VITAL SIGNS INC, DEF 14A, 1996-05-16

VITAL SIGNS INC
DEF 14A, 1996-05-16
SURGICAL & MEDICAL INSTRUMENTS & APPARATUS

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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 Section 240.14a-11(c) or
Section 240.14a-12

VITAL SIGNS, 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] 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 (Set forth the
amount on which the filing fee is calculated and state how it was
determined):

.................................................................

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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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
VITAL SIGNS, INC.

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Vital
Signs, Inc. (the 'Company' or 'Vital Signs') will be held at the Company's
headquarters, 20 Campus Road, Totowa, New Jersey, on Thursday, June 13, 1996 at
10:00 a.m., to consider and act upon the following:

1. The election of six directors to serve for a period of one year and
thereafter until their successors shall have been duly elected and shall
have qualified.

2. The adoption of the Company's 1996 Employee Stock Purchase Plan.

3. To consider and act upon any other matter which may properly come
before the meeting or any adjournment thereof.

The Board of Directors has fixed the close of business on May 10, 1996 as
the date for determining the stockholders of record entitled to receive notice
of, and to vote at, the Annual Meeting.

By Order of the Board of Directors

/s/ Anthony J. Dimun
Anthony J. Dimun
Secretary

Totowa, New Jersey
May 16, 1996

WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
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VITAL SIGNS, INC.
20 CAMPUS ROAD
TOTOWA, NEW JERSEY 07512

--------------------------
PROXY STATEMENT
--------------------------

The following statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Vital Signs, Inc. (the 'Company' or 'Vital
Signs'), a New Jersey corporation. Such proxies are to be used at the Company's
Annual Meeting of Stockholders to be held at the Company's headquarters, 20
Campus Road, Totowa, New Jersey, on June 13, 1996 commencing at 10:00 a.m. This
Proxy Statement and the enclosed form of proxy are first being sent to
stockholders on or about May 16, 1996.

STOCKHOLDERS ENTITLED TO VOTE

Only holders of record of the Company's Common Stock (the 'Common Stock')
at the close of business on May 10, 1996 (the record date fixed by the Board of
Directors) will be entitled to receive notice of, and to vote at, the Annual
Meeting. At the close of business on the record date, there were 13,067,625
shares of Common Stock outstanding and entitled to vote at the Meeting. Each
such share is entitled to one vote.

VOTING; REVOCATION OF PROXY; QUORUM AND VOTE REQUIRED

A form of proxy is enclosed for use at the Annual Meeting if a stockholder
is unable to attend in person. Each proxy may be revoked at any time before it
is exercised by giving written notice to the Secretary of the Meeting or by
submitting a duly executed, later-dated proxy. All shares represented by valid
proxies pursuant to this solicitation (and not revoked before they are
exercised) will be voted as specified in the form of proxy. If the proxy is
signed but no specification is given, the shares will be voted FOR the Board's
nominees for election to the board of Directors and FOR adoption of the proposed
Employee Stock Purchase Plan. A majority of the shares outstanding on the record
date will constitute a quorum for purposes of the Annual Meeting. Assuming that
a quorum is present, the election of directors will be effected by a plurality
vote and approval of the proposed Employee Stock Purchase Plan will require the
affirmative vote of a majority of the votes cast at the Annual Meeting. For
purposes of determining the votes cast with respect to any matter presented for
consideration at the Annual Meeting, only those votes cast 'for' or 'against'
are included. Abstentions and broker non-votes are counted only for the purpose
of determining whether a quorum is present at the Annual Meeting.

COSTS OF SOLICITATION

The entire cost of soliciting these proxies will be borne by the Company.
In following up the original solicitation of the proxies by mail, the Company
may make arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy materials to the beneficial owners of the
Common Stock and may reimburse them for their expenses in so doing. If
necessary, the Company may also use its officers and their assistants to solicit
proxies from the stockholders, either personally or by telephone or special
letter.

PRINCIPAL STOCKHOLDERS; BENEFICIAL OWNERSHIP OF DIRECTORS AND OFFICERS

The following table sets forth information regarding the beneficial
ownership of the Common Stock as of March 31, 1996 by (i) each person who is
known by the Company to own beneficially more than five percent of the Common
Stock; (ii) trusts maintained for the benefit of the children of certain
directors of the Company; (iii) each director and each Named Officer (as defined
herein) of the Company; and (iv) all current executive officers and directors of
the Company as a group. Unless

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otherwise indicated, each of the named stockholders possesses sole voting and
investment power with respect to the shares beneficially owned. Shares covered
by stock options are included in the table below only to the extent that such
options may be exercised by May 30, 1996.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
--------------------
STOCKHOLDER NUMBER PERCENT
- -------------------------------------------------------------------------------------------- --------- -------

<S> <C> <C>
Terence D. Wall (1)(2)...................................................................... 4,343,113 33.3%
Trusts for the benefit of the minor children of Terence D. Wall (Anthony J. Dimun, trustee)
(1)(3).................................................................................... 2,386,782 18.3
Barry Wicker (4)............................................................................ 368,836 2.8
Trusts for the benefit of the children of Barry Wicker (Anthony J. Dimun, trustee) (1)(3)... 195,150 1.5
David J. Bershad (5)........................................................................ 38,200 *
Anthony J. Dimun (1)(3)..................................................................... 2,783,780 21.2
Dennis Fenstermaker (6)..................................................................... 6,117 *
Stephen Lieberman........................................................................... -- --
Joseph J. Thomas (7)........................................................................ 62,618 *
John Toedtman (8)........................................................................... 29,784 *
All directors and executive officers as a group (8 persons) (9)............................. 7,632,448 57.9
</TABLE>

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* Represents less than one percent.

(1) The business addresses of Mr. Wall, Mr. Dimun and the above-mentioned trusts
is c/o Vital Signs, Inc., 20 Campus Road, Totowa, New Jersey 07512.

(2) Includes 836,748 shares owned by Carol Vance Wall, Mr. Wall's wife, and
15,296 shares held in the Company's 401(k) plan on Mr. Wall's behalf;
excludes shares held in trust for the benefit of the Walls' minor children
(which shares may not be voted or disposed of by Mr. Wall or Carol Vance
Wall) and shares held by a charitable foundation established by Terence and
Carol Wall.

(3) As trustee of the trusts maintained for the benefit of the minor children of
Terence D. Wall and the children of Barry Wicker, Anthony J. Dimun has the
power to vote and dispose of each of the shares held in such trusts and thus
is deemed to be the beneficial owner of such shares under applicable
regulations of the Securities and Exchange Commission. Mr. Dimun is also
deemed to be the beneficial owner of 1,000 shares held in certain insurance
trusts established by Mr. Wicker. He is also deemed to be the beneficial
owner of 68,300 shares held by the charitable foundation described above.
Accordingly, the shares reflected in the table above as shares beneficially
owned by Mr. Dimun include shares held by Mr. Dimun for such trusts and
foundation, 54,788 shares owned by Mr. Dimun individually, 4,000 shares
owned by his children (as to which he disclaims beneficial ownership), 1,097
shares held in the Company's 401(k) plan on Mr. Dimun's behalf and 72,663
shares covered by options exercisable by Mr. Dimun.

(4) Includes 17,380 shares owned by Mr. Wicker's wife; excludes shares held in
trust for the benefit of Mr. Wicker's children and shares held in certain
insurance trusts (which shares may not be voted or disposed of by Mr. Wicker
or his wife).

(5) Includes 2,000 shares owned by Mr. Bershad's wife as to which Mr. Bershad
disclaims beneficial ownership; also includes 32,000 shares covered by
exercisable options.

(6) Includes 2,099 shares held in the Company's 401(k) plan on Mr.
Fenstermaker's behalf, 756 shares held in the Company's Investment Plan on
Mr. Fenstermaker's behalf and 1,762 shares covered by exercisable options.

(7) Consists of shares owned jointly by Mr. Thomas and his wife.

(8) Includes 19,000 shares covered by exercisable options.

(9) Includes 125,425 shares covered by options exercisable by the Company's
executive officers and directors, 18,492 shares held in the Company's 401(k)
plan and 756 shares held in the Company's

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(footnotes continued from previous page)
Investment Plan; also includes shares held in trust by Mr. Dimun for Mr.
Wall's children and Mr. Wicker's children and pursuant to certain insurance
trusts established by Mr. Wicker and shares held by a charitable foundation
established by Terence and Carol Wall.

There were 13,056,743 shares of Common Stock outstanding on March 31, 1996.

Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors, executive officers and 10% shareholders to file with the
Securities and Exchange Commission certain reports regarding such persons'
ownership of the Company's securities. The Company is obligated to disclose any
failures to file such reports on a timely basis. With respect to the fiscal year
ended September 30, 1995, a late filing was made on behalf of David J. Bershad
with respect to a stock option (disclosed in last year's proxy statement)
covering 4,000 shares of Common Stock automatically granted pursuant to the
Company's 1991 Director Stock Option Plan in May 1995. This late filing was
inadvertent; the required filing was made promptly after the failure to file on
a timely basis was noted.

ELECTION OF DIRECTORS

The holders of the Common Stock will elect six directors at the Annual
Meeting, each of whom will be elected for a one year term. Unless a stockholder
either indicates 'withhold authority' on his proxy or indicates on his proxy
that his shares should not be voted for certain nominees, it is intended that
the persons named in the proxy will vote for the election of the persons named
in the table below to serve until the expiration of their terms and thereafter
until their successors shall have been duly elected and shall have qualified.
Discretionary authority is also solicited to vote for the election of a
substitute for any of said nominees who, for any reason presently unknown,
cannot be a candidate for election.

The table below sets forth the names and ages (as of September 30, 1995) of
each of the nominees, the other positions and offices presently held by each
such person within the Company, the period during which each such person has
served on the Board of Directors of the Company, the expiration of their
respective terms and the principal occupations and employment of each such
person during the past five years.

<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
NAME AND AGE (A) SINCE OF TERM BUSINESS EXPERIENCE (A)
- --------------------------- -------- ---------- --------------------------------------------------------------
<S> <C> <C> <C>
Terence D. Wall, 54 1972 1996 President and Chief Executive Officer of the Company. Mr. Wall
presently serves on the Boards of Directors of Exogen, Inc.
and EchoCath, Inc.
David J. Bershad, 55 1991 1996 Member of the law firm of Milberg Weiss Bershad Hynes &
Lerach.
Anthony J. Dimun, 52 1987 1996 Executive Vice President and Chief Financial Officer of the
Company (March 1991 to Present); Treasurer and Secretary of
the Company (December, 1991 to Present); Senior Vice
President, First Atlantic Capital Ltd. (U.S. affiliate of an
international merchant banking group) (July 1989 to February
1991); Principal Owner, Strategic Concepts, Inc. (financial
and acquisition advisory firm) (January 1988 to Present).
Mr. Dimun presently serves on the Board of Directors of
EchoCath, Inc.
Joseph J. Thomas, 59 1992 1996 President of Thomas Medical Products, Inc. (a subsidiary of
the Company) (1990 to Present); President and General
Manager of Access Devices, Inc. (a catheter manufacturer)
(1982-1989); Research and development positions with various
companies, including Johnson & Johnson (prior years).
</TABLE>

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(A) In each instance in which dates are not provided in connection with a
director's business experience, such director has held the position
indicated for at least the past five years. Messrs. Wall, Bershad and Dimun
have invested together (and serve together as Board members) in Bioscience,
Limited and related companies ('Bioscience') and Messrs. Wall and Bershad
have invested together (and serve or served as Board members) in
Sonokinetics Corp. ('Sonokinetics'). Further, Messrs. Wall and Dimun are
shareholders (as well as Board members) of EchoCath, Inc. ('EchoCath').

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table sets forth, for the fiscal years ended September 30,
1993, 1994 and 1995, the annual and long-term compensation of the Company's
Chief Executive Officer and the four other most highly compensated executive
officers of the Company during the year ended September 30, 1995 (the 'Named
Officers'):

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------
--------------------------------------- COMMON SHARES
OTHER SUBJECT TO
ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(A) COMPENSATION(B) GRANTED(#) COMPENSATION(C)
- --------------------------------------- ---- -------- -------- --------------- --------------- ---------------

<S> <C> <C> <C> <C> <C> <C>
1995 $225,000 $42,135 $39,000 -- $ 4,110
Terence D. Wall ....................... 1994 225,000 10,610 42,000 -- 3,710
President and Chief Executive Officer 1993 225,000 10,585 -- 120,000 3,187
Anthony J. Dimun ...................... 1995 180,000 33,758 -- -- 3,750
Executive Vice President and Chief 1994 180,000 8,533 -- -- 2,363
Financial Officer 1993 180,000 8,508 -- 325 2,992
1995 151,250 28,406 -- -- 3,191
Barry Wicker .......................... 1994 151,250 7,206 -- -- 2,575
Executive Vice President -- Sales 1993 128,029 6,070 -- 80,000 2,222
Dennis Fenstermaker ................... 1995 123,000 28,866 -- -- 2,982
Vice President -- Manufacturing and 1994 104,615 16,266 -- 1,514 2,212
General Manager 1993 89,853 13,097 -- 1,000 1,708
Stephen Lieberman ..................... 1995 113,000 23,612 -- -- 2,464
Vice President -- Quality and 1994 108,117 19,134 -- 1,624 1,859
Regulatory Affairs 1993 108,393 14,377 -- 2,118 2,222
</TABLE>

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(A) Reflects bonuses in the fiscal year earned, which may not correspond with
the fiscal year paid.

(footnotes continued on next page)

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(footnotes continued from previous page)

(B) It was necessary for Terence D. Wall and his family to relocate during
fiscal 1994 and 1995. The Company provided lodging to Mr. Wall and his
family at a house which the Company purchased several years ago for the
purpose of providing lodging for visiting out-of-state employees. Based on
an estimate of fair market rental value, the Company valued this benefit at
$36,000 for fiscal 1994 and $33,000 for fiscal 1995, which amounts are
included above. During the years set forth above, no other Named Officer
received perquisites (i.e., personal benefits) in excess of 10% of such
individual's reported salary and bonus.

(C) 'Compensation' reported under this column for the year ended September 30,
1995 includes: (i) contributions of $2,310, $2,310, $1,981, $1,998 and
$1,560, respectively, for Messrs. Wall, Dimun, Wicker, Fenstermaker and
Lieberman, respectively, to the Company's 401(k) Plan on behalf of the
Named Officers to match pre-tax elective deferral contributions (included
under 'Salary') made by each Named Officer to that Plan and (ii) premiums
of $1,800, $1,440, $1,210, $984 and $904, respectively, with respect to
life insurance purchased by the Company for the benefit of Messrs. Wall,
Dimun, Wicker, Fenstermaker and Lieberman, respectively.

STOCK OPTIONS

No stock options were granted to, or exercised by, the Named Officers
during the year ended September 30, 1995.

The following table provides data regarding the number of shares of the
Company's Common Stock covered by both exercisable and non-exercisable stock
options held by the Named Officers at September 30, 1995. Also reported are the
values for 'in-the-money' options, which represent the positive spread between
the exercise prices of existing options and $20.75, the closing sale price of
the Company's Common Stock on September 29, 1995.

UNEXERCISED OPTIONS AT FISCAL YEAR-END

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT YEAR-END(#) AT YEAR-END($)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------

<S> <C> <C> <C> <C>
Terence D. Wall......................................... -- 120,000 $ -- $ 360,000
Anthony J. Dimun........................................ 82,663 45,162 1,021,425 247,500
Barry Wicker............................................ -- 80,000 -- 240,000
Dennis Fenstermaker..................................... 250 2,264 813 12,279
Stephen Lieberman....................................... 2,376 4,016 12,000 25,746
</TABLE>

ARRANGEMENTS WITH DIRECTORS

Joseph Thomas became a director of the Company upon the Company's
acquisition of Thomas Medical Products, Inc. ('TMP') on September 30, 1992. In
connection with the TMP acquisition, Mr. Thomas entered into an employment
agreement with TMP pursuant to which Mr. Thomas is entitled to receive a salary
of at least $100,000 per year (with a cost of living adjustment) during the
five-year term of his employment agreement. He was also granted stock options
under the Company's 1990 Employee Stock Option Plan. For the year ended
September 30, 1995, Mr. Thomas received a salary of $110,119 and a bonus of
$26,250. Pursuant to arrangements agreed upon at the time of the TMP
acquisition, Mr. Thomas canceled his options in exchange for a cash payment of
$1.6 million (representing $20 per option) during the current fiscal year.

Directors of the Company presently do not receive any cash fees for serving
in such capacity.

Messrs. Wall, Wicker, Dimun and Thomas were granted stock options in prior
years. Messrs. Bershad and Toedtman, the two directors who are not employed by
the Company or its subsidiaries, participate in the Company's 1991 Director
Stock Option Plan (the 'Director Plan'). Under the

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Director Plan, each outside director automatically receives options covering
4,000 shares (with an exercise price equal to fair market value on the date of
grant) on an annual basis and is entitled to receive additional options at the
discretion of the committee administering the Director Plan. During fiscal 1995,
Mr. Bershad and Mr. Toedtman each received options covering 4,000 shares of
Common Stock pursuant to the Director Plan. One half of the options granted
under the Director Plan vest immediately at the time of grant. Half of the
balance may be exercised commencing one year after the date of grant and the
remainder may be exercised commencing two years after the date of grant.

THE BOARD OF DIRECTORS; COMMITTEES OF THE BOARD

The Board of Directors of the Company held five meetings during the year
ended September 30, 1995. The Board's Audit Committee, which is responsible for
reviewing significant audit and accounting principles, policies and practices
and for meeting with the Company's independent accountants, met three times
during the year ended September 30, 1995. The Audit Committee presently consists
of David J. Bershad and John Toedtman.

The Board has formed a Nominating Committee, consisting of Terence D. Wall,
Anthony J. Dimun and John Toedtman. This Committee did not meet during the year
ended September 30, 1995, as all nominating matters were considered by the full
Board. The Nominating Committee is charged with the responsibility of
interviewing potential candidates for election to the Board and for nominating
individuals each year for election to the Board. The Nominating Committee has
not established any procedures for considering nominees recommended by
stockholders.

The Board has not formed a general Compensation Committee. It maintains a
Stock Option Committee, however, to administer the 1990 Employee Stock Option
Plan, the 1991 Director Stock Option Plan and the Vital Signs Investment Plan.
The Stock Option Committee presently consists of Terence D. Wall and Barry
Wicker and acted by unanimous consent during the Company's most recent fiscal
year.

With the exception of Mr. John Toedtman, each member of the Company's Board
was present for 75% or more of the aggregate of the total meetings of the Board
and each Board committee on which he serves.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors does not maintain a Compensation Committee.
Accordingly, compensation decisions are made by the entire Board of Directors.
During the fiscal year ended September 30, 1995, the following individuals
served on the Board: Terence D. Wall, David J. Bershad, Anthony J. Dimun, Joseph
Thomas, John Toedtman and Barry Wicker. During that year, of the persons named,
Messrs. Wall, Dimun, Thomas and Wicker were officers and employees of the
Company or its subsidiaries.

The Company previously guaranteed the repayment of $750,000 of bank debt
extended by Chemical Bank to EchoCath; this debt was repaid during the fiscal
year ended September 30, 1995. The Company has also provided general and
administrative services to EchoCath and, during the fiscal year ended September
30, 1995, billed EchoCath $78,050 for such services, which amount was paid by
EchoCath from the proceeds of its January 1996 initial public offering. After
that offering, the Company and its chief executive officer, Terence D. Wall,
together continue to own more than 15% of EchoCath's outstanding common stock
and together own more than 25% of the voting power of EchoCath's outstanding
common stock. Anthony J. Dimun, the Company's Chief Financial Officer, owns a
small equity position in EchoCath. Messrs. Wall and Dimun are also directors and
officers of EchoCath. The Company does not intend to guarantee additional
indebtedness of EchoCath and is not currently providing general and
administrative services to EchoCath.

Previously (November 1994), the Company's wholly-owned subsidiary, O.R.
Concepts ('ORC'), entered into an agreement (which agreement was superseded in
1996 by an exclusive agreement between Sonokinetics and an unrelated third
party) to sell products manufactured either by or on behalf of Sonokinetics.
Terence D. Wall and David J. Bershad, a director of Vital Signs, are or were
officers, directors and shareholders (in Mr. Wall's case, a majority
shareholder) of Sonokinetics. Under its prior agreement with Sonokinetics, ORC
served as the exclusive sales representative in the United States for

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the sale of Sonokinetics' ACRYL-X cement removal system and related products.
ORC shared in the revenues generated from such sales, with specific revenue
sharing percentages depending upon the products sold and the selling prices of
the products. During the fiscal year ended September 30, 1995, the Company
generated revenues of $170,147 from this agreement and made payments of $37,092
to Sonokinetics pursuant to the revenue-sharing provisions of this agreement.

ORC also had a distribution agreement with Bioscience that terminated in
April 1995. Terence D. Wall, David J. Bershad and Anthony J. Dimun are
shareholders, officers and directors of Bioscience. Under its agreement with
Bioscience, ORC had the non-exclusive right to distribute all of Bioscience's
orthopedic bioabsorbable products and related instruments in the United States.
Prices paid by ORC for such products were based on Bioscience's price list,
subject to increases in the U.S. rate of inflation. During the year ended
September 30, 1995, ORC paid Bioscience $110,010 for products purchased pursuant
to such agreement. In connection with the Bioscience distribution agreement,
Bioscience borrowed $100,000 from the Company, subject to a nine percent per
annum interest obligation. In addition, in connection with the termination of
such agreement, Bioscience agreed to pay ORC $87,000 upon return of certain
inventory to Bioscience; such amount, as well as the $100,000 borrowing,
remained outstanding at September 30, 1995. During April 1996, the entire amount
owed by Bioscience to the Company (including ORC), $187,002, was paid by
Bioscience. The largest amount owed by Bioscience to the Company from October 1,
1994 through April 1996 did not exceed $200,000.

The Company believes that the overall terms of the above-described
agreements with Sonokinetics and Bioscience were no less favorable to ORC than
terms that would be available from similarly situated unrelated parties.

BOARD REPORT ON EXECUTIVE COMPENSATION

Pursuant to rules adopted by the SEC designed to enhance disclosure of
corporate policies regarding executive compensation, the Company has set forth
below a report of its Board regarding compensation policies as they affect Mr.
Wall and the other Named Officers.

The Board of Directors views compensation of executive officers as having
three distinct parts, a current compensation program, a set of standard benefits
and a long-term benefit. The current compensation element focuses upon the
executive officer's salary and is designed to provide appropriate reimbursement
for services rendered. The Company's standard benefit package consists primarily
of the matching portion of the Company's 401(k) Plan and eligibility for bonuses
based upon performance of the specific individual and the Company. The long-term
benefit element has been reflected in the grants of stock options to specific
executive officers.

Traditionally, Mr. Wall's salary has been set at levels which are perceived
by the Board to be below the salaries of chief executive officers of other
comparable companies. Mr. Wall, whose family continues to own more than half of
the outstanding Common Stock of the Company, has been willing to accept such
salary levels primarily because of the message his salary sends to other
executive officers, employees and shareholders. Furthermore, Mr. Wall's personal
net worth ultimately depends more on the performance of the Company than on any
specific salary level. The salaries of each of the other Named Officers are
based upon experience with the Company, contributions to the Company and the
relationship of such individual's responsibilities to the Chief Executive
Officer's responsibilities.

Stock options granted to executive officers of the Company have
historically been granted at a price equal to fair market value. Accordingly,
such options will gain appreciable value if, and only if, the market value of
the Common Stock increases subsequent to the date of grant. The Board believes
that the issuance of stock options at fair market value provides incentives to
employees to maximize the Company's performance and to assure continued
affiliation with the Company.

The Board believes that an appropriate compensation program can help in
promoting strong earnings performance if it reflects an appropriate balance
between providing rewards to executive officers while at the same time
effectively controlling cash compensation costs. It is the Board's objective to
continue monitoring the Company's compensation program to assure that this
balance is maintained.

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During 1993, the Omnibus Reconciliation Act of 1993 was enacted. This Act
includes potential limitations on the deductibility of compensation in excess of
$1 million paid to the Company's five highest paid officers beginning in 1994.
Based on regulations issued by the Internal Revenue Service and an analysis by
the Company to date, the Company does not believe that compensation levels will
reach the threshold described in this Act. The Board of Directors will continue
to evaluate the impact of this legislation on the Company's compensation program
and intends to submit appropriate proposals to stockholders at future meetings
if necessary in order to maintain the deductibility of executive compensation.

By: The Board of Directors

<TABLE>
<S> <C>
Terence D. Wall Joseph Thomas
David J. Bershad John Toedtman
Anthony J. Dimun Barry Wicker
</TABLE>

STOCKHOLDER RETURN COMPARISON

Set forth below is a line-graph presentation comparing the cumulative
stockholder return on the Company's Common Stock, on an indexed basis, against
the cumulative total returns of the NASDAQ Market Index and the Media General
Medical Instruments and Supplies Group Index (consisting of 277 publicly traded
medical instrument and device companies) for the period from October 1, 1990
(October 1, 1990 = 100) through September 30, 1995.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
ON VITAL SIGNS, INC. COMMON STOCK,
NASDAQ MARKET INDEX AND MEDIA GENERAL MEDICAL INSTRUMENTS
AND SUPPLIES GROUP INDEX

[PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
- ------------------------------------------------FISCAL YEAR ENDING------------------------------------------------
COMPANY 1990 1991 1992 1993 1994 1995

<S> <C> <C> <C> <C> <C> <C>
VITAL SIGNS INC 100 186.84 255.26 184.21 133.16 220.24
INDUSTRY INDEX 100 159.03 168.48 142.21 164.98 246.87
BROAD MARKET 100 134.19 131.96 171.62 181.61 220.50
</TABLE>

<PAGE>
<PAGE>
PROPOSAL FOR ADOPTION OF EMPLOYEE STOCK PURCHASE PLAN

On March 4, 1996, the Board of Directors approved (subject to shareholder
approval at the Annual Meeting) the Company's 1996 Employee Stock Purchase Plan
(the 'Plan') covering 300,000 shares of Common Stock. The following is a summary
of certain terms of the Plan, the full text of which is set forth in Exhibit A
annexed to this Proxy Statement.

Purpose

The purpose of the Plan is to provide employees of the Company with an
opportunity to purchase shares of Common Stock through payroll deductions and to
foster interest in the Company's success, growth and development.

Purchase Periods; Investment Limitations

Employee purchases will be made during a 12 month purchase period beginning
on October 1 of each year ('Purchase Period'). The first Purchase Period is
October 1, 1996 through September 30, 1997. Employees who participate in the
Plan will authorize the Company to withhold from each paycheck a specific
percentage of their 'Base Compensation' (as defined in the Plan), subject to the
following limitations: (i) no more than 10% of Base Compensation may be
withheld; (ii) no more than $25,000 of fair market value (based on the Closing
Price, as defined below) of Common Stock, on the first trading day of the
Purchase Period, may be purchased by any participant in any calendar year; (iii)
no less than $10.00 per paycheck may be invested by any participant; and (iv) no
less than five shares may be purchased by a participant in any Purchase Period.
Furthermore, no more than 100,000 (the 'Maximum Number') shares may be purchased
by all employees during any given Purchase Period. In the event that investments
made during a Purchase Period would result in more than the Maximum Number of
shares being purchased, the Plan provides for an automatic pro rata reduction in
the number of shares purchased by each participant and the return to employees
of an equivalent portion of the purchase price.

Eligibility

In order to be eligible to participate in the Plan for any Purchase Period,
a participant (i) must have been continuously employed by the Company for at
least three (3) months, (ii) must be customarily employed by the Company or its
subsidiaries for more than 20 hours per week, and (iii) immediately after the
grant must not own, or hold outstanding options to purchase, shares that
constitute five percent or more of the value or voting power of the voting stock
of the Company or its subsidiaries. Non-employee directors and non-employee
officers of the Company are not eligible to participate.

Purchase Price; Payment

For any Purchase Period, shares of Common Stock will be purchased under the
Plan at a price (the 'Purchase Price') equal to 85% of the 'Closing Price' (as
defined) of the Common Stock on the first trading day of the Purchase Period. In
general, the term 'Closing Price' means the closing sale price of a share of
Common Stock on the NASDAQ National Market System as quoted in The Wall Street
Journal.

The Company will deposit payroll deductions in an interest bearing escrow
account with a commercial bank designated by the Company's Stock Option
Committee. Promptly after the end of the Purchase Period, the Company will
utilize the amounts invested by participants, together with the interest earned
on deposited payroll deductions, as calculated by the Company, to purchase
Common Stock at the Purchase Price determined in accordance with the formula
described above, subject in all instances to the purchase limitations described
above. Fractional shares will not be purchased. Instead, payments which would
have been utilized to purchase fractional shares will be retained in a
participant's account for investment during the following Purchase Period if the
participant is enrolled for that Purchase Period or, if not, returned to the
participant.

<PAGE>
<PAGE>
Enrollment

In order to participate in the Plan with respect to a Purchase Period, an
employee must enroll in the Plan prior to, and must satisfy all eligibility
requirements as of, the first day of the Purchase Period. Enrollment forms will
be made available by, and must be returned to, the Director of Human Resources
in Totowa, New Jersey. Unless a participant withdraws, enrollment will
automatically carry-over from Purchase Period to Purchase Period; employees need
not re-enroll each Purchase Period in order to continue participating in the
Plan.

Withdrawals and Reductions

A participant who has enrolled in the Plan for any Purchase Period may
withdraw from the Plan by delivering a withdrawal form to the Company's Director
of Human Resources prior to the last day of such Purchase Period. An employee
shall automatically be deemed to have withdrawn from the Plan upon termination
of employment for any reason. Upon withdrawal, the Company will return to the
participant all of his or her payroll deductions during the current Purchase
Period, together with interest accrued through the date of withdrawal, as
calculated by the Company. An employee who withdraws from the Plan during a
Purchase Period may not re-enter the Plan until the following Purchase Period.

Participants may reduce, but may not increase, the amount of their payroll
deductions (expressed either in dollar amounts or as a percentage of Base
Compensation) during the Purchase Period. To ease the administrative burden upon
the Company, a participant may only reduce his or her payroll deductions once
during each Purchase Period.

Shares Covered by the Plan

A total of 300,000 shares of Common Stock may be purchased pursuant to the
Plan. Such shares may either be treasury shares purchased on the market by the
Company or shares originally issued by the Company, subject to determination by
the Stock Option Committee. Unless otherwise specified by the Stock Option
Committee with respect to purchases for a particular Purchase Period, shares
purchased pursuant to the Plan will be originally issued by the Company. In the
event that shares are to be purchased from the treasury and there are
insufficient shares in the Company's treasury to cover the aggregate amount of
shares required for a particular Purchase Period, the Company will retain an
independent agent to purchase such shares in the market on behalf of the
Company.

Administration

The Plan will be administered by the Stock Option Committee of the
Company's Board of Directors. The Stock Option Committee is authorized to
administer and interpret the Plan, and make rules and regulations determined by
the Stock Option Committee to be necessary to administer the Plan. Any
determination, decision or action of the Committee in connection with the
interpretation, administration or application of the Plan will be binding upon
all participants.

Amendment or Termination

The Board of Directors may amend or terminate the Plan at any time. In the
event that the Plan is terminated prior to the last day of a Purchase Period,
such Purchase Period shall be deemed to have ended on the effective date of such
termination.

Federal Income Tax Consequences

The Plan is not subject to the requirements of the Employee Retirement
Income Security Act of 1974, as amended, but is intended to qualify as an
'employee stock purchase plan,' as defined in Section 423 of the Internal
Revenue Code of 1986, as amended. An employee does not recognize taxable income
when the employee purchases shares of stock under the Plan. An employee, though,
does recognize taxable income with respect to any interest credited by the bank
escrow account on his deposited payroll deductions under the Plan. The tax
consequences upon disposition of acquired shares depend upon whether the
employee holds the shares purchased under the Plan for a period (the

<PAGE>
<PAGE>
'Holding Period') ending on the later of (1) two years from the date on which
the option to buy the shares was granted (i.e., the first day of the applicable
Purchase Period), or (2) one year from the date of purchase (the 'Purchase
Date').

If shares of stock purchased under the Plan are disposed of by an employee
after the Holding Period (or the employee dies while owning the shares), the
employee must report as ordinary compensation income in the year of disposition
(or at the employee's death) an amount equal to the lesser of (a) the excess (if
any) of the fair market value of the shares at the time of disposition (or
death) over the Purchase Price, or (b) the excess (if any) of the fair market
value of the shares at the time the option was granted over the Purchase Price.
To the extent that the fair market value of the shares at the time an employee
disposes of the shares after the Holding Period exceeds the sum of the Purchase
Price plus the amount included as ordinary compensation income as a result of
the disposition, such excess is taxable as long term capital gain.

If an employee disposes of the shares before expiration of the Holding
Period, the employee recognizes at the time of disposition ordinary compensation
income to the extent of the excess of the fair market value of the shares on the
Purchase Date over the Purchase Price (the 'Discount Amount'). In addition, the
employee recognizes as short term capital gain an amount equal to the excess (if
any) of (i) the fair market value of the shares at disposition, over (ii) the
sum of the Purchase Price plus the Discount Amount.

In addition to the Federal income tax consequences described herein, an
employee may also be subject to state and/or local income tax consequences in
the jurisdiction in which he works and/or resides.

The foregoing represents the Company's current position with respect to its
compliance with the various complex federal tax rules that relate to the Plan,
and is not intended as legal or tax advice or advice regarding state or local
tax rules. Employees are cautioned to contact their legal and tax advisors
regarding their own personal tax liability attributable to any purchase or sale
of shares by them. Each employee is responsible for determining and satisfying
his or her own income tax obligations, regardless of whether the Company
withholds or reports any amounts with respect to shares acquired under the Plan.

Administrative Matters

The amounts received by the Company upon the purchase of shares of its
Common Stock pursuant to the Plan will be used for general corporate purposes.

No directors or officers who are not employees will receive any benefit as
a result of the adoption of the Plan. The benefits that will be received as a
result of the adoption of the Plan by all eligible employees are not currently
determinable. As of March 31, 1996, approximately 710 employees of the Company
would have been eligible to participate in the Plan had it been implemented on
that date.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ADOPTION OF THE COMPANY'S 1996 EMPLOYEE STOCK PURCHASE PLAN.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

Goldstein Golub Kessler & Company, P.C. ('GGK'), certified public
accountants, has been selected by the Board of Directors to audit and report on
the Company's financial statements for the year ending September 30, 1996. A
representative of that firm is expected to be present at the Annual Meeting and
will have an opportunity to make a statement if he so desires. The
representative is expected to be available to respond to appropriate questions
from stockholders. GGK audited the Company's financial statements for the past
five years and for several years prior to fiscal 1987.

OTHER MATTERS

At the time that this Proxy Statement was mailed to the stockholders,
management was not aware that any matter other than the election of directors
and consideration of the proposed Employee Stock Purchase Plan would be
presented for action at the Annual Meeting. If other matters properly come

<PAGE>
<PAGE>
before the Meeting, it is intended that shares represented by proxies will be
voted with respect to those matters in accordance with the best judgment of the
persons voting them.

If a stockholder intends to present a proposal at the next Annual Meeting
of Stockholders, the proposal must be received by the Company in writing no
later than January 16, 1997 in order for such proposal to be eligible for
inclusion in the Company's Proxy Statement and form of proxy for next year's
meeting.

By Order of the Board of Directors

ANTHONY J. DIMUN, Secretary

Dated: May 16, 1996

A COPY OF AN ANNUAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 1995, INCLUDING
FINANCIAL STATEMENTS, ACCOMPANIES THIS PROXY STATEMENT. THE ANNUAL REPORT IS NOT
TO BE REGARDED AS PROXY SOLICITING MATERIAL OR AS A COMMUNICATION BY MEANS OF
WHICH ANY SOLICITATION IS TO BE MADE.

12
<PAGE>
<PAGE>
EXHIBIT A

VITAL SIGNS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN

1. Purpose. The purpose of the Vital Signs, Inc. 1996 Employee Stock
Purchase Plan (the 'Plan') is to provide employees of Vital Signs, Inc., a New
Jersey corporation ('Vital Signs'), and its subsidiaries (collectively, the
'Corporation') with an opportunity to purchase common stock of Vital Signs
through annual offerings to be made in accordance with the directions of the
Stock Option Committee, as well as to foster interest in the Corporation's
success, growth and development. It is the intention of the Corporation to have
the Plan qualify as an 'Employee Stock Purchase Plan' within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended (the 'Code'). The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that Section
of the Code.

2. Definitions. The following terms shall have the following meanings:

(a) 'Base Compensation' means regular straight time earnings,
including Commissions and excluding payments for overtime, incentive
compensation, bonuses (other than Commissions) and other special payments,
except to the extent that the inclusion of any such terms is specifically
approved by the Committee for purposes of the Plan.

(b) 'Commissions' shall mean commissions paid by the Corporation to
its sales personnel as compensation based on sales.

(d) 'Common Stock' means the common stock of Vital Signs.

(e) 'Employer' means Vital Signs or any of its subsidiaries. A
corporation shall constitute a subsidiary of Vital Signs if, and only if,
it constitutes a subsidiary corporation within the meaning of Section
424(f) of the Code.

(f) 'Employee' means, with respect to any Purchase Period, any person,
including an officer, whose customary employment is for more than 20 hours
per week.

(g) 'NASDAQ' means the National Market System of the National
Association of Securities Dealers Automated Quotation System.

(h) 'Participant' means an Employee who has agreed to participate in
an offering hereunder and has met the requirements of Paragraphs 3 and 5
hereof.

(i) 'Purchase Period' means any twelve month period commencing on
October 1 and ending on the next September 30, during which a Participant
may purchase Common Stock pursuant to any particular offering under the
Plan. The first Purchase Period is October 1, 1996 through September 30,
1997.

3. Eligibility.

(a) Any Employee shall be eligible to participate in the Plan as of the
first day of a Purchase Period coincident with or next following his or her
completion of three months of continuous service with one or more Employers,
subject to the limitations set forth in Section 3(b) hereof.

(b) Any provision of the Plan to the contrary notwithstanding, no Employee
shall be granted an option:

(i) if, immediately after the grant, such Employee would own shares,
and/or hold outstanding options to purchase shares, of Common Stock
possessing 5% or more of the total combined voting power or value of all
classes of stock of any Employer; or

(ii) which permits him or her rights to purchase shares of Common
Stock under all employee stock purchase plans of the Corporation at a rate
which exceeds $25,000 of fair market value of Common Stock for each
calendar year in which any option granted to the Employee is outstanding at
any time, determined on the basis of the Market Price (as defined in
Section 7) on the first trading day of the Purchase Period of any offering.

4. Offerings. On October 1 of each calendar year, commencing on October 1,
1996, the Corporation will make an offering to Employees to purchase Common
Stock under the Plan. During

A-1

<PAGE>
<PAGE>
each Purchase Period, amounts received as Base Compensation by an Employee shall
constitute the measure of such Employee's participation in the offering.

5. Participation. An Employee who will be, on the first day of any
Purchase Period, eligible to participate in the offering commencing on such date
in accordance with Paragraph 3 hereof, may so participate by completing and
submitting to the Director of Human Resources of Vital Signs (the 'HR
Director'), prior to the commencement of such Purchase Period, a written
authorization of payroll deductions on a form provided by the HR Director.
Payroll deductions for a Participant who has timely submitted such a written
authorization shall commence on the first payday within such Purchase Period and
shall end on the last payday during such Purchase Period, unless sooner
terminated as provided herein. An Employee who has enrolled in the Plan with
respect to a particular Purchase Period shall automatically be deemed to have
re-enrolled in the Plan for all subsequent Purchase Periods at the payroll
deduction rate in effect immediately prior to the commencement of each such
subsequent Purchase Period unless (i) the Employee withdraws from the Plan or
(ii) prior to the commencement of a new Purchase Period, the Employee advises
the HR Director in writing that he or she desires to change his or her payroll
deduction rate for such new Purchase Period.

6. Payroll Deductions.

(a) At the time an Employee files his or her authorization for a payroll
deduction, he or she shall elect to have deductions made from such Employee's
pay on paydays during the Purchase Period at a rate not to exceed 10% of such
Employee's Base Compensation. At a minimum, an Employee must authorize a payroll
deduction of at least $10.00 per day period.

(b) All payroll deductions made for a Participant shall be deposited by the
Corporation in an interest bearing escrow account with a custodian bank (the
'Bank'). Participants may not make separate cash payments into such account.

(c) A Participant may, at any time during a Purchase Period, decrease (but
not increase until the next Purchase Period) the amount authorized to be
deducted from such Participant's pay, provided the minimum deduction specified
in Paragraph 6(a) hereof is maintained. Authorizations to reduce the amount of
payroll deductions shall be made on forms provided by the HR Director and shall
be effective for the next pay period after the pay period in which the
authorization form is submitted to the HR Director. A Participant may reduce his
or her payroll deductions only once during any Purchase Period.

7. Granting of Option.

(a) Each Participant participating in any offering under the Plan will be
granted an option, effective as of the first date of such offering, to purchase
as many full shares of Common Stock as he or she may be entitled to purchase
with the payroll deductions credited to his or her account during such
Employee's participation in that offering, together with interest earned on
deposited payroll deductions.

(b) The option price of shares purchased with payroll deductions made
during the Purchase Period for a Participant shall be equal to 85% of the Market
Price of the Common Stock on the first trading day of the Purchase Period.

The term 'Market Price' shall mean, as of any date, (i) if the Common Stock
is quoted on NASDAQ on such date, the closing price of the Common Stock on
NASDAQ on such date or, if no such closing price is reported on such date, the
closing price of the Common Stock on NASDAQ on the next preceding trading day on
which such closing price is reported, or (ii) if the Common Stock is listed on a
national securities exchange on such date, the closing price of the Common Stock
on such exchange on such date, or, if no such closing price is reported on such
date, the closing price of the Common Stock on such exchange on the next
preceding trading day on which such closing price is reported. In the event that
the Common Stock is not quoted on NASDAQ or listed on a national securities
exchange on a date on which 'Market Price' is to be determined pursuant to the
Plan, then 'Market Price' shall mean the fair market value of one share of
Common Stock as determined by the Committee in good faith.

8. Exercise of Option.

(a) As of the last day of the Purchase Period of any offering, the amount
of each Participant's account (representing accumulated payroll deductions and
accrued interest earned thereon) shall be totaled. Subject to the limitations
described in Paragraph 8(b), each Participant shall be deemed to have exercised
his or her option to purchase a number of full shares of Common Stock determined
by

A-2

<PAGE>
<PAGE>
dividing the amount in such Participant's account (including interest credited
thereon) by the option price and rounding down to the nearest whole number. If,
pursuant to such calculation (after giving effect to any proration required
pursuant to Paragraph 8(b)), the Participant would be entitled to exercise
options to purchase less than five whole shares, then such Participant shall not
be entitled to receive any shares, and all amounts in his or her account shall
be refunded with interest. Upon all purchases by a Participant under the Plan,
such Participant's account shall be charged for the amount of the purchase.

(b) Notwithstanding any provision to the contrary contained in this Plan,
in no event shall all Participants with respect to any offering be permitted to
exercise options exceeding an aggregate of 100,000 shares (as such number may be
adjusted from time to time by the Committee to give effect to the types of
transactions described in Paragraph 15) (the 'Maximum Number'). In the event
that, in the absence of the immediately preceding sentence, all such
Participants would otherwise have elected to exercise options exceeding the
Maximum Number of shares with respect to any such offering, then (i) the number
of shares with respect to which each Participant shall be deemed to have
exercised his or her option with respect to such offering shall be reduced on a
pro-rated basis so that the total number of shares with respect to such offering
for which all Participants shall be deemed to have exercised options shall
approximate as closely as possible, but shall not exceed, the Maximum Number of
shares and (ii) the purchase price applicable to the unpurchased shares that
would have been purchased but for this Section 8(b) shall be returned to
Participants. In no event shall any fractional shares be issued under the Plan.

(c) Failure to participate in any offering will not bar an Employee from
participating in any subsequent offering. Payroll deductions shall be made in
each offering to the extent authorized by the Employee, subject to the maximum
and minimum limitations imposed for such offering. A separate account will be
maintained for each Participant with respect to each offering. Except as
provided in Paragraphs 8(a) and 8(b), any unused balance in a Participant's
account at the end of the last day of a Purchase Period after the exercise of
options shall be refunded if the Participant is not enrolled for the subsequent
Purchase Period and shall be retained in the Participant's account for the
subsequent Purchase Period if the Participant is so enrolled.

(d) A Participant may not purchase a share under any offering beyond twelve
calendar months from the effective date thereof.

9. Withdrawal.

(a) With respect to a particular Purchase Period, a Participant may
withdraw payroll deductions credited to such Participant's account under the
Plan and interest earned thereon by giving written notice to the HR Director at
any time prior to the last day of such Purchase Period. All of the payroll
deductions credited to such Participant's account and interest earned thereon
shall be paid to such Participant after receipt of his or her notice of
withdrawal, and no further deductions shall be made for that Purchase Period for
that Participant.

(b) An Employee's withdrawal will not have any effect upon his or her
eligibility to participate in any subsequent offering under this Plan.

(c) In the event that an Employee's employment with the Corporation is
terminated for any reason during a Purchase Period, such Employee shall be
deemed to have withdrawn from the Plan at such time and the balance in such
Employee's account shall be paid to such Employee.

(d) Any payroll deductions returned to an Employee who withdraws from or
terminates participation in the Plan for any reason, or paid to any person in
accordance with Paragraph 13 hereof, shall be credited with interest computed as
provided in Paragraph 10.

10. Interest. Accounts shall earn such rate of interest as shall be paid
by the Bank.

11. Stock.

(a) The shares to be sold to Participants under the Plan are to be, in the
Committee's discretion, either authorized and unissued shares of Common Stock or
treasury shares of Common Stock; provided, however, that in the event that the
Committee fails to make such a determination with respect to a particular
Purchase Period, all shares to be purchased with respect to such Purchase Period
shall be authorized and unissued shares. In the event that shares are to be
transferred from the Company's treasury and the shares in the Company's treasury
are insufficient to cover the number of shares to be purchased for a particular
Purchase Period, Vital Signs shall retain an independent agent to purchase

A-3

<PAGE>
<PAGE>
such shares in the market. The maximum aggregate number of shares which shall be
made available for sale under the Plan during all offerings shall be 300,000
shares, subject to adjustment upon changes in capitalization of Vital Signs as
provided in Paragraph 15 hereof.

(b) None of the rights or privileges of a shareholder of Vital Signs shall
exist with respect to shares purchased under the Plan unless and until
certificates representing such shares shall have been issued and delivered to or
for the benefit of the applicable Participant.

12. Administration. The Plan shall be administered by the Stock Option
Committee of the Board of Directors of Vital Signs. The Committee shall be
vested with full authority to administer and interpret the Plan, and make such
rules and regulations as it deems necessary or advisable to administer the Plan,
and any determination, decision, or action of the Committee in connection with
the construction, interpretation, administration or application of the Plan
shall be final, conclusive and binding upon all Participants and any and all
persons claiming under or through any Participant. The Committee may retain the
services of an outside firm to serve as its agent in administering the Plan on a
day-by-day basis.

13. Designation of Beneficiary. A Participant may file a written
designation of a Beneficiary who is to receive any shares credited to such
Participant's account and cash credited to the Participant under the Plan in the
event of such Participant's death prior to the delivery of such shares and cash.
Such designation of a Beneficiary may be changed by the Participant at any time
upon written notice. Upon the death of a Participant and upon receipt by the
Corporation of proof of the Participant's death and of the identity and
existence of a Beneficiary validly designated by such Participant under the
Plan, the Corporation shall deliver any such shares and cash to such
Beneficiary. In the event of the death of a Participant and in the absence of a
Beneficiary validly designated under the Plan who is living at the time of such
Participant's death, the Corporation shall deliver any such shares and cash to
the executor or administrator of the estate of the Participant. No designated
Beneficiary shall, prior to the death of the Participant by whom such
Beneficiary has been designated, acquire any interest in the shares or cash
credited to the Participant under the Plan.

14. Transferability. No rights with regard to the exercise of an option or
with regard to receipt of shares under the Plan may be assigned, transferred,
pledged or otherwise disposed of by an Employee. Options granted under the Plan
are not transferable by such Employee otherwise than by will or the laws of
descent and distribution, and are exercisable, during an Employee's lifetime,
only by such Employee.

15. Changes in Capitalization. If any option under this Plan is exercised
subsequent to any stock dividend, split, spin-off, recapitalization, merger,
consolidation, exchange of shares, or the like, occurring after such option has
been granted, as a result of which shares of any class shall be issued in
respect of the outstanding shares of Common Stock, or shares shall be changed
into the same or a different number of the same or another class or classes, the
number of shares to which such option shall be applicable and the option price
for such shares shall be appropriately adjusted by the Committee.

16. Government Regulations. The Corporation's obligations to sell and
deliver Common Stock of Vital Signs under the Plan are subject to the approval
of any governmental authority required in connection with the authorization,
issuance and sale of such Common Stock.

17. Amendment or Termination. The Board of Directors of Vital Signs may at
any time terminate or amend the Plan. In the event that the Plan is terminated
prior to the last day of a Purchase Period, such Purchase Period shall be deemed
to have ended on the effective date of such termination and there shall be no
subsequent Purchase Periods.

18. Shareholder Approval. This Plan is subject to the approval of the
stockholders of Vital Signs within 12 months prior to or after the date the Plan
is adopted by the Board of Directors of Vital Signs.

A-4
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<PAGE>

APPENDIX 1
PROXY CARD

VITAL SIGNS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS,
JUNE 13, 1996

The undersigned hereby appoints Anthony J. Dimun, Terence D. Wall and Barry
Wicker, and each of them, attorneys and proxies, with power of substitution in
each of them, to vote for and on behalf of the undersigned at the annual meeting
of the shareholders of the Company to be held on June 13, 1996, and at any
adjournment thereof, upon matters properly coming before the meeting, as set
forth in the related Notice of Meeting and Proxy Statement, both of which have
been received by the undersigned. Without otherwise limiting the general
authorization given hereby, said attorneys and proxies are instructed to vote as
follows:

1. Election of the Board's nominees for Director. (The Board of Directors
recommends a vote 'FOR'.)

<TABLE>
<S> <C>
[ ] FOR the nominees listed below (except as marked to the [ ] WITHHOLD AUTHORITY to vote for the nominees listed
contrary below). below.
</TABLE>

NOMINEES: David J. Bershad, Anthony Dimun, Joseph Thomas, John Toedtman, Terence
Wall and Barry Wicker.

INSTRUCTION: To withhold authority to vote for any individual nominee listed
above, write the nominee's name in the space provided below.

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

2. The adoption of the Company's 1996 Employee Stock Purchase
Plan. [ ] FOR [ ] AGAINST [ ] ABSTAIN
(The Board of Directors recommends a vote 'FOR'.)

3. Upon all such other matters as may properly come before the meeting and/or
any adjournment or adjournments thereof, as they in their discretion may
determine. The Board of Directors is not aware of any such other matters.

(see reverse side)

<PAGE>
<PAGE>
UNLESS OTHERWISE SPECIFIED IN THE SQUARES OR SPACE PROVIDED IN THIS PROXY,
THIS PROXY WILL BE VOTED FOR EACH OF THE BOARD'S NOMINEES.

Dated:........................, 1996

Signed..............................

....................................

Please sign exactly as your name
appears hereon. Give full title if
an Attorney, Executor,
Administrator, Trustee, Guardian,
etc. For an account in the name of
two or more persons, each should
sign, or if one signs, he should
attach evidence of his authority.

PLEASE SIGN THIS PROXY AND RETURN IT
PROMPTLY WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING.
YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND.

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