers, Etc. The Stock Option Committee
will make appropriate adjustments in outstanding awards to reflect stock
dividends, stock splits and similar events. In the event of a merger,
liquidation, sale of the Company or similar event, the Stock Option Committee,
in its discretion, may provide for substitution or adjustments of outstanding
options, or may terminate all unexercised options with or without payment of
cash consideration.

Amendments and Termination. The Board of Directors may at any time amend or
discontinue the 1988 Option Plan and the Stock Option Committee may at any
time amend or cancel outstanding awards for the purpose of satisfying changes
in the law or for any other lawful purpose. However, no such action may be
taken which adversely affects any rights under outstanding awards without the
holder's consent. Further, amendments to the 1988 Option Plan are subject to
approval by the Company's stockholders if and to the extent required by the
Code to preserve the qualified status of Incentive Options.

Change of Control Provisions. Notwithstanding any other provision of the
1988 Option Plan, in the event of a Change of Control, the 1988 Option Plan
provides for the immediate exercisability of all outstanding options. Under
the 1988 Option Plan, "Change of Control" is generally defined to include a
change of control that the Company is required to report in response to Item
6(e) of Schedule 14A promulgated under the Exchange Act provided, however,
that without limiting the foregoing, such a change of control shall be deemed
to have occurred (i) if any "person" (as such term is defined in Sections
13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly by acquisition, or otherwise, of securities of the
Company representing 25% or more of the combined voting power of the Company's
then outstanding securities; or (ii) if during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by the
Company's stockholders of each new Director was approved by a vote of at least
two-thirds of the Directors then in office who were Directors at the beginning
of the period.

10
<PAGE>

Plan Benefits. Approximately 50 employees are currently eligible to
participate in the 1988 Option Plan. The table below shows the aggregate
number of options that have been granted under the 1988 Option Plan subject to
stockholder approval of the 1988 Plan Amendments.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION SUBJECT TO AWARD
----------------- ----------------
<S> <C>
Donald E. Lepone......................................... 500,000
President, Chief Executive Officer and Director
Richard C. Zakin......................................... 20,000
Vice President of Marketing
John J. Manheimer........................................ 20,000
Vice President of Sales
Robert F. Burns.......................................... 10,000
Vice President, Chief Financial Officer and Treasurer
James W. McGrath, Jr..................................... 10,000
Vice President of Regulatory Affairs and Technical
Services
Executive Group (6 persons, including those named
above).................................................. 570,000
</TABLE>

TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE

The Federal income tax consequences of option grants under the 1988 Option
Plan are identical in all respects to the Federal income tax consequences of
option grants under the 1996 Option Plan. See "Proposal Number 2--Approval of
the 1996 Stock Option Plan--Tax Aspects Under the U.S. Internal Revenue Code."
The summary thereunder does not describe all Federal tax consequences under
the 1988 Option Plan, nor does it describe state or local tax consequences.

PROPOSAL NUMBER 4

Approval of the MEDIQ Stock Repurchase

PROPOSAL

At the Annual Meeting, the stockholders of the Company (other than MEDIQ and
MIS) will be asked to consider and vote upon the acquisition by the Company of
up to an aggregate of 4,037,258 (approximately 46.4% of the total shares
issued and outstanding) shares of the Company's Common Stock from MIS, at a
price per share of $9.00 for an aggregate purchase price of $36,335,322,
pursuant to the Stock Purchase Agreement. The primary purpose of the MEDIQ
Stock Repurchase is to (i) permit the Company to take advantage of MEDIQ's
desire for liquidity by purchasing its shares of Company Common Stock at a
price and on other terms which the Board of Directors of the Company believes
are favorable to the Company and its stockholders and (ii) reduce the risk
that MEDIQ's desire for liquidity will lead the Company into a transaction or
transactions that may not be consistent with maximizing long-term stockholder
value for all of the stockholders of the Company. Pursuant to the terms of the
Stock Purchase Agreement, the MEDIQ Stock Repurchase must be approved by the
affirmative vote of a majority of the votes cast by stockholders other than
MEDIQ and MIS at the Annual Meeting. As of the Record Date, an aggregate of
4,662,014 shares of Company Common Stock (representing approximately 53.6% of
the total outstanding shares as of the Record Date) were owned beneficially or
of record by persons other than MEDIQ and MIS. The Company and MEDIQ will not
consummate the MEDIQ Stock Repurchase unless the MEDIQ Stock Repurchase is
approved by the stockholders.

RECOMMENDATION

THE BOARD OF DIRECTORS BELIEVES THAT THE MEDIQ STOCK REPURCHASE IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, AND ACCORDINGLY,
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE MEDIQ STOCK REPURCHASE.

11
<PAGE>

BACKGROUND

In January 1995, MEDIQ announced that its Board of Directors had formed a
special committee to explore alternative ways to maximize value for MEDIQ's
stockholders. At that time, MEDIQ also announced that among the matters to be
considered by its special committee was the possible sale of all of MEDIQ's
interests in its partially owned subsidiaries. In March 1995, MEDIQ announced
that its special committee had authorized Lazard Freres & Co. to solicit
offers for MEDIQ, its wholly owned subsidiary, PRN Holdings, Inc. ("PRN"), and
its investments in PCI Services, Inc. ("PCI") and the Company, from various
groups that had expressed an interest in pursuing a transaction with MEDIQ and
from other persons. MEDIQ also announced at that time that its special
committee would consider offers for MEDIQ, or for one or more of its various
businesses or for its investments in PCI and the Company. From January 1995
until October 1995, MEDIQ's special committee continued to explore and analyze
possible strategic alternatives to enhance stockholder value. During this
period of time, MEDIQ received an unsolicited inquiry from a third party
expressing an interest in acquiring the Company. In response to this inquiry
and the process undertaken by MEDIQ to explore its strategic alternatives, in
June 1995 the Company decided to reevaluate its strategic plan and to analyze
all possible alternatives available to enhance stockholder value. In this
regard, the Board of Directors decided that it was appropriate to appoint a
special committee of independent directors, comprised of Frederick W. McCarthy
and Dennis M. Newnham (the "Special Committee"), to retain a financial advisor
on behalf of the Company and to consider, among other things, issues relating
to a potential business combination transaction or sale of the Company. On
June 19, 1995, the Company announced that its Board of Directors had formed
the Special Committee and that the Special Committee had retained Wasserstein
Perella & Co., Inc. ("Wasserstein Perella") as financial advisors to assist
the Special Committee in exploring strategic alternatives for the Company. The
Company advised the third party who had made the unsolicited inquiry to MEDIQ
concerning a possible acquisition of the Company that the Company had formed
the Special Committee and had engaged Wasserstein Perella to proceed with an
orderly review of the Company's strategic alternatives and that the third
party was welcome to submit a proposal for the Board's consideration. However,
the Company did not receive such a proposal from this third party.

To facilitate the process of identifying and analyzing potential strategic
opportunities, Wasserstein Perella recommended that the Company solicit
interest from third parties in an effort to identify and communicate with
potential acquirors and investors. In this regard, the Board of Directors of
the Company authorized management, with the assistance of Wasserstein Perella
and the Company's legal advisors, to prepare a confidential information
package for distribution to potential acquirors and investors and to enter
into confidentiality agreements with such potential acquirors and investors.
As a result of these efforts, between October 1995 and March 1996, contacts
were made with, and proposals were received from, several potential acquirors
and investors who expressed an interest in acquiring all or a portion of the
Company pursuant to either a recapitalization or cash merger.

In addition to receiving proposals from these third parties, in April 1996
the Company received a proposal from MEDIQ pursuant to which MEDIQ proposed
that the Company purchase all of the 4,037,258 shares (the "MEDIQ Shares") of
Company Common Stock owned by MIS (the "MEDIQ Proposal"). Pursuant to this
proposal, MEDIQ proposed that the Company buy all of the MEDIQ Shares at a per
share price of $10.00 for an aggregate purchase price of approximately
$40,370,000. Pursuant to the MEDIQ Proposal, 1,782,000 of the MEDIQ Shares
would be purchased by the Company for cash (approximately $17,820,000). The
remaining $22,550,000 of the aggregate purchase price, representing the price
to be paid for the MEDIQ Shares held in escrow (the "MEDIQ Escrowed Shares")
in support of MEDIQ's 7 1/2% Subordinated Debentures due 2003 (the "MEDIQ
Bonds"), would be paid by the Company pursuant to a promissory note (the
"Note") as the MEDIQ Escrowed Shares were released from escrow pursuant to the
terms of the indenture relating to the MEDIQ Bonds (the "MEDIQ Indenture") and
the terms of an escrow agreement relating thereto (the "Escrow Agreement").
MEDIQ also proposed that the Note bear interest at 7 1/2% per annum and be
secured by a letter of credit. Finally, MEDIQ proposed that (i) during the
period in which the balance of the Note remained outstanding, and unless the
Company were in default under the Note, MEDIQ would vote the MEDIQ Escrowed
Shares in a manner directed by the Company, and (ii) MEDIQ would agree not to
acquire any additional shares of Company Common Stock.

12
<PAGE>

Under the MEDIQ Indenture, holders of MEDIQ Bonds are permitted to exchange
their MEDIQ Bonds for MEDIQ Escrowed Shares at an initial exchange rate of
65.3595 shares for each $1,000 principal amount of MEDIQ Bonds tendered for
exchange (as adjusted pursuant to the terms of the MEDIQ Indenture, the
"Exchange Rate"). Accordingly, based on the current Exchange Rate, each $15.30
principal amount of MEDIQ Bonds may be exchanged for one MEDIQ Escrowed Share.
The Indenture also provides that, in lieu of delivering MEDIQ Escrowed Shares
to holders of MEDIQ Bonds who exercise their exchange rights, MEDIQ may
deliver cash in an amount equal to the value of the MEDIQ Escrowed Shares
otherwise required to be delivered to such holders.

After considering the proposals presented by the potential acquirors and
investors, as well as the MEDIQ Proposal, in consultation with Wasserstein
Perella and the Special Committee's legal advisors, in May 1996 the Special
Committee concluded that a proposal presented by one of the potential
acquirors (the "Bidder") concerning a leveraged recapitalization merger (the
"Recapitalization Merger Proposal") would be more likely to maximize long-term
stockholder value than the other proposals received by the Company, including
the MEDIQ Proposal. Accordingly, the Special Committee recommended that the
Company reject all of the proposals except the Recapitalization Merger
Proposal and negotiate with the Bidder. Pursuant to the Recapitalization
Merger Proposal, the Bidder proposed that a newly formed corporation ("Newco")
organized and capitalized by the Bidder be merged into the Company (the
"Merger") with each share of Company Common Stock outstanding immediately
prior to the Merger being converted into the right to retain one share of
Company Common Stock and $8.50 in cash (the "Mixed Merger Consideration"). In
lieu of receiving the Mixed Merger Consideration, a holder of Company Common
Stock was to be given the right to elect to receive in cash (a "Cash
Election") from the Company following the Merger an amount equal to $9.50 for
each share of Company Common Stock held by such holder (a "Cash Electing
Share") immediately prior to the Merger (the "Cash Merger Consideration"). The
Recapitalization Merger Proposal provided that MEDIQ and MIS (the "MEDIQ
Entities") would agree to make a Cash Election with respect to all shares of
Company Common Stock owned by them. In addition, the Bidder proposed that an
aggregate number of shares of Company Common Stock (the "Minimum Retained
Shares Amount") be retained by existing stockholders of the Company such that,
if only the MEDIQ Entities elected to receive the Cash Merger Consideration,
the remaining stockholders of the Company would own collectively approximately
38% of the equity of the Company and the Bidder would own the remaining 62%
equity interest in the Company. Accordingly, holders of Company Common Stock
who made a Cash Election were to receive the Mixed Merger Consideration on a
pro rata basis to the extent that the aggregate number of shares of Common
Stock with respect to which the holders thereof made a Cash Election exceeded
the difference between the total outstanding shares of Company Common Stock
immediately prior to the Merger and the Minimum Retained Shares Amount.

In addition, pursuant to the Recapitalization Merger Proposal, certain
members of the Company's management would have a continuing investment in the
Company following the Merger. In this regard, the Recapitalization Merger
Proposal contemplated that the shares of Common Stock held by these members of
management would be exchanged for a combination of cash and common stock of
Newco based on the value of the Mixed Merger Consideration. The equity
interest of management in Newco, together with the Bidder's equity interest in
Newco, would then be converted into an equity interest in the Company
following the Merger of Newco into the Company.

Between May and August 1996, the Company and the Bidder exchanged
information and continued to negotiate the terms of a proposed leveraged
recapitalization of the Company. As part of the Bidder's due diligence
process, the Company provided the Bidder with certain financial projections.
In June 1996, after reviewing certain revised financial projections which the
Company had provided to the Bidder, the Bidder revised its proposal to
decrease the Cash Merger Consideration from $9.50 per share to $8.63 per share
(the "Revised Proposal"). After considering the Revised Proposal, the Special
Committee concluded that the effect of the Revised Proposal on the Company
would not maximize long-term stockholder value. In arriving at this
conclusion, the Special Committee considered, among other things, the fact
that the Special Committee believed that the Company's Common Stock was
undervalued. Accordingly, the Special Committee recommended that the Board
reject the Revised Proposal. Negotiations continued and the Bidder indicated a
willingness to increase

13
<PAGE>

its offer for the Cash Merger Consideration to $8.875, at which point the
Special Committee made no recommendation and the Board of Directors concluded
that this revised offer continued to be unacceptable. Finally, the Bidder
indicated that it might be willing to return to the terms of its original
proposal of a Cash Merger Consideration of $9.50 which the Special Committee
and the Board of Directors had previously approved, provided that the parties
could agree to the terms and conditions of management's continuing investment
in the Company. Following further negotiations in July 1996, the Company and
the Bidder failed to reach agreement on the amount of the Cash Merger
Consideration and the terms of management's continuing investment at which
time the Company and the Bidder terminated negotiations.

In July 1996, the Company received a revised proposal from MEDIQ pursuant to
which MEDIQ requested that the Company reconsider a transaction involving the
purchase of the MEDIQ Shares (the "Revised MEDIQ Proposal"). Pursuant to this
proposal, MEDIQ proposed that the Company buy all of the MEDIQ Shares at a per
share price of $9.25 per share for an aggregate purchase price of
approximately $37,380,000. Pursuant to the Revised MEDIQ Proposal, 1,782,000
of the MEDIQ Shares would be purchased by the Company for cash (approximately
$16,480,000). The remaining $20,900,000 of the aggregate purchase price,
representing the price to be paid for the MEDIQ Escrowed Shares, would be paid
by the Company pursuant to the Note as the MEDIQ Escrowed Shares were released
from escrow pursuant to the terms of the MEDIQ Indenture. MEDIQ also proposed
that the Note bear interest at 8% per annum and be secured by a letter of
credit. Finally, MEDIQ proposed that (i) the Company would be required to pay
MEDIQ no more than $4,000,000 under the Note in any one year except in the
case of a default, (ii) in the event that MEDIQ Bonds were tendered for
exchange and the Company was not required to pay MEDIQ as a result of the
foregoing restriction, MEDIQ would continue to hold the MEDIQ Escrowed Shares
and the interest rate on the portion of the Note owing with respect to such
shares would be variable to match MEDIQ's cost of funds, and (iii) any gain
realized by MEDIQ (i.e., any benefit arising from the spread between $9.25 and
the Exchange Rate which would be realized by MEDIQ if the MEDIQ Bonds were
exchanged) upon the exchange of MEDIQ Bonds for such shares in excess of
$4,000,000 would be shared equally by MEDIQ and the Company .

After considering the Revised MEDIQ Proposal, the Special Committee
concluded that the Revised MEDIQ Proposal might present a favorable
transaction for the Company and its stockholders and authorized management to
initiate discussions with MEDIQ. In particular, the Special Committee believed
that the interests of the Company and its stockholders might best be served if
the Company were to take advantage of MEDIQ's desire for liquidity by
purchasing the MEDIQ Shares at a favorable price and on other favorable terms.
In addition, the Special Committee concluded that the acquisition by the
Company of the MEDIQ Shares would reduce the risk that MEDIQ's desire for
liquidity would lead the Company into a transaction or transactions that may
not be consistent with maximizing long-term stockholder value for all of the
stockholders of the Company. Based on the conclusions of the Special
Committee, the Company indicated to MEDIQ a willingness to accept the Revised
MEDIQ Proposal, provided that MEDIQ agree to certain modifications. These
modifications included a revised per share purchase price of $9.00 (resulting
in an aggregate purchase price of $36,335,322) (the "Purchase Price") and an
interest rate on the Note of 7 1/2%. In addition, the Company believed that it
should receive the entire benefit of any increase in the value of the MEDIQ
Escrowed Shares, and accordingly, proposed that it should be permitted to
purchase MEDIQ Escrowed Shares at $9.00 per share regardless of any increases
in the market value of the Company Common Stock. MEDIQ agreed to the Purchase
Price and an interest rate of 7 1/2% as proposed by the Company. However,
MEDIQ was not agreeable to the Company's proposal that it receive the entire
benefit of any increase in the value of the MEDIQ Escrowed Shares.

After further negotiations, the Company and MEDIQ agreed that to the extent
that a holder of a MEDIQ Bond presents such MEDIQ Bond for exchange, MEDIQ
would be permitted to deliver MEDIQ Escrowed Shares to such holder and the
principal amount of the Note would be reduced by the sum of the Purchase Price
for such MEDIQ Escrowed Shares plus an amount (the "Excess Cash Amount") equal
to the difference between (i) $1,000 divided by the then Exchange Rate and
(ii) $9.00, provided that, in lieu of the reduction in the principal
amount of the Note in an amount equal to the Excess Cash Amount, the Company
may elect to receive in cash from MEDIQ an amount equal to such Excess Cash
Amount. In addition, the parties agreed that the interest rate

14
<PAGE>

on the Note would be incrementally reduced over time beginning after eighteen
months following the closing. The parties also conditioned the MEDIQ Stock
Repurchase upon the Company receiving the favorable vote of
its stockholders other than MEDIQ and MIS and upon the receipt by each of the
Company and MEDIQ of fairness opinions to the effect that the MEDIQ Stock
Repurchase is fair from a financial point of view to their respective
stockholders.

Based upon the terms of the MEDIQ Stock Repurchase described above, the
Special Committee recommended that the Board of Directors of the Company
approve the terms of the MEDIQ Stock Repurchase. On September 5, 1996, the
Board met to discuss the Special Committee's recommendation and unanimously
approved the MEDIQ Stock Repurchase (with Michael Sandler, an executive
officer of MEDIQ, abstaining). Thereafter, the Company announced the event and
the Company and MEDIQ entered into a Stock Purchase Agreement dated September
18, 1996 (the "Original Stock Purchase Agreement").

On November 20, 1996, the Special Committee recommended that the Board of
Directors of the Company approve, and the Board of Directors approved,
amendments to the terms of the Original Stock Purchase Agreement to provide,
among other things, that (i) at the closing of the MEDIQ Stock Repurchase (the
"MEDIQ Closing"), the Company would purchase for $9.00 per share the MEDIQ
Shares other than the MEDIQ Shares then held in escrow pursuant to the terms
of the MEDIQ Indenture, and (ii) at the MEDIQ Closing, the Note to be
delivered by the Company to MEDIQ shall have an original principal amount
equal to the aggregate number of MEDIQ Escrowed Shares then held in escrow
pursuant to the terms of the MEDIQ Indenture, multiplied by $9.00.
Accordingly, on November 20, 1996, the Company, MEDIQ and MIS entered into the
Stock Purchase Agreement. The principal purpose of the amendment and
restatement of the Original Stock Purchase Agreement was to permit MEDIQ to
repurchase MEDIQ Bonds and thereby release MEDIQ Escrowed Shares from escrow
prior to the MEDIQ Closing.

FINANCING

General. In connection with the MEDIQ Stock Repurchase, the Company has
received a commitment (the "Senior Debt Commitment") from a lender (the
"Senior Lender") to provide senior financing in the aggregate principal amount
of $60,000,000 (the "Senior Debt Financing") and a commitment (the
"Subordinated Debt Commitment") from a lender (the "Subordinated Lender") to
provide senior subordinated financing in the aggregate principal amount of up
to $15,000,000 (the "Subordinated Debt Financing" and, together with the
Senior Debt Financing, the "Debt Financing"). Consummation of the Senior Debt
Financing and the Subordinated Debt Financing is subject to various conditions
discussed below. In addition, the actual terms of the Senior Debt Financing
and the Subordinated Debt Financing may differ significantly from those set
forth below as a result of the Senior Lender's and Subordinated Lender's due
diligence reviews and negotiations between the parties.

Senior Debt Financing. Pursuant to the Senior Debt Commitment, the Senior
Lender has agreed to provide the Company with senior secured credit facilities
in the aggregate principal amount of $60,000,000 (the "Senior Debt"), consisting
of (i) a $20,000,000 term loan (the "Term Loan A"), (ii) a $15,000,000 term loan
(the "Term Loan B" and, together with the Term Loan A, the "Term Loans"), (iii)
a $20,000,000 letter of credit to support the Note relating to the MEDIQ Stock
Repurchase (the "Stock Repurchase Letter of Credit"), (iv) a $17,300,000
revolving credit facility (the "Revolving Credit Facility"), and (v) a
$7,700,000 letter of credit to support the Company's Variable Rate Industrial
Development Bonds (the "IDB Letter of Credit" and, together with the Stock
Repurchase Letter of Credit, the "Letters of Credit"). The Senior Debt
Commitment provides that the Company shall use the Senior Debt Financing to
finance the MEDIQ Stock Repurchase, to refinance the Company's existing
indebtedness, to satisfy the Company's working capital requirements and for
general corporate purposes not otherwise prohibited by the terms of the Senior
Debt Commitment. Pursuant to the terms of the Senior Debt Commitment, at the
closing of the Senior Debt Financing (the "Senior Debt Closing"), $15,000,000 of
the Term Loan A will be drawn by the Company and the Stock Repurchase Letter of
Credit will be issued by the Senior Lender. The Term Loan B and the balance of
the Term Loan A will be advanced only to fund drawings under the Stock
Repurchase Letter of Credit. The Senior Debt Commitment also provides that the
subsidiaries of the Company shall guarantee the obligations of the Company under
the Senior Debt Financing.

15
<PAGE>

Pursuant to the Senior Debt Commitment, the Term Loan A will consist of a
$20,000,000 term loan having a final maturity of five years following the
Senior Debt Closing and will be used by the Company to fund the acquisition of
the MEDIQ Shares pursuant to the MEDIQ Stock Repurchase and to refinance
certain existing indebtedness of the Company. The Senior Debt Commitment
provides that the Term Loan A will amortize in quarterly payments aggregating
$1,500,000 during the first year following the Senior Debt Closing, $3,750,000
during the second year following the Senior Debt Closing, $4,500,000 during
the third year following the Senior Debt Closing, $5,000,000 during the fourth
year following the Senior Debt Closing and $5,250,000 during the fifth year
following the Senior Debt Closing.

Pursuant to the Senior Debt Commitment, the Term Loan B will consist of a
$15,000,000 term loan having a final maturity of seven years following the
Senior Debt Closing and will be used by the Company to fund the acquisition of
the MEDIQ Shares pursuant to the MEDIQ Stock Repurchase. The Senior Debt
Commitment provides that the Company shall make interest payments on the Term
Loan B only during the first through the fifth years following the Senior Debt
Closing, and the Term Loan B will amortize in eight quarterly payments
aggregating $15,000,000 during the sixth and seventh years following the
Senior Debt Closing.

Pursuant to the Senior Debt Commitment, the Revolving Credit Facility will
consist of a $17,300,000 revolving loan having a final maturity of five years
following the Senior Debt Closing and will be used by the Company for working
capital and other general corporate purposes. Advances under the Revolving
Credit Facility will be subject to a borrowing base anticipated to be 85% of
the Company's eligible accounts receivable and 50% of the Company's eligible
inventory. The actual advance rates and eligibility definitions will be
subject to a due diligence review by the Senior Lender of the Company's
collateral. The Senior Debt Commitment provides that the Company shall pay the
entire outstanding balance of the Revolving Credit Facility on the maturity
date.

Under the terms of the Senior Debt Commitment, the Senior Debt will be
cross-collateralized by a first priority security interest in all tangible and
intangible assets of the Company and its subsidiaries. The Company will be
required to prepay the Term Loans from excess cash flow and the net proceeds
of certain asset sales and equity and debt offerings, and, subject to LIBOR
break-up fees, the Company will be permitted to make voluntary prepayments.
Pursuant to the Senior Debt Commitment, the Company will be required to pay at
the Senior Debt Closing a fee to the Senior Lender equal to 1.5% of the
aggregate principal amount of the Senior Debt. In addition, the Company will
be required to pay an agent's fee of $10,000 per annum and a commitment fee
payable quarterly at a rate of 0.375% per annum on the average daily unused
portion of the Revolving Credit Facility and the Term Loan B during any period
for which the ratio (the "Funded Debt Ratio") of the Company's total funded
debt to its earnings before interest, taxes, depreciation and amortization
("EBITDA") is less than 3.5, and at a rate of 0.50% per annum if the Funded
Debt Ratio is greater than or equal to 3.5.

The Senior Debt Commitment provides that interest on the Term Loan A and
amounts outstanding under the Revolving Credit Facility will be payable
according to, at the Company's option, an alternate base rate based on the
Senior Lender's base rate (or the Federal funds rate plus 0.50%, if higher)
plus 0.25% to 1.00% (depending on the Funded Debt Ratio) or LIBOR plus 1.75%
to 2.50% (depending on the Funded Debt Ratio). Outstanding amounts under the
Term Loan B will be payable according to, at the Company's option, an
alternate base rate based on the Senior Lender's base rate plus 1.5% (or the
Federal funds rate plus 0.50%, if higher) or LIBOR plus 3.00%. Overdue amounts
outstanding on the Senior Debt will bear interest at 2% above the otherwise
applicable interest rate, pursuant to the terms of the Senior Debt Commitment.
Interest on the Senior Debt will be payable at the end of each fiscal quarter
of the Company, if based on the alternate base rate, and at the end of each
Interest Period (as hereinafter defined), or quarterly, if earlier, if based
on LIBOR. The "Interest Periods" are defined in the Senior Debt Commitment as
one, two, three or six months, subject to availability. The Senior Debt
Commitment also provides that fees on the Letters of Credit shall be payable
by the Company quarterly in arrears at a per annum rate equal to 1.75% to
2.50% (depending on the Funded Debt Ratio) times the maximum amount to be
drawn under the applicable Letter of Credit.

Consummation of the Senior Debt Financing is subject to the satisfaction of
certain conditions precedent, including, without limitation, completion by the
Senior Lender of due diligence, satisfactory representations and

16
<PAGE>

warranties, satisfactory collateral examination and appraisals and environmental
reports on owned real estate, and satisfaction of certain minimum net worth and
Funded Debt Ratio requirements. Pursuant to the Senior Debt Commitment, the
Company will be subject to certain customary financial covenants satisfactory to
the Senior Lender including, without limitation, minimum requirements with
respect to the Funded Debt Ratio, the ratio of EBITDA to interest expense and
net worth. The Company will also be subject to, among other things, (i)
limitations on capital expenditures, liens, indebtedness, contingent
liabilities, dividends, distributions, mergers, acquisitions and assets sales,
and (ii) customary events of default including, without limitation, cross
default with respect to other indebtedness and change of control.

Subordinated Debt Financing. Pursuant to the Subordinated Debt Commitment,
the Subordinated Lender has agreed to provide the Company with an aggregate
principal amount of up to $15,000,000 in the form of senior subordinated notes
(the "Senior Subordinated Notes") issued to the Subordinated Lender. The
Senior Subordinated Notes will mature approximately seven years from the
closing of the Subordinated Debt Financing (the "Subordinated Debt Closing")
and will bear interest at the greater of (i) 11 1/2% per annum or (ii) the
average yield on seven year Treasury Bonds as reported in the Wall Street
Journal for the previous five business days prior to the Subordinated Debt
Closing, plus 4.5%. Interest on the Senior Subordinated Notes will be payable
quarterly in arrears, commencing on the first calendar quarter following the
Subordinated Debt Closing. Interest on any overdue interest and principal
payments will accrue at a rate of 2% in excess of the applicable interest rate
on the Senior Subordinated Notes. The Company may redeem the Senior
Subordinated Notes in whole or in part at any time after three and one-half
years following the Subordinated Debt Closing at a redemption price equal to
the product of the principal amount thereof multiplied by the Call Premium (as
hereinafter defined), plus accrued interest. Pursuant to the Subordinated Debt
Commitment, the "Call Premium" is defined as an amount equal to 103% if
redemption occurs between three and one-half years and four years following
the Subordinated Debt Closing, 102% if redemption occurs between four years
and five years following the Subordinated Debt Closing, 101% if redemption
occurs between five years and six years following the Subordinated Debt
Closing, and 100% if redemption occurs after six years following the
Subordinated Debt Closing. Subject to the requirements of the Senior Debt
Financing, following receipt by the Company of proceeds from the issuance of
certain debt, equity or hybrid securities or from the disposition of certain
assets, the Company will be required to redeem the Senior Subordinated Notes
at the same price as if the Company had exercised its optional redemption
rights. Pursuant to the Subordinated Debt Commitment, the Senior Subordinated
Notes will rank junior to an amount of "Senior Indebtedness" (which shall
include the Senior Debt) in an amount not to exceed the greater of (i) 110% of
$55,000,000 less all permanent payments of principal thereof made and
commitment reductions thereunder and (ii) $25,000,000. Any other future
indebtedness of the Company will rank junior to the Senior Subordinated Notes.
The Senior Subordinated Notes will have the benefit of subordinated guarantees
from each entity guaranteeing any Senior Indebtedness and the Senior Debt.

Pursuant to the Subordinated Debt Commitment, the Company will issue to the
Subordinated Lender warrants (the "Warrants") to purchase an aggregate of 4.5%
of the Company's Common Stock, on a fully- diluted basis (assuming the
repurchase of all of the MEDIQ Shares). The Warrants will be exercisable for a
period of ten years and will be exercisable at a price per share equal to
$9.00. In connection with the issuance of the Warrants, the Subordinated
Lender will be entitled to demand and "piggy-back" registration rights with
respect to the shares of Company Common Stock underlying the Warrants.

Pursuant to the Subordinated Debt Commitment, the Company will be required
to pay at the Subordinated Debt Closing a fee to the Subordinated Lender equal
to 1.5% of the aggregate principal amount of the Senior Subordinated Notes.

The Subordinated Debt Commitment provides that the Company and the
Subordinated Lender will enter into, among other agreements, a Note and Warrant
Purchase Agreement (the "Purchase Agreement") containing customary
representations and warranties. In addition, the Purchase Agreement will contain
customary affirmative and negative covenants satisfactory to the Subordinated
Lender. Affirmative covenants will include, without limitation, compliance with
laws, maintenance of all licenses, regulatory good standing, insurance, payment
of taxes, reporting and delivery of audited financial statements and other
financial information to the

17
<PAGE>

Subordinated Lender. Negative covenants will include, without limitation,
limitations on business activities, limitations on liens, limitations on
additional indebtedness, contingent obligations and preferred stock of the
Company (with exceptions for additional working capital), limitations on
dividends or payments on the capital stock of the Company, limitations on the
redemption or repurchase of capital stock of the Company, limitations on the
sale of assets and subsidiary stock and transactions with affiliates,
limitations on mergers and consolidations, limitations on investments and
joint ventures and limitations on changes of control. The Purchase Agreement
will also contain customary financial covenants including, without limitation,
minimum requirements with respect to the Company's EBITDA, minimum interest
coverage ratio requirements, minimum net worth requirements, maximum total
debt to twelve-month EBITDA and minimum fixed charges ratio requirements.
Certain of the affirmative and negative covenants will continue in effect
after payment in full of the Senior Subordinated Notes for so long as the
Warrants are outstanding. The Purchase Agreement will also contain standard
default provisions including, without limitation, failure to pay principal or
interest on the Senior Subordinated Notes when due, failure to comply with
covenants under the Purchase Agreement, cross-payment default and cross-
acceleration on material obligations of the Company, certain events of
bankruptcy involving the Company and change of control of the Company.

Consummation of the Subordinated Debt Financing is subject to the
satisfaction of certain conditions precedent, including, without limitation,
completion by the Subordinated Lender of business, legal and regulatory due
diligence, consummation of the Senior Debt Financing and issuance of the
Warrants to the Subordinated Lender.

FAIRNESS OPINION

On November 20, 1996, Wasserstein Perella delivered its written opinion to
the Special Committee that, as of such date, the consideration to be paid by
the Company to MEDIQ pursuant to the Stock Purchase Agreement is fair from a
financial point of view to the Company and to the holders of Common Stock of
the Company other than MEDIQ and its affiliates. No limitations were imposed
by the Special Committee upon Wasserstein Perella with respect to the
investigations made or the procedures followed by it in rendering its opinion.

The full text of the written opinion of Wasserstein Perella, dated November
20, 1996, which sets forth assumptions made and matters considered, appears as
Exhibit B to this Proxy Statement. Holders of the Company's Common Stock are
urged to read this opinion in its entirety. Wasserstein Perella's opinion was
directed only to the fairness, from a financial point of view to the Company
and to the holders of Common Stock of the Company other than MEDIQ and its
affiliates, of the consideration to be paid by the Company to MEDIQ pursuant
to the Stock Purchase Agreement. In the course of performing its services as
financial advisor to the Special Committee, Wasserstein Perella reviewed the
financial terms of other proposed transactions between the Company and MEDIQ
as well as among the Company and other third parties. In rendering its
opinion, Wasserstein Perella did not consider the financial terms of such
other proposed transactions nor did it compare the financial terms of such
other transactions with those of the MEDIQ Stock Repurchase. In connection
with its review of the terms of the financing arrangements proposed to be
entered into by the Company to finance the MEDIQ Stock Repurchase, Wasserstein
Perella only reviewed the terms of the Senior Debt Commitment and the
Subordinated Debt Commitment, and, accordingly, the terms contained in the
definitive agreements relating to such financing could affect its opinion.
Wasserstein Perella's opinion was delivered for the information of the Special
Committee and does not constitute a recommendation as to how any holder of the
Company's Common Stock should vote at the Annual Meeting with respect to the
MEDIQ Stock Repurchase. This summary of the opinion of Wasserstein Perella is
qualified in its entirety by reference to the full text of such opinion.

In connection with rendering its opinion, Wasserstein Perella: (i) reviewed
the Stock Purchase Agreement, the MEDIQ Indenture, the Escrow Agreement, the
form of MEDIQ Bond, the form of the Note, the Senior Debt Commitment and the
Subordinated Debt Commitment; (ii) reviewed certain publicly available business
and financial information related to the Company for recent years and interim
periods to date; (iii) reviewed certain internal financial and operating
information and analyses, and reviewed projected financial information
consisting of the Company's 1996 budget and updates thereof and the Company's
preliminary 1997 budget (collectively,

18
<PAGE>

the "Budget"), in each case prepared by the Company and provided to
Wasserstein Perella for the purposes of its analysis, and Wasserstein Perella
met with management of the Company to review and discuss such information and,
among other matters, the Company's business, operations, assets, financial
condition and prospects; (iv) reviewed certain publicly available historical
stock prices and trading volumes of the Company's Common Stock; (v) compared
certain publicly available financial and stock market data of the Company with
similar data for certain other publicly traded companies which Wasserstein
Perella deemed generally comparable, in certain respects, to the Company; (vi)
reviewed and considered the financial terms of certain recent acquisitions and
business combination transactions in the private label health and beauty aids
and over-the-counter pharmaceutical industries specifically, and in other
industries generally; and (vii) performed such other studies, analyses and
investigations as Wasserstein Perella considered appropriate.

In its review and analysis and in the formulation of its opinion,
Wasserstein Perella assumed and relied upon the accuracy and completeness of
all the financial and other information provided to or discussed with
Wasserstein Perella or publicly available, and Wasserstein Perella did not
assume any responsibility for independent verification of any of such
information. Wasserstein Perella also relied upon the reasonableness and
accuracy of the analyses and the Budget provided to Wasserstein Perella and
assumed, with the consent of the Company, that such analyses and Budget were
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the Company's management, and expressed
no opinion with respect to such analyses and Budget or the assumptions upon
which they were based. In addition, Wasserstein Perella did not review any of
the books and records of the Company or assume any responsibility for
conducting a physical inspection of the properties or facilities of the
Company, or for making or obtaining an independent valuation or appraisal of
the assets or liabilities of the Company. Wasserstein Perella's opinion was
necessarily based upon market, economic and other conditions as they existed
and could be evaluated as of the date of the opinion.

INFORMATION CONCERNING THE FINANCIAL ADVISOR

Wasserstein Perella is an internationally recognized investment banking firm
and, as a customary part of its investment banking activities, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, underwritings, private placements, and valuations
for corporate and other purposes. The Special Committee selected Wasserstein
Perella because of its expertise, reputation and familiarity with the Company
and the private label health and beauty aids industry.

In the ordinary course of Wasserstein Perella's business, Wasserstein
Perella may actively trade in the equity and debt securities of the Company
and MEDIQ for Wasserstein Perella's own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.

Pursuant to a letter agreement dated June 19, 1995 (the "Wasserstein Perella
Engagement Letter"), the Special Committee engaged Wasserstein Perella as
financial and strategic advisor to the Special Committee to provide certain
financial advisory and investment banking services to the Special Committee.
See "Proposal Number 4--Approval of the MEDIQ Stock Repurchase--Background."
Pursuant to the Wasserstein Perella Engagement Letter, the Company agreed to
pay Wasserstein Perella a retainer fee of $150,000 (the "Retainer Fee") and
certain additional fees in connection with a sale of the Company (which
additional fees were not received by Wasserstein Perella because no such sale
was consummated). Pursuant to the Wasserstein Perella Engagement Letter, the
Company agreed to reimburse Wasserstein Perella for reasonable expenses
incurred by Wasserstein Perella, subject to certain limitations, including
fees and disbursements of counsel, and to indemnify Wasserstein Perella
against certain liabilities in connection with its engagement.

Pursuant to a letter agreement dated October 22, 1996, the Company and
Wasserstein Perella amended the Wasserstein Perella Engagement Letter to provide
that, if requested by the Special Committee, Wasserstein Perella would provide
an opinion to the Special Committee with respect to the adequacy and fairness,
from a financial point of view, of the consideration to be received in a sale of
the Company or the consideration to be received or paid in a strategic
transaction (the "Opinion"). The parties also provided that upon delivery of the
Opinion the Company would pay to Wasserstein Perella a fee of $350,000. In
addition, pursuant to a letter

19
<PAGE>

agreement dated October 23, 1996, the Company and Wasserstein Perella amended
the Wasserstein Perella Engagement Letter to provide that upon the closing of
the purchase by the Company of all or a portion of MEDIQ's interest in the
Company, the Company will pay to Wasserstein Perella a financial advisory fee
of $250,000, provided that the Retainer Fee will be credited against such
financial advisory fee.

PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated balance sheets and
income statements of the Company (collectively, the "Pro Forma Condensed
Financial Statements") were prepared to present the estimated effects of the
MEDIQ Stock Repurchase as if the transaction had occurred as of October 1,
1995. The Pro Forma Condensed Financial Statements do not purport to represent
what the Company's financial position or results of operations would actually
have been if such transaction in fact had occurred on such date or at the
beginning of the period indicated or to project the Company's financial
position or results of operations for any future date or period. The Pro Forma
Condensed Financial Statements are based on certain assumptions and
adjustments described in the notes thereto and should be read in conjunction
therewith.

<PAGE>

NUTRAMAX PRODUCTS, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 28, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS:
Total current assets..................... $32,882 $32,882
Property, plant and equipment, net....... 29,207 29,207
Goodwill, net............................ 13,415 13,415
Other assets............................. 7,374 1,300(1) 8,674
------- -------- -------
$82,878 $ 1,300 $84,178
======= ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses.... $ 8,893 $ 8,893
Current maturities of long-term debt..... 14,498 (11,518)(2) 2,980
------- -------- -------
Total current liabilities.............. 23,391 (11,518) 11,873

Long term debt, less current maturities.... 11,780 49,544 (2) 61,324
Other liabilities.......................... 1,890 1,890
Stockholders' equity....................... 45,817 (36,335)(3) 9,091
(1,200)(4)
809 (5)
------- -------- -------
$82,878 $1,300 $84,178
======= ======== =======
</TABLE>
- --------
(1)Represents fees associated with the Debt Financing.

(2)Represents the net impact of refinancing existing debt with the Debt
Financing.

(3)Represents the impact of the MEDIQ Stock Repurchase.

(4)Represents fees associated with the MEDIQ Stock Repurchase and the Debt
Financing.

(5)Represents the value of the Warrants to be issued in connection with the
Subordinated Debt Financing.

21
<PAGE>

NUTRAMAX PRODUCTS, INC.

PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED SEPTEMBER 28, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales................... $ 80,479 $ 80,479
Cost of sales............... 57,686 57,686
------------ ------------
Gross profit................ 22,793 22,793
Selling, general &
administrative expenses.... 11,662 11,662
------------ ----------- ------------
Operating income............ 11,131 11,131
Other (charges)
Interest expense.......... (1,479) 216 (1) (5,505)
(3,810)(2)
Interest income........... 95 95
Other..................... (384) (384)
------------ ------------
Income before income taxes.. 9,363 (4,026) 5,337
Income taxes................ 3,680 1,582 (3) 2,098
------------ ----------- ------------
Net income.................. $ 5,683 (2,444) $ 3,239
------------ ----------- ------------
Earnings per share.......... $ 0.67 $ 0.72
------------ ------------
Weighted average shares
outstanding................ 8,581 13 (4) 4,507
(4,037)(5)
</TABLE>
- --------
(1)Represents amortization of fees directly related to the Debt Financing.

(2) Represents the increase in interest expense that reflects total interest
expense related to the MEDIQ Stock Repurchase, the refinancing of existing
bank debt and the amortization of the value of the Warrants to be issued in
connection with the Subordinated Debt Financing.

(3)Represents the tax effect of pro forma adjustments.

(4)Represents the equivalent shares associated with the Warrants as determined
by the treasury stock method.

(5)Represents the total number of shares purchased from MEDIQ.

22
<PAGE>

THE STOCK PURCHASE AGREEMENT

The following description of the Stock Purchase Agreement does not purport
to be complete and is qualified in its entirety by reference to the text of
the Stock Purchase Agreement, a copy of which is attached hereto as Exhibit C.
For purposes of the following description of the Stock Purchase Agreement,
references to MEDIQ include MIS unless otherwise specified.

General. On September 18, 1996, the Company and MEDIQ entered into the
Original Stock Purchase Agreement, pursuant to which MEDIQ agreed to sell to
the Company, and the Company agreed to purchase from MEDIQ, all 4,037,258
shares of Company Common Stock owned by MEDIQ, 2,254,902 of which were then
held in escrow in support of the MEDIQ Bonds pursuant to the terms of the
MEDIQ Indenture and the terms of the Escrow Agreement. On November 20, 1996,
the Company and MEDIQ amended and restated the Original Stock Purchase
Agreement to provide, among other things, that (i) at the MEDIQ Closing, the
Company would purchase for $9.00 per share the MEDIQ Shares other than the
MEDIQ Shares then held in escrow pursuant to the terms of the MEDIQ Indenture,
and (ii) at the MEDIQ Closing, the Note to be delivered by the Company to
MEDIQ shall have an original principal amount equal to the aggregate number of
MEDIQ Escrowed Shares then held in escrow pursuant to the terms of the MEDIQ
Indenture, multiplied by $9.00. The aggregate purchase price of the MEDIQ
Shares is $36,335,332 representing a purchase price of $9.00 per share.
Pursuant to the terms of the Stock Purchase Agreement, the MEDIQ Closing will
be held on December 31, 1996 or on such other date as the Company and MEDIQ
may mutually agree.

As of November 20, 1996, there were a total of 2,254,902 MEDIQ Escrowed
Shares. Subsequent to September 18, 1996, MEDIQ has repurchased an aggregate
principal amount of MEDIQ Bonds representing 435,751 MEDIQ Escrowed Shares.
Prior to the MEDIQ Closing, all 435,751 of such MEDIQ Escrowed Shares will be
released from escrow and delivered to MEDIQ pursuant to the terms of the MEDIQ
Indenture. If no additional MEDIQ Shares are released from escrow pursuant to
the terms of the MEDIQ Indenture and the Escrow Agreement between the date
hereof and the MEDIQ Closing (other than the foregoing 435,751 MEDIQ Escrowed
Shares), the aggregate cash consideration to be paid by the Company to MEDIQ
at the MEDIQ Closing will be $19,962,963 and the Note will have an original
principal amount equal to $16,372,359. To the extent that additional MEDIQ
Shares are released from escrow between the date hereof and the MEDIQ Closing
(other than the foregoing 435,751 MEDIQ Escrowed Shares), the cash portion of
the Purchase Price will increase by an amount equal to $9.00 multiplied by
each MEDIQ Share so released and the original principal amount of the Note
will decrease by an amount equal to $9.00 multiplied by each MEDIQ Share so
released.

Delivery of Escrowed Shares. The Stock Purchase Agreement provides that
MEDIQ shall, as MEDIQ Escrowed Shares are released from escrow under the MEDIQ
Indenture and the Escrow Agreement, upon three business days prior notice to
the Company, deliver to the Company such MEDIQ Escrowed Shares upon receipt by
MEDIQ from the Company of a prepayment of the Note in an amount equal to the
Purchase Price of the MEDIQ Escrowed Shares so delivered. Notwithstanding the
foregoing, the Company shall not be required to prepay the Note and accept
delivery of any of the MEDIQ Escrowed Shares except in lots of no less than
50,000 shares; provided, however, if there are less than 50,000 MEDIQ Escrowed
Shares remaining, the Company shall be required to prepay the Note upon
delivery of such remaining MEDIQ Escrowed Shares.

Cash in Lieu of MEDIQ Escrowed Shares. Pursuant to the Stock Purchase
Agreement, to the extent that any holder of a MEDIQ Bond (other than MEDIQ)
presents such MEDIQ Bond for exchange for MEDIQ Escrowed Shares in accordance
with the terms of the MEDIQ Indenture and MEDIQ delivers MEDIQ Escrowed Shares
to such holder, (i) the principal amount of the Note shall be reduced by an
amount equal to the product of the number of MEDIQ Escrowed Shares so
delivered by MEDIQ to such holder and $9.00, and (ii) the principal amount of
the Note shall further be reduced by the Excess Cash Amount; provided,
however, that in lieu of such further reduction in the principal amount of the
Note under the foregoing clause (ii), the Company may elect to receive an
amount in cash from MEDIQ equal to the Excess Cash Amount.

Voting. MEDIQ agreed under the terms of the Stock Purchase Agreement that,
from and after the MEDIQ Closing, (i) MEDIQ shall deliver to the Company an
irrevocable proxy authorizing the Board of Directors of the

23
<PAGE>

Company to vote all of the MEDIQ Escrowed Shares in the same proportion as the
votes of all other shares of the Company's Common Stock at any meeting of the
stockholders of the Company or in connection with any written consent of the
Company's stockholders, and (ii) the Company shall be entitled to receive any
and all dividends paid or payable with respect to the MEDIQ Escrowed Shares
(other than dividends apportioned to the MEDIQ Escrowed Shares pursuant to the
MEDIQ Indenture to which MEDIQ is not entitled); provided, however, that the
obligations of MEDIQ under the foregoing clause (i) and the right of the
Company to receive dividends pursuant to the foregoing clause (ii) shall
terminate upon an event of default under the Note.

Representations and Warranties. The Stock Purchase Agreement contains
various customary representations and warranties of the Company and MEDIQ
relating to, among other things, (i) the Company's and MEDIQ's organization
and similar corporate matters, (ii) authorization, execution, delivery,
performance and validity of the Stock Purchase Agreement and related matters,
(iii) absence of conflicts with law or contracts and related matters, (iv)
governmental approvals and other third party consents, and (v) absence of
broker's and finder's fees. In addition, the Stock Purchase Agreement contains
a customary representation and warranty of MEDIQ relating to MEDIQ's ownership
of the MEDIQ Shares and various customary representations and warranties of
the Company relating to (a) documents filed by the Company with the SEC and
the accuracy of the information contained therein, and (b) the Company's
capitalization.

Conditions Precedent. The Stock Purchase Agreement provides that the
obligations of the Company to enter into and complete the transactions
contemplated thereby are subject to, among other things, (i) the Company
having received financing upon terms and for such amount necessary to fulfill
its obligations under the Stock Purchase Agreement, (ii) the Company having
received a favorable vote of its stockholders other than MEDIQ with respect to
the consummation of the transactions contemplated by the Stock Purchase
Agreement, (iii) the Board of Directors of the Company having received a
fairness opinion from an internationally recognized investment banking firm to
the effect that the transactions contemplated by the Stock Purchase Agreement
are fair from a financial point of view to the stockholders of the Company
(other than MEDIQ), and (iv) the Board of Directors of MEDIQ having received a
fairness opinion from an internationally recognized investment banking firm to
the effect that the transactions contemplated by the Stock Purchase Agreement
are fair from a financial point of view to the stockholders of MEDIQ. On
September 19, 1996, Howard, Lawson & Co. delivered its written opinion to
MEDIQ that the price to be paid to MEDIQ pursuant to the Stock Purchase
Agreement is fair to MEDIQ from a financial point of view. With respect to the
fairness opinion received by the Company, see "Fairness Opinion" above.

The Stock Purchase Agreement provides that the obligations of MEDIQ to enter
into and complete the transactions contemplated thereby are subject to, among
other things, (i) the Company having obtained and provided to MEDIQ the letter
of credit securing the Company's obligations under the Note, (ii) the Company
having received a favorable vote of its stockholders other than MEDIQ with
respect to the consummation of the transactions contemplated by the Stock
Purchase Agreement, (iii) the Board of Directors of the Company having
received a fairness opinion from an internationally recognized investment
banking firm to the effect that the transactions contemplated by the Stock
Purchase Agreement are fair from a financial point of view to the stockholders
of the Company (other than MEDIQ), and (iv) the Board of Directors of MEDIQ
having received a fairness opinion from an internationally recognized
investment banking firm to the effect that the transactions contemplated by
the Stock Purchase Agreement are fair from a financial point of view to the
stockholders of MEDIQ.

Indemnification. The Stock Purchase Agreement provides that each of the
Company and MEDIQ (each, an "Indemnifying Party") shall indemnify and hold the
other party and its officers, directors and stockholders (each, an
"Indemnified Party") harmless against and in respect of any and all losses,
costs, expenses, claims, damages, obligations and liabilities, including
interest, costs of investigation, penalties and reasonable attorneys' fees and
disbursements which such Indemnified Party may suffer, incur or become subject
to arising out of, based upon or otherwise in respect of any inaccuracy in or
breach of any representation or warranty of the Indemnifying Party made in or
pursuant to the Stock Purchase Agreement or any agreement or document required
to be delivered pursuant to the Stock Purchase Agreement or any breach or
nonfulfillment of any covenant or obligation of the Indemnifying Party
contained in the Stock Purchase Agreement or such other agreements and
documents.

24
<PAGE>

Termination. The Stock Purchase Agreement may be terminated and the
transactions contemplated thereunder may be abandoned at any time prior to the
MEDIQ Closing (i) by the Company or MEDIQ, if the MEDIQ Closing has not
occurred by December 31, 1996, (ii) by mutual consent of the Company and
MEDIQ, (iii) by the Company, if any representation or warranty of MEDIQ made
in or pursuant to the Stock Purchase Agreement is untrue or incorrect in any
material respect, MEDIQ breaches its covenants or other terms of the Stock
Purchase Agreement or any of the Company's conditions precedent to the MEDIQ
Closing contained therein are not satisfied on or before December 31, 1996, or
any event or circumstance occurs such that any of such conditions will not be
satisfied as of such date, or (iv) by MEDIQ, if any representation or warranty
of the Company made in or pursuant to the Stock Purchase Agreement is untrue
or incorrect in any material respect, the Company breaches the covenants or
other terms of the Stock Purchase Agreement or any of MEDIQ's conditions
precedent to the MEDIQ Closing contained therein are not satisfied on or
before December 31, 1996 or any event or circumstance occurs such that any of
such conditions will not be satisfied as of such date.

CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS

This Proxy Statement contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act.
Although the Company believes its expectations are based upon reasonable
assumptions within the bounds of its knowledge of its business operations,
there can be no assurance that actual results will not differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference include the following: the inability of the Company to
consummate the MEDIQ Stock Repurchase, the inability of the Company to
consummate the Senior Debt Financing or the Subordinated Debt Financing on
terms satisfactory to the Company, the timing of new product introductions by
the Company, the timing of orders received from customers, the gain or loss of
significant customers, changes in the mix of products sold, competition from
other private label manufacturers, seasonal changes in the demand for the
Company's products, increases in the cost of raw materials and changes in the
retail market for health and beauty aids in general. For additional
information concerning these and other important factors which may cause the
Company's actual results to differ materially from expectations and underlying
assumptions, please refer to the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report on Form 10-K for Fiscal 1996.

INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON

As described in "Proposal Number 4--Approval of the MEDIQ Stock Repurchase,"
MEDIQ and MIS beneficially owned an aggregate of 4,037,258 shares of Company
Common Stock as of the date hereof, representing approximately 46.4% of the
total outstanding shares as of the date hereof. Mr. Sandler, a Director of the
Company, is Senior Vice President, Chief Financial Officer, Treasurer and a
Director of MEDIQ, and, until October 1995, Mr. Korman, a Director of the
Company, was the President, Chief Executive Officer and a Director of MEDIQ.
In addition, Mr. Korman beneficially owns in excess of 10% of the common stock
of MEDIQ. Mr. Sandler also may be deemed to beneficially own certain shares of
common stock of MEDIQ held in retirement accounts and certain shares that may
be acquired upon the exercise of stock options, the aggregate number of which
constitute less than 1% of the total outstanding shares of MEDIQ as of the
date hereof. In addition, Messrs. Lepone, Gleklen, Manheimer and McCarthy
beneficially own 18,327, 71,429, 500 and 10,000 shares, respectively, of MEDIQ
common stock, which represent in the aggregate less than 1% of the total
outstanding shares of MEDIQ common stock as of the date hereof. Mr. Gleklen also
owns 15,790 shares of preferred stock of MEDIQ.

INFORMATION REGARDING DIRECTORS

The Board of Directors of the Company held nine meetings during Fiscal 1996.
During Fiscal 1996, each of the incumbent Directors attended at least 75% of
the total number of meetings of the Board of Directors and of the committees
of which he was a member. The Board of Directors has established an Audit
Committee, a Compensation Committee and a Stock Option Committee. The Audit
Committee reviews the financial statements

25
<PAGE>

of the Company and the scope of the annual audit, monitors the Company's
internal financial and accounting controls and recommends to the Board of
Directors the appointment of independent certified public accountants. Messrs.
Korman, McCarthy, Newnham and Sandler were members of the Audit Committee
during Fiscal 1996. The Audit Committee met one time during Fiscal 1996. The
Compensation Committee recommends the compensation levels of officers and
employees of the Company to the Board of Directors. Messrs. Korman Lepone,
McCarthy and Newnham were members of the Compensation Committee during Fiscal
1996. The Compensation Committee met one time during Fiscal 1996. Messrs.
Korman, McCarthy and Newnham served as members of the Stock Option Committee
during Fiscal 1996. The Stock Option Committee is responsible for
administering the Company's stock option plans pursuant to authority delegated
to it by the Board of Directors. The Stock Option Committee met one time
during Fiscal 1996. The Board of Directors does not have a nominating
committee.

Directors who are officers or employees of the Company receive no
compensation for service as Directors. Non-employee Directors each receive
$10,000 for their service as Directors. During fiscal 1996 each non-employee
Director also received a one time fee in the aggregate amount of $2,500 in
connection with certain special meetings of the Board of Directors held during
Fiscal 1996. In addition, in 1991 each non-employee Director received options
under the 1988 Option Plan to purchase 25,000 shares of Company Common Stock
at $6.00 per share, vesting in equal installments over the subsequent five
years beginning on the first anniversary of the grant date. All Directors are
reimbursed for expenses incurred in connection with attendance at meetings.

In addition, during Fiscal 1996, each of Messrs. McCarthy and Newnham
received $12,500 for serving on the Special Committee. See "Proposal Number
4--Approval of the MEDIQ Stock Repurchase."

During Fiscal 1996, the Company paid Triumph Corporate Finance Group, Inc., of
which Mr. McCarthy is Chief Executive Officer, $25,000 for services rendered to
the Company in connection with the Company's acquisition of Mi-Lor Corporation,
Professional Brushes, Inc. and Codent Dental Products, Inc.

Set forth below is certain information regarding the Directors of the
Company, including the five Directors who have been nominated for re-election
at the Annual Meeting, based on information furnished by them to the Company.

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ---- --- --------
<S> <C> <C>
Donald M. Gleklen................................................. 60 1990
Bernard J. Korman................................................. 65 1990
Donald E. Lepone.................................................. 52 1987
Dennis M. Newnham................................................. 56 1987
Michael F. Sandler................................................ 50 1990
</TABLE>

The principal occupation and business experience during at least the last
five years for each Director of the Company is set forth below.

MR. GLEKLEN has been a Director of the Company since 1990. Mr. Gleklen is
also President of Jocard Financial Services, Inc. (financial consulting
services), a position he has held since September 1994, and he has been
Chairman and Chief Executive Officer of Intellihealth, Inc. since July 1996
(provider of healthcare information to consumers). Mr. Gleklen served as
Senior Vice President of Corporate Development of MEDIQ from 1985 to March
1994. Mr. Gleklen also served as Managing Partner of Brobyn Capital Partners
(venture capital) from March 1994 to September 1994 and he currently serves as
a Director of Gandalf Technologies, Inc. (telecommunications technology), New
West Eyeworks, Inc. (retail eyewear stores), Lason, Inc. (provider of laser
printing and imaging services) and Microleague Multimedia, Inc. (development
and distribution of computer games).

26
<PAGE>

MR. KORMAN has been Chairman of the Board of Directors of the Company since
August 1990. Mr. Korman served as President and Chief Executive Officer of
MEDIQ from 1980 to October 1995 and as a Director from 1980 to January 1996.
Mr. Korman is a Director of Kapson Senior Quarters Corp. (assisted living
services), The New America High Income Fund (financial services), The Pep
Boys, Inc. (automotive supplies), Today's Man, Inc. (retail men's clothing
sales), Omega Healthcare Investors, Inc. (real estate investment trust) and
InnoServ Technologies, Inc. (medical equipment support services).

MR. LEPONE has been President, Chief Executive Officer and a Director of the
Company since 1987.

MR. NEWNHAM has been a Director of the Company since 1987. Mr. Newnham has
been President and Chief Executive Officer of Tsumura International since
March 1996. Before joining Tsumura International, Mr. Newnham was Chairman,
President and Chief Executive Officer of Adirondack Beverages, Inc. from March
1995 to December 1995. Mr. Newnham was a venture capitalist consultant from
March 1994 to March 1995. Mr. Newnham previously served as President and Chief
Executive Officer of Lea & Perrins, Inc. (manufacturer of condiments) from
1983 to February 1994. Mr. Newnham is also a director of United Water
Resources (a holding company for water related businesses).

MR. SANDLER, a certified public accountant, has been a Director of the
Company since July 1990, and was Chief Financial Officer and Treasurer of the
Company from July 1990 to August 1994. He has been Senior Vice President-
Finance and Chief Financial Officer since November 1988, Treasurer since 1991,
and a Director since November 1994, of MEDIQ. He has also served as Vice
President and Chief Financial Officer of PCI Services, Inc. from September
1991 to October 1996. He has served as Vice President of PRN, a wholly-owned
subsidiary of MEDIQ, since May 1992, and also served as Chief Financial
Officer of PRN from January 1989 to September 1992. Mr. Sandler also serves as
a director of MHM Services, Inc. and InnoServ Technologies, Inc.

27
<PAGE>

EXECUTIVE OFFICERS

The names and ages of all executive officers of the Company and the
principal occupation and business experience during at least the last five
years for each are set forth below.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert F. Burns................ 47 Vice President, Chief Financial Officer and
Treasurer
Gary A. LeDuc.................. 42 Vice President of Materials Management
Donald E. Lepone............... 52 President and Chief Executive Officer
John J. Manheimer.............. 49 Vice President of Sales
James W. McGrath, Jr. ......... 52 Vice President of Regulatory Affairs and
Technical Services
Dennis M. Nolan................ 52 Vice President of Operations
Richard C. Zakin............... 39 Vice President of Marketing
</TABLE>

MR. BURNS is a certified public accountant and has been Vice President,
Chief Financial Officer and Treasurer of the Company since August 1994. From
1984 to August 1994, Mr. Burns served as Vice President of Finance for Tetley,
Inc. (tea and coffee manufacturer), a subsidiary of Allied-Lyons PLC.

MR. LEDUC is currently Vice President of Materials Management for the
Company. Before becoming Vice President of Materials Management in May 1991,
Mr. LeDuc was Vice President of Shareholder Relations for the Company from
July 1990 to May 1991.

MR. LEPONE has been President and Chief Executive Officer of the Company
since 1987.

MR. MANHEIMER has been Vice President of Sales for the Company since 1990.

MR. MCGRATH has been Vice President of Regulatory Affairs and Technical
Services for the Company since August 1994, and was Vice President of
Operations for the Company from July 1993 to August 1994. He served as
Director of Quality Assurance and Quality Control for the Company from
September 1992 to June 1993. Mr. McGrath previously served as Director of
Quality Assurance for Circa Pharmaceutical Co., Inc. (pharmaceutical
manufacturer) from May 1991 to July 1992. He also served as Vice President of
Technical Services for Nice-Pak Products (pharmaceutical manufacturer and
consumer products manufacturer) from March 1990 to May 1991.

MR. NOLAN joined the Company in August 1990 as Vice President of Operations.
Prior to joining the Company, Mr. Nolan held various positions with CCL Custom
Manufacturing, Inc. from 1990 until August 1996, including the position of
Senior Vice President of Operations.

MR. ZAKIN has been Vice President of Marketing for the Company since June
1993. He served as Vice President and General Manager of the Company from
September 1992 to June 1993 and Vice President of Marketing for the Company
from July 1990 to September 1992.

Each of the executive officers holds his respective office until the regular
annual meeting of the Board of Directors following the annual meeting of
stockholders and until his successor is elected and qualified or until his
earlier resignation or removal.

OTHER KEY EMPLOYEES

In addition to the Directors and executive officers listed above, the
following individuals are also expected to make significant contributions to
the business of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Michael C. Bill............ 43 Vice President of Operations, Optopics
Laboratories Corporation (a subsidiary of the
Company)
Joseph F. Callaghan........ 53 President and Chief Operating Officer, Powers
Pharmaceutical Corporation (a subsidiary of the
Company)
Jack M. Ernst.............. 60 Vice President and General Manager, Oral Care
Division
</TABLE>

28
<PAGE>

EXECUTIVE COMPENSATION

The following sections of this Proxy Statement set forth and discuss the
compensation paid or awarded during the last three years to the Company's
Chief Executive Officer and the four most highly compensated executive
officers who earned in excess of $100,000 during Fiscal 1996.

SUMMARY COMPENSATION TABLE

The following table shows for each of the last three fiscal years
compensation paid by the Company to the Chief Executive Officer and the four
most highly compensated executive officers who earned in excess of $100,000
during Fiscal 1996.

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------- ---------- ----------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1)($) BONUS($) OPTIONS(#) COMPENSATION ($)
- --------------------------- ---- ------------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Donald E. Lepone........ 1996 309,375 -- (2) -- 7,300(4)
President and Chief 1995 290,000 100,000 -- 7,000
Executive Officer 1994 265,000 309,000(3) 500,000 11,000

Richard C. Zakin........ 1996 167,000 -- (2) -- 6,200(5)
Vice President of 1995 157,000 39,000 20,000 6,000
Marketing 1994 143,000 205,000(3) -- 10,000

John J. Manheimer....... 1996 152,000 -- (2) -- 6,700(6)
Vice President of Sales 1995 143,000 25,000 20,000 6,000
1994 140,000 20,000 -- 8,000

Robert F. Burns......... 1996 136,000 -- (2) -- 3,800(7)
Vice President, Chief 1995 127,000 14,000 10,000 2,000
Financial Officer 1994 10,000 -- -- 6,000
and Treasurer

James W. McGrath, Jr.... 1996 116,000 -- (2) -- 4,800(8)
Vice President of 1995 106,000 10,000 10,000 5,000
Regulatory Affairs and 1994 103,000 10,000 -- 6,000
Technical Services
</TABLE>
- --------
(1) Includes all voluntary pre-tax contributions to the NutraMax Products,
Inc. Employee's Savings Plan (the "401(k) Plan").
(2) Cash bonuses for executive officers for Fiscal 1996 have not yet been
determined by the Compensation Committee. For the criteria applied by the
Compensation Committee in making such determinations, see "Report of the
Compensation Committee of the Board of Directors on Executive
Compensation."
(3) Includes the value of stock awarded as bonus compensation pursuant to
employment agreements with the Company in the amounts of $143,000 and
$86,000 for Messrs. Lepone and Zakin, respectively.
(4) Includes approximately $5,100 representing the Company's contributions to
the 401(k) Plan account of Mr. Lepone, $800 of automobile expenses and
$1,400 of group life insurance expenses paid by the Company on behalf of
Mr. Lepone.
(5) Includes approximately $5,200 representing the Company's contributions to
the 401(k) Plan account of Mr. Zakin, $500 of automobile expenses and $500
of group life insurance expenses paid by the Company on behalf of Mr.
Zakin.
(6) Includes approximately $5,100 representing the Company's contributions to
the 401(k) Plan account of Mr. Manheimer, $200 of automobile expenses and
$1,400 of group life insurance expenses paid by the Company on behalf of
Mr. Manheimer.
(7) Includes approximately $3,000 representing the Company's contributions to
the 401(k) Plan account of Mr. Burns and $800 of group life insurance
expenses paid by the Company on behalf of Mr. Burns.
(8) Includes approximately $3,800 representing the Company's contributions to
the 401(k) Plan account of Mr. McGrath and $1,000 of group life insurance
expenses paid by the Company on behalf of Mr. McGrath.

<PAGE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END VALUES

The following table sets forth the shares acquired and the value realized
upon exercise of stock options during Fiscal 1996 by the Chief Executive
Officer and each other executive officer named in the Summary Compensation
Table and certain information concerning the number and value of unexercised
options.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
SHARES OPTIONS AT FY-END(#)(1) FY-END($)(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald E. Lepone........ -- -- 150,000 400,000 168,750 0
Richard C. Zakin........ -- -- 49,000 16,000 84,375 0
John J. Manheimer....... 15,000 50,625 24,000 16,000 0 0
Robert F. Burns......... -- -- 4,000 6,000 0 0
James W. McGrath, Jr.... -- -- 8,000 7,000 0 0
</TABLE>
- --------
(1) Included in the number which are exercisable are 100,000 options granted
to Mr. Lepone, 8,000 options granted to Mr. Zakin, 8,000 options granted
to Mr. Manheimer, 4,000 options granted to Mr. Burns and 4,000 options
granted to Mr. McGrath which are subject to stockholder approval of the
1988 Plan Amendments. Included in the number which are unexercisable are
400,000 options granted to Mr. Lepone, 12,000 options granted to Mr.
Zakin, 12,000 options granted to Mr. Manheimer, 6,000 options granted to
Mr. Burns and 6,000 options granted to Mr. McGrath which are subject to
stockholder approval of the 1988 Plan Amendments.
(2) Equal to the market value of shares covered by in-the-money options as of
the end of the Company's fiscal year on September 28, 1996 less the
aggregate option exercise price. Options are in-the-money if the market
value of the shares covered thereby is greater than the option exercise
price.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION

The Compensation Committee of the Board of Directors of the Company consists
of Bernard J. Korman, Donald E. Lepone, Frederick W. McCarthy and Dennis M.
Newnham. Messrs. Korman, McCarthy and Newnham are outside directors. The
Compensation Committee approves the Company's compensation policies and
procedures and establishes compensation levels for executive officers. Mr.
Lepone does not participate in Compensation Committee deliberations concerning
his compensation.

GENERAL

The compensation arrangements of the Company reflect the philosophy of the
Compensation and Stock Option Committees of the Company's Board of Directors,
and the Board of Directors as a whole, that a significant portion of the
annual compensation of the Company's Chief Executive Officer and the Company's
other executive officers should be linked to the Company's performance. The
Company's compensation programs are designed to provide competitive financial
rewards for successfully meeting the Company's strategic and operating
objectives, with the purposes of retaining personnel and supporting a
performance-oriented environment. Where applicable, the Compensation Committee
takes into account employment agreements between an executive officer and the
Company. See "Employment Agreements" below.

COMPENSATION POLICIES FOR EXECUTIVE OFFICERS

The compensation of the Company's Chief Executive Officer and other
executive officers is comprised of annual salary and cash and stock incentives
based on annual and long-term results of the Company.

Base Salary. The annual base salary and base salary adjustments for
executive officers are determined by the Compensation Committee in its
discretion and are targeted according to the salaries of executives holding

<PAGE>

similar offices and having similar responsibilities within the private label
health and personal care products industry. The Compensation Committee also
considers factors such as industry experience and executive retention. Based
upon the foregoing criteria, the base salaries for Messrs. Lepone, Zakin and
LeDuc were established pursuant to their respective employment agreements as
described below under "Employment Agreements." Generally, salary adjustments
for executive officers (whether determined annually with respect to such
officers or pursuant to employment agreements) are determined by evaluating
the competitive marketplace (including the Company's industry segment), the
performance of the Company, the performance of the executive officer and any
change in the responsibilities assumed by the executive officer. While many
aspects of performance can be measured in financial terms, the Compensation
Committee also evaluates the success of executive officers in areas of non-
financial performance, such as the development and implementation of
objectives and plans. Salary adjustments are normally determined and made on
an annual basis. Salary adjustments for the Chief Executive Officer were
established pursuant to his employment agreement. See "Employment Agreements"
below.

Cash Bonuses. The Company has an incentive compensation plan (the
"Compensation Plan") pursuant to which the Company's executive officers are
awarded cash bonuses based upon individual performance and the Company's
achievement of certain internal financial objectives. The Compensation Plan
provides for annual cash bonuses ranging from 2% to 60% of the executive
officer's base salary, with executive officers becoming entitled to receive a
percentage of their bonus potential based upon the percentage achievement of
the Company's internal operating objectives and, with respect to executive
officers other than the Chief Executive Officer, also on such executive
officers' individual performance. These internal financial objectives include
pre-tax income targets, product line sales growth targets (for sales and
marketing executives), productivity objectives (for operations executives),
material price targets (for purchase managers) and timely information
reporting and working capital control objectives (for financial managers). The
Chief Executive Officer's bonus is determined solely by the Company's
achievement of pre-tax income targets while bonuses for all other executive
officers are determined by the Company's achievement of pre-tax income targets
and the achievement by such officers of their individual performance targets.
Executive officers other than the Chief Executive Officer may receive bonuses
even if the Company does not achieve the pre-tax income targets. Through the
Compensation Plan, a significant portion of each executive officer's annual
total compensation is placed at risk in order to provide an incentive toward
sustained high performance. For Mr. Lepone, the Chief Executive Officer of the
Company, the bonus potential is entirely dependent upon the Company's
operating performance, without regard to individual achievements. As of the
date of this report, the Compensation Committee has not completed its review
of executive officer performance for Fiscal 1996, and accordingly, as not yet
made determinations as to the cash bonuses, if any, to be awarded to executive
officers.

Equity Incentives. The Stock Option Committee consists of Bernard J. Korman,
Frederick W. McCarthy and Dennis M. Newnham, all of whom are outside
Directors, and is responsible for administering the Company's Stock Option
Plans. Equity incentive awards are designed to attract and retain executives
who can make significant contributions to the Company's success; reward
executives for such significant contributions; and give executives a longer-
term incentive to increase stockholder value. The size and frequency of equity
and equity-based incentive awards are determined by the Stock Option Committee
in its discretion, taking into account individual performance and
responsibilities and in most cases without any specific performance measures.
The Compensation Committee may, however, impose specific performance measures
on stock option grants and in the case of Mr. Lepone, has conditioned the
vesting of certain of Mr. Lepone's options on the Company attaining a certain
compounded annual stock price growth. See "Compensation of the Chief Executive
Officer" below. The Compensation Committee also may grant stock options for
executive retention purposes in amounts that the Compensation Committee, in
its discretion, deems necessary and appropriate in order to retain highly
qualified executives. To ensure that high levels of performance occur over the
long-term, stock options granted to executives typically vest over a period of
five years. All outstanding options have been granted with an exercise price
equal to 100% of the fair market value of the Company's Common Stock on the
grant date. Any value received by an executive officer from a stock option
grant and any increase in the value of stock received as a bonus depends
entirely on increases in the price of the Company's Common Stock. Since the
adoption of the

31
<PAGE>

1988 Option Plan, the Company's executive officers have all been granted
options to acquire shares of the Company's Common Stock. During Fiscal 1995,
Messrs. Zakin, Manheimer, Burns and McGrath received options to purchase
20,000, 20,000, 10,000 and 10,000 shares of Common Stock, respectively. During
Fiscal 1996, Mr. LeDuc received an option to purchase 10,000 shares of Common
Stock

The 1996 Option Plan, if approved by the stockholders of the Company at the
Annual Meeting, will be the principal vehicle by which the Company intends to
achieve the executive compensation policy objective of providing long-term
incentives to executive officers. Pursuant to the 1996 Option Plan, the
Compensation Committee may grant a variety of long-term incentive awards based
on the Common Stock of the Company, including stock options (both Incentive
Options and Non-Qualified Options), SARs, restricted stock and unrestricted
stock.

Other Compensation. The Company provides executive officers and management
with health, retirement and other benefits under plans that are generally
available to the Company's employees.

Compensation of the Chief Executive Officer. Increases in Mr. Lepone's
compensation are determined by the Compensation Committee based upon an
analysis of his performance during the year and the Company's overall
performance. In particular, based upon Mr. Lepone's successful leadership of
the Company during the Company's recent expansion through internal development
and acquisition, the Compensation Committee determined that it was in the best
interests of the Company to continue to retain Mr. Lepone's service to the
Company, and to revise his compensation arrangement. Accordingly, in fiscal
1994, the Company entered into a new employment agreement with Mr. Lepone to
replace a prior agreement which expired in fiscal 1994. Under the terms of the
new employment agreement, which expires in 1998, Mr. Lepone is currently
entitled to receive an annual base salary of $309,735, subject to a minimum
annual increase equal to the greater of 5% or the annual inflation rate. Mr.
Lepone also participates in the Compensation Plan, as described above. In
addition, pursuant to the terms of his employment agreement, Mr. Lepone was
granted options to acquire at $11.00 per share, up to 500,000 shares of the
Company's Common Stock under the 1988 Option Plan. The options vested with
respect to 100,000 shares upon the date of grant and vest with respect to an
additional 100,000 at the end of each of fiscal 1995, 1996, 1997 and 1998,
depending upon the Company attaining and maintaining a 15% compounded annual
stock price growth rate; provided, however, that such vesting may accelerate
under certain circumstances, such as a Change of Control of the Company. For
Fiscal 1995 and Fiscal 1996, no additional vesting of this option occurred.

Federal Tax Regulations Limiting Deductibility of Certain Compensation. As a
result of Section 162(m) of the Code, a company's deduction of executive
compensation may be limited to the extent that a "covered employee" (i.e., the
chief executive officer or one of the four highest compensated officers who is
employed on the last day of the company's taxable year and whose compensation
is reported in the summary compensation table in the company's proxy
statement) receives compensation in excess of $1 million in such taxable year
of the company (other than performance-based compensation that otherwise meets
the requirements of Section 162(m) of the Code).

COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS OF THE BOARD OF DIRECTORS

Bernard J. Korman Bernard J. Korman
Donald E. Lepone Frederick W. McCarthy
Frederick W. McCarthy Dennis M. Newnham
Dennis M. Newnham

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Lepone, Chief Executive Officer and President of the Company, is a
member of the Compensation Committee and makes general recommendations to and
reviews with the Compensation Committee the compensation of executives and
management other than himself.

32
<PAGE>

STOCKHOLDER RETURN PERFORMANCE GRAPH

Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock, based
on the market price of the Company's Common Stock and assuming reinvestment of
dividends, with the total return of companies within the Russell 2000 Index
and the companies within the NASDAQ Pharmaceutical Index prepared by
Research:. The calculation of total cumulative return assumes a $100
investment in the Company's Common Stock, the Russell 2000 Index and the
NASDAQ Pharmaceutical Index on September 30, 1991. The comparisons in this
line graph are historical and are not intended to forecast or be indicative of
possible future performance of the Common Stock of the Company.

[PERFORMANCE GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
9/91 9/92 9/93 9/94 9/95 9/96
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NMPC $100 $110 $200 $138 $133 $123
Russell 2000 $100 $109 $145 $149 $184 $208
NASDAQ Pharmaceutical $100 $ 85 $ 85 $ 74 $109 $123
</TABLE>

EMPLOYMENT AGREEMENTS

On November 28, 1993, Mr. Lepone entered into an employment agreement with
the Company (the "Lepone Employment Agreement"), pursuant to which Mr. Lepone
serves as President and Chief Executive Officer of the Company through
November 30, 1998. Under the Lepone Employment Agreement, Mr. Lepone received
a base salary of $265,000 through November 30, 1994. Thereafter, the Lepone
Employment Agreement provides that such base salary shall be increased at an
annual rate of the greater of 5% or the annual rate of inflation as described
in the Consumer Price Index "All Cities--All Consumers" prepared by the Bureau
of Labor Statistics of the United States Department of Labor, or by such
greater amount as the Company and Mr.

33
<PAGE>

Lepone may otherwise agree. For Fiscal 1996 Mr. Lepone's salary was $309,735.
Pursuant to the Lepone Employment Agreement, Mr. Lepone is entitled to receive
a cash bonus if certain performance criteria are satisfied (as discussed above
under "Report of the Compensation Committee of the Board of Directors on
Executive Compensation") ranging from 20% to 60% of his base salary. In the
event Mr. Lepone's employment is terminated without cause, he is entitled to
receive a sum equal to the compensation then due him for the balance of the
term of the Lepone Employment Agreement at the annual rate of compensation to
which he is entitled as of the date of such termination. Mr. Lepone is subject
to certain non-competition provisions during the term of his employment and,
in certain circumstances, for a period of one year subsequent to his leaving
the Company.

On January 1, 1994, Mr. LeDuc entered into an employment agreement with the
Company (the "LeDuc Employment Agreement"), pursuant to which Mr. LeDuc serves
as the Vice President of Materials Management of the Company until December
31, 1996. Under the LeDuc Employment Agreement, Mr. LeDuc receives a base
salary at an annual rate set forth in the Annual Business Plan of the Company
for such year, and, upon the achievement of certain financial performance
criteria (as discussed above under "Report of the Compensation Committee of
the Board of Directors on Executive Compensation"), a bonus in an amount of up
to 26% of his base salary in each year. In the event Mr. LeDuc's employment is
terminated without cause, Mr. LeDuc is entitled to receive the salary then due
to him for the balance of the term of the LeDuc Employment Agreement at the
annual rate of compensation to which he is entitled as of the date of such
termination. Mr. LeDuc is subject to certain non-competition provisions during
the term of his employment and, in certain circumstances, for a period of two
years subsequent to his leaving the Company.

On January 1, 1994, Mr. Zakin entered into an employment agreement with the
Company (the "Zakin Employment Agreement"), pursuant to which Mr. Zakin serves
as the Vice President of Marketing of the Company until December 31, 1997.
Under the Zakin Employment Agreement, Mr. Zakin receives a base salary at an
annual rate set forth in the Annual Business Plan of the Company for such
year, and, upon the achievement of certain financial performance criteria (as
discussed above under "Report of the Compensation Committee of the Board of
Directors on Executive Compensation"), a bonus in an amount of up to 48% of
his base salary in each year. In the event Mr. Zakin's employment is
terminated without cause, Mr. Zakin is entitled to receive the salary then due
to him for the balance of the term of the Zakin Employment Agreement at the
annual rate of compensation to which he is entitled as of the date of such
termination. Mr. Zakin is subject to certain non-competition provisions during
the term of his employment and, in certain circumstances, for a period of two
years subsequent to his leaving the Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In September 1996, the Company and MEDIQ entered into the Stock Purchase
Agreement, the terms of which are more fully described under "Proposal Number
4--Approval of the MEDIQ Stock Repurchase."

Through December 31, 1995, the Company obtained certain legal, accounting,
tax, insurance and human resource services from MEDIQ. Subsequent to December
31, 1995 the Company received only certain tax and insurance services from
MEDIQ. Costs for such services were $85,000 in fiscal 1996 and $100,000 for each
of the two preceding years. The Company believes that MEDIQ's charges for such
services are on terms no less favorable to the Company than those that could be
obtained from unaffiliated third parties for comparable services.

34
<PAGE>

PRINCIPAL AND MANAGEMENT STOCKHOLDERS

The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the Common
Stock of the Company as of November 20, 1996 by (i) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each of the Company's Directors and executive officers, (iii) each
of the named executive officers in the Summary Compensation Table and (iv) all
of the Company's executive officers and Directors as a group.

<TABLE>
<CAPTION>
SHARES
DIRECTORS, EXECUTIVE OFFICERS BENEFICIALLY PERCENT OF
AND 5% STOCKHOLDERS OWNED(1) CLASS(2)
- ----------------------------- ------------ ----------
<S> <C> <C>
MEDIQ Investment Services, Inc.(3)..................... 4,037,258 46.41%
c/o MEDIQ Incorporated
One MEDIQ Plaza
Pennsauken, New Jersey 08110
Warburg, Pincus Counsellors, Inc.(4)................... 586,100 6.74%
466 Lexington Avenue
New York, NY 10017
Robert Fleming Inc.(5)................................. 506,400 5.82%
320 Park Avenue, 11th Floor
New York, NY 10022
Robert F. Burns(6)..................................... 4,000 *
Donald M. Gleklen...................................... 37,000 *
Bernard J. Korman...................................... 105,539 1.21%
Donald E. Lepone(7).................................... 546,345 6.21%
Gary A. LeDuc(8)....................................... 126,800 1.45%
John J. Manheimer(9)................................... 39,589 *
Frederick W. McCarthy.................................. 0 *
James W. McGrath, Jr.(10).............................. 8,259 *
Dennis M. Newnham...................................... 27,000 *
Dennis M. Nolan........................................ 0 --
Michael F. Sandler(11)................................. 21,900 *
Richard C. Zakin(12)................................... 103,247 1.18%
All directors and executive officers as a group (12
persons).............................................. 1,037,659 11.48%
</TABLE>
- --------
* Less than 1%.
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Exchange Act. Accordingly, a beneficial owner of a security includes any
person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares the power to vote
such security or the power to dispose of such security. The amounts set
forth above as beneficially owned include shares owned, if any, by
spouses and relatives living in the same home as to which beneficial
ownership may be disclaimed. The amounts set forth as beneficially owned
include shares of Common Stock which such persons had the right to
acquire within 60 days of November 20, 1996, pursuant to stock options.
(2) Percentages are calculated on the basis of 8,662,272 shares of Common
Stock outstanding of November 20, 1996.
(3) The above information is based on copies of a statement on Schedule 13D
filed with the SEC on August 22, 1991, which indicates that MEDIQ
Investment Services, Inc. has shared voting and dispositive power with
respect to all 4,037,258 shares.

35
<PAGE>

(4) The above information is based on copies of a statement on Schedule 13G
filed with the SEC on February 6, 1996, which indicates that Warburg,
Pincus Counsellors, Inc. has sole voting power with respect to 430,100
shares, shared voting power with respect to 81,100 shares and sole
dispositive power with respect to all 586,100 shares.
(5) The above information is based on copies of a statement on Schedule 13G
filed with the SEC on February 12, 1996, which indicates that Robert
Fleming, Inc. has sole voting and dispositive power with respect to all
506,400 shares.
(6) Represents 4,000 shares deemed to be beneficially owed by Mr. Burns which
are subject to options previously granted pursuant to the 1988 Option
Plan.
(7) Includes 100,000 shares deemed to be beneficially owned by Mr. Lepone
which are subject to options previously granted pursuant to the 1988
Option Plan. Does not include an aggregate of 200,000 shares subject to
options which vest upon the satisfaction of certain stock performance
criteria which have not been met to date.
(8) Includes 20,000 shares deemed to be beneficially owned by Mr. LeDuc which
are subject to options previously granted pursuant to the 1988 Option
Plan.
(9) Includes 24,000 shares deemed to be beneficially owned by Mr. Manheimer
which are subject to options previously granted pursuant to the 1988
Option Plan.
(10) Includes 8,000 shares deemed to be beneficially owned by Mr. McGrath
which are subject to options previously granted pursuant to the 1988
Option Plan.
(11) Mr. Sandler is also an officer, Director and stockholder of MEDIQ. Any
shares which Mr. Sandler may be deemed to beneficially own by virtue of
these positions have not been included. Mr. Sandler disclaims any such
beneficial ownership.
(12) Includes 24,000 shares deemed to be beneficially owned by Mr. Zakin which
are subject to options previously granted pursuant to the 1988 Option
Plan.

36
<PAGE>

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

The Company's executive officers and Directors and beneficial owners of more
than 10% of its Common Stock are required under Section 16(a) of the Exchange
Act to file reports of ownership and changes in ownership with the SEC. Copies
of those reports must also be furnished to the Company. Based solely on a
review of the copies of reports furnished to the Company, and written
representations that no other reports were required, the Company believes that
during Fiscal 1996 no person who was a Director, officer or greater than 10%
beneficial owner of the Company's Common Stock failed to file on a timely
basis all reports required by Section 16(a).

EXPENSES OF SOLICITATION

The Company will pay the entire expense of soliciting proxies for the Annual
Meeting. In addition to solicitations by mail, certain Directors, officers and
regular employees of the Company (who will receive no compensation for their
services other than their regular compensation) may solicit proxies by
telephone, telegram or personal interview. Banks, brokerage houses,
custodians, nominees and other fiduciaries have been requested to forward
proxy materials to the beneficial owners of shares held of record by them and
such custodians will be reimbursed for their expenses. In addition, D.F. King
& Co., Inc. has been engaged by the Company to assist in the solicitation of
proxies and will receive a fee of $7,500 plus expenses. All costs incurred
with respect to the Annual Meeting will be borne by the Company.

SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING

Stockholder proposals intended to be presented at the 1997 annual meeting
must be received by the Company on or before July 20, 1997 in order to be
considered for inclusion in the Company's proxy statement and form of proxy
for that meeting. Any such proposal should be mailed to: Secretary, NutraMax
Products, Inc., 9 Blackburn Drive, Gloucester, Massachusetts 01930.

INDEPENDENT ACCOUNTANTS

The Company has not made a decision as to the independent public accountants
to be selected as the auditors of the financial statements of the Company and
its subsidiaries for the fiscal year ending September 27, 1997. The firm of
Deloitte & Touche LLP has served as the Company's independent public
accountants for Fiscal 1995 and Fiscal 1996 and has also served as the
accountants for certain of its subsidiaries. A representative of Deloitte &
Touche LLP will be present at the Annual Meeting and will be given the
opportunity to make a statement if he or she so desires. The representative
will be available to respond to appropriate questions.

OTHER MATTERS

The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are duly presented, proxies will be voted in
accordance with the best judgment of the proxy holders.

37
<PAGE>

EXHIBIT A

NUTRAMAX PRODUCTS, INC.
1996 STOCK OPTION PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

The name of the plan is the NutraMax Products, Inc. 1996 Stock Option Plan
(the "Plan"). The purpose of the Plan is to encourage and enable the officers,
employees, Directors and other key persons of NutraMax Products, Inc. (the
"Company") and its Subsidiaries upon whose judgment, initiative and efforts
the Company largely depends for the successful conduct of its business to
acquire a proprietary interest in the Company. It is anticipated that
providing such persons with a direct stake in the Company's welfare will
assure a closer identification of their interests with those of the Company,
thereby stimulating their efforts on the Company's behalf and strengthening
their desire to remain with the Company.

The following terms shall be defined as set forth below:

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

"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified
Stock Options, Stock Appreciation Rights, Restricted Stock Awards and
Unrestricted Stock Awards.

"Board" means the Board of Directors of the Company.

"Change of Control" is defined in Section 13.

"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

"Committee" means the Committee of the Board referred to in Section 2.

"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 15.

"Fair Market Value" on any given date means the last reported sale price at
which Stock is traded on such date or, if no Stock is traded on such date, the
next preceding date on which Stock was traded, as reflected on the principal
stock exchange or, if applicable, any other national stock exchange on which
the Stock is traded or admitted to trading.

"Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.

"Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.

"Non-Qualified Stock Option" means any Stock Option that is not an Incentive
Stock Option.

"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.

"Restricted Stock Award" means Awards granted pursuant to Section 7.

"Stock" means the Common Stock, par value $.001 per share, of the Company,
subject to adjustments pursuant to Section 3.

"Stock Appreciation Right" means any Award granted pursuant to Section 6.

A-1
<PAGE>

"Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities, beginning with the
Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain.

"Unrestricted Stock Award" means any Award granted pursuant to Section 8.

SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT
PARTICIPANTS AND DETERMINE AWARDS

(a) Committee. The Plan shall be administered by either the Board or a
committee of not less than two Independent Directors (in either case, the
"Administrator"). Each member of the Committee shall be an "outside director"
within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder and a "non-employee director" within the meaning of
Rule 16b-3(b)(3)(i) promulgated under the Act, or any successor definition
under said rule.

(b) Powers of Administrator. The Administrator shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

(i) to select the officers, employees and key persons of the Company
and its Subsidiaries to whom Awards may from time to time be granted;

(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards and Unrestricted Stock
Awards, or any combination of the foregoing, granted to any one or more
participants;

(iii) to determine the number of shares of Stock to be covered by any
Award;

(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of
the Plan, of any Award, which terms and conditions may differ among
individual Awards and participants, and to approve the form of written
instruments evidencing the Awards;

(v) to accelerate at any time the exercisability or vesting of all or
any portion of any Award;

(vi) subject to the provisions of Section 5(a)(iii), to extend at any
time the period in which Stock Options may be exercised;

(vii) to determine at any time whether, to what extent, and under
what circumstances Stock and other amounts payable with respect to an
Award shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or
credit amounts constituting interest (at rates determined by the
Administrator) or dividends or deemed dividends on such deferrals; and

(viii) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in
connection with the Plan; and to otherwise supervise the administration
of the Plan.

All decisions and interpretations of the Administrator shall be binding on
all persons, including the Company and Plan participants.

(c) Delegation of Authority to Grant Awards. The Administrator, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator's authority and duties with respect to Awards,
including the granting thereof, to individuals who are not subject to the
reporting and other provisions of Section 16 of the Act or "covered employees"
within the meaning of Section 162(m) of the Code. The

A-2
<PAGE>

Administrator may revoke or amend the terms of a delegation at any time but
such action shall not invalidate any prior actions of the Administrator's
delegate or delegates that were consistent with the terms of the Plan.

SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

(a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 470,000 shares. For purposes of
this limitation, the shares of Stock underlying any Awards which are
forfeited, canceled, reacquired by the Company, satisfied without the issuance
of Stock or otherwise terminated (other than by exercise) shall be added back
to the shares of Stock available for issuance under the Plan. Subject to such
overall limitation, shares of Stock may be issued up to such maximum number
pursuant to any type or types of Award; provided, however, that Stock Options
or Stock Appreciation Rights with respect to no more than 150,000 shares of
Stock may be granted to any one individual participant during any twelve-month
calendar period. The shares available for issuance under the Plan may be
authorized but unissued shares of Stock or shares of Stock reacquired by the
Company. Upon the exercise of a Stock Appreciation Right settled in shares of
Stock, the right to purchase an equal number of shares of Stock covered by a
related Stock Option, if any, shall be deemed to have been surrendered and
will no longer be exercisable, and said number of shares of Stock shall no
longer be available under the Plan.

(b) Recapitalizations. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar transaction, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company, or additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Stock or other
securities, the Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the
Plan, (ii) the number of Stock Options or Stock Appreciation Rights that can
be granted to any one individual participant, (iii) the number and kind of
shares or other securities subject to any then outstanding Awards under the
Plan, and (iv) the price for each share subject to any then outstanding Stock
Options and Stock Appreciation Rights under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by the number of
Stock Options and Stock Appreciation Rights) as to which such Stock Options
and Stock Appreciation Rights remain exercisable. The adjustment by the
Administrator shall be final, binding and conclusive. No fractional shares of
Stock shall be issued under the Plan resulting from any such adjustment, but
the Administrator in its discretion may make a cash payment in lieu of
fractional shares.

(c) Mergers. Upon consummation of a consolidation or merger or sale of all
or substantially all of the assets of the Company in which outstanding shares
of Stock are exchanged for securities, cash or other property of an unrelated
corporation or business entity or in the event of a liquidation of the Company
(in each case, a "Transaction"), the Board, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding Stock Options
and Stock Appreciation Rights: (i) provide that such Stock Options shall be
assumed or equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), (ii) upon written notice to
the optionees, provide that all unexercised Stock Options and Stock
Appreciation Rights will terminate immediately prior to the consummation of
the Transaction unless exercised by the optionee within a specified period
following the date of such notice, and/or (iii) in the event of a business
combination under the terms of which holders of the Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the business combination, make or provide for a cash payment to the optionees
equal to the difference between (A) the value (as determined by the
Administrator) of the consideration payable per share of Stock pursuant to the
business combination (the "Merger Price") times the number of shares of Stock
subject to such outstanding Stock Options and Stock Appreciation Rights (to
the extent then exercisable at prices not in excess of the Merger Price) and
(B) the aggregate exercise price of all such outstanding Stock Options and
Stock Appreciation Rights in exchange for the termination of such Stock
Options and Stock Appreciation Rights. In the event Stock Options and Stock
Appreciation Rights will terminate upon the consummation of the Transaction,
each optionee shall be

A-3
<PAGE>

permitted, within a specified period determined by the Administrator, to
exercise all non-vested Stock Options and Stock Appreciation Rights, subject
to the consummation of the Transaction.

(d) Substitute Awards. The Administrator may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result
of a merger or consolidation of the employing corporation with the Company or
a Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the
substitute awards be granted on such terms and conditions as the Administrator
considers appropriate in the circumstances.

SECTION 4. ELIGIBILITY

Participants in the Plan will be such full or part-time officers and other
employees, Independent Directors and key persons of the Company and its
Subsidiaries who are responsible for or contribute to the management, growth
or profitability of the Company and its Subsidiaries as are selected from time
to time by the Administrator in its sole discretion.

SECTION 5. STOCK OPTIONS

Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.

Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. To the extent that any
Option does not qualify as an Incentive Stock Option, it shall be deemed a
Non-Qualified Stock Option.

No Incentive Stock Option shall be granted under the Plan after November 20,
2006.

(a) Stock Options Granted to Employees and Key Persons. The Administrator in
its discretion may grant Stock Options to eligible employees and key persons
of the Company or any Subsidiary. Stock Options granted pursuant to this
Section 5(a) shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms
of the Plan, as the Administrator shall deem desirable:

(i) Exercise Price. The exercise price per share for the Stock covered by
a Stock Option granted pursuant to this Section 5(a) shall be determined by
the Administrator at the time of grant but shall not be less than 100% of
the Fair Market Value on the date of grant in the case of Incentive Stock
Options, or 85% of the Fair Market Value on the date of grant, in the case
of Non-Qualified Stock Options. Notwithstanding the foregoing, with respect
to Non-Qualified Stock Options which are granted in lieu of cash
compensation, the exercise price per share shall not be less than 50% of
the Fair Market Value on the date of grant. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation and an Incentive Stock
Option is granted to such employee, the option price of such Incentive
Stock Option shall be not less than 110% of the Fair Market Value on the
grant date.

(ii) Grant of Discount Options in Lieu of Cash Compensation. Upon the
request of a participant and with the consent of the Administrator, such
participant may elect each calendar year to receive a Non-Qualified Stock
Option in lieu of any compensation to which he may become entitled during
the following calendar year pursuant to any other plan or arrangement of
the Company, but only if such participant makes an advance election to
waive receipt of all or a portion of such cash compensation. Such election
shall be made on or before the date specified by the Administrator. A Non-
Qualified Stock Option shall be granted to each participant who made such
an election on the date the waived compensation would otherwise be paid.
The exercise price per share shall be determined by the Administrator but
shall not be less than 50% of the Fair Market Value of the Stock on the
date the Stock Option is granted. The number of shares of

A-4
<PAGE>

Stock subject to the Stock Option shall be determined by dividing the
amount of the waived cash compensation by the difference between the Fair
Market Value of the Stock on the date the Stock Option is granted and the
exercise price per Stock Option. The Stock Option shall be granted for
whole number of shares so determined; the value of any fractional share
shall be paid in cash.

(iii) Option Term. The term of each Stock Option shall be fixed by the
Administrator, but no Incentive Stock Option shall be exercisable more than
ten years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation and an Incentive Stock
Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.

(iv) Exercisability; Rights of a Stockholder. Stock Options shall become
vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Administrator at or after the
grant date; provided, however, that Stock Options granted in lieu of
compensation shall be exercisable in full as of the grant date. The
Administrator may at any time accelerate the exercisability of all or any
portion of any Stock Option. An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of a Stock Option
and not as to unexercised Stock Options.

(v) Method of Exercise. Stock Options may be exercised in whole or in
part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made
by one or more of the following methods:

(A) In cash, by certified or bank check or other instrument
acceptable to the Administrator;

(B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been beneficially
owned by the optionee for at least six months, if permitted by the
Administrator in its discretion. Such surrendered shares shall be
valued at Fair Market Value on the exercise date;

(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event
the optionee chooses to pay the purchase price as so provided, the
optionee and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Administrator shall prescribe as a condition of such payment procedure;
or

(D) By the optionee delivering to the Company a promissory note if
the Board has authorized the loan of funds to the optionee for the
purpose of enabling or assisting the optionee to effect the exercise of
his Stock Option; provided that at least so much of the exercise price
as represents the par value of the Stock shall be paid other than with
a promissory note.

Payment instruments will be received subject to collection. The delivery
of certificates representing the shares of Stock to be purchased pursuant
to the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws.

(vi) Annual Limit on Incentive Stock Options. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its parent and subsidiary
corporations become exercisable for the first time by an optionee during
any calendar year shall not exceed $100,000. To the extent that any Stock
Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.

(b) Stock Options Granted to Independent Directors. The Administrator, in
its discretion, may grant Non-Qualified Stock Options to Independent
Directors.

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(i) Exercise Price. The exercise price per share for the Stock covered by
a Stock Option granted under this Section 5(b) shall be equal to the Fair
Market Value of the Stock on the date the Stock Option is granted.

(ii) Exercise; Termination. Stock Options shall become vested and
exercisable at such time or times, whether or not in installments, as shall
be determined by the Administrator at or after the grant date. The
Administrator may at any time accelerate the exercisability of all or any
portion of any Stock Option. An Option issued under this Section 5(b) shall
not be exercisable after the expiration of ten years from the date of
grant. An optionee shall have the rights of a stockholder only as to shares
acquired upon the exercise of a Stock Option and not as to unexercised
Stock Options.

(iii) Method of Exercise. Payment of the full purchase price of the
shares to be purchased may be made by one or more of the methods specified
in Section 5(a)(v).

(c) Non-transferability of Options. No Stock Option shall be transferable by
the optionee otherwise than by will or by the laws of descent and distribution
and all Stock Options shall be exercisable, during the optionee's lifetime,
only by the optionee. Notwithstanding the foregoing, the Administrator may
permit the optionee to transfer, without consideration for the transfer, his
Non-Qualified Stock Options to members of his immediate family, to trusts for
the benefit of such family members to partnerships in which such family
members are the only partners, or to charitable organizations, provided that
the transferee agrees in writing with the Company to be bound by all of the
terms and conditions of this Plan and the applicable option agreement.

SECTION 6. STOCK APPRECIATION RIGHTS.

(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
Award entitling the recipient to receive an amount in cash or shares of Stock
or a combination thereof having a value equal to the excess of the Fair Market
Value of the Stock on the date of exercise over the exercise price per Stock
Appreciation Right set by the Administrator at the time of grant, which price
shall not be less than 85% of the Fair Market Value of the Stock on the date
of grant (or over the option exercise price per share, if the Stock
Appreciation Right was granted in tandem with a Stock Option) multiplied by
the number of shares of Stock with respect to which the Stock Appreciation
Right shall have been exercised, with the Administrator having the right to
determine the form of payment.

(b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation
Rights may be granted by the Administrator in tandem with, or independently
of, any Stock Option granted pursuant to Section 5 of the Plan. In the case of
a Stock Appreciation Right granted in tandem with a Non-Qualified Stock
Option, such Stock Appreciation Right may be granted either at or after the
time of the grant of such Option. In the case of a Stock Appreciation Right
granted in tandem with an Incentive Stock Option, such Stock Appreciation
Right may be granted only at the time of the grant of the Option.

A Stock Appreciation Right or applicable portion thereof granted in tandem
with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.

(c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation
Rights shall be subject to such terms and conditions as shall be determined
from time to time by the Administrator, subject to the following:

(i) Stock Appreciation Rights granted in tandem with Options shall be
exercisable at such time or times and to the extent that the related Stock
Options shall be exercisable.

(ii) Upon exercise of a Stock Appreciation Right, the applicable portion
of any related Option shall be surrendered.

(iii) All Stock Appreciation Rights shall be exercisable during the
participant's lifetime only by the participant or the participant's legal
representative.

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SECTION 7. RESTRICTED STOCK AWARDS

(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an Award
entitling the recipient to acquire, at par value or such other purchase price
determined by the Administrator, shares of Stock subject to such restrictions
and conditions as the Administrator may determine at the time of grant
("Restricted Stock"). Conditions may be based on continuing employment (or
other business relationship) and/or achievement of pre-established performance
goals and objectives.

(b) Rights as a Stockholder. Upon execution of a written instrument setting
forth the Restricted Stock Award and paying any applicable purchase price, a
participant shall have the rights of a stockholder with respect to the voting
of the Restricted Stock, subject to such conditions contained in the written
instrument evidencing the Restricted Stock Award. Unless the Administrator
shall otherwise determine, certificates evidencing the Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested
as provided in Section 7(d) below.

(c) Restrictions. Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the written instrument evidencing the Restricted Stock Award. If
a participant's employment (or other business relationship) with the Company
and its Subsidiaries terminates for any reason, the Company shall have the
right to repurchase Restricted Stock with respect to which conditions have not
lapsed at their purchase price, from the participant or the participant's
legal representative.

(d) Vesting of Restricted Stock. The Administrator at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-
transferability of the Restricted Stock and the Company's right of repurchase
or forfeiture shall lapse. Subsequent to such date or dates and/or the
attainment of such pre-established performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no longer
be Restricted Stock and shall be deemed "vested." Except as may otherwise be
provided by the Administrator at any time, a participant's rights in any
shares of Restricted Stock that have not vested shall automatically terminate
upon the participant's termination of employment (or other business
relationship) with the Company and its Subsidiaries and such shares shall
either be subject to the Company's right of repurchase as provided in Section
7(c) above.

(e) Waiver, Deferral and Reinvestment of Dividends. The written instrument
evidencing the Restricted Stock Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Stock.

SECTION 8. UNRESTRICTED STOCK AWARDS

(a) Grant or Sale of Unrestricted Stock. The Administrator may, in its sole
discretion, grant (or sell at a purchase price determined by the
Administrator) an Unrestricted Stock Award to any participant pursuant to
which such participant may receive shares of Stock free of any restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be
granted or sold as described in the preceding sentence in respect of past
services or other valid consideration, or in lieu of any cash compensation due
to such participant.

(b) Elections to Receive Unrestricted Stock In Lieu of Compensation. Upon
the request of a participant and with the consent of the Administrator, each
such participant may, pursuant to an advance written election delivered to the
Company no later than the date specified by the Administrator, receive a
portion of the cash compensation otherwise due to such participant in the form
of shares of Unrestricted Stock either currently or on a deferred basis.

(c) Restrictions on Transfers. The right to receive shares of Unrestricted
Stock on a deferred basis may not be sold, assigned, transferred, pledged or
otherwise encumbered, other than by will or the laws of descent and
distribution.

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SECTION 9. TAX WITHHOLDING

(a) Payment by Participant. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld with respect to such
income. The Company and its Subsidiaries shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant.

(b) Payment in Stock. Subject to approval by the Administrator, a
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the participant with an aggregate Fair Market Value (as of
the date the withholding is effected) that would satisfy the withholding
amount due.

SECTION 10. TRANSFER, LEAVE OF ABSENCE, ETC.

For purposes of the Plan, the following events shall not be deemed a
termination of employment:

(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or

(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to re-
employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.

SECTION 11. AMENDMENTS AND TERMINATION

The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award (or
provide substitute Awards at the same or reduced exercise or purchase price or
with no exercise or purchase price in a manner not inconsistent with the terms
of the Plan), but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Award if it were then initially
granted under this Plan) for the purpose of satisfying changes in law or for
any other lawful purpose, but no such action shall adversely affect rights
under any outstanding Award without the holder's consent. If and to the extent
determined by the Administrator to be required by the Act to ensure that
Incentive Stock Options granted under the Plan are qualified under Section 422
of the Code, Plan amendments shall be subject to approval by the Company
stockholders entitled to vote at a meeting of stockholders.

SECTION 12. STATUS OF PLAN

With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a
general creditor of the Company unless the Administrator shall otherwise
expressly determine in connection with any Award or Awards. In its sole
discretion, the Administrator may authorize the creation of trusts or other
arrangements to meet the Company's obligations to deliver Stock or make
payments with respect to Awards hereunder, provided that the existence of such
trusts or other arrangements is consistent with the foregoing sentence.

SECTION 13. CHANGE OF CONTROL PROVISIONS

Upon the occurrence of a Change of Control as defined in this Section 13:

(a) Each outstanding Stock Option and Stock Appreciation Right shall
automatically become fully exercisable.

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(b) Each Restricted Stock Award shall be subject to such terms, if any, with
respect to a Change of Control as have been provided by the Administrator in
connection with such Award.

(i) any "person," as such term is used in Sections 13(d) and 14(d) of the
Act (other than the Company, any of its Subsidiaries, or any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan or trust of the Company or any of its Subsidiaries), together
with all "affiliates" and "associates" (as such terms are defined in Rule
12b-2 under the Act) of such person, shall become the "beneficial owner"
(as such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 25% or more of either
(A) the combined voting power of the Company's then outstanding securities
having the right to vote in an election of the Company's Board of Directors
("Voting Securities") or (B) the then outstanding shares of Stock of the
Company (in either such case other than as a result of an acquisition of
securities directly from the Company); or

(ii) persons who, as of the Effective Date, constitute the Company's
Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority
of the Board, provided that any person becoming a director of the Company
subsequent to the Effective Date whose election or nomination for election
was approved by a vote of at least a majority of the Incumbent Directors
shall, for purposes of this Plan, be considered an Incumbent Director; or

(iii) the stockholders of the Company shall approve (A) any consolidation
or merger of the Company or any Subsidiary where the shareholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly,
shares representing in the aggregate 80% or more of the voting shares of
the corporation issuing cash or securities in the consolidation or merger
(or of its ultimate parent corporation, if any), (B) any sale, lease,
exchange or other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Company or (C) any plan or proposal
for the liquidation or dissolution of the Company.

Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Stock or other Voting Securities outstanding, increases (x) the
proportionate number of shares of Stock beneficially owned by any person to
25% or more of the shares of Stock then outstanding or (y) the proportionate
voting power represented by the Voting Securities beneficially owned by any
person to 25% or more of the combined voting power of all then outstanding
Voting Securities; provided, however, that if any person referred to in clause
(x) or (y) of this sentence shall thereafter become the beneficial owner of
any additional shares of Stock or other Voting Securities (other than pursuant
to a stock split, stock dividend, or similar transaction), then a "Change of
Control" shall be deemed to have occurred for purposes of the foregoing clause
(i).

SECTION 14. GENERAL PROVISIONS

(a) No Distribution; Compliance with Legal Requirements. The Administrator
may require each person acquiring Stock pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.

No shares of Stock shall be issued pursuant to an Award until all applicable
securities law and other legal and stock exchange or similar requirements have
been satisfied. The Administrator may require the placing of such stop-orders
and restrictive legends on certificates for Stock and Awards as it deems
appropriate.

(b) Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when
the Company or a stock transfer agent of the Company shall have mailed

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<PAGE>

such certificates in the United States mail, addressed to the participant, at
the participant's last known address on file with the Company.

(c) Other Compensation Arrangements; No Employment Rights. Nothing contained
in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of this Plan and the grant of Awards do not confer upon any employee any right
to continued employment with the Company or any Subsidiary.

SECTION 15. EFFECTIVE DATE OF PLAN

This Plan shall become effective upon approval by the holders of a majority
of the shares of Stock of the Company present or represented and entitled to
vote at a meeting of stockholders. Subject to such approval by the
stockholders and to the requirement that no Stock may be issued hereunder
prior to such approval, Stock Options and other Awards may be granted
hereunder on and after adoption of this Plan by the Board.

SECTION 16. GOVERNING LAW

This Plan shall be governed by Delaware law except to the extent such law is
preempted by federal law.

DATE APPROVED BY BOARD OF DIRECTORS: NOVEMBER 20, 1996

DATE APPROVED BY STOCKHOLDERS:

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EXHIBIT B

WASSERSTEIN PERELLA & CO., INC.
31 WEST 52ND STREET
NEW YORK, NEW YORK 10019
WASSERSTEIN TELEPHONE 212-969-2700
PERELLA & CO FAX 212-969-7836

NOVEMBER 20, 1996

Special Committee of the Board of Directors
NutraMax Products, Inc.
9 Blackburn Drive
Gloucester, MA 01930

Members of the Special Committee of the Board of Directors (the "Special
Committee"):

You have asked us to advise you with respect to the fairness, from a financial
point of view, to NutraMax Products, Inc. (the "Company") and to the holders
(other than MEDIQ Incorporated ("MEDIQ"), MEDIQ Investment Services, Inc.
("MIS" and, together with MEDIQ, the "Sellers"), and their respective
affiliates) of the Company's Common Stock, par value $.001 per share (the
"Common Stock"), of the consideration to be paid by the Company to the Sellers
pursuant to the terms of that certain Stock Purchase Agreement, dated as of
September 18, 1996, as amended and restated by the Amended and Restated Stock
Purchase Agreement, dated as of November 20, 1996 (as so amended and restated,
the "Stock Purchase Agreement"), by and among the Sellers and the Company.

The Stock Purchase Agreement provides, among other things, that (i) at the
closing (the "Closing") contemplated by the Stock Purchase Agreement, the
Company will purchase (the "Stock Repurchase") up to 4,037,258 shares (the
"Repurchased Shares") of Common Stock from the Sellers for a purchase price of
$9.00 per share, or $36,335,332 in the aggregate for all the Repurchased
Shares (the "Consideration"), (ii) at the Closing the Company will purchase
2,218,107 shares of Common Stock (which includes 435,751 shares of Common
Stock to be received by MEDIQ following cancellation of Debentures (as defined
below) it has repurchased from September 18, 1996 through the date hereof), or
such greater number of Repurchased Shares being delivered at such Closing by
virtue of their release from escrow (the "Escrow") in accordance with the
terms of an indenture (the "Indenture") relating to MEDIQ's 7 1/2%
Exchangeable Subordinated Debentures due 2003 (the "Debentures") and an escrow
agreement relating thereto (the "Escrow Agreement"), and will pay the Sellers
an amount equal to the product of $9.00 and such number of delivered shares,
(iii) the Company will issue a promissory note (the "Note") in favor of MIS in
an original principal amount equal to the product of $9.00 and either (A) the
remaining 1,819,151 Repurchased Shares held in Escrow as at the date hereof
(which number excludes 435,751 shares of Common Stock to be delivered at
Closing following cancellation of Debentures repurchased by MEDIQ between
September 18, 1996 and the date hereof) or (B) such lesser number of
Repurchased Shares remaining in Escrow at the Closing (the "Escrowed Shares"),
(iv) the Escrowed Shares will continue to remain in Escrow subject either (A)
to release and transfer in favor of the Company as and to the extent that
payments of principal are made by MEDIQ on the Debentures or (B) to release
and transfer in favor of holders of Debentures as and to the extent that such
holders exchange the principal amount of their Debentures for Escrowed Shares,
(v) the principal amount of the Note will become due as and to the extent that
Escrowed Shares are released to the Company from Escrow and remaining unpaid
principal amounts will bear interest at 7 1/2% per annum, subject to reduction
to 5% per annum with respect to principal outstanding after 18 months
following the Closing, 4% per annum with respect to principal outstanding
after 30 months following the Closing and 3% per annum with respect to
principal outstanding after 42 months following the Closing, (vi)

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<PAGE>

as and to the extent that Debentures are exchanged for shares of Common Stock,
the principal amount of the Note will be reduced by the sum of (A) $9.00 per
Escrowed Share released to such holder of Debentures and (B) the amount, if
any, of the difference between (1) $1,000 divided by the then current exchange
rate under the Indenture and (2) $9.00 (the "Excess Cash Amount"), provided
that the Company may elect to receive the Excess Cash Amount in cash rather
than by way of reduction in the principal of the Note, (vii) the Company's
obligations to the Sellers under the Note will be secured by a letter of
credit reasonably acceptable in form and substance to the Sellers, (viii) any
dividends or other distributions on the Escrowed Shares (other than those
inuring to the holders of the Debentures under the terms of the Indenture)
will be paid over to the Company until such Escrowed Shares are released from
Escrow, and (ix) at any meeting of stockholders of the Company or in
connection with a written consent of the Company's stockholders, the Sellers
shall deliver to the Company an irrevocable proxy authorizing the Board of
Directors of the Company to vote all of the Escrowed Shares in the same
proportion as the votes of the holders of all other shares of Common Stock of
the Company voted at any such meeting or pursuant to any such consent, which
obligations shall terminate only upon an event of default under the Note. The
Company has informed us that it intends to finance the payment of the
Consideration by (i) refinancing and increasing its senior debt up to an
aggregate principal amount of $60 million (which shall include the financing
required to obtain the aforementioned letter of credit), and has received a
commitment from a lender to provide such financing (the "Senior Debt
Commitment"), and (ii) obtaining subordinated debt financing in an aggregate
principal amount of $15 million from a lender (the "Subordinated Debt
Commitment"), the terms of which would include the granting of warrants to
purchase an aggregate of 4.5% of the Common Stock, on a fully diluted basis,
taking into account the contemplated retirement of the Repurchased Shares
after the Stock Repurchase.

In connection with rendering our opinion, we have:

. reviewed the Stock Purchase Agreement, the Indenture, the Escrow
Agreement and form of Debentures, the form of the Note, the Senior Debt
Commitment, and the Subordinated Debt Commitment;

. reviewed certain publicly available business and financial information
related to the Company of recent years and interim periods to date;

. reviewed certain internal financial and operating information and
analyses of the Company, and reviewed projected financial information
consisting of the Company's 1996 budget and updates thereof and the
Company's preliminary 1997 budget (collectively, the "Budget"), in each
case prepared by the Company and provided to us for the purposes of our
analysis, and we have met with management of the Company to review and
discuss such information and, among other matters, the Company's
business, operations, assets, financial condition and prospects;

. reviewed certain publicly available historical stock prices and trading
volumes of the Common Stock;

. compared certain publicly available financial and stock market data of
the Company with similar data for certain other publicly traded companies
which we believe may be generally comparable, in certain respects, to the
Company;

. reviewed and considered the financial terms of certain recent
acquisitions and business combination transactions in the private label
health and beauty aids and OTC pharmaceutical industries specifically,
and in other industries generally; and

. performed such other studies, analyses and investigations as we
considered appropriate.

In our review and analysis and in formulating our opinion, we have assumed and
relied upon the accuracy and completeness of all the financial and other
information provided to or discussed with us or publicly available, and we
have not assumed any responsibility for independent verification of any of
such information. We have also relied upon the reasonableness and accuracy of
the analyses and the Budget provided to us and we have assumed, with your
consent, that such analyses and Budget provided to us were reasonably prepared
in good faith and on bases reflecting the best currently available judgments
and estimates of the Company's management, and we express no opinion with
respect to such analyses and Budget or the assumptions upon which they are
based. In addition, we have not reviewed any of the books and records of the
Company or assumed any

B-2
<PAGE>

responsibility for conducting a physical inspection of the properties or
facilities of the Company, or for making or obtaining an independent valuation
or appraisal of the assets or liabilities of the Company, and we have not been
furnished any such valuation or appraisal. Our opinion is necessarily based on
economic and market conditions and other circumstances as they exist and can
be evaluated by us as of the date hereof. For purposes of this opinion, we
have assumed that the Stock Purchase Agreement will not be amended in any
material respect from the final conformed copy provided to us.

As you are aware, we have acted as financial advisor to the Special Committee
in connection with the strategic evaluation of the Company for which you
engaged us in June 1995 and have so acted on a continuing basis, leading up
to, and including, the proposed Stock Repurchase, and we will receive a fee
for our services, a significant portion of which is contingent upon
consummation of the Stock Repurchase. In the course of performing our services
as financial advisor to the Special Committee, we have reviewed the financial
terms of other proposed transactions between the Company and MEDIQ as well as
among the Company and other third parties. In rendering this opinion we have
not considered the financial terms of such other proposed transactions nor
have we compared the financial terms of such transactions with those of the
Stock Repurchase. In connection with our review of the terms of the financing
arrangements proposed to be entered into by the Company to finance the Stock
Repurchase, we have only reviewed the terms of the Senior Debt Commitment and
the Subordinated Debt Commitment and, accordingly, the terms contained in the
definitive agreements relating to such financing could affect our opinion. In
the ordinary course of our business, we may actively trade the debt and equity
securities of the Company and MEDIQ for our own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position
in such securities.

It is understood that this letter is solely for the benefit and use of the
Special Committee in its consideration of the Stock Repurchase and may not be
used for any other purpose, relied upon by any other person or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose without our prior written consent. Notwithstanding the foregoing, with
our prior written consent, the Company may set forth in full, or quote or
refer to, this letter in any proxy statement, information statement,
prospectus, registration statement or tender or exchange offer materials
required to be filed or distributed by the Company relating to the Stock
Repurchase. This letter does not constitute an opinion or recommendation to
any holder of shares of Common Stock as to how such holder should vote with
respect to the Stock Repurchase, or as to the price at which the Common Stock
or any other security of the Company may trade upon consummation of the Stock
Repurchase or thereafter, and should not be relied upon by any such holder as
such.

Based upon and subject to the foregoing, including the various assumptions and
limitations set forth herein, it is our opinion that, as of the date hereof,
the Consideration to be paid by the Company to the Sellers pursuant to the
Stock Purchase Agreement is fair to the Company and to the holders of the
Common Stock (other than the Sellers and their respective affiliates) from a
financial point of view.

Very truly yours,

/s/ Wasserstein Perella & Co., Inc.

WASSERSTEIN PERELLA & CO., INC.

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EXHIBIT C

AMENDED AND RESTATED STOCK PURCHASE AGREEMENT

This AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, dated as of November 20,
1996 (the "Agreement"), among MEDIQ Incorporated, a Delaware corporation
("MEDIQ"), MEDIQ Investment Services, Inc., a Delaware corporation ("MIS" and
together with MEDIQ, collectively the "Seller"), and NutraMax Products, Inc.,
a Delaware corporation (the "Company"), amends and restates in its entirety
the Stock Purchase Agreement dated September 18, 1996, by and between Seller
and the Company.

W I T N E S S E T H:

WHEREAS, Seller owns 4,037,258 shares of Common Stock of the Company (the
"NutraMax Shares"); and

WHEREAS, as of the date hereof, 2,254,902 of the NutraMax Shares are held in
escrow in support of MEDIQ's 7 1/2% Subordinated Debentures due 2003 (the
"Bonds") pursuant to that certain Indenture dated as of July 30, 1993 between
MEDIQ and First Fidelity Bank, N.A., Pennsylvania (the "Indenture") and that
certain Escrow Agreement dated July 30, 1993 among MEDIQ, MIS and First
Fidelity Bank, N.A., Pennsylvania (the "Escrow Agreement"); and

WHEREAS, the Seller desires to sell and the Company desires to purchase all
of the NutraMax Shares in accordance with the terms and conditions hereof; and

WHEREAS, pursuant to Section 11.14 of the Indenture, MEDIQ has the right to
deliver cash in lieu of the Escrowed Shares upon exchange of the MEDIQ Bonds.

NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties, the parties hereto
agree as follows:

1. SALE OF THE SHARES

1.1 On the dates and in the amounts as set forth herein, the Seller shall
transfer, assign, sell and deliver to the Company, and the Company shall
purchase from the Seller all of the NutraMax Shares for a purchase price of
$9.00 per share (the "Purchase Price"), or $36,335,332 in the aggregate for
all NutraMax Shares. The closing (the "Closing") of the sale and purchase and
delivery of all of the NutraMax Shares other than any NutraMax Shares then
held in escrow pursuant to the Indenture and the Escrow Agreement (the
"Escrowed Shares") shall be held as provided in Section 1.2 and thereafter the
sale and purchase and delivery against payment of the Note (as hereinafter
defined) of Escrowed Shares shall occur as provided in Section 1.3.

1.2 Closing. The Closing of the purchase and sale of the NutraMax Shares
(other than the Escrowed Shares) shall be held on December 31, 1996 or such
other date as Seller and the Company may mutually agree (the "Closing Date").
At the Closing (i) the Purchase Price for the NutraMax Shares other than the
Escrowed Shares shall be paid by the Company by wire transfer pursuant to
instructions previously given by Seller to the Company for that purpose
against delivery of certificates for the NutraMax Shares so purchased duly
endorsed or accompanied by stock powers duly executed in blank; and (ii)
payment for the Escrowed Shares shall be made by delivery by the Company to
Seller of a promissory note of the Company in favor of Seller substantially in
the form attached hereto as Exhibit A, in an original principal amount equal
to the aggregate number of Escrowed Shares multiplied by $9.00 (the "Note")
secured by a letter of credit reasonably acceptable in form and substance to
Seller (the "Letter of Credit").

1.3 Delivery of Escrowed Shares. Seller shall, as Escrowed Shares are
released from escrow under the Indenture and Escrow Agreement, upon 3 business
days prior notice to the Company, sell, transfer, assign and deliver such
Escrowed Shares to the Company free and clear of all liens, claims,
encumbrances and restrictions (other than as imposed by applicable securities
laws), upon receipt by Seller from the Company of a prepayment of the Note in
an amount equal to the Purchase Price of the Escrowed Shares so delivered.
Notwithstanding the foregoing, the Company shall not be required to prepay the
Note and accept delivery of any of the Escrowed Shares except in lots of no
less than 50,000 shares; provided, however, if there are less than 50,000
Escrowed Shares remaining, the Company shall be required to prepay the Note
upon delivery of such remaining Escrowed Shares.

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1.4 Delivery of Cash. To the extent that any holder of a MEDIQ Bond or Bonds
(other than Seller) presents such MEDIQ Bond or Bonds for exchange for
Escrowed Shares in accordance with the terms of the Indenture and MEDIQ
delivers Escrowed Shares to such holder, (i) the principal amount of the Note
shall be reduced by an amount equal to the product of the number of Escrowed
Shares so delivered by MEDIQ to such holder and $9.00, and (ii) the principal
amount of the Note shall further be reduced by an amount (the "Excess Cash
Amount") equal to the product of the number of Escrowed Shares so delivered by
MEDIQ to such holders and the number which is equal to (X) $1,000 divided by
the then Exchange Rate (as such term is defined in the Indenture) minus (Y)
$9.00, provided, however, that in lieu of such further reduction in the
principal amount of the Note under the foregoing clause (ii), the Company may
elect to receive an amount in cash from Seller equal to the Excess Cash
Amount.

1.5 Voting of Escrowed Shares, etc. Seller agrees that, from and after the
Closing, (i) at any meeting of stockholders of the Company, however called, or
in connection with a written consent of the Company's stockholders, Seller
shall deliver to the Company an irrevocable proxy authorizing the Board of
Directors of the Company to vote all of the Escrowed Shares in the same
proportion as the votes of the holders of all the other shares of Common Stock
of the Company at any such meeting or pursuant to any such consent, and (ii)
the Company shall be entitled to receive any and all dividends paid or payable
with respect to the Escrowed Shares (other than dividends apportioned to the
Escrowed Shares pursuant to Section 11.05 of the Indenture to which Seller is
not entitled); provided, however, that the obligations of Seller under the
foregoing clause (i) and the right of the Company to receive dividends
pursuant to the foregoing clause (ii) shall terminate upon an event of default
under the Note.

2. CERTAIN REPRESENTATIONS AND WARRANTIES

2.1 Certain Representations and Warranties by the Seller. The Seller
represents and warrants to the Company that:

(a) Organization and Good Standing. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all necessary corporate power and authority to
carry on its business and to own and lease the assets which it owns and
leases.

(b) Power and Authorization. Each Seller has full legal right, power and
authority to enter into and perform its obligations under this Agreement
and the other agreements and documents required to be delivered by it
hereunder. The execution, delivery and performance by each Seller of this
Agreement and such other agreements and documents have been duly authorized
by all necessary corporate action on the part of Seller. This Agreement has
been duly and validly executed and delivered by each Seller and constitutes
its legal, valid and binding obligation, enforceable against it in
accordance with its terms. When executed and delivered by such Seller as
contemplated herein, each of such other agreements and documents shall
constitute the legal, valid and binding obligation of each Seller,
enforceable against it in accordance with its terms.

(c) No Conflicts. (i) Neither the execution of this Agreement nor the
consummation by each Seller of the transactions contemplated hereby will
constitute a violation of or default under, or conflict with, any statute
or regulation, contract, commitment, agreement, understanding, arrangement
or restriction of any kind to which such Seller is a party or by which it
or any of its properties are bound (which, in relation to a contract,
commitment, agreement, understanding, arrangement or restriction would have
a material adverse effect on the Seller or prohibit the transactions
contemplated herein) and (ii) no consent, approval, order or authorization
of any court, administrative agency, other governmental entity or any other
person is required (as opposed to voluntary) by or with respect to such
Seller in connection with the execution and delivery of this Agreement by
such Seller.

(d) Ownership of Shares. (i) Upon transfer and delivery of the NutraMax
Shares by the Seller hereunder to the Company, as provided herein, Company
shall acquire good and marketable title to such shares, free and clear of
all claims, liens, charges, proxies, encumbrances and security interests
and (ii) the Seller does not own beneficially (as hereinafter defined) or
of record any shares of common stock of the Company other than the NutraMax
Shares.

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(e) No Broker. Neither Seller nor any director, officer, employee of
Seller has incurred or will incur on behalf of the Company any brokerage,
finder's or similar fee in connection with the transactions contemplated by
this Agreement.

2.2 Certain Representations and Warranties by the Company. The Company
represents and warrants to the Seller that:

(a) Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all necessary corporate power and authority to
carry on its business and to own and lease the assets which it owns and
leases.

(b) Power and Authorization. The Company has legal right, power and
authority to enter into and perform its obligations under this Agreement
and the other agreements and documents required to be delivered by it
hereunder. The execution, delivery and performance by the Company of this
Agreement and such other agreements and documents have been duly authorized
by all necessary corporate action pursuant to the Delaware General
Corporation Law and otherwise. The transactions contemplated by this
Agreement have been approved by a special committee of the board of
directors composed entirely of directors who are not officers or employees
of the Company and/or present or former employees or consultants of MEDIQ.
This Agreement has been duly and validly executed and delivered by the
Company and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms. When executed and
delivered as contemplated herein, each of such other agreements and
documents shall constitute the legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms.

(c) No Conflicts. (i) Neither the execution of this Agreement nor the
consummation by the Company of the transactions contemplated hereby will
constitute a violation of or default under, or conflict with, any statute
or regulation, contract, commitment, agreement, understanding, arrangement,
obligation, duty or restriction of any kind to which the Company is a party
or by which it or any of its properties is bound and (ii) no consent,
approval, order or authorization of or by the stockholders of the Company
or of any court, administrative agency, other governmental entity or any
other person (other than that which has already been obtained) is required
(as opposed to voluntary) by or with respect to the Company in connection
with the execution and delivery of this Agreement by it.

(d) Company SEC Documents. The Company has timely filed with the
Securities and Exchange Commission (the "SEC"), and has heretofore
delivered to Seller true, correct and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed
with the SEC by it since December 31, 1993 pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act") or the Securities Act of 1933
(the "Securities Act") (such documents, as supplemented and amended since
the time of filing, collectively, the "NutraMax SEC Documents"). The
NutraMax SEC Documents, including, without limitation, any financial
statements or schedules included therein, at the time filed (and in the
case of registration statements and proxy statements, on the dates of
effectiveness and the date of mailing, respectively) (a) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated herein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may
be. The financial statements of the Company included in the NutraMax SEC
Documents at the time filed (and, in the case of registration statements
and proxy statements, on the date of effectiveness and the date of mailing,
respectively) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
period involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the Commission),
and fairly present (subject in the case of unaudited statements to normal,
recurring audit adjustments) the consolidated financial position of the
Company as at the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended.

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(e) Capitalization. The Company's authorized issued and outstanding
capital stock and its other securities are fully and accurately described
in the Company's most recent SEC reports. Except for shares subject to the
Company's employee stock option and similar employee benefits plans, no
person has any preemptive or other similar rights and with respect to any
such equity interests or other securities and there are no offers, options,
warrants, rights, agreements or commitments of any kind (contingent or
otherwise) relating to the issuance, conversion, registration, voting, sale
or transfer of any equity interests or other securities of the Company
(including, without limitation, the NutraMax Shares) or obligating the
Company or any other person to purchase or redeem any such equity interests
or other securities.

(f) No Brokers. Neither the Company nor any director, officer or employee
of the Company has incurred or will incur on behalf of the Company, any
brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement.

3. CONDITIONS PRECEDENT

3.1 Mutual Condition. The obligation of the Company and the Seller to enter
and consummate the transactions contemplated hereby is subject to the
satisfaction of the following condition: the transactions contemplated hereby
shall not violate any order or decree of any court or governmental body of
competent jurisdiction and no suit, action, proceeding or investigation shall
have been brought or threatened by any person (other than Seller or the
Company) which questions the validity or legality of this Agreement or any of
the transactions contemplated hereby.

3.2 Certain Conditions Precedent to the Company's Obligations. The
obligation of the Company to enter into and complete the transactions
contemplated hereby is subject to the fulfillment (or waiver in writing by the
Company in its sole discretion) on or prior to the Closing Date of the
conditions that:

(a) the representations and warranties of the Seller contained in this
Agreement shall be true and correct in all material respects on and as of
the date hereof and on the Closing Date with the same force and effect as
though made on and as of the Closing Date;

(b) the Seller shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be
performed or complied with by the Seller on or prior to the Closing Date;

(c) the Seller shall have delivered to the Company a certificate, dated
the Closing Date and signed by a duly authorized officer of the Seller, to
the foregoing effect; and

(d) the Company shall have received financing upon terms and for such
amount necessary to fulfill its obligations hereunder.

(e) Seller shall have delivered to the Company an opinion of counsel to
the Seller as to the matters set forth in Section 2.1(a), (b), (c) and (d)
hereof (provided that with respect to Sections 2.1(c) and (d) the opinion
need only relate to such factual matters as to which such counsel has
knowledge.

(f) the Company shall have received a favorable vote of its shareholders
other than Seller with respect to the consummation of the transactions
contemplated by this Agreement.

(g) the Board of Directors of the Company shall have received a fairness
opinion from an internationally recognized investment banking firm to the
effect that the transactions contemplated by this Agreement are fair from a
financial point of view to the Shareholders of the Company (other than the
Seller).

(h) the Board of Directors of the Seller shall have received a fairness
opinion from an internationally recognized investment banking firm to the
effect that the transactions contemplated by this Agreement are fair from a
financial point of view to the shareholders of the Seller.

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3.3 Certain Conditions Precedent to Seller's Obligations. The obligation of
the Seller to enter into and complete the transactions contemplated hereby is
subject to the fulfillment (or waiver in writing by the Seller in its sole
discretion) on or prior to the Closing Date of the conditions that:

(a) the representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects on and as of
the date hereof and on the Closing Date with the same force and effect as
though made on and as of the Closing Date;

(b) the Company shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complete with the by the Company on or prior to the Closing
Date;

(c) the Company shall have delivered to Seller a certificate, dated the
Closing Date and signed by a duly authorized officer of the Company, to the
foregoing effect;

(d) the Company shall have obtained at its own expense and provided to
Seller the Letter of Credit securing its obligations under the Note; and

(e) the Company shall have delivered to Seller an opinion of counsel to
the Company as to the matters set forth in Section 2.2(a), (b), (c) hereof
(provided that with respect to Section 2.2(c) the opinion need only relate
to agreements as to which such counsel has knowledge).

(f) the Company shall have received a favorable vote of its shareholders
other than Seller with respect to the consummation of the transactions
contemplated by this Agreement.

4. CLOSING DELIVERIES

4.1 Seller's Deliveries. At the Closing, Seller shall deliver, or shall
cause to be delivered to the Company the following:

(a) certificates for all of the NutraMax Shares other than the Escrowed
Shares, duly endorsed or accompanied by stock powers duly executed in
blank;

(b) an irrevocable proxy authorizing the Board of Directors of the
Company to vote all of the Escrowed Shares, in form and substance
reasonably satisfactory to the parties; provided that such proxy shall
terminate upon an event of default under the Note;

(c) copies of the resolutions of the Board of Directors of each Seller
authorizing the execution, delivery and performance of this Agreement,
certified as of the Closing by the Secretary or an Assistant Secretary of
Seller; and

(d) such other documents and instruments as the Company may reasonably
request to effectuate or evidence the transactions contemplated by this
Agreement;

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4.2 The Company's Deliveries. At the Closing, the Company shall deliver, or
shall cause to be delivered to Seller the items described below:

(a) the Closing Payment;

(b) the Note;

(d) a copy of the resolutions of the Board of Directors of the Company
and each committee thereof authorizing the execution, delivery and
performance by the Company of this Agreement and the other agreements and
instruments referred to herein, certified as of the Closing by the
Secretary or an Assistant Secretary of the Company.

5. INDEMNIFICATION

5.1 Indemnification by Seller. Seller shall indemnify and hold the Company
and its officers, directors and shareholders harmless against and in respect
of any and all losses, costs, expenses, claims, damages, obligations and
liabilities, including interest, costs of investigation, penalties and
reasonable attorneys' fees and disbursements ("Damages") which Buyer or any
such person may suffer, incur or become subject to arising out of, based upon
or otherwise in respect of any inaccuracy in or breach of any representation
or warranty of Seller made in or pursuant to this Agreement or any agreement
or document required to be delivered pursuant to this Agreement or any breach
or nonfulfillment of any covenant or obligation of Seller contained in this
Agreement or such other agreements and documents.

5.2 Indemnification by the Company. The Company shall indemnify and hold
Seller and its officers, directors and shareholders harmless against and in
respect of any and all Damages which Seller or any such person may suffer,
incur or become subject to arising out of, based upon or otherwise in respect
of any inaccuracy in or breach of any representation or warranty of the
Company made in or pursuant to this Agreement or any agreement or document
required to be delivered pursuant to this Agreement or any breach or
nonfulfillment of any covenant or obligation of the Company contained in this
Agreement or such other agreements and documents.

5.3 Third Party Claims.

(a) Each party shall promptly notify the other of the assertion by any
third party of any claim with respect to which the indemnification set
forth in this Section relates. The indemnifying party shall have the right,
upon notice to the indemnified party within ten (10 business days after the
receipt of any such notice, to undertake the defense of or, with the
consent of the indemnified party (which consent shall not unreasonably be
withheld), to settle or compromise such claim. The failure of the
indemnifying party to give such notice and to undertake the defense of or
to settle or compromise such a claim shall constitute a waiver of the
indemnifying party's rights under this Section 5.3(a) and in the absence of
gross negligence or willful misconduct on the part of the indemnified party
shall preclude the indemnifying party from disputing the manner in which
the indemnified party may conduct the defense of such claim or the
reasonableness of any amount paid by the indemnified party in satisfaction
of such claim.

(b) The election by the indemnifying party, pursuant to Section 5.3(a),
to undertake the defense of a third party claim shall not preclude the
party against which such claim has been made also from participating or
continuing to participate in such defense, so long as such party bears its
own legal fees and expenses for so doing.

6. MISCELLANEOUS

6.1 Best Efforts. Each of the parties shall use its best reasonable efforts
to take all action and do all things necessary, proper or advisable to
consummate the transaction contemplated by this Agreement.

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6.2 Parties in Interest; Assignment. Neither of the parties to this
Agreement may assign any of its rights or obligations under this Agreement
without the prior written consent of the other party hereto, provided that
Seller may pledge, assign or otherwise transfer part or all of its interest in
and to the Note without such consent. Subject to the foregoing, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns.

6.3 Entire Agreement; Amendments; Waiver. This Agreement contains the entire
understanding between the Seller and the Company with respect to its specific
subject matter. This Agreement may be amended only by written instrument duly
executed by the parties hereto. No party may waive any term, provision,
covenant or restriction of this Agreement except by duly signed writing
referring to the specific provision to be waived.

6.4 Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be delivered personally or transmitted
by telex, fax or telegram, to the respective parties as follows:

(a) If to the Seller, to it at:

MEDIQ Incorporated
One MEDIQ Plaza
Pennsauken, New Jersey 08110-1460
Attention: Thomas E. Carroll, President
Telecopier: (609) 661-0958

with a copy to:

Drinker, Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attention: F. Douglas Raymond, III, Esquire
Telecopier: (215) 988-2757

(b) If to the Company, to it at:

NutraMax Products, Inc.
9 Blackburn Drive
Gloucester, Massachusetts 01930
Attention: Donald E. Lepone, President
Telecopier: 508-281-7824

with a copy to:

Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
Attention: Richard E. Floor, P.C.
Telecopier: 617-570-8150

or to such other address as any party may have furnished to the others in
writing.

6.5 Governing Law. This Agreement will be governed by and construed in
accordance with the internal laws of the State of Delaware.

6.6 Survival. All representations, warranties, covenants and agreements of
the parties hereto shall survive indefinitely the Closing.

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6.7 Termination.

(a) This Agreement may be terminated and the transactions contemplated
herein may be abandoned at any time prior to the Closing:

(i) by Company or Seller, if the Closing has not occurred by December
31, 1996;

(ii) by mutual consent of Company and Seller;

(iii) by Company, if any representation or warranty of Seller made in
or pursuant to this Agreement is untrue or incorrect in any material
respect, Seller breaches its covenants or other terms of this Agreement
or any of the conditions precedent to Closing contained in Section 3.2
are not satisfied on or before December 31, 1996; or any event or
circumstance occurs such that any of such conditions will not be
satisfied as of such date; or

(iv) by Seller, if any representation or warranty of Company made in
or pursuant to this Agreement is untrue or incorrect in any material
respect, Company breaches the covenants or other terms of this
Agreement or any of the conditions precedent to Closing contained in
Section 3.3 are not satisfied on or before December 31, 1996 or any
event or circumstance occurs such that any of such conditions will not
be satisfied as of such date.

(b) A party terminating this Agreement pursuant to Section 6.7 shall give
written notice thereof to each other party hereto, whereupon this Agreement
shall terminate and the transactions contemplated hereby shall be abandoned
without further action by any party; provided, however, that if such
termination is pursuant to Section 6.7(a)(i) by reason of a breach by a
party hereto, such termination is by Company pursuant to Section
6.7(a)(iii) or if such termination is by Seller pursuant to Section
6.7(a)(iv), nothing herein shall affect the non-breaching party's right to
damages on account of such other party's breach.

6.8 Specific Performance. The Seller acknowledges that the NutraMax Shares
are unique and that the Company will not have an adequate remedy at law if the
Seller fails to perform any of its obligations hereunder, and the Seller
agrees that the Company shall have the right, in addition to any other right
it has, to specific performance or equitable relief by way of injunction if
the Seller fails to perform any of its obligations hereunder.

6.9 Counterparts; Headings. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same document. The article and
section headings contained herein are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.

6.10 Expenses. Each of the parties hereto shall pay the fees and expenses it
incurs in connection with this Agreement, other than as a result of the breach
hereof by the other party hereto.

6.11 Certain Definitions. For purposes of the Agreement:

(a) "beneficially owned" shall have the meaning set forth in Rule 13d-3
promulgated under the Exchange Act, as such Rule is in effect on the date
hereof.

(b) "business day" means any day which is neither a Saturday or Sunday
nor a legal holiday on which banks are authorized or required to be closed
in New York, New York or Philadelphia, Pennsylvania.

6.12 Stock Splits, etc. The number of NutraMax Shares and the purchase price
therefor specified in this Agreement shall be appropriately adjusted for any
stock split, reverse stock split, stock dividend or any similar event
occurring after the date hereof and prior to the consummation of the purchase
and sale of all such NutraMax Shares.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written.

MEDIQ INCORPORATED

By: /s/ Michael F. Sandler
-----------------------------------

MEDIQ INVESTMENT SERVICES, INC.

By: /s/ Michael F. Sandler
-----------------------------------

NUTRAMAX PRODUCTS, INC.

By: /s/ Donald E. Lepone
-----------------------------------

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EXHIBIT A TO STOCK PURCHASE AGREEMENT

PROMISSORY NOTE

_______________________________________________________________ , 1996

FOR VALUE RECEIVED, NutraMax Products, Inc., a Delaware corporation with its
principal place of business at 9 Blackburn Drive, Gloucester, MA 01930
("Company"), hereby promises to pay to the order of MEDIQ Investment Services,
Inc. ("Seller"), a Delaware corporation with its principal place of business
c/o MEDIQ Incorporated ("MEDIQ"), One MEDIQ Plaza, Pennsauken, NJ 08110-1460,
the principal amount of Dollars ($ ) in
installments as Escrowed Shares (as defined in that certain Amended and
Restated Stock Purchase Agreement among MEDIQ, Seller and Company, dated as of
November 20, 1996 (the "Purchase Agreement")) are released from escrow under
the Indenture and the Escrow Agreement (as such terms are defined in the
Purchase Agreement) in accordance with Section 1.3 of the Purchase Agreement,
together with interest at the annual rate of 7 1/2%, payable quarterly in
arrears; provided, however, that (i) if this Note is still outstanding
eighteen (18) months after the Closing Date (as such date is defined in the
Purchase Agreement), the annual interest rate of this Note shall be reduced to
5%; (ii) if this Note is still outstanding thirty (30) months after the
Closing Date, the annual interest rate on this Note shall be reduced to 4%;
and (iii) if this Note is still outstanding forty-two (42) months after the
Closing Date, the annual interest rate on this Note shall be reduced to 3%.
Notwithstanding the foregoing, the outstanding principal amount of this Note
is subject to reduction in accordance with the terms of the Purchase Agreement
and is subject in all respects thereto.

Payments of principal and interest shall be made in lawful money of the
United States of America by wire transfer of immediately available funds to
Seller at One MEDIQ Plaza, Pennsauken, New Jersey 08110-1460 or at such other
place as Seller shall designate to Company in writing.

This Note is entitled to be benefits of, and is secured by that certain
Letter of Credit issued by The First National Bank of Boston (the "Letter of
Credit").

The failure of Company to make any payment of principal or interest when due
under this Note shall consititute an "Event of Default" hereunder. Upon the
occurrence of an Event of Default, Seller may draw on the Letter of Credit to
satisfy the obligations of Company hereunder.

Payment under this Note is subject to the terms and conditions of the
Purchase Agreement, including, without limitation, the delivery of Escrowed
Shares to Company pursuant to Section 1.3 thereof.

This Note shall inure to the benefit of Seller and its successors and
assigns and shall be binding upon Company and its successors and assigns.
Subject to applicable law, this Note may be amended, modified and supplemented
only by written agreement of both Company and Seller.

Any notice, request or other communication pursuant to this Note shall be
deemed duly given if delivered pursuant to the notice provisions contained in
the Purchase Agreement.

No failure or delay on the part of Seller to insist on strict performance of
Company's obligations hereunder or to exercise any remedy shall constitute a
waiver of Seller's rights in that or any other instance. No waiver of any of
Seller's rights shall be effective unless in writing, and any waiver of any
default or any instance of non-compliance shall be limited to its express
terms and shall not extend to any other default or instance of non-compliance.

Company hereby waives presentment, notice of nonpayment or dishonor,
protest, notice of protest and all other notices in connection with the
delivery, acceptance, performance, default or enforcement of payment of this
Note, and hereby waives all notice or right of approval of any extensions,
renewals, modifications or forbearances which may be allowed.

C-10
<PAGE>

Company shall pay all reasonable costs and expenses (including attorneys'
fees) incurred by Seller relating to the enforcement of this Note.

Any provision hereof found to be illegal, invalid or enforceable for any
reason whatsoever shall not affect the validity, legality or enforceability of
the remainder hereof.

If the effective interest rate on this Note would otherwise violate any
applicable usury law, then the interest rate shall be reduced to the maximum
permissible rate and any payment received by Seller in excess of the maximum
permissible rate shall be treated as a prepayment of the principal of this
Note.

The execution, delivery and performance of this Note shall be governed by
and construed in accordance with the laws of the State of Delaware.

C-11
<PAGE>

IN WITNESS WHEREOF, Company has caused this Note to be executed under seal
by its duly authorized representatives as of the date set forth above.

NUTRAMAX PRODUCTS, INC.

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

ATTEST:
--------------------------

C-12

<PAGE>

PROXY CARD
NUTRAMAX PRODUCTS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF NUTRAMAX PRODUCTS, INC.

PROXY FOR SPECIAL MEETING IN LIEU OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, DECEMBER 20, 1996

The undersigned hereby constitutes and appoints Donald E. Lepone and Eugene
M. Schloss, Jr., and each of them, as Proxies of the undersigned, with full
power to appoint his substitute, and authorizes each of them to represent and
to vote all shares of common stock of NutraMax Products, Inc. (the "Company")
held of record by the undersigned as of the close of business on November 21,
1996, at the Special Meeting in Lieu of the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at the Ocean View Inn, 171 Atlantic Road,
Gloucester, Massachusetts 01930 at 10:00 a.m., local time, on Friday, December
20, 1996, and at any adjournments or postponements thereof.

WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE FIVE NOMINEES OF THE BOARD OF DIRECTORS
LISTED IN PROPOSAL NUMBER 1, FOR THE APPROVAL OF THE NUTRAMAX PRODUCTS, INC.
1996 STOCK OPTION PLAN AS SET FORTH IN PROPOSAL NUMBER 2, FOR THE APPROVAL OF
AMENDMENTS TO THE COMPANY'S 1988 STOCK OPTION PLAN AS SET FORTH IN PROPOSAL
NUMBER 3 AND FOR THE APPROVAL OF THE PURCHASE BY THE COMPANY FROM MEDIQ
INVESTMENT SERVICES, INC. OF UP TO AN AGGREGATE OF 4,037,258 SHARES OF COMMON
STOCK OF THE COMPANY AS SET FORTH IN PROPOSAL NUMBER 4. IN THEIR DISCRETION,
THE PROXIES ARE EACH AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF. A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTOR'S RECOMMENDATIONS NEED ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN
THE ENCLOSED ENVELOPE.

The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Special Meeting in Lieu of the Annual Meeting of Stockholders, the
Proxy Statement with respect thereto, the Company's 1996 Annual Report to
Stockholders and the Company's 1995 Annual Report to Stockholders and hereby
revoke(s) any proxy or proxies heretofore given. This proxy may be revoked at
any time before it is exercised.

PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
PLEASE SIGN NAME EXACTLY AS SHOWN. WHERE THERE IS MORE THAN ONE HOLDER, EACH
SHOULD SIGN. WHEN SIGNING AS AN ATTORNEY, ADMINISTRATOR, EXECUTOR, GUARDIAN OR
TRUSTEE, PLEASE ADD YOUR TITLE AS SUCH. IF EXECUTED BY A CORPORATION OR
PARTNERSHIP, THE PROXY SHOULD BE SIGNED BY A DULY AUTHORIZED PERSON, STATING
HIS OR HER TITLE OR AUTHORITY.

<PAGE>

PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE.

PROPOSAL 1. Election of five Directors, for a one-year term.

FOR ALL
FOR WITHHOLD EXCEPT
/ / / / / /

NOMINEES: Donald M. Gleklen, Bernard J. Korman, Donald E. Lepone, Dennis M.
Newnham and Michael F. Sandler

If you do not wish your shares voted FOR a particular nominee, mark the FOR
ALL EXCEPT box and strike a line through that nominee's name. Your shares will
be voted for the remaining nominee(s).

PROPOSAL 2. Approval of the NutraMax Products, Inc. 1996 Stock Option Plan.

FOR AGAINST ABSTAIN
/ / / / / /

PROPOSAL 3. Approval of amendments to the Company's 1988 Stock Option
Plan, authorizing issuance thereunder of an additional 500,000 shares of the
Company's common stock.

FOR AGAINST ABSTAIN
/ / / / / /

PROPOSAL 4. Approval of the purchase by the Company from MEDIQ Investment
Services, Inc. of up to an aggregate of 4,037,258 shares of common stock of the
Company pursuant to the Amended and Restated Stock Purchase Agreement dated
November 21, 1996 among the Company, MEDIQ Incorporated and MEDIQ Investment
Services, Inc. and the transactions contemplated thereby.

FOR AGAINST ABSTAIN
/ / / / / /

PROPOSAL 5. To consider and act upon such other business as may properly come
before the meeting and any adjournments or postponements thereof.

HAS YOUR ADDRESS CHANGED?
_______________________________________________________________________________

_______________________________________________________________________________

SIGNATURE(S) ___________________________________ DATE______________________

PLEASE BE SURE TO SIGN AND DATE THIS PROXY.