KINETIC CONCEPTS INC /TX/, 8-K, 1994-10-17

KINETIC CONCEPTS INC /TX/
8-K, 1994-10-17
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<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

F O R M 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

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

Date of Report
September 30, 1994

Kinetic Concepts, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
Texas 1-9913 74-1891727
- - ------------------------------- ----------------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
</TABLE>

<TABLE>
<S> <C>
8023 Vantage Drive, San Antonio, Texas 78230
- - ---------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
</TABLE>

Registrant's telephone number, including area code: (210) 524-9000
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.

(a) On September 30, 1994, KCI Therapeutic Services, Inc.
("KCTS"), a Delaware corporation and wholly-owned subsidiary of Registrant,
sold certain of its assets (collectively, the "Assets") used exclusively by
KCTS' Medical Services Division (the "Medical Services Division") to MEDIQ/PRN
Life Support Services-I, Inc. ("Buyer"), a Delaware corporation and indirect,
wholly-owned subsidiary of MEDIQ Incorporated, a Delaware corporation
("MEDIQ"), pursuant to that certain Asset Purchase Agreement (the "Asset
Purchase Agreement") dated August 23, 1994 by and among Registrant, KCTS,
MEDIQ, Buyer and PRN Holdings, Inc., a Delaware corporation and wholly-owned
subsidiary of MEDIQ. The Assets consisted of those assets of KCTS used
exclusively by the Medical Services Division in its business of offering for
rent to hospitals and other health care providers a variety of movable critical
care and life support equipment in categories described in Schedule 1.1.1
attached to the Asset Purchase Agreement and selling disposable medical care
products to hospitals and other health care providers for use in conjunction
with such equipment. The aggregate purchase price (the "Purchase Price") for
the Assets was $84,092,664, consisting of cash in the amount of $65,300,000 and
promissory notes in the aggregate principal amount of $18,792,664. The
Purchase Price may be subject to a post-closing adjustment to be based upon the
Net Asset Value (as defined in the Purchase Agreement) of the inventory sold by
KCTS to Buyer. The Purchase Price was determined pursuant to negotiations
between the parties and Registrant believes the Purchase Price represents the
fair market value of the Assets.

<PAGE> 3

Item 7. FINANCIAL STATEMENTS AND EXHIBITS.

(b) Pro Forma Financial Information required pursuant to Article 11
of Regulation S-X

Pro Forma Condensed Divested Balance Sheet - June 30, 1994

Pro Forma Condensed Divested Statement of Earnings for the six months
ended June 30, 1994

Pro Forma Condensed Divested Statement of Earnings for the year ended
December 31, 1993

Notes to Pro Forma Condensed Divested Financial Statements

The following unaudited pro forma condensed consolidated
balance sheet as of June 30, 1994 and unaudited pro forma condensed
consolidated statements of earnings for the six months ended June 30,
1994 and the year ended December 31, 1993, give effect to the
consummation of the disposition of the Assets described more fully
in the financial statements which follow and Item 2 above. The
unaudited pro forma condensed consolidated financial statements
present the Medical Services Division's activity as if the disposition
had been effected on June 30, 1994 for purposes of presenting
financial position, and on January 1, 1993 for purposes of presenting
results of operations. These unaudited pro forma condensed
consolidated financial statements should be read in conjunction with
the notes to the: (i) unaudited pro forma condensed consolidated
financial statements filed herewith; and (ii) consolidated financial
statements of Kinetic Concepts, Inc. (the "Company") included in the
Forms 10-K and 10-Q filed by the Company on March 29, 1994, and
August 12, 1994, respectively.

The unaudited pro forma condensed consolidated financial statements
have been prepared by Company management. These unaudited pro forma
condensed consolidated financial statements may not be indicative of
the results that actually would have occurred if the combination had
been in effect on the dates indicated or which may be obtained in the
future.
<PAGE> 4
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Pro Forma Condensed Divested Balance Sheet
June 30, 1994
UNAUDITED
(in thousands)

Kinetic Medical Services Pro-Forma
Concepts, Inc. Division -----------------------
and Subsidiaries To Be Sold Adjustments Divested
---------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and equivalents 15,695 15,695
Accounts receivable, net 61,862 2,000 (a) 59,862
Inventories 21,635 (3,126) 18,509
Notes receivable 0 6,092 (b) 6,092
Prepaid expenses and other 11,898 11,898
-------- -------- -------- -------
Total current assets 111,090 (3,126) 4,092 112,056
Net property, plant and equipment 100,480 (38,137) 62,343
Notes receivable 0 3,760 (b) 3,760
Goodwill, net 43,859 (24,683)(c) 19,176
Other assets, net 15,829 (117)(c) 19,337
3,625 (e)
-------- -------- -------- -------
Total Assets 271,258 (41,263) (13,323) 216,672
======== ======== ======== =======

Liabilities and Capital Accounts
Notes payable 2,937 2,937
Current installments of long-term obligations 13,175 13,175 (f) 0
Current installments of capital lease obligations 2,590 (2,590) 0
Accrued expenses 29,810 2,802 (d) 32,612
Income taxes payable 256 21,000 (e) 21,256
-------- -------- -------- -------
Total current liabilities 48,768 (2,590) 10,627 56,805
-------- -------- -------- -------
Long-term obligations, excluding current
installments 85,583 (52,125)(f) 33,458
Capital leases obligations, excluding current
installments 811 (623) 188
Deferred income taxes 4,985 (4,875)(e) 110
-------- -------- -------- -------
Total Liabilities 140,147 (3,213) (46,373) 90,561
-------- -------- -------- -------
Common stock 44 44
Additional paid-in capital 10,303 10,303
Retained earnings 121,826 (5,000)(g) 116,826
Other (1,062) (1,062)
-------- -------- -------- -------

Total Liabilities and Equity 271,258 (3,213) (51,373) 216,672
======== ======== ======== =======
</TABLE>

See accompanying notes to pro forma condensed consolidated financial statements.
<PAGE> 5
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Pro Forma Condensed Divested Statement of Earnings
For the six months ended June 30, 1994
UNAUDITED
(in thousands, except per share data)

Kinetic Medical Services Pro-Forma
Concepts, Inc. Division -----------------------
and Subsidiaries To Be Sold Adjustments Divested
---------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Revenue:
Service and rental 119,160 24,281 0 94,879
Sales and other 20,676 6,261 0 14,415
------- ------ ------ -------
Total revenue 139,836 30,542 0 109,294

Rental expenses 81,173 18,529 0 62,644
Cost of goods sold 10,392 4,432 0 5,960
------- ------ ------ -------
91,565 22,961 0 68,604
------- ------ ------ -------
Gross profit 48,271 7,581 0 40,690

Selling, general and administrative expenses 31,075 4,755 0 26,320
------- ------ ------ -------
Operating income 17,196 2,826 0 14,370

Interest expense 3,501 230 (2,841)(h) 430
------- ------ ------ -------
Earnings before income taxes, minority
interest and cumulative effect of
change in accounting principle 13,695 2,596 2,841 13,940

Income tax 7,040 1,012 1,108 (i) 7,136
------- ------ ------ -------
Earnings before minority interest and cumulative
effect of change in accounting principle 6,655 1,584 1,733 6,804
======= ====== ====== =======

Earnings per share before minority interest and
cumulative effect of change in accounting
principle $ 0.15 $ 0.15
======= =======
Shares used in earnings per share computations 43,983 43,983
======= =======
</TABLE>

See accompanying notes to pro forma condensed consolidated financial
statements.
<PAGE> 6

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Pro Forma Condensed Divested Statement of Earnings
For the year ended December 31, 1993
UNAUDITED
(in thousands, except per share data)

Kinetic Medical Services Pro-Forma
Concepts, Inc. Division -------------------------
and Subsidiaries To Be Sold Adjustments Divested
---------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Revenue:
Service and rental 232,250 44,756 0 187,494
Sales and other 36,622 11,234 0 25,388
------- ------- ------- -------
Total revenue 268,872 55,990 0 212,882

Rental expenses 172,169 32,195 0 139,974
Cost of goods sold 18,666 9,238 0 9,428
------- ------- ------- -------
190,835 41,433 0 149,402
------- ------- ------- -------
Gross profit 78,037 14,557 0 63,480

Selling, general and administrative expenses 50,797 8,724 0 42,073
Unusual Items 6,705 0 0 6,705
------- ------- ------- -------
Operating income 20,535 5,833 0 14,702

Interest expense 5,908 702 (6,135)(h) (929
------- ------- ------- -------
Earnings before income taxes, minority interest,
extraordinary item and cumulative effect of
change in accounting principle 14,627 5,131 6,135 15,631

Income tax 7,175 2,001 2,393 7,567
------- ------- ------- -------
Earnings before minority interest, extraordinary
item and cumulative effect of change in accounting
principle 7,452 3,130 3,742 8,064
======= ======= ======= =======

Earnings per share before minority interest,
extraordinary item and cumulative effect of
change in accounting principle $0.17 $0.18
======= =======
Shares used in earnings per share computations 44,627 44,627
======= =======
</TABLE>

See accompanying notes to pro forma condensed consolidated financial
statements.
<PAGE> 7
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Condensed
Divested Financial Statements
UNAUDITED
(in thousands)

1. On September 30, 1994, KCI Therapeutic Services, Inc. ("KCTS"),
a wholly-owned subsidiary of the Company, sold certain assets
(the "Assets") used exclusively by KCTS' Medical Services
Division (the "Medical Services Division") to MEDIQ/PRN Life
Support Services-I, Inc. ("Buyer") under an Asset Purchase
Agreement. Upon consummation of the transactions contemplated
by the Asset Purchase Agreement, the Buyer acquired the Assets
and assumed certain liabilites of the Medical Services
Division. The sales price was approximately $84,093. In
conjunction with the sale, KCTS and its affiliates agreed not to
rent or distribute certain critical care and life support
equipment for up to a period of 5 years.

Gross proceeds included a cash payment of approximately $65,300
and promissory notes in the aggregate principal amount of
$18,792. Currently, the net proceeds of the sale for accounting
purposes are estimated to be approximately $72,817, as follows:

<TABLE>
<S> <C>
Cash 65,300
Note receivable (Exhibit 99.5) 4,361
Notes receivable (Exhibits 99.1,
99.3 and 99.4) 3,183
Note receivable (Exhibit 99.2) 2,308
------
75,152

Fees and commissions (2,335)
------

Net proceeds 72,817
======
</TABLE>

The discounting of the various notes receivable for accounting
purposes are described below:

Note receivable (Exhibit 99.5): $5,836, interest
payable at 0%, due in 10 equal monthly installments
beginning 90 days from closing. Discounted at 11% with a
20% valuation allowance.

Notes receivable (Exhibits 99.1, 99.3 and 99.4):
$10,000, interest payable quarterly at 10% after an 18
month grace period, principal due 5 years from closing.
Discounted at 17% with a 50% valuation allowance.

Note receivable (Exhibit 99.2): $2,957, interest
payable at 8%, interest and principal due in equal
installments beginning 90 days after closing with final
payment due 1 year from closing. Discounted at 12% with
a 20% valuation allowance.

In addition, the Asset Purchase Agreement includes a post-closing
adjustment which may result in a reimbursement to the Buyer for a
portion of the purchase price. The adjustment occurs if actual
inventory, or equipment levels are found to be lower than
specified levels. Interest accrues at the rate of 8% on any
required payment. KCTS anticipates that no liability will result
from this post-closing adjustment calculation.

2. The pro forma condensed divested balance sheet gives effect to the
following pro forma adjustments:

(a) To record additional allowance required to bring reserve
balance to 25% of receivables retained. The absence of a
sales force which could be used to facilitate the collection
process necessitates this adjustment.

(b) To record the discounted value of notes receivable received
as partial consideration for the Assets acquired from the
Medical Services Division.

(c) To record the write-off of the remaining book value of
goodwill and other intangible assets related to KCTS'
original acquisition of the Medical Services Division.

(d) To record estimated liabilities for direct costs related to
the disposition of the Assets of the Medical Services
Division including legal, accounting, severance, and
reorganization costs.

(e) Represents the effect on income taxes resulting from the
disposition of the Assets of the Medical Services Division,
including the adjustments described above.

(f) Cash received in connection with the sale of $65,300 was
used to reduce Company debt.

(g) After-tax loss which would have been recognized from the
sale of the Assets of the Medical Services Division as if
the transaction had been consummated on June 30, 1994.
<PAGE> 8
3. The pro forma condensed divested statements of earnings for the
year ended December 31, 1993, and and the six months ended June
30, 1994 excluded certain historical items such as cumulative
effect of changes in accounting principle, extraordinary items,
and minority interests. In addition, certain reclassifications
of rental and selling, general and administrative expenses
related to 1993 have been made to conform with the current
period's presentation. The statements presented give effect to
the following pro forma adjustments:

(h) Decrease in interest expense as a result of the paid down
debt, combined with the interest income which would have
been earned under the notes receivable.

(i) The tax rate used for pro forma adjustments was the
statutory rate of 39% which is made up of 35% for federal
Income taxes and 4% for state income taxes.
<PAGE> 9
(c) Exhibits.

The following exhibits are filed as part of this report:

<TABLE>
<CAPTION>
Number Document
------ --------
<S> <C>
2.1 Asset Purchase Agreement dated August 23, 1994 by and among Kinetic Concepts, Inc., a Texas corporation,
KCI Therapeutic Services, Inc., a Delaware corporation, MEDIQ Incorporated, a Delaware corporation, PRN
Holdings, Inc., a Delaware corporation, and MEDIQ/PRN Life Support Services-I, Inc., a Delaware
corporation.

2.2 Amendment No. 1 to Asset Purchase Agreement dated September 30, 1994 by and among Kinetic Concepts, Inc., a
Texas corporation, KCI Therapeutic Services, Inc., a Delaware corporation, MEDIQ Incorporated, a Delaware
corporation, PRN Holdings, Inc., a Delaware corporation, and MEDIQ/PRN Life Support Services-I, Inc., a
Delaware corporation.

99.1 Promissory Note dated September 30, 1994 in the principal amount of $2,000,000 payable by PRN Holdings,
Inc., a Delaware corporation, to the order of KCI Therapeutic Services, Inc., a Delaware corporation.

99.2 Promissory Note dated September 30, 1994 in the principal amount of $2,956,957 payable by MEDIQ/PRN Life
Support Services-I, Inc., a Delaware corporation, to the order of KCI Therapeutic Services, Inc., a
Delaware corporation.
</TABLE>

<PAGE> 10
<TABLE>
<CAPTION>
Number Document
------ --------
<S> <C>
99.3 Promissory Note dated September 30, 1994 in the principal amount of $3,000,000 payable by PRN Holdings,
Inc., a Delaware corporation, to the order of KCI Therapeutic Services, Inc., a Delaware corporation.

99.4 Promissory Note dated September 30, 1994 in the principal amount of $5,000,000 payable by PRN Holdings,
Inc., a Delaware corporation, to the order of KCI Therapeutic Services, Inc., a Delaware corporation.

99.5 Promissory Note dated September 30, 1994 in the principal amount of $5,835,707 payable by MEDIQ/PRN Life
Support Services, Inc., a Delaware corporation, to the order of KCI Therapeutic Services, Inc., a Delaware
corporation.

</TABLE>

<PAGE> 11
<TABLE>
<CAPTION>
Number Document
------ --------
<S> <C>
99.6 Negative Covenants Agreement dated September 30, 1994 by and among Kinetic Concepts, Inc., a Texas
corporation, KCI Therapeutic Services, Inc., a Delaware corporation, MEDIQ Incorporated, a Delaware
corporation, PRN Holdings, Inc., a Delaware corporation, and MEDIQ/PRN Life Support Services-I, Inc., a
Delaware corporation.

99.7 Guaranty Agreement dated September 30, 1994 made by PRN Holdings, Inc., a Delaware corporation, in favor
of KCI Therapeutic Services, Inc., a Delaware corporation.

99.8 Guaranty Agreement dated September 30, 1994 made by MEDIQ Incorporated, a Delaware corporation, in favor of
KCI Therapeutic Services, Inc., a Delaware corporation.

</TABLE>

<PAGE> 12
<TABLE>
<CAPTION>
Number Document
------ --------
<S> <C>
99.9 Collateral Transfer of Note (Security Agreement) dated September 30, 1994 by MEDIQ Incorporated, a Delaware
corporation, for the benefit of KCI Therapeutic Services, Inc., a Delaware corporation.

99.10 Press Release dated September 30, 1994.
</TABLE>

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

KINETIC CONCEPTS, INC.

By: /s/ DENNIS E. NOLL
Dennis E. Noll
Vice President, General
Counsel and Secretary

Dated: October 17, 1994

<PAGE> 13
EXHIBIT INDEX

99.3 Promissory Note dated September 30, 1994 in the principal amount of $3,000,000 payable by PRN Holdings,
Inc., a Delaware corporation, to the order of KCI Therapeutic Services, Inc., a Delaware corporation.

99.6 Negative Covenants Agreement dated September 30, 1994 by and among Kinetic Concepts, Inc., a Texas
corporation, KCI Therapeutic Services, Inc., a Delaware corporation, MEDIQ Incorporated, a Delaware
corporation, PRN Holdings, Inc., a Delaware corporation, and MEDIQ/PRN Life Support Services-I, Inc., a
Delaware corporation.

99.7 Guaranty Agreement dated September 30, 1994 made by PRN Holdings, Inc., a Delaware corporation, in favor
of KCI Therapeutic Services, Inc., a Delaware corporation.

99.8 Guaranty Agreement dated September 30, 1994 made by MEDIQ Incorporated, a Delaware corporation, in favor of
KCI Therapeutic Services, Inc., a Delaware corporation.

99.9 Collateral Transfer of Note (Security Agreement) dated September 30, 1994 by MEDIQ Incorporated, a Delaware
corporation, for the benefit of KCI Therapeutic Services, Inc., a Delaware corporation.

99.10 Press Release dated September 30, 1994.

</TABLE>

<PAGE> 1
EXHIBIT 2.1

ASSET PURCHASE AGREEMENT

by and among

KINETIC CONCEPTS, INC.,

KCI THERAPEUTIC SERVICES, INC.,

MEDIQ INCORPORATED,

PRN HOLDINGS, INC.

and

MEDIQ/PRN LIFE SUPPORT SERVICES-I, INC.

August 23, 1994

<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. PURCHASE AND SALE OF BUSINESS AND ASSETS . . . . . . . . 1
1.1 Purchased Assets . . . . . . . . . . . . . . . . . . . . 1
1.2 Assets Excluded from Purchase . . . . . . . . . . . . . . 3

SECTION 2. AGGREGATE CONSIDERATION AND PAYMENT; ASSUMED
LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Aggregate Consideration . . . . . . . . . . . . . . . . . 3
2.2 Liabilities Assumed . . . . . . . . . . . . . . . . . . . 4
2.3 Excluded Liabilities . . . . . . . . . . . . . . . . . . 5
2.4 Allocation of Consideration . . . . . . . . . . . . . . . 6
2.5 Sales Taxes . . . . . . . . . . . . . . . . . . . . . . . 6

SECTION 3. CLOSING PAYMENT ADJUSTMENTS . . . . . . . . . . . . . . . 7
3.1 Closing Statement . . . . . . . . . . . . . . . . . . . . 7
3.2 Post Closing Adjustment . . . . . . . . . . . . . . . . . 8
3.3 Certain Payments . . . . . . . . . . . . . . . . . . . . 9
3.4 Accounts Receivable . . . . . . . . . . . . . . . . . . . 11

SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING SELLER . . . . . 11
4.1 Organization and Good Standing . . . . . . . . . . . . . 12
4.2 Power and Authorization . . . . . . . . . . . . . . . . . 12
4.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Investments and Subsidiaries . . . . . . . . . . . . . . 14
4.5 Compliance with Laws . . . . . . . . . . . . . . . . . . 14
4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . 14
4.7 The February Statement . . . . . . . . . . . . . . . . . 14
4.8 Accounts Receivable . . . . . . . . . . . . . . . . . . . 15
4.9 Personal Property . . . . . . . . . . . . . . . . . . . . 15
4.10 Warranties, Insurance . . . . . . . . . . . . . . . . . . 16
4.11 Real Property . . . . . . . . . . . . . . . . . . . . . . 16
4.12 Title to Assets . . . . . . . . . . . . . . . . . . . . . 16
4.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . 17
4.14 Customers and Suppliers . . . . . . . . . . . . . . . . . 17
4.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.16 Employee Matters . . . . . . . . . . . . . . . . . . . . 18
4.17 Environmental Matters . . . . . . . . . . . . . . . . . . 19
4.18 Absence of Certain Changes and Events . . . . . . . . . . 20
4.19 Books and Records . . . . . . . . . . . . . . . . . . . . 21
4.20 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.21 Full Disclosure . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>

-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . 21
5.1 Organization and Good Standing . . . . . . . . . . . . . 22
5.2 Power and Authorization . . . . . . . . . . . . . . . . . 22
5.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Financing Commitment . . . . . . . . . . . . . . . . . . 23
5.6 MHM Note . . . . . . . . . . . . . . . . . . . . . . . . 24
5.7 Full Disclosure . . . . . . . . . . . . . . . . . . . . . 24

SECTION 6. OBLIGATIONS OF THE PARTIES UNTIL CLOSING . . . . . . . . 25
6.1 Conduct of Medical Services Business Pending Closing . . 25
6.2 Negative Covenants . . . . . . . . . . . . . . . . . . . 26
6.3 Access to Information; Confidentiality . . . . . . . . . 26
6.4 Best Efforts . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Delivery of Additional Information . . . . . . . . . . . 27
6.7 Use of Business Name . . . . . . . . . . . . . . . . . . 28

SECTION 7. CERTAIN CONDITIONS PRECEDENT TO BUYER'S
AND MEDIQ'S OBLIGATIONS . . . . . . . . . . . . . . . . . 28
7.1 Representations and Warranties . . . . . . . . . . . . . 28
7.2 Assets of Seller . . . . . . . . . . . . . . . . . . . . 28
7.3 Performance of Covenants . . . . . . . . . . . . . . . . 29
7.4 Approvals . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 Legal Matters . . . . . . . . . . . . . . . . . . . . . . 29
7.6 Escrow Agreement . . . . . . . . . . . . . . . . . . . . 29
7.7 Opinion of Counsel . . . . . . . . . . . . . . . . . . . 29
7.8 Agreements with Congress . . . . . . . . . . . . . . . . 29
7.9 MHM Subordination Agreement . . . . . . . . . . . . . . . 30

SECTION 8. CERTAIN CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS . . 30
8.1 Representations and Warranties . . . . . . . . . . . . . 30
8.2 Post-Closing Liability . . . . . . . . . . . . . . . . . 30
8.3 Performance of Covenants . . . . . . . . . . . . . . . . 30
8.4 Approvals . . . . . . . . . . . . . . . . . . . . . . . . 30
8.5 Legal Matters . . . . . . . . . . . . . . . . . . . . . . 31
8.6 Marketing Agreement . . . . . . . . . . . . . . . . . . . 31
8.7 Escrow Agreement . . . . . . . . . . . . . . . . . . . . 31
8.8 Opinion of Counsel . . . . . . . . . . . . . . . . . . . 31
8.9 Negative Covenants Agreement . . . . . . . . . . . . . . 31
8.10 Collateral Transfer . . . . . . . . . . . . . . . . . . . 31
</TABLE>

-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.11 MEDIQ Guaranty . . . . . . . . . . . . . . . . . . . . . 32
8.12 Highline Agreement. . . . . . . . . . . . . . . . . . . . 32

SECTION 9. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Time and Place of Closing; Effective Time of Closing . . 32
9.2 Deliveries at the Closing . . . . . . . . . . . . . . . . 32
9.3 Noncompetition; Confidential Information . . . . . . . . 35
9.4 Provisions Relating to Employees . . . . . . . . . . . . 37
9.5 Transitional Activities . . . . . . . . . . . . . . . . . 38
9.6 Delivery of Financials . . . . . . . . . . . . . . . . . 38
9.7 Bug-Out Procedures . . . . . . . . . . . . . . . . . . . 38
9.8 Employee Health Insurance . . . . . . . . . . . . . . . . 38
9.9 Customer Pricing . . . . . . . . . . . . . . . . . . . . 38
9.10 Computer Software Support . . . . . . . . . . . . . . . . 39
9.11 Intercreditor and Subordination Agreements . . . . . . . 39

SECTION 10. TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . 40
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 40
10.2 Procedure for Termination . . . . . . . . . . . . . . . . 40

SECTION 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 40
11.1 Indemnification by Seller and KCI . . . . . . . . . . . . 40
11.2 Indemnification by Buyer and MEDIQ . . . . . . . . . . . 41
11.3 Inter-Party Claims . . . . . . . . . . . . . . . . . . . 41
11.4 Third Party Claims . . . . . . . . . . . . . . . . . . . 41
11.5 Limitations and Requirements . . . . . . . . . . . . . . 42
11.6 Right of Set-Off . . . . . . . . . . . . . . . . . . . . 42
</TABLE>

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<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 43
12.1 Survival of Representations and Warranties . . . . . . . 43
12.2 Further Assurances . . . . . . . . . . . . . . . . . . . 44
12.3 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . 44
12.4 Costs and Expenses . . . . . . . . . . . . . . . . . . . 44
12.5 Public Announcements . . . . . . . . . . . . . . . . . . 44
12.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.7 Assignment and Benefit . . . . . . . . . . . . . . . . . 46
12.8 Amendment, Modification and Waiver . . . . . . . . . . . 47
12.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . 47
12.10 Section Headings and Defined Terms . . . . . . . . . . . 47
12.11 Severability . . . . . . . . . . . . . . . . . . . . . . 47
12.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . 47
12.13 Entire Agreement . . . . . . . . . . . . . . . . . . . . 47
12.14 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>

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<PAGE> 6
SCHEDULES AND EXHIBITS

<TABLE>
<S> <C>
Schedule 1.1.1 . . . . . . . . Equipment Categories
Schedule 1.1.2 . . . . . . . . Transferred Computer Assets
Schedule 1.1.3 . . . . . . . . Assumed Capital Leases
Schedule 1.1.4 . . . . . . . . Assumed Contracts
Schedule 1.1.5 . . . . . . . . Motor Vehicles
Schedule 2.4 . . . . . . . . . Allocation of Aggregate Consideration
Schedule 3.4 . . . . . . . . . Agreed Upon Procedures for Accounts Receivable
Schedule 9.7 . . . . . . . . . Bug-Out Procedures

Exhibit IA . . . . . . . . . . Form of Promissory Note (#1)
Exhibit IB . . . . . . . . . . Form of Promissory Note (#2)
Exhibit IC . . . . . . . . . . Form of Promissory Note (#3)
Exhibit II . . . . . . . . . . Escrow Agreement
Exhibit III . . . . . . . . . . Certain Personnel Policies of Buyer
Exhibit IV . . . . . . . . . . Form of Opinion of Cox & Smith Incorporated
Exhibit V . . . . . . . . . . Marketing Agreement
Exhibit VI . . . . . . . . . . Form of Opinion of Drinker Biddle & Reath
Exhibit VII . . . . . . . . . . Form of Negative Covenants Agreement
Exhibit VIII . . . . . . . . . Form of Guaranty Agreement
Exhibit IX . . . . . . . . . . Form of General Assignment and Bill of Sale
Exhibit X . . . . . . . . . . . Form of Assumption Agreement
Exhibit XI . . . . . . . . . . Form of Collateral Transfer of Note (Security Agreement)
</TABLE>

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<PAGE> 7
ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT ( "Agreement") is dated August 23, 1994,
by and among KINETIC CONCEPTS, INC., a Texas corporation ("KCI"), KCI
THERAPEUTIC SERVICES, INC., a Delaware corporation which is a wholly-owned
subsidiary of KCI ("Seller"), MEDIQ Incorporated, a Delaware corporation
("MEDIQ"), PRN HOLDINGS, INC., a Delaware corporation which is a wholly-owned
subsidiary of MEDIQ ("Holdings"), and MEDIQ/PRN LIFE SUPPORT SERVICES-I, INC.,
a Delaware corporation which is a wholly-owned subsidiary of Holdings
("Buyer"). An index of defined terms is attached as an appendix hereto.

BACKGROUND

Seller is engaged, through its KCI Medical Services Division (the
"Division"), in the business of offering for rent to hospitals and other health
care providers during peak-need times a complete portfolio of movable critical
care and life support equipment in the categories described in Schedule 1.1.1
hereto and selling disposable medical care products to hospitals and other
health care providers for use in conjunction with such equipment in the United
States (collectively referred to herein as the "Medical Services Business").
Buyer is in the business of supplying critical care and life support equipment
to hospitals and other health care providers.

Seller is also engaged in the business of renting and selling
therapeutic specialty beds and patient surfaces and related products,
accessories and disposables to acute care, long term care and home care
providers of health care services (the "KCITS Business").

The parties hereto desire to provide for the sale by Seller and the
acquisition by Buyer, subject to certain specified liabilities, of certain of
the assets of the Division, and for certain other matters, all on the terms and
conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:

SECTION 1. PURCHASE AND SALE OF BUSINESS AND ASSETS.

1.1 Purchased Assets. Subject to the terms and conditions hereof
and on the basis of and in reliance upon the covenants, agreements and
representations and warranties set forth herein, at the Closing (as herein
defined), Seller (or Seller's permitted assignee pursuant to Section 12.7)
shall assign, sell and transfer, or cause to be assigned, sold and transferred,
to Buyer (or Buyer's permitted assignee pursuant to Section 12.7) all of the
following properties, assets, rights and claims of Seller (other than the
assets described in

<PAGE> 8
Section 1.2) wherever situated, which are then owned by Seller and used
exclusively in, or held for exclusive use in, the Medical Services Business:

(a) (i) all rental equipment and equipment held for
resale in the categories described in Schedule 1.1.1 hereto and
disposable products used in conjunction with such equipment, (ii) all
other disposable medical care products inventory, (iii) all packaging
not bearing any of the Names (as hereinafter defined), supplies and
accessories related to any of the foregoing, (iv) all furniture and
office equipment (other than computer equipment, including hardware
and software) located at Seller's office in Salt Lake City, Utah, (v)
all biomedical spare parts, supplies and all biomedical related
testing and service equipment, and (vi) all computer equipment
(including software and hardware) referred to on Schedule 1.1.2
hereto;

(b) all documents, records, files and other documents (in
whatever form, including computer files, invoices, purchase orders and
proofs of delivery) relating to or evidencing the assets described in
Section 1.1(a)(i) and the physical location thereof;

(c) all right, title and interest of Seller in, to and
under all capital and other leases expressly identified on Schedule
1.1.3 hereto (the "Assumed Capital Leases");

(d) all of the rights of Seller under all contracts,
arrangements, leases and other agreements relating to the Medical
Services Business set forth on Schedule 1.1.4 hereto (the "Assumed
Contracts"), and with respect to real property interests pursuant
thereto, all right, title and interest of Seller in and to all
improvements, fixtures and all other appurtenances thereto, (or, in
the case of Seller's Salt Lake City facility, a sublease thereof); and

(e) the motor vehicles described in Schedule 1.1.5.

provided that to the extent that the consent of a third party is required in
order to assign to Buyer an Assumed Capital Lease or an Assumed Contract and
such consent is not (notwithstanding the use of reasonable efforts, as
specified in Section 6.5 hereof) obtained on or prior to Closing, none of
Seller's right, title and interest in, to or under any such Assumed Capital
Lease or Assumed Contract shall be sold, assigned or transferred to Buyer at
Closing and from and after the Closing, any such lease, contract, arrangement
or agreement shall be deemed not to be an Assumed Contract or Assumed Capital
Lease and shall not be included in the Assets (as hereinafter defined)
(provided that for purposes of representations and warranties set forth herein
to the extent made as of the date hereof and the covenants which are operable
only prior to Closing hereunder, any such lease, contract, arrangement and
agreement shall be deemed to be included in the Assets and to constitute an
Assumed Contract or Assumed Capital Lease, as the case may be).

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<PAGE> 9
All of the properties, assets, rights and claims referred to above in
this Section 1.1 are hereinafter called the "Assets."

1.2 Assets Excluded from Purchase.
Except as otherwise expressly provided herein, Buyer shall not acquire any
assets of Seller, including, without limitation, any of the following assets of
Seller:

(a) cash and cash equivalents, such as bank deposits or
money market accounts;

(b) accounts receivable;

(c) rights under agreements, contracts and commitments to
which Seller is a party or by which it or any of its assets are bound
other than the Assumed Contracts and the Assumed Capital Leases;

(d) all corporate names, assumed names, trade names or
trademarks, including, without limitation, the trade names and
trademarks "KCI", "KCI Therapeutic", "Kinetic Concepts", "KCI Medical
Services", "KCI Financial Services" and all trade names and trademarks
derived from or including any of the foregoing (collectively, the
"Names"); and

(e) any assets used in, or held for use in, the KCITS
Business.

SECTION 2. AGGREGATE CONSIDERATION AND PAYMENT; ASSUMED
LIABILITIS.

2.1 Aggregate Consideration. Subject to Section 3, the aggregate
consideration (the "Consideration") for the Assets acquired by Buyer hereunder
and for the agreement contained in Section 9.3(a) shall be equal to the sum of:
(a) sixty-five million, three hundred thousand dollars ($65,300,000) (the
"Closing Payment"), which shall be paid at the Closing by wire transfer of
immediately available funds pursuant to instructions previously given by Seller
to Buyer for that purpose; plus (b) an amount equal to the sum of five million
dollars ($5,000,000) and the Highline Buy-Out Amount (as hereinafter defined),
which shall be paid at the Closing by delivery of an executed promissory note
of Buyer (or of MEDIQ/PRN Life Support Services, Inc., a Delaware corporation
("First PRN"), in the event Buyer makes the assignment contemplated in Section
12.7 hereof) in favor of Seller in the form of Exhibit IA hereto; plus (c) ten
million dollars ($10,000,000), which shall be paid at the Closing by delivery
of three executed promissory notes of Holdings in favor of Seller in the form
of Exhibit IB hereto, one in the principal amount of five million dollars
($5,000,000), one in the principal amount of three million dollars
($3,000,000), and the other in the principal amount of two million dollars
($2,000,000); plus (d) $2,956,957, which shall be paid at the Closing by
delivery of an executed promissory note of Buyer in favor of Seller in the form

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<PAGE> 10
of Exhibit IC hereto (the promissory notes delivered pursuant to this Section
being referred to as the "Notes"). The allocation of the Consideration among
the Assets and the agreement set forth in Section 9.3(a) is as set forth in
Schedule 2.4 hereof. For purposes hereof, "Highline Buy-Out Amount" means the
amount (not exceeding $880,000) paid by Seller to Highline Financial Services,
Inc. with Buyer's approval in respect of the termination of the Purchase,
Administrative and Remarketing Agreement dated August 14, 1989 between Highline
Financial Services, Inc. ("Highline") and Medirec (predecessor in interest to
Seller), as amended (the "Highline Agreement"), and the acquisition by Seller
of all of Highline's right, title and interest in an to the equipment covered
by the Highline Agreement.

2.2 Liabilities Assumed. At the Closing, Buyer shall assume and
agree to pay, perform and discharge, or cause to be paid, performed and
discharged, the following obligations and liabilities of Seller to the extent
incurred in connection with the Division (the "Assumed Liabilities"):

(a) any and all liabilities and obligations of Seller
under the Assumed Capital Leases included in the Assets, but only to
the extent such liabilities and obligations of Seller (i) arise or
accrue after the Closing Date (as herein defined) and (ii) do not
arise from and are not attributable to, in whole or in part, any
breach or default thereunder occurring on or prior to the Closing
Date;

(b) any and all liabilities and obligations of Seller
pursuant to or arising under the Assumed Contracts included in the
Assets, but only to the extent such liabilities and obligations of
Seller (i) arise or accrue after the Closing Date and (ii) do not
arise from and are not attributable to, in whole or in part, any
breach or default thereunder occurring on or prior to the Closing
Date;

(c) any and all liabilities and obligations of Seller, if
any, pursuant to the Worker Adjustment and Retraining Notification
Act, 29 U.S.C. Section Section 2101-2109 (the "WARN Act"), and all
state or local "plant closing" or similar laws (collectively, the
"Plant Closing Laws") in connection with the transactions contemplated
hereby;

(d) any obligation of Seller with respect to (i) any
warranty repair claims involving any of the Assets or any equipment of
a type described in Schedule 1.1.1 hereto sold by Seller prior to the
Closing Date in connection with the remarketing portion of the Medical
Services Business, which claims either (A) are first made after the
Closing Date or (B) relate to warranty repairs which Seller is in the
process of making as of the Closing Date but which are not then
complete and (ii) any product liability or other claims on account of
personal injury involving any of the Assets or the Medical Services
Business arising out of any injury occurring after the Closing Date;
and

(e) any obligation of Seller with respect to any warranty
repair claim involving any equipment (of a type described in Schedule
1.1.1 hereto) on which

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<PAGE> 11
Seller performed repair services during the period beginning six
months prior to the Closing Date and ending on the Closing Date in
connection with Seller's biomedical-for-hire business.

2.3 Excluded Liabilities. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, BUYER SHALL NOT DIRECTLY OR INDIRECTLY ASSUME ANY LIABILITIES OR
OBLIGATIONS OF SELLER OR ANY OF SELLER'S AFFILIATES OF ANY NATURE WHATSOEVER
("EXCLUDED LIABILITIES"), WHETHER LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN,
ACTUAL OR INCHOATE, ACCRUED, CONTINGENT OR OTHERWISE, AND WHETHER ARISING FROM
FACTS EXISTING OR EVENTS OCCURRING PRIOR TO, ON OR AFTER THE CLOSING DATE,
INCLUDING, WITHOUT LIMITATION:

(a) any obligation or liability to any present or former
customer of Seller, or pursuant to any contract, agreement, commitment
or undertaking not expressly included in the Assets (including,
without limitation, the existence of any restriction, mortgage, deed
of trust, pledge, lien, security interest or other charge, claim or
encumbrance on any of the Assets except as permitted hereby) or the
Assumed Liabilities;

(b) any obligation or liability of any nature whatsoever
to, or with respect to, any present or former employee of Seller,
including, without limitation, any obligation or liability of Seller
with respect to any employment benefit plan or any employment,
severance, or collective bargaining agreement (written or oral) to
which Seller is a party, including, without limitation, any such
relating to severance (except to the extent specifically provided in
Section 3.3), bonuses or sales incentives;

(d) any liabilities and obligations to or of any Seller
Affiliate (as hereinafter defined);

(e) any liability or obligation relating to any of the
matters disclosed or required to be disclosed on the Disclosure
Statement previously delivered to Buyer by Seller (the "Disclosure
Statement"), including, without limitation, any liability, obligation
or related expense arising out of, pursuant to or in connection with
any claim, action, suit, litigation or administrative, arbitration or
other proceeding or governmental investigation involving Seller or KCI
or any Seller Affiliate or any employees thereof, or any products
distributed, rented or leased on or prior to the Closing Date or any
services provided or failed to be provided on or before the Closing
Date, regardless of whether any such claim, action, suit, litigation,
arbitration, proceeding or investigation is made, brought or commenced
prior to or after the Closing;

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<PAGE> 12
(f) any obligation or liability of Seller which is
incurred or arises after the Closing except for the Assumed
Liabilities;

(g) any obligation of Seller or KCI for state, local,
foreign or federal taxes, including, without limitation, any
obligation for franchise, unitary business, capital stock or income
taxes (including, without limitation, deferred taxes);

(h) any obligation or liability of Seller or KCI with
respect to product liability claims on account of personal injury
arising out of any injury occurring prior to the close of business on
the Closing Date; and

(i) any obligation, duty, liability, expense or cost
(including, without limitation, costs and expenses of remediation)
arising out of or related to the discharge, dispersal, release,
emission, escape, transportation, storage, generation, treatment, or
disposal of any substance, material, smoke, vapor, soot, fumes, acids,
alkalis, chemicals, liquids, gases, irritants, pollutants and/or
waste, whether hazardous, toxic or otherwise, in violation of, or
respecting which remedial action may be required under any Law (as
such term is defined herein) or government license, permit, consent or
authorization concerning or relating to industrial hygiene or the
protection of health and/or the environment (collectively referred to
as "Environmental Laws"), including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act,
USCA Section 9601 et seq. (as amended, "CERCLA"), the Resource
Conservation and Recovery Act, 42 USCA Section 6901 et seq. ("RCRA"),
the Federal Water Pollution Control Act, 33 USCA Section 1251 et seq.,
the Clean Air Act, 42 USCA Section 7401 et seq., the Toxic Substances
Control Act, 15 USCA Section 2601 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act, 7 USCA Section 136 et seq., or the Safe
Drinking Water Act, 42 USCA Section 300 et seq., or regulations
promulgated thereunder.

2.4 Allocation of Consideration. The consideration paid by Buyer
to Seller for the various assets and rights acquired hereunder shall be
allocated pursuant to Schedule 2.4 hereto. Buyer and Seller shall file all
tax returns consistently with such allocation. On a timely basis, Buyer and
Seller shall prepare and submit Internal Revenue Form 8594 (relating to
purchase price allocation) to the Internal Revenue Service (the "IRS") prepared
in accordance with this Section 2.4.

2.5 Sales Taxes. Buyer shall pay all sales, transfer and
documentary taxes (the "Transfer Taxes") (but not any income or franchise taxes
of Seller or any Seller Affiliate), if any, payable in connection with the
sale, transfer, and assignment of the Assets to be made hereunder. Buyer shall
prepare and timely file with the appropriate governmental agency all tax
returns required to be filed in respect of the Transfer Taxes.

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<PAGE> 13
SECTION 3. CLOSING PAYMENT ADJUSTMENTS.

3.1 Closing Statement.

(a) Promptly following the Closing, Seller shall cause to
be prepared a statement as of the close of business on the Closing
Date, which shall set forth (i) the Assets acquired by Buyer pursuant
to Section 1.1 and (ii) the Assumed Liabilities assumed by Buyer
pursuant to Section 2.2(a). Each line item included in (i) and (ii)
above shall be accounted for consistently with United States generally
accepted accounting principles ("GAAP") applied on a basis consistent
with the preparation of the February Statement (as defined herein).
Such statement of assets and liabilities prepared as provided in this
Section 3.1 is referred to herein as the "Closing Statement." Seller
shall, at its sole expense, engage KPMG Peat Marwick ("Seller's
Auditors") to perform an audit in accordance with generally accepted
auditing standards with respect to the Closing Statement. Buyer,
MEDIQ and Seller shall cooperate fully with such audit and shall use
best efforts to cause their respective affiliates so to cooperate, so
as to cause Seller's Auditors to complete such audit within 40 days
after the Closing Date. Buyer and Buyer's independent public
accountants ("Buyer's Auditors") shall have the opportunity, at
Buyer's sole expense, to review the work papers of Seller and Seller's
Auditors relating to such audit.

(b) Upon completion of such audit, Seller shall deliver
to Buyer (i) the Closing Statement, (ii) the calculation of Net Asset
Value (as defined below), in each case as of the close of business on
the Closing Date, and (iii) Seller's Auditors' unqualified opinion on
the Closing Statement to the effect that (A) the Closing Statement is
accounted for in accordance with GAAP applied on a basis consistent
with the preparation of the February Statement and the requirements of
this Section 3 and (B) the calculation of Net Asset Value complies
with the requirements of this Section 3.

(c) Unless Buyer notifies Seller within 30 days after
receipt of the Closing Statement and calculation of Net Asset Value of
any objections thereto (specifying in reasonable detail the basis
therefor), such Closing Statement and calculation shall be the
definitive Closing Statement and shall be final, binding and
conclusive for all purposes. If Buyer timely notifies Seller of any
such objection, Buyer and Seller shall, together with Seller's
Auditors and Buyer's Auditors, attempt in good faith to reach an
agreement as to the matter in dispute. If the parties shall have
failed to resolve such disputed matter within ten (10) business days
after receipt of notice of such objection, then any such disputed
matter shall, at the instance of Buyer or Seller, be submitted to and
resolved by a national accounting firm other than Seller's Auditors
and Buyer's Auditors reasonably acceptable to Buyer and Seller. The
fees and expenses of any such accounting firm incurred in resolving
the disputed matters shall be divided equally between Seller and
Buyer. The Closing Statement and calculation of Net Asset Value
shall, after adjustment to reflect the resolution of any

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<PAGE> 14
disputes pursuant to this Section 3.1, be the definitive Closing
Statement and shall be final, binding and conclusive for all purposes.

3.2 Post Closing Adjustment.

(a) If the amount of inventories set forth on the Closing
Statement is less than $3,479,000, Seller shall pay or cause to be
paid to Buyer the amount of the difference.

(b) If the sum of (i) Net Asset Value set forth on the
Closing Statement and (ii) the amount, if any, by which the amount of
inventories set forth on the Closing Statement exceeds $3,479,000 is
less than $37,283,177, Seller shall pay or cause to be paid to Buyer
the amount of the difference.

(c) Seller shall, at the time it delivers the Closing
Statement and other documents pursuant to Section 3.1(b), pay Buyer
any and all amounts payable pursuant to Sections 3.2(a) and 3.2(b)
based on the Closing Statement delivered by Seller pursuant to Section
3.1(b), together with interest thereon from the Closing Date at the
rate of 8% per annum. If the amount paid by Seller pursuant to the
preceding sentence with respect to either or both of Sections 3.2(a)
and 3.2(b) (and if no amount has been paid with respect thereto, an
amount equal to zero shall be deemed to have been paid) is (i) less
than the amount payable pursuant to Sections 3.2(a) and 3.2(b) based
upon the definitive Closing Statement referred to in Section 3.1(c),
Seller shall, within five business days following the date on which
such definitive Closing Statement becomes final, binding and
conclusive pursuant to Section 3.1(c), pay Buyer the difference,
together with interest thereon from the Closing Date at the rate of 8%
per annum or (ii) greater than the amount payable pursuant to Sections
3.2(a) and 3.2(b) based upon the definitive Closing Statement referred
in Section 3.1(c), Buyer shall, within five business days following
the date on which such definitive Closing Statement becomes final,
binding and conclusive pursuant to Section 3.1(c), pay Seller the
excess, together with interest thereon from the date on which Buyer
received such amount from Seller at the rate of 8% per annum. All
payments by Seller made pursuant to this Section 3.2 shall be made by
wire transfer of immediately available funds to an account designated
by Buyer.

(d) For purposes of this Agreement, "Net Asset Value"
shall mean the sum of (i) the net book value of the assets other than
inventories included in the Assets (other than Assets acquired by
Seller from Highline as a result of the termination of the Highline
Agreement), plus (ii) an amount equal to depreciation expense for the
Assets for the period from February 28, 1994 to and including the
Closing Date, minus (iii) all indebtedness and other liabilities
assumed pursuant to Section 2.2(a), in each case to the extent set
forth on the Closing Statement and determined in accordance with the
requirements of Section 3.1.

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<PAGE> 15
3.3 Certain Payments.

(a) On the Closing Date, Buyer and MEDIQ shall establish
and fund an escrow account (the "Escrow") maintained by a third party
reasonably satisfactory to Buyer and Seller (the "Escrow Agent") in an
amount equal to $1.6 million (the "Escrow Payment"). All payments
made pursuant to this Section 3.3 shall be made in accordance with the
terms and conditions of the escrow agreement attached hereto as
Exhibit II (the "Escrow Agreement"). The Escrow Agreement shall
provide that payments shall be made by the Escrow Agent to Seller in
order to reimburse Seller (up to an aggregate maximum amount of $1.6
million) for (i) severance payments actually made by Seller to
employees of Seller identified in Schedule 1 to the Escrow Agreement
whose employment is terminated by Seller after the date hereof and
before the 90th day after the Closing Date and who (A) do not become
employees of Buyer, MEDIQ or an Affiliate of MEDIQ or (B) become
employees of Buyer, MEDIQ or an Affiliate of MEDIQ after the Closing
(collectively, "Transferred Employees") whose employment with Buyer or
MEDIQ or an Affiliate of MEDIQ is terminated by Buyer or MEDIQ or an
Affiliate of MEDIQ prior to the first anniversary of the Closing Date,
except any such Transferred Employee terminated by Buyer or MEDIQ or
an Affiliate of MEDIQ for reasons that would constitute "cause" as set
forth in the modified form of Buyer's personnel policies described in
Exhibit III hereto or (C) are Transferred Employees whose employment
with Buyer or MEDIQ or an Affiliate of MEDIQ is terminated by the
employee as a result of any action by Buyer or MEDIQ or an Affiliate
of MEDIQ materially decreasing the employee's level of responsibility,
salary or benefits or transferring the employee to a location greater
than 25 miles of the principal place of his employment with Seller;
(ii) payments by Seller to Jonathan M. Sadock referred to in Section
3.3(e); (iii) payments by Seller to Robert A. Wehrmeyer, Jr. referred
to in Section 3.3(f); and (iv) the employer's portion of FICA taxes
relating to any of the foregoing. The aggregate amount payable to
reimburse Seller for (i) payments in respect of any employee and the
employer's portion of FICA taxes relating to such payments shall not
exceed the amount shown for such employee in Schedule 1 to the Escrow
Agreement and (ii) payments to Mr. Sadock shall not exceed the Sadock
Amount (as hereinafter defined). In the case of any written inquiry
from Seller requesting that MEDIQ confirm whether or not a specified
Transferred Employee has been terminated for reasons that would
constitute "cause" as described in Exhibit III hereto, MEDIQ or Buyer
shall promptly respond to Seller with such information.

(b) Notwithstanding the foregoing, Seller shall (i) not be
entitled to reimbursement for severance payments relating to any
employee of Seller (or for the employer's portion of FICA taxes
relating to such payments) who is offered employment with Buyer, MEDIQ
or an Affiliate of MEDIQ in writing on or prior to the Closing Date
for a similar position and level of responsibility, at a location
within 25 miles of the principal place of his employment with Seller
and at a similar salary and with similar benefits and who does not
accept such offer and (ii) pay Buyer all

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<PAGE> 16
amounts paid to Seller out of the Escrow with respect to any employee
(other than Jonathan M. Sadock, and, subject to Section 3.3(f), Robert
A. Wehrmeyer, Jr.) who, subject to Section 3.3(c), becomes an employee
of, or independent contractor or consultant to, or otherwise provides
any other services to, Seller or any Seller Affiliate prior to one
year after such termination of employment (each such payment by Seller
to be made within 30 days after any such event.

(c) The provisions of Section 3.3(b)(ii) shall not apply
to, and Seller shall not be required to reimburse Buyer for, severance
payments to employees who are offered employment relating to the
transition arising from the transactions contemplated under this
Agreement by Seller or a Seller Affiliate on or prior to the Closing
Date; provided that if any such employee remains in the employ of
Seller or a Seller Affiliate for a period of one (1) year or more
following the Closing Date, Seller will pay Buyer, within 30 days
after the expiration of such one year period, all amounts paid to
Seller out of the Escrow on account of any such employee.

(d) Notwithstanding anything to the contrary herein
provided, the limitations of Section 3.3(b)(i) shall not apply to the
employees of Seller listed in Schedule 2 to the Escrow Agreement.

(e) Of the Escrow Payment, the Sadock Amount (as defined
below) is to be paid to reimburse Seller for payments to Jonathan M.
Sadock in satisfaction of all obligations of Seller to Mr. Sadock
(including, without limitation, severance, commissions and rights
under employment agreements). Notwithstanding anything to the
contrary herein, Seller shall not be entitled to receive out of the
Escrow any reimbursement for payments to Mr. Sadock unless Seller
shall have previously delivered to Buyer the duly executed agreement
of Mr. Sadock to the effect that the non-competition obligations of
Mr. Sadock set forth in the Employment Agreement dated October 2, 1990
between Mr. Sadock and Medirec are in full force and effect and will
continue, notwithstanding anything to the contrary in such Employment
Agreement, in full force and effect through April 1, 1996, and shall
be deemed for the benefit of, and enforceable by Buyer. The "Sadock
Amount" shall mean an amount equal to $175,000 minus the aggregate
amount of compensation (including, without limitation, salary,
commissions and bonus, but not including expense reimbursement and
health benefit payments) paid (or which should have been paid) by KCI,
Seller or a Seller Affiliate to Mr. Sadock for periods after August
31, 1994, through the Closing Date.

(f) The amount payable to Robert A. Wehrmeyer, Jr. from
the Escrow pursuant to this Section shall be payable whether or not
Seller's payment to him constitutes severance and whether or not he
continues to be an employee of or becomes an independent contractor or
consultant to Seller or any Seller Affiliate. However, Seller shall
pay to Buyer all amounts paid to Seller out of the Escrow with respect
to Mr. Wehrmeyer if and only if Mr. Wehrmeyer continues to be or
becomes

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<PAGE> 17
an employee of or independent contractor or consultant to Seller or a
Seller Affiliate and his activities in that capacity (i) constitute an
activity in which Seller may not engage pursuant to Section 9.3 hereof
or (ii) are in pursuance of the therapeutic bed portion of the KCITS
Business (other than consulting with respect to certain pending
litigation). Such repayment shall be made within 30 days after the
event giving rise to the requirement to make the repayment.

3.4 Accounts Receivable.

(a) Seller's Auditors will within 15 business days after
the Closing Date perform agreed upon procedures as set forth on
Schedule 3.4 with respect to a schedule (prepared by Seller) of
accounts receivable of the Division which are due and payable as of
Closing and with respect to any unbilled amounts accrued through the
Closing Date; Seller will deliver to Buyer a copy of such schedule
within 2 business days of the completion of the performance of such
agreed upon procedures thereon by Seller's Auditors. The cost of
preparation of such schedule will be borne half by Seller and half by
Buyer.

(b) Within 30 days after the Closing Date, Seller shall
deliver to each customer of the Medical Services Business with respect
to amounts which have not previously been invoiced by Seller an
invoice for all services rendered, equipment rented and products sold
through the Closing Date, along with a notification satisfactory to
Buyer of the sale of the Medical Services Business. Seller shall
promptly deliver copies thereof to Buyer after delivery thereof to
customers. All such invoices shall be consistent with the schedule
prepared in accordance with subsection (a). Seller shall deliver
prorated invoices in any instances in which the end of Seller's
billing cycle for such customers does not correspond to the Closing
Date. Any payment or proceeds received from any customer with respect
to such invoices or any accounts receivable of the Division which are
due and payable as of the Closing are the property of Seller, and if
received by Buyer shall be remitted within five business days to
Seller in the form received, endorsed by Buyer to the order of Seller
(if necessary). Any payment or proceeds with respect to services
rendered or equipment rented or products sold after the Closing Date
are the property of Buyer, and if received by Seller shall be remitted
within five business days to Buyer in the form received, endorsed by
Seller to the order of Buyer (if necessary). Any payment received
respecting which a customer has not specified the accounts receivable
to which it should be applied shall be applied to the oldest account
receivable of such customer which is not disputed by that customer.

SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING SELLER.

Seller and KCI hereby jointly and severally represent and warrant to
Buyer and MEDIQ as of the date of this Agreement and as of the Closing Date as
follows:

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<PAGE> 18
4.1 Organization and Good Standing.

(a) Seller and KCI are corporations duly organized,
validly existing and in good standing under the laws of their
respective jurisdictions of organization and have all necessary
corporate power and authority to carry on their businesses as
presently conducted, to own and lease the assets which they own and
lease and to perform all of their obligations under each agreement and
instrument by which they are bound. Seller is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of the jurisdictions identified in the Disclosure Statement,
which includes each jurisdiction in which its ownership or leasing of
assets or properties relating to the Division or the operation of the
Division requires such qualification.

(b) The authorized, issued and outstanding capital stock
and other securities of Seller and the beneficial and record ownership
thereof are fully and accurately described in the Disclosure
Statement. Except as described in the Disclosure Statement, no person
has any preemptive or other rights with respect to any such equity
interests or other securities of such corporation and there are no
offers, options, warrants, rights, agreements or commitments of any
kind (contingent or otherwise) relating to the issuance, conversion,
voting, sale or transfer of any such equity interests or securities or
obligating Seller or any other person to purchase or redeem any such
equity interests or other securities.

4.2 Power and Authorization. Seller and KCI have the corporate
right, power and authority to enter into and perform their respective
obligations under this Agreement and under the other agreements and documents
(the "Seller Transaction Documents") required to be delivered by them under
this Agreement prior to or at the Closing. The execution, delivery and
performance by Seller and KCI of their respective obligations under this
Agreement and the Seller Transaction Documents have been duly authorized by
all necessary corporate action. This Agreement has been duly and validly
executed and delivered by Seller and KCI and, assuming the due execution and
delivery by Buyer and MEDIQ, constitutes the respective legal, valid and
binding obligation of each of them, enforceable against each of them in
accordance with its terms. When executed and delivered as contemplated herein,
each of the Seller Transaction Documents shall, assuming the due execution and
delivery by the other parties thereto, constitute the respective legal, valid
and binding obligation of Seller and KCI, enforceable against each of them in
accordance with its terms. Upon transfer of the Assets to Buyer at Closing as
contemplated by this Agreement, Buyer shall acquire good and valid title
thereto (other than any interest in Real Property), free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance, other than the Assumed Liabilities and any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance placed upon the Assets by Buyer or any of its
Affiliates.

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<PAGE> 19
4.3 No Conflicts.

(a) Except as described in the Disclosure Statement, the
execution, delivery and performance of this Agreement and the Seller
Transaction Documents do not and will not (with or without the passage
of time or the giving of notice):

(i) violate or conflict with the certificate or
articles of incorporation or bylaws (or other organizational
documents) of Seller or KCI or any applicable law (including,
without limitation, principles of common law), statute,
regulation, permit, license, certificate, judgment, order,
award or other decision or requirement of any arbitrator,
court, government or governmental agency or instrumentality
(domestic or foreign) (collectively, "Laws") binding upon
Seller or KCI or any of the Assets;

(ii) violate or conflict with, result in a breach
or termination of, or constitute a default or otherwise cause
any loss of benefit under any agreement or other obligation
included in the Assets or by which any of the Assets are
bound, or give to others any rights (including rights of
termination, foreclosure, cancellation or acceleration), in or
with respect to any of the Assets; or

(iii) except as contemplated in the Negative
Covenants Agreement (as hereinafter defined), result in or
require the creation or imposition of any restriction,
mortgage, deed of trust, pledge, lien, security interest or
other charge, claim or encumbrance upon or with respect to any
of the Assets.

(b) The Disclosure Statement sets forth each consent or
approval of, or registration, notification, filing and/or declaration
with, any court, government or governmental agency or instrumentality,
creditor, lender, lessor or other person required to be given or made
by Seller in connection with the execution, delivery and performance
of this Agreement and the other agreements and instruments
contemplated herein. Except as described in the Disclosure
Statement, all such consents, approvals, registrations,
notifications, filings and declarations have been obtained or made or
will be obtained or made or the requirement therefor waived in writing
prior to the Closing without loss of benefit to the Medical Services
Business (or Buyer as the successor to the Medical Services Business).

(c) There are no judicial, administrative or other
governmental actions, proceedings or investigations pending or, to the
knowledge of Seller or KCI, threatened, that question any of the
transactions contemplated by this Agreement or the validity of this
Agreement or any of the other agreements or instruments contemplated
hereby or which, if adversely determined, could have a material
adverse effect upon Seller's or KCI's ability to enter into or perform
its obligations under this Agreement or any of the other agreements or
instruments contemplated hereby.

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<PAGE> 20
Neither Seller nor KCI has received any request from any governmental
agency or instrumentality for information with respect to the
transactions contemplated hereby, except (if any) pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act").

4.4 Investments and Subsidiaries. Except as described in the
Disclosure Statement, the Medical Services Business is, and during the last
three years has been, conducted solely by and through Seller, and neither
Seller nor any other person directly or indirectly owns, controls or has any
investment or other interest in any corporation, partnership, joint venture,
business trust or other entity engaged or involved in the Medical Services
Business. Except as described in the Disclosure Statement or as contemplated
herein, in connection with the Medical Services Business, neither Seller nor
KCI has agreed, contingently or otherwise, to share any profits, losses, costs
or liabilities, or to indemnify any person or entity or to guaranty the
obligations of any person or entity.

4.5 Compliance with Laws. Except as described in the Disclosure
Statement, Seller, with respect to the Division, is in compliance, in all
material respects, with all applicable Laws and does not have any basis to
expect, and has not received, any written notice, order or other communication
from any government, governmental agency or instrumentality of any alleged,
actual, or potential violation of, or failure to comply with, any applicable
Law.

4.6 Litigation. Except as described in the Disclosure Statement,
there are no, and during the last three years, there have not been any, claims,
actions, suits, proceedings (arbitration or otherwise) or, to the knowledge of
Seller or KCI, investigations involving or affecting Seller or KCI with respect
to the Medical Services Business or any of the Assets, or any of Seller's
directors, officers or shareholders in their capacities as such, before or by
any court, government, governmental agency or instrumentality, or before an
arbitrator of any kind; and there is no pending claim, action, suit, proceeding
or investigation which, if determined adversely, could either individually or
in the aggregate have a material effect on the earnings, business, operations
or financial condition of the Division, or could result in a liability in
excess of $25,000 in the case of any single action or $100,000 in the case of
all such actions in the aggregate. To Seller's or KCI's knowledge, except as
described in the Disclosure Statement, no such claim, action, suit, proceeding
or investigation is presently threatened or contemplated. Except as described
in the Disclosure Statement, there are no unsatisfied judgments, penalties or
awards against or affecting the Division or any of the Assets.

4.7 The February Statement. The Disclosure Statement includes a
statement of the Assets and the Assumed Liabilities described in Section 2.2(a)
as of February 28, 1994 (the "February Statement"). Each line item of the
February Statement has been accounted for in accordance with GAAP. The only
Assumed Liabilities reflected in the February Statement are Assumed Liabilities
described in Section 2.2(a) as of February 28, 1994.

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<PAGE> 21
4.8 Accounts Receivable.

(a) The Disclosure Statement includes a correct and
complete accounts and notes receivable aging of Seller with respect to
the Medical Services Business with the names of the customers deleted,
as of June 30, 1994, reflecting the designated and undesignated
reserves for possible losses and customer credits and discounts as of
such date and the aggregate dollar amount of all accounts and notes
receivable which have been outstanding for: 30 days or less; more than
30 but less than 61 days; more than 60 but less than 91 days; more
than 90 days but less than 121 days; and more than 120 days. Seller
has provided to Buyer's Auditors an identical document, except that
the names of customers have been included therein.

(b) All accounts receivable of Seller with respect to the
Medical Services Business represent valid obligations from bona fide
rentals or sales made or services rendered in the ordinary course of
business.

4.9 Personal Property.

(a) The rental equipment and disposable medical care
products inventory of Seller with respect to the Medical Services
Business is valued on the February Statement at the lower of cost or
fair market value thereof, based upon the "first in, first out" method
of accounting. The rental equipment inventory has been depreciated
for financial reporting purposes in accordance with GAAP and on a
basis consistent with KCI's past practices over the respective periods
described in the Disclosure Statement for each class of such
equipment.

(b) Except (i) for obsolete items and items of
below-standard quality, all of which have been accounted for in
accordance with GAAP on a basis consistent with the preparation of the
February Statement, (ii) for cleaning, prepping and preventive
maintenance of equipment to be performed in the ordinary course of
business, and (iii) as set forth in the Disclosure Statement, all of
the rental equipment and equipment held for resale of Seller with
respect to the Medical Services Business meets, as of July 25, 1994,
all applicable requirements of applicable Laws and is, as of July 25,
1994, in good operating condition and repair and is, as of July 25,
1994, usable in the ordinary course of business consistent with past
practice.

(c) All rental equipment and disposable medical care
products inventory is in the possession or under the control of
Seller, except any rental equipment inventory which is (i) currently
being rented or held by a customer and therefore is in the possession
or control of a customer or (ii) in transit with a common carrier for
delivery to or from a customer of Seller.

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<PAGE> 22
(d) The representations and warranties set forth in
this Section 4.9 shall survive until resolution of the Closing
Statement and the final determination and payment of any post closing
adjustment under Section 3.2.

4.10 Warranties, Insurance.

(a) Except as described in the Disclosure Statement: (a)
Seller has not agreed to become responsible for consequential damages
or made any express warranties to third parties with respect to any
products distributed, rented or leased, or any services rendered, by
the Medical Services Business; and (b) there are no warranties
(express or implied) outstanding with respect to any such products or
services other than any such implied by law, including, without
limitation, pursuant to Sections 2-312 and 2-314 of the Uniform
Commercial Code. A copy of each standard warranty of Seller with
respect to such products is included in the Disclosure Statement.

(b) The Disclosure Statement describes each policy and
binder of insurance maintained for the benefit of, or respecting which
any premiums are paid directly or indirectly by, the Division,
including whether such policies and binders are "claims made" or
"occurrence" policies, and the respective issuers and expiration dates
thereof.

4.11 Real Property.

(a) The Disclosure Statement describes each interest in
real property leased by Seller pursuant to a lease included in the
Assets (the "Real Property"), including the location and a brief
description thereof. Except as described in the Disclosure Statement,
Seller owns all right, title and interest in all leasehold estates and
other rights purported to be granted to it by the leases referred to
above free and clear of any restriction, mortgage, deed of trust,
pledge, lien, security interest or other charge, claim or encumbrance
in favor of any person claiming by, under or through Seller or any
Seller Affiliate.

(b) The amount of each security deposit made by Seller in
respect of a lease of Real Property is set forth in the Disclosure
Statement. Following transfer of such leases to Buyer as part of the
Assets, Buyer shall be entitled to receive refunds of such amounts
subject to the terms of the applicable leases.

4.12 Title to Assets. Except as described in the Disclosure
Statement, Seller has good and valid title to all of the Assets (excluding
Real Property), including without limitation, all such reflected on the
February Statement or to be reflected on the Closing Statement, free and clear
of any restriction, mortgage, deed of trust, pledge, lien, security interest or
other charge, claim or encumbrance (all of which, if any, will be released or
terminated prior to Closing, unless expressly assumed by Buyer as an Assumed
Liability).

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<PAGE> 23
The Disclosure Statement lists each contract, agreement or commitment which
restricts or purports to restrict any business activities of Seller or KCI with
respect to the Medical Services Business or the freedom of Seller or KCI (or,
to the knowledge of Seller or KCI, any of their officers or employees) to
engage in the Medical Services Business or to compete with any person.

4.13 Contracts. Except as described in the Disclosure Statement,
each of the Assumed Contracts and the Assumed Capital Leases (including any
such required to be identified in the Disclosure Statement) was made in the
ordinary course of business, is in full force and effect and is valid, binding
and enforceable against the parties thereto in accordance with its terms.
Except as described in the Disclosure Statement, Seller has performed in all
material respects all obligations required to be performed by it under the
Assumed Contacts and the Assumed Capital Leases and no condition exists or
event has occurred which with notice or lapse of time would constitute a
default or a basis for delay or non-performance by Seller or, to the best
knowledge of Seller, by any other party thereto. Upon consummation of the
Closing, all of Seller's rights in the Assumed Contracts and the Assumed
Capital Leases shall be transferred to Buyer, and Buyer will acquire such
rights free and clear of all restrictions, pledges, liens or other claims or
encumbrances of any nature; provided that in the case of leases relating to the
Real Property only, Buyer will acquire such rights free and clear only of
restrictions, pledges, liens or other claims or encumbrances in favor of
persons claiming by, under or through Seller or any Seller Affiliate. Except
as set forth in the Disclosure Statement, there are no consents or notices
required to be given in order to assign the Assumed Contracts or Assumed
Capital Leases to Buyer.

4.14 Customers and Suppliers. Seller has provided to Buyer's
Auditors an accurate and complete list of the names of the customers of the
Division, and the revenues attributable to each during each of 1993 and 1994
through April 30, 1994, and of the twenty (20) suppliers and vendors with
respect to the Division's disposable medical care products business from whom
the Division made the most purchases during each such period and the aggregate
expenditures attributable to each in each such period. To the best knowledge
of the persons identified by an asterisk in Schedule 2 to the Escrow Agreement
("Senior Management"), no customer that accounted for more than $100,000 of the
rentals or sales of the Division during the last twelve months has terminated
or materially reduced or has given notice that it intends to terminate or
materially reduce the amount of business done with the Division, except as
disclosed to Buyer's Auditors on such list. Except as set forth on the
Disclosure Statement, to the best knowledge of Senior Management, no supplier
or vendor that accounted for more than $50,000 of the purchases of the Division
with respect to the disposable medical care products business during the last
twelve months has terminated or materially reduced or has given written notice
that it intends to terminate or materially reduce, the amount of business done
with the Division. Except as set forth in the Disclosure Statement, there are
no, and during the last three years there have not been, any disputes or
controversies of which Seller or KCI has received notice involving, in the
aggregate, more than $25,000 between Seller or KCI with respect to the Medical
Services Business, on the

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<PAGE> 24
one hand, and any customer, supplier or other person, on the other hand,
regarding the quality, merchantability or safety of, or involving a claim of
breach of warranty which has not been fully resolved with respect to, or defect
in, any product purchased, rented or leased by Seller.

4.15 Taxes. Except as described in the Disclosure Statement: (a)
all federal, state, local and foreign tax returns and tax, duty and value added
statements and reports (or extensions relating thereto) required to be filed by
Seller, KCI or any affiliate of Seller or KCI, including, without limitation,
those relating to or affecting the Assets or the Medical Services Business,
have been filed on a timely basis with the appropriate governmental agencies in
all jurisdictions in which such returns and reports are required to be filed
and all such returns, statements, and reports were true and correct when filed;
(b) all federal, state, local and foreign income, duties, profits, franchise,
sales, use, payroll, premium, occupancy, property, severance, excise,
withholding, value added and other taxes (including interest and penalties) due
from Seller or KCI with respect to the Medical Services Business including,
without limitation, those relating to the Assets, have been fully and timely
paid, except for such taxes as are being contested in good faith; and those not
yet due and payable have been provided for in accordance with GAAP on the
February Statement or on the books and records of Seller; and (c) there are no
material levies, liens, or other encumbrances existing, pending or, to the
knowledge of Seller or KCI, threatened with respect to any of the Assets
relating to any taxes described in (b) above.

4.16 Employee Matters.

(a) Except as described in the Disclosure Statement: (i)
none of the employees of Seller involved in the Medical Services
Business are, or during the last three years have been, represented by
any union or other bargaining representative and no application or
petition for certification of a collective bargaining agent is
pending; (ii) to the knowledge of Seller, during the last three years,
no union has attempted to organize any group of such employees and no
such group has sought to organize into a union or similar organization
for the purpose of collective bargaining; (iii) there are no pending
grievances, arbitration proceedings, unfair labor practice charges or
other similar controversies between Seller and any such employees; and
(iv) to the knowledge of Seller or KCI, no such agreement, action,
proceeding or occurrence is threatened or contemplated by any person.

(b) The Disclosure Statement describes each employment,
severance, change of control, consulting, commission, agency and
representative agreement or arrangement to which Seller or KCI with
respect to the Medical Services Business is a party or is otherwise
bound including, without limitation, all agreements and commitments
relating to wages, hours, severance, retirement benefits or annuities,
or other terms or conditions of employment (other than unwritten
employment arrangements terminable at will without payment of any
contractual severance or other amount).

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<PAGE> 25
(c) Except as set forth in the Disclosure Statement,
neither Seller nor KCI maintains or contributes to any employee
pension benefit plan ("Pension Plan"), as such term is defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any employee welfare benefit plan ("Welfare
Plan"), as such term is defined in Section 3(1) of ERISA, in either
case with respect to any employee or former employee of the Medical
Services Business. Each Pension Plan and each Welfare Plan listed in
the Disclosure Statement is, has been or will be in all cases prior to
the end of the applicable reporting period administered in compliance
in all material respects with the applicable provisions of ERISA and
the Internal Revenue Code of 1986, as amended (the "Code"). Neither
Seller nor any organization which is in a controlled group of
organizations which includes Seller under either Section 414(b), (c),
(m) or (o) of the Code is obligated to contribute to any multiemployer
plan, as defined in Section 3(37) of ERISA.

(d) The Salt Lake City, Utah facility is the only
facility of Seller relating to the Medical Services Business that
employs sufficient employees to be subject to the WARN Act, and
neither that facility nor any of Seller's other facilities are subject
to the requirements of any state or local Plant Closing Laws.

4.17 Environmental Matters.

(a) Except as described in the Disclosure Statement: (i)
Seller is operating the Medical Services Business in material
compliance with all applicable Environmental Laws; (ii) to the
knowledge of Seller, there are no conditions on, about, beneath or
arising from the Real Property which might, under any applicable
Environmental Law, (A) give rise to liability of Seller or KCI or the
imposition of a statutory lien on the Assets, or (B) which would or
may require any "Response," "Removal" or "Remedial Action" (as those
terms are defined below) or any other action, including without
limitation reporting, monitoring, cleanup or contribution; (iii)
neither Seller nor KCI has received any written notification of a
release or threat of a release of a "Hazardous Substance" (as defined
below) with respect to the Real Property; and (iv) to the knowledge of
Seller or KCI, no Hazardous Substances have been used, handled,
generated, processed, treated, stored, transported to or from,
released, discharged or disposed of by Seller or KCI or any third
party on, about, or beneath the Real Property in a manner not
consistent with applicable Laws.

(b) Neither Seller nor KCI has received written notice or
otherwise has knowledge of: any claim, demand, suit or action, made or
threatened by any person against Seller or KCI with respect to the
Real Property pursuant to any of the Environmental Laws or relating to
any form of damage, loss or injury resulting from, or claimed to
result from, any Hazardous Substance on, about, beneath or arising
from the Real Property; or any written communication to or from any
governmental or regulatory agency arising out of or in connection with
Hazardous Substances on, about, beneath, arising from or generated at
the Real Property.

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<PAGE> 26
(c) As used in this Agreement: (i) the terms "Response,"
"Removal" and "Remedial Action" shall have the meanings ascribed to
them in Sections 101(23)-101(25) of CERCLA; and (ii) the term
"Hazardous Substances" or "Hazardous Substance" shall mean any
substance regulated under any of the Environmental Laws including,
without limitation, any substance which is: (A) petroleum, asbestos or
asbestos-containing material or polychlorinated biphenyls; (B)
defined, designated or listed as a "Hazardous Substance" pursuant to
Sections 307 and 311 of the Clean Water Act, 33 U.S.C. Section Section
1317, 1321 or Section 101(14) of CERCLA, 42 U.S.C. Section 9601 (C)
listed in the United States Department of Transportation Hazardous
Material Tables, 49 C. F. R. Section 172.101 or (D) defined,
designated or listed as a "Hazardous Waste" under Section 1004(5) of
the Resource and Conservation and Recovery Act, 42 U.S.C. 6903(5).

4.18 Absence of Certain Changes and Events.

(a) Except as described in the Disclosure Statement, from
the date of the February Statement to the date of this Agreement,
Seller has conducted the Medical Services Business only in the usual
and ordinary course consistent with its current calendar year's
practices and there has not been any:

(i) material change in the business or operations
of the Medical Services Business or any damage, destruction or
loss to any material asset or property of the Medical Services
Business, whether or not covered by insurance;

(ii) entry into, amendment, termination or receipt
of notice of termination of any Assumed Contract or Assumed
Capital Lease or of any other material agreement, document or
commitment which is required to be disclosed in the Disclosure
Statement or any material transaction affecting the Division
or the Assets, whether or not in the ordinary course of
business;

(iii) sale, assignment, conveyance, lease, or other
disposition of any asset or property of Seller with respect to
the Medical Services Business (other than sales of inventory
and sales, rentals and leases of equipment, in each case in
the ordinary course of business) or mortgage, pledge, or
imposition of any lien or other encumbrance on any of the
Assets;

(iv) change in the accounting methods, principles
or practices followed by Seller with respect to the Medical
Services Business or any change in any of the assumptions
underlying, or methods of calculating, any bad debt,
contingency or other reserve; or

(v) agreement, whether or not in writing, to do
any of the foregoing.

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(b) Since the date of the February Statement, there has
not been any material adverse change in the business, operations,
properties, assets, prospects, working capital, or condition
(financial or otherwise) of the Medical Services Business or the
Assets or any event, condition or contingency that is likely to result
in such a material adverse change.

4.19 Books and Records. The copies of the certificates or articles
of incorporation of Seller and KCI and of their bylaws which have been
delivered to Buyer are true, complete and correct and are in full force and
effect as of the date hereof. The books and records of Seller fairly reflect
the assets and liabilities set forth in the February Statement and Seller
maintains internal accounting controls which provide reasonable assurance that:
(i) transactions are executed in accordance with management's authorization;
(ii) transactions are recorded as necessary to permit preparation of reliable
financial statements and to maintain accountability for earnings and assets;
(iii) access to assets is permitted only in accordance with management's
authorization; (iv) the recorded accountability of all assets is compared with
existing assets at reasonable intervals; and (v) all intercompany transactions,
charges and expenses among or between Seller and/or its affiliates are
accurately reflected at fair arms length value in all financial statements.
Seller has furnished to Buyer true and complete copies of each agreement, plan
and other document required to be disclosed on the Disclosure Statement.

4.20 Brokers. No person acting on behalf of Seller, KCI or any of
their affiliates or under the authority of any of the foregoing is or will be
entitled to any brokers' or finders' fee or any other commission or similar
fee, directly or indirectly, from any of such parties in connection with any of
the transactions contemplated by this Agreement, other than Alex. Brown & Sons
Incorporated, whose fees and expenses shall be paid by Seller and KCI and not
by Buyer.

4.21 Full Disclosure. No representation or warranty of Seller and
KCI contained in this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements herein, in light of the circumstances under which they were made,
not misleading in any material respect. Except as described in this Agreement
or the Disclosure Statement, there is no material fact known to Seller or KCI
(other than general economic or industry conditions) which materially adversely
affects or, so far as Seller and KCI can reasonably foresee, materially
threatens, the assets, business, financial condition or results of operations
of the Division or Seller with respect to the Medical Services Business or the
ability of Seller or KCI to perform this Agreement.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.

Buyer, Holdings and MEDIQ, jointly and severally, hereby represent and
warrant to Seller and KCI as of the date of this Agreement and of the Closing
Date as follows:

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5.1 Organization and Good Standing. (a) Buyer, Holdings and MEDIQ
are corporations duly organized, validly existing and in good standing under
the laws of the State of Delaware and each of Buyer, Holdings and MEDIQ has all
necessary corporate power and authority to carry on its business as presently
conducted, to own and lease the assets which it owns and leases and to perform
all its obligations under each agreement and instrument by which it is bound.
Each of Buyer, Holdings and MEDIQ is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in
which its ownership or leasing of assets or properties requires such
qualification, provided, however, that as a newly-formed corporation, Buyer is
in the process of applying for qualification as a foreign corporation and has
not yet become so qualified in certain of the jurisdictions in which it will be
required to be so qualified after the consummation of the transactions
contemplated herein.

(b) MEDIQ owns all of the outstanding capital stock of
Holdings, and Holdings owns all of the outstanding capital stock of Buyer and
First PRN. Except for the warrant to purchase 2.5% of the capital stock of
First PRN granted to Internationale Nederlanden (U.S.) Finance Corporation
dated May 29, 1992, no person has any preemptive or other rights with respect
to any such equity interests and there are no offers, options, warrants,
rights, agreements or commitments of any kind (contingent or otherwise) (other
than any of the foregoing in favor of lenders to MEDIQ, Holdings, Buyer or
First PRN) relating to the issuance, conversion, voting, sale or transfer of
any such equity interests or obligating Holdings, First PRN or Buyer or any
other person to purchase or redeem any such equity interests. Except for First
PRN and Buyer, Holdings does not have any equity investment in any corporation,
partnership, joint venture, business trust or other entity.

5.2 Power and Authorization. Buyer, Holdings, First PRN and MEDIQ
have the corporate right, power and authority to enter into and perform their
respective obligations under this Agreement and under the other agreements and
documents (the "Buyer Transaction Documents") required to be delivered by them
prior to or at the Closing. The execution, delivery and performance by Buyer,
Holdings and MEDIQ of this Agreement and the Buyer Transaction Documents have
been duly authorized by all necessary corporate action. The execution,
delivery and performance by First PRN of the promissory note referred to in
Section 2.1(b) hereof (in the event Buyer makes the assignment contemplated in
Section 12.7 hereof) have been duly authorized by all necessary corporate
action. This Agreement has been duly and validly executed and delivered by
Buyer, Holdings and MEDIQ and, assuming the due execution and delivery by
Seller and KCI, constitutes the respective legal, valid and binding obligation
of each of them, enforceable against each of them in accordance with its terms.
When executed and delivered as contemplated herein, each of the Buyer
Transaction Documents shall, assuming the due execution and delivery by the
other parties thereto, constitute the respective legal, valid and binding
obligation of each of Buyer, Holdings, First PRN and MEDIQ that is a party
thereto, enforceable against each of them in accordance with its terms.

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5.3 No Conflicts.

(a) The execution, delivery and performance of this
Agreement and the Buyer Transaction Documents do not and will not
(with or without the passage of time or the giving of notice): (i)
violate or conflict with Buyer's, Holdings', First PRN's or MEDIQ's
certificate of incorporation or bylaws or any Law binding upon Buyer;
or (ii) violate or conflict with, result in a breach or termination
of, or constitute a default or otherwise cause any loss of benefit
under any material agreement or other material obligation to which
Buyer, Holdings, First PRN or MEDIQ is a party.

(b) Except in connection with the MHM Subordination
Agreement (as hereinafter defined), no consents or approvals of, or
registrations, notifications, filings and/or declarations with, any
court, government or governmental agency or instrumentality, creditor,
lessor or other person are required to be given or made by Buyer,
Holdings, First PRN or MEDIQ in connection with the execution,
delivery and performance of this Agreement and the other agreements
and instruments contemplated herein, other than pursuant to HSR Act
and such as have been obtained or made or with respect to which the
requirement therefor has been waived in writing or which the failure
to obtain would not have a material adverse affect on Buyer's,
Holdings', First PRN's or MEDIQ's ability to consummate the
transactions contemplated herein and therein.

(c) There are no judicial, administrative or other
governmental actions, proceedings or investigations pending or, to the
knowledge of Buyer, Holdings, First PRN and MEDIQ, threatened that
question any of the transactions contemplated by this Agreement or the
validity of this Agreement or any of the other agreements or
instruments contemplated hereby or which, if adversely determined,
could have a material adverse effect upon Buyer's, Holdings', First
PRN's and MEDIQ's ability to enter into or perform their obligations
under this Agreement or any of the other agreements or instruments
contemplated hereby. Buyer, Holdings, First PRN and MEDIQ have not
received any request from any governmental agency or instrumentality
for information with respect to the transactions contemplated hereby,
except (if any) pursuant to the HSR Act.

5.4 Brokers. No person acting on behalf of Buyer or any Affiliate
of MEDIQ or under the authority of any of the foregoing is or will be entitled
to any brokers' or finders' fee or any other commission or similar fee,
directly or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement, other than Dillon, Read & Co.
Inc., whose fees and expenses shall be paid by Buyer, Holdings and MEDIQ and
not by Seller or KCI.

5.5 Financing Commitment. Buyer has delivered to Seller a true
and correct copy of a commitment letter from Congress Financial Corporation
pursuant to which Congress

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Financial Corporation has advised Buyer that it is willing, on the terms and
subject to the conditions set forth in such commitment letter, to provide up to
an aggregate $55,000,000 of credit facilities to Buyer upon the consummation of
the transactions contemplated by this Agreement and the Buyer Transaction
Documents.

5.6 MHM Note.

(a) The promissory note dated August 31, 1993, issued by
Mental Health Management, Inc. ("MHM") in favor of MEDIQ, in the
original principal amount of $11,500,000 (the "MHM Note"), a true and
correct copy of which has been delivered to Seller, is owned by MEDIQ
free and clear of liens, charges and encumbrances, and no payment of
principal has been made on the MHM Note.

(b) The MHM Note is in full force and effect and has not
been modified, supplemented, cancelled, renewed, extended, altered or
otherwise amended in any respect. There is no default under the MHM
Note, and no condition or circumstance exists, which, but for the
passage of any applicable cure or grace period, the giving of notice
or both, would constitute a default under the MHM Note.

(c) To the knowledge of Buyer and MEDIQ, MHM is solvent
and there are no bankruptcies, liens or executions, voluntary or
involuntary, pending or threatened against MHM under the laws of the
United States of any state thereof.

(d) To the knowledge of Buyer and MEDIQ, MHM has no
claims against MEDIQ or any defenses or rights of offset against any
of the amounts due and owing to MEDIQ under the MHM Note.

(e) Except for the Subordination and Intercreditor
Agreement dated as of September 30, 1993 (the "MHM Subordination
Agreement"), executed by MEDIQ and MHM for the benefit of Maryland
National Bank, there are no other agreements, written or oral, which
govern, evidence, pertain to, arise out of, or otherwise relate to the
indebtedness evidenced by the MHM Note and MHM does not have any right
or option to renew the indebtedness evidenced by the MHM Note or to
otherwise modify, extend, or alter the MHM Note or the indebtedness
evidenced thereby.

5.7 Full Disclosure.

(a) All registration statements, reports, proxy
statements and other materials (collectively "SEC Reports") filed by
MEDIQ or First PRN (collectively the "MEDIQ Group"), with the
Securities and Exchange Commission ("SEC") since January 1, 1993
complied in all material respects with the applicable requirements of
the Securities Act of 1933, as amended, and the Securities Exchange
Act of 1934, as amended, (the "1934 Act"), and the applicable rules
and regulations of the SEC promulgated thereunder and at the time
filed did not contain any untrue statement of a

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material fact or omit to state a material fact required to be stated
therein when necessary to make the statements made therein, in light
of the circumstances in which they were made, not misleading. Since
January 1, 1993, each member of the MEDIQ Group has made all filings
with the SEC which it is required to make and has not received any
requests from the SEC to file any amendment or supplement to any of
the reports described in the preceding sentence. To the knowledge of
MEDIQ, neither it nor any member of the MEDIQ Group or any of the
officers or directors of any member of the MEDIQ Group have been since
January of 1989, or currently are the subject of any investigation or
proceeding by any state or federal securities agency or any self
regulatory authority, have been made subject to any stop order or
similar restriction in the offer or sale of securities, been enjoined
from any activities relating to the offer or sale of securities, or
had entered against it or him a judgment involving fraud or
misrepresentation with respect to any transaction involving a
security.

(b) No representation or warranty of Buyer, Holdings or
MEDIQ contained in this Agreement contains any untrue statement of
material fact or omits to state a material fact necessary in order to
make the statements herein, in light of the circumstances under which
they were made, not misleading in any material respect. Except as
described in this Agreement or the Schedules relating to Buyer,
Holdings and MEDIQ hereto, there is no material fact known to Buyer,
Holdings and MEDIQ (other than general economic or industry
conditions) which materially adversely affects or, so far as Buyer,
Holdings and MEDIQ can reasonably foresee, materially threatens, the
assets, business, financial condition or results of operations of the
MEDIQ Group or the ability of Buyer to perform this Agreement or any
of the Buyer Transaction Documents.

SECTION 6. OBLIGATIONS OF THE PARTIES UNTIL CLOSING.

6.1 Conduct of Medical Services Business Pending Closing. Except
as expressly provided herein, between the date hereof and the Closing Date,
without the prior written consent of Buyer, Seller shall:

(a) maintain Seller's and KCI's corporate existence, pay
and discharge all debts, liabilities and obligations as they become
due except where Seller or KCI, in good faith, disputes such debts,
liabilities and other obligations and operate the Medical Services
Business solely in the ordinary course in a manner consistent with its
current calendar year's practices and the provisions of this Agreement
and in compliance with all applicable Laws, government licenses,
permits, consents, authorizations, contracts and agreements
(including, without limitation, those identified in the Disclosure
Statement);

(b) maintain the Assets, in the same state of repair,
order and condition as they were on the date hereof, reasonable wear
and tear excepted;

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(c) maintain Seller's and KCI's books and records
relating to the Medical Services Business in accordance with past
practice, and use all reasonable efforts to maintain in full force and
effect all authorizations and all insurance policies and binders
relating to the Medical Services Business (including all such relating
to workers' compensation, business interruption, property, and
products liability);

(d) use all reasonable efforts to preserve intact their
present business organization relating to the Medical Services
Business and maintain their relations and goodwill with the suppliers,
customers, employees and others having a business relationship
relating to the Medical Services Business with them.

6.2 Negative Covenants. Except as expressly provided herein,
between the date hereof and the Closing, without the prior written consent of
Buyer, Seller shall not:

(a) fail to pay or discharge when due any liability or
obligation of Seller relating to the Medical Services Business or
which is secured, in whole or in part, by any of the Assets including,
without limitation, any such included in the Assumed Liabilities
except where Seller, in good faith, contests such liability or
obligation (it being understood that, notwithstanding Section 2.2,
Buyer shall not be required to assume any liability being so
contested);

(b) amend or terminate any Assumed Capital Lease or
Assumed Contract;

(c) directly or indirectly, through any representative or
otherwise, solicit or entertain offers from, negotiate with or in any
manner encourage, accept or consider any proposal of any other person
relating to the acquisition of the Medical Services Business or the
Assets, in whole or in part, except in the ordinary course of
business;

(d) take any action or permit to occur any event which
would breach any covenant of Seller contained herein or cause any
representation or warranty of Seller contained herein to be untrue if
made immediately after such event; or

(e) permit any of the furniture or equipment identified
in Section 1.1(a)(iv) or Section 1.1(a)(vi) hereof to be moved out of
Seller's Salt Lake City, Utah office.

6.3 Access to Information; Confidentiality.

(a) Prior to the Closing, KCI shall cause Seller to, and
Seller shall, give Buyer and its authorized representatives complete
access to all of Seller's and KCI's personnel, books, records, plants,
offices and other facilities and properties relating to the Medical
Services Business and the Assets and permit Buyer to make such
inspections thereof as Buyer may reasonably request, and cause their
officers, employees and advisors to furnish Buyer with such financial,
operating and other information regarding the Medical Services
Business and agreements, commitments,

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liabilities, personnel and properties relating to the Medical Services
Business as Buyer may reasonably request; provided, however, Buyer's
access to personnel of Seller and KCI before the Closing shall be
subject to the consent (not to be unreasonably withheld) of the
President of the Division, and Seller shall not be required to deliver
any customer list to Buyer (as opposed to Buyer's Auditors) until the
Closing shall have occurred. Buyer acknowledges that the information
which may be made available to it is proprietary and includes
confidential information. The parties will remain subject to that
certain confidentiality letter agreement dated November 12, 1993 by
and between Seller and MEDIQ (the "Confidentiality Agreement").

(b) Until Closing, Seller shall provide Buyer, within 15
days after the beginning of each month, with (i) a statement of
revenues by segment of the Division as of and for the month then ended
and (ii) a Statement of the Assets and Assumed Liabilities set forth
in Section 2.2(a) as of the end of such month, all of which shall be
prepared in accordance with GAAP on a basis consistent with the
preparation of the February Statement, and certified as such by the
chief financial officer of the Division.

6.4 Best Efforts. Prior to the Closing, each party hereto shall
use best efforts to cause to occur the transactions contemplated hereby and by
the Transaction Documents and to cause all conditions to the performance of the
parties hereto that are within its control to be satisfied. No party shall
take any action to cause any such covenant, agreement, transaction or condition
not to occur, be satisfied or be performed, as the case may be.

6.5 Consents. Buyer, MEDIQ, Seller and KCI shall fully comply
with the requirements of the HSR Act and the documents filed by Buyer, MEDIQ,
Seller and KCI, respectively, pursuant to the HSR Act shall adequately respond
to its requirements. Prior to the Closing, all parties hereto shall use all
reasonable efforts to obtain (and cooperate with the other parties hereto in
obtaining) all consents, permits, authorizations, approvals of, and exemptions
by, any regulatory authority or third party (including, without limitation,
lenders and lessors) necessary for the consummation of the transactions
contemplated by this Agreement, including, without limitation, pursuant to the
HSR Act, provided that Buyer shall have sole responsibility for complying with
all notice and other requirements of the WARN Act and the Plant Closing Laws in
connection with the transactions contemplated hereby. In connection with
obtaining consents to the assignment of leases of the Real Property, Seller
shall obtain the acknowledgement of the lessors with respect to the amount of
security deposits relating to such leases and the fact that the security
deposits will be payable to Buyer following such assignment subject to the
terms of the applicable leases. Seller shall use all reasonable efforts to
negotiate the termination of the Highline Agreement in consideration of payment
by Seller of the Highline Buy-Out Amount.

6.6 Delivery of Additional Information. Seller shall deliver to
Buyer promptly after the date hereof a list setting forth the following
information for each officer and employee of Seller involved in the Medical
Services Business and for each consultant and

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independent contractor regularly retained (including each such person on leave
or layoff status): employee name and job title; current annual rate of
compensation (identifying bonuses, car allowances and other fringe benefits
separately), and the amount of severance compensation to which such person is
entitled, if any, upon termination of employment pursuant to applicable Law,
contractual obligation, policy or otherwise, and any change in compensation
since the date of the February Statement and service credited for purposes of
vesting and eligibility to participate in applicable Employee Benefit Plans.

6.7 Use of Business Name. After the Closing, neither MEDIQ nor
any MEDIQ Affiliate shall, directly or indirectly, use or do business, or
assist any third party in using or doing business, under the Names except that
Buyer will have 90 days after the Closing in which to remove any labels or
other insignia containing any of the Names from the Assets.

SECTION 7. CERTAIN CONDITIONS PRECEDENT TO BUYER'SAND MEDIQ'S OBIGATIONS.

The obligation of Buyer to consummate the acquisition of the Assets is
subject to the fulfillment by or at the Closing of each of the following
conditions, any or all of which may be waived by Buyer in its sole discretion:

7.1 Representations and Warranties. The representations and
warranties of Seller and KCI set forth in this Agreement, as of the date of
this Agreement and as of the time of Closing, shall not contain inaccuracies,
misrepresentations, or breaches which, in the aggregate, would have a material
adverse effect on the Assets, the Medical Services Business, the consummation
of the transactions contemplated hereby or Seller's ability to perform its
obligations hereunder. For purposes of this Section 7.1 and Section 7.4 below,
the phrase "material adverse effect" as it relates to the Assets or the Medical
Services Business shall mean an effect which is likely to result in damages or
liabilities in excess of $5 million, determined without reference to (i) the
Basket described in Section 11.5, (ii) the fact that the representation or
warranty in question does not survive the Closing or cannot constitute the
basis of a claim for indemnification under Section 11.1, and (iii) any
post-Closing adjustments to the Consideration made pursuant to Section 3.2.

7.2 Assets of Seller. As of the Closing Date: (i) the amount of
the disposable medical care products inventory of Seller with respect to the
Medical Services Business, determined consistently with the February Statement,
shall not be less than $1.75 million; and (ii) the amount of all of the other
Assets in the aggregate, determined consistently with such value on the
February Statement, plus an amount equal to depreciation expenses of the Assets
for the period from February 28, 1994 to and including the Closing Date, shall
not be less than the amount of all of such other Assets in the aggregate as set
forth on the February Statement minus $4.2 million.

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7.3 Performance of Covenants. Seller and KCI shall have performed
or complied in all material respects with all of the agreements, covenants and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing.

7.4 Approvals. The waiting period under the HSR Act shall have
expired or been terminated. The consent or approval of (i) all persons not
within the control of Buyer, MEDIQ or Holdings necessary (by reason of any
agreement or requirement of law applicable to Seller or KCI) for the
consummation of the transactions contemplated hereby (including, without
limitation, consent or approval of lenders and lessors to Seller and KCI), (ii)
all parties to each of the leases identified on Schedule 1.1.3 hereto whose
consent is necessary for the assignment to Buyer of each such lease as
contemplated herein and (iii) the lessor under the lease of Seller's facility
in Salt Lake City with respect to the assignment or sublease to Buyer of such
lease as contemplated herein, except where the failure to obtain such consent
(other than the consent or approval of a lender and the consents and approvals
referred to in the foregoing clauses (ii) and (iii)) would not have a material
adverse effect on the Assets or the Medical Services Business, and no such
consent or approval (A) shall have been conditioned upon the modification,
cancellation or termination of any lease, commitment, agreement or right of
Seller included in the Assets or (B) shall impose on the Buyer any condition,
provision or requirement not presently imposed upon Seller and which is not
described in the Disclosure Statement, or any condition that is not described
in the Disclosure Statement that would be more restrictive after the Closing on
Buyer than the conditions presently imposed on Seller.

7.5 Legal Matters. The Closing 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 Buyer or any of its affiliates) which questions the
validity or legality of this Agreement or the transactions contemplated hereby.

7.6 Escrow Agreement. Seller shall have executed and delivered
the Escrow Agreement.

7.7 Opinion of Counsel. Buyer shall have received the opinion of
Cox & Smith Incorporated, counsel for Seller and KCI, dated as of the Closing
Date, substantially in the form of Exhibit IV hereto, it being understood that
paragraph 4 of such opinion may be stated to be subject to exceptions the
existence of which do not constitute a failure to satisfy any of the conditions
precedent stated in this Section 7.

7.8 Agreements with Congress. Seller and KCI shall have (a)
executed and delivered an intercreditor and subordination agreement (the
"Congress Intercreditor Agreement") with Congress Financial Corporation
containing the provisions described in paragraph 12(d)(ii)(X) and (Y) of the
commitment letter mentioned in Section 5.5 and otherwise on terms satisfactory
to Seller, and (b) executed a consent, on terms satisfactory to Seller, to the
assignment by Buyer, MEDIQ and First PRN to Congress Financial

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Corporation of all indemnification rights and remedies and claims for damages
or other relief under this Agreement and the Seller Transaction Documents, such
assignment to be subject to any restrictions and limitations contained in this
Agreement and the Seller Transaction Documents on such rights, remedies and
claims.

7.9 MHM Subordination Agreement. Seller and KCI shall have
executed and delivered a subordination agreement with respect to the MHM Note
in favor of NationsBank, N.A. (successor to Maryland National Bank) on the same
terms as the MHM Subordination Agreement.

SECTION 8. CERTAIN CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.

The obligation of Seller to consummate the sale of the Assets is
subject to the fulfillment by or at the Closing of each of the following
conditions, any or all of which may be waived by Seller in its sole discretion:

8.1 Representations and Warranties. The representations and
warranties of Buyer, Holdings and MEDIQ set forth in this Agreement, as of the
date of this Agreement and as of the time of Closing, shall not contain
inaccuracies, misrepresentations, or breaches which, in the aggregate, would
have a material adverse effect on the consummation of the transactions
contemplated herein or Buyer's, Holdings' or MEDIQ's ability to perform their
obligations hereunder.

8.2 Post-Closing Liability. Under the facts and circumstances as
they exist at the Closing Date, it shall not be reasonably likely that KCI and
Seller will have liability to Buyer under Section 11.1(a) of this Agreement in
excess of $5 million in the aggregate, determined with reference to the Basket
described in Section 11.5 but without reference to any post-Closing adjustment
to the Consideration made pursuant to Section 3.2.

8.3 Performance of Covenants. Each of Buyer, Holdings and MEDIQ
shall have performed or complied in all material respects with all of the
agreements, covenants and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.

8.4 Approvals. The waiting period under the HSR Act shall have
expired or been terminated. The consent or approval of (i) all persons not
within the control of KCI or Seller necessary (by reason of any agreement or
requirement of law applicable to MEDIQ or any Affiliate of MEDIQ) for the
consummation of the transactions contemplated hereby (including, without
limitation, consent or approval of lenders of MEDIQ or any Affiliate of MEDIQ)
and (ii) all third parties who are parties to any of the leases identified on
Schedule 1.1.3 hereto whose consent is necessary for the assignment to Buyer of
each such lease as contemplated herein shall have been obtained, except where
the failure to obtain such consent

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would not have a material adverse effect on the Buyer's, Holdings' and MEDIQ's
ability to consummate the transactions contemplated herein.

8.5 Legal Matters. The Closing shall not violate any order or
decree of any court or governmental body of competent jurisdiction and no suit,
action, investigation, or legal or administrative proceeding shall have been
brought or threatened by any person (other than Seller, KCI or any Seller
Affiliate) which questions the validity or legality of this Agreement or the
transactions contemplated hereby.

8.6 Marketing Agreement. Holdings, its subsidiaries and MEDIQ
shall have entered into a Marketing Agreement substantially in the form of
Exhibit V hereto (the "Marketing Agreement").

8.7 Escrow Agreement. Buyer and MEDIQ shall have executed and
delivered the Escrow Agreement.

8.8 Opinion of Counsel. Seller and KCI shall have received an
opinion of Drinker Biddle & Reath, counsel for Buyer, dated as of the Closing,
substantially in the form of Exhibit VI hereto, it being understood that (i)
any opinion concerning the absence of conflict with the financing pursuant to
the commitment described in Section 5.5 hereof and with the Indenture dated as
of June 6, 1992, between First PRN and United Jersey Bank, as trustee, may be
given by other counsel reasonably satisfactory to Seller, and (ii) paragraph 4
of such opinion may be stated to be subject to exceptions the existence of
which do not constitute a failure to satisfy any of the conditions precedent
stated in this Section 8.

8.9 Negative Covenants Agreement.

(a) Holdings, Buyer and MEDIQ shall have entered into a
negative covenants agreement (the "Negative Covenants Agreement") substantially
in the form of Exhibit VII hereto.

(b) The Services Agreement, the Tax Sharing Agreement,
the Insurance Agreement and the Reimbursement Agreement referred to in the
Negative Covenants Agreement shall have been executed and delivered by MEDIQ,
Buyer, Leasing and Holdings; Seller shall have received copies of such
agreements; and such agreements shall be in substantially the form of the
corresponding agreements between MEDIQ and First PRN, copies of which have been
previously delivered to Seller, except that payments under the Services
Agreement shall be limited to $50,000 per year.

8.10 Collateral Transfer. MEDIQ shall have executed and delivered
to Seller a Collateral Transfer of Note (Security Agreement) (the "Collateral
Transfer") substantially in the form attached hereto as Exhibit XI, and shall
have endorsed and delivered the MHM Note to Seller; and MHM shall have executed
and delivered to Seller an estoppel certificate (the "Estoppel Certificate") in
a form reasonably satisfactory to Seller.

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8.11 MEDIQ Guaranty. MEDIQ and Holdings shall have entered into a
guaranty agreement (the "Guaranty Agreement") substantially in the form of
Exhibit VIII hereto.

8.12 Highline Agreement. Highline Financial Services, Inc. and
Seller shall have agreed to terminate the Highline Agreement.

SECTION 9. CLOSING.

9.1 Time and Place of Closing; Effective Time of Closing. The
closing of the purchase and sale of the Assets and the assumption of the
Assumed Liabilities (the "Closing") pursuant to this Agreement shall take place
on the later of: (a) the second Friday following termination or expiration of
the waiting period under the HSR Act, or (b) September 30, 1994, at the offices
of Drinker Biddle & Reath, Broad and Chestnut Streets, Philadelphia,
Pennsylvania commencing at 10:00 A.M., local time or at such other date, time
or place as may be agreed to by Buyer and Seller (the "Closing Date"). Subject
to Section 11, failure to consummate the Closing shall not result in the
termination of this Agreement or relieve any person of any obligation
hereunder. Notwithstanding the actual time at which the Closing occurs on the
Closing Date, the Closing shall be deemed effective (i) solely for purposes of
determining the time on the Closing Date at which title to each of the Assets
passes from Seller to Buyer, at 11:59 p.m., local time in the jurisdiction in
which such Asset is then located, on the Closing Date, and (ii) for all other
purposes hereunder, at 11:59 p.m., Eastern Time, on the Closing Date.

9.2 Deliveries at the Closing. At the Closing, in addition to the
other actions contemplated elsewhere herein:

(a) Seller and KCI shall deliver or cause to be delivered
to Buyer and MEDIQ the following:

(i) one or more general warranty bills of sale
and general assignment agreements duly executed by Seller,
substantially in the form of Exhibit IX hereto (the "Bill of
Sale"), conveying title of all of the Assets (other than Real
Property) to Buyer (or Buyer's permitted assignee pursuant to
Section 12.7), free and clear of any liability, obligation,
restriction, mortgage, lien, security interest, or other
charge, claim or encumbrance not included in the Assumed
Liabilities;

(ii) specific assignment of the Assumed Contracts
and the Assumed Capital Leases included in the Assets,
together with all requisite consents of third parties which
are parties to any of the foregoing;

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(iii) such other instruments of transfer and
assignment as may be necessary or appropriate to vest in Buyer
(or Buyer's permitted assignee pursuant to Section 12.7) good
title to the Assets (including, without limitation, title
certificates for the motor vehicles described in Schedule
1.1.5, duly endorsed for transfer);

(iv) a certificate, dated the Closing Date, to the
effect set forth in Sections 7.1, 7.2, 7.3 and 7.4 (with
respect to Seller and KCI);

(v) the Marketing Agreement, duly executed by
Seller;

(vi) the Escrow Agreement, duly executed by Seller;

(vii) the Negative Covenants Agreement, duly
executed by Seller;

(viii) the subordination agreement mentioned in
Section 7.9;

(ix) duly executed releases or terminations of
financing statements, or other evidence reasonably
satisfactory to Buyer's lenders that all liens on and security
interests in the Assets have been released and terminated;

(x) copies of the certificate or articles of
incorporation and bylaws of Seller and KCI, or the
corresponding charter documents, and all amendments thereof to
date, certified as of a recent date by the Secretary of State
or corresponding certifying authority of its jurisdiction of
organization and by the Secretary or an Assistant Secretary of
Seller and KCI;

(xi) a certificate of good standing of a recent
date for Seller, certified by the Secretary of State or
corresponding certifying authority of Seller's jurisdiction of
organization;

(xii) copies of the resolutions of the boards of
directors of Seller and KCI and, if necessary, stockholders of
Seller and KCI authorizing the execution, delivery and
performance of this Agreement and the other agreements and
instruments referred to herein, certified as of the Closing
Date by the Secretary or an Assistant Secretary of Seller; and

(xiii) such other documents and instruments as Buyer
may reasonably request to effectuate or evidence the
transactions contemplated by this Agreement.

(b) Buyer, Holdings and MEDIQ shall deliver, or shall
cause to be delivered, to Seller and KCI the items described below:

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(i) the Closing Payment and the Notes;

(ii) the Guaranty Agreement, duly executed by
MEDIQ and Holdings;

(iii) one or more Assumption of Liabilities
Agreements, duly executed by Buyer (or Buyer's permitted
assignee pursuant to Section 12.7), substantially in the form
of Exhibit X hereto, pursuant to which Buyer shall assume the
Assumed Liabilities;

(iv) a certified check or official bank check in
next day funds payable to Seller in the aggregate amount of
$23,135.68 in respect of the security deposits made by Seller
under the leases of Real Property (or such lesser amount as is
equal to the aggregate amount of security deposits under
leases of Real Property included in the Assets if fewer than
all leases of real property set forth in the Disclosure
Statement are included in the Assets).

(v) a certificate of Buyer, dated the Closing
Date, to the effect set forth in Sections 8.1, 8.3 and 8.4;

(vi) the Marketing Agreement, duly executed by
Holdings, its subsidiaries and MEDIQ;

(vii) the Escrow Agreement, duly executed by Buyer
and MEDIQ and accompanied by the delivery by Buyer to Escrow
Agent of the Escrow Payment;

(viii) the Negative Covenants Agreement, duly
executed by MEDIQ, Holdings and Buyer;

(ix) the Collateral Transfer, duly executed by
MEDIQ, and the MHM Note, duly endorsed by MEDIQ, and the
Estoppel Certificate, duly executed by MHM;

(x) a copy of Buyer's, Holdings' and MEDIQ's
certificates of incorporation and bylaws and all amendments
thereof to date, certified as of a recent date by the
Secretary of State of Delaware and by the Secretary or an
Assistant Secretary of Buyer, Holdings and MEDIQ, and
accompanied by a certificate of good standing as of a recent
date for Buyer, Holdings and MEDIQ, certified by the Secretary
of State of Delaware;

(xi) a copy of the resolutions of the board of
directors of Buyer, Holdings and MEDIQ authorizing the
execution, delivery and performance by Buyer, Holdings and
MEDIQ of this Agreement and the other agreements and

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instruments referred to herein to which such entity is a
party, certified as of the Closing by the Secretary or an
Assistant Secretary of Buyer, Holdings and MEDIQ; and

(xii) such other documents and instruments as
Seller may reasonably request to effectuate or evidence the
transactions contemplated by this Agreement.

9.3 Noncompetition; Confidential Information.

(a) For a period of five (5) years from and after the
Closing Date, unless expressly consented to in writing by Buyer,
neither Seller, KCI nor any Seller Affiliate shall, directly or
indirectly: (i) engage, anywhere in the United States of America, in
the rental of a portfolio of standard-of-care medical products
manufactured by third parties (examples of which include but are not
limited to the products identified on Schedule 1.1.1); or (ii) be or
become a stockholder, partner, owner, officer, director or employee or
agent of, or a consultant to or give financial or other assistance to,
any person or entity considering engaging in any such activities or so
engaged; provided, however, that nothing herein shall prohibit Seller,
KCI and/or any Seller Affiliate from (A) owning, as passive investors,
in the aggregate not more than 5.0% of the outstanding publicly traded
stock of any corporation so engaged or (B) engaging in the KCITS
Business or (C) engaging in the manufacture, sale, lease, rental,
distribution or marketing of any medical product or equipment
(including, without limitation, the PlexiPulse and any other product
or product-line acquired or developed by Seller, KCI or a Seller
Affiliate) (1) that Seller, KCI or a Seller Affiliate manufactures,
(2) with respect to which Seller, KCI or a Seller Affiliate owns
proprietary rights (including, without limitation, through development
of such product or equipment), or (3) for which KCI, Seller or a
Seller Affiliate has distribution rights (but nothing in this clause
(C)(3) shall permit KCI, Seller or any Seller Affiliate to obtain
distribution rights for a series of products manufactured by third
parties such that Seller and/or its Affiliates are engaged in the
rental of a portfolio of standard- of-care products), or (D) engaging
in the business conducted by KCI Financial Services, Inc. a
wholly-owned subsidiary of KCI, on the date hereof, including, without
limitation, the leasing and "rent-to-own" types of financing. The
duration of Seller's and KCI's covenants set forth in this Section
shall be extended by a period of time equal to the number of days, if
any, during which Seller or KCI is in violation of the provisions
hereof.

(b) For a period of five (5) years from and after the
Closing Date, neither Seller, KCI nor any Seller Affiliate shall,
directly or indirectly use in furtherance of any of their business
affairs or otherwise and to the detriment of Buyer with respect to the
Medical Services Business, or disclose to any third party except as
required by Law, any trade secret, customer list, supplier list,
financial data, pricing or marketing policy or plan or any other
proprietary or confidential information relating exclusively

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to the Medical Services Business or any of its products or services so
long as the same is not publicly known (other than by the act of
Seller, KCI or any Seller Affiliate).

(c) For the purposes of this Agreement, an "Affiliate" of
a person means: (i) any corporation, limited liability company,
partnership or other entity of which such person owns or otherwise
possesses the power to direct the vote, directly or indirectly, of an
amount of voting securities sufficient to elect a majority of the
board of directors of such corporation, and (ii) any other person or
entity controlled by such person. For the purposes of this definition
of "Affiliate," "control" means the power to direct the management and
policies of a person or entity, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
provided that, any person or entity of which a person owns
beneficially or of record, either directly or through one or more
intermediaries, more than 20% of the ownership interests, shall be
conclusively presumed to be an "Affiliate" of such person. A "Seller
Affiliate" is an Affiliate of Seller or KCI.

(d) If any party hereto learns of any breach or potential
breach of Section 9.3, such party shall immediately notify the other
party hereto of such event, specifying the basis therefor in
reasonable detail. Buyer may, in its sole discretion, afford Seller
and KCI an opportunity to remedy or otherwise cure such breach or
potential breach before seeking legal redress, provided that Seller
and KCI are actively seeking to cure or remedy such breach or
potential breach; but such opportunity to remedy shall be without
prejudice to the right of Buyer to seek and obtain injunctive or other
relief.

(e) Seller and KCI acknowledge that damages alone shall
not be an adequate remedy for any breach by Seller, KCI or any Seller
Affiliate of Seller's covenants contained in this Agreement and
accordingly expressly agree that, in addition to any other remedies
which Buyer may have, Buyer shall be entitled to injunctive relief in
any court of competent jurisdiction for any breach or threatened
breach of any such covenants by Seller, KCI and/or any Seller
Affiliate.

(f) Seller and KCI acknowledge and agree that the
covenants contained in this Section 9.3 are fair and reasonable in
light of the consideration paid hereunder and in order to protect
Buyer's investment through its acquisition of the Assets in the
Medical Services Business, and the invalidity or unenforceability of
any particular provision, or part of any provision, of this Section
shall not affect the other provisions or parts hereof. If any
provision hereof is determined to be invalid or unenforceable by a
court of competent jurisdiction, Seller and KCI shall negotiate in
good faith to provide Buyer with protection as nearly equivalent to
that found to be invalid or unenforceable and if any such provision
shall be so determined to be invalid or unenforceable by reason of the
duration or geographical scope of the covenants contained therein,
such duration or geographical scope, or both, shall be considered to

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be reduced to a duration or geographical scope to the extent necessary
to cure such invalidity. The parties acknowledge and agree that the
amount of Buyer's damages for any breach by Seller and KCI of the
provisions of this Section 9.3 shall be determined without reference
to, and irrespective of, the allocation of the Consideration pursuant
to Section 2.4.

9.4 Provisions Relating to Employees.

(a) Except as set forth in Sections 2.2(d) and 3.3,
Seller and KCI shall be solely responsible for any severance pay,
accrued salary, pension benefit, unemployment compensation, vacation
pay and any other obligations to present or former employees created
or owing as a consequence of the termination or prior employment
(whether by agreement, policy or by Law) of any employees of Seller
involved in the Medical Services Business. Seller and KCI shall be
solely responsible for preparing and filing for all their Pension
Plans and Welfare Plans all Forms 5500 (Annual Return/Report of
Employee Benefit Plan) and all other reports and filings required with
respect thereto. Seller and KCI shall remain solely responsible for
any and all violations of the Code and/or ERISA with respect to
Seller's and KCI's Pension Plans and Welfare Plans (including the
reporting and disclosure requirements and the fiduciary standards),
and shall be solely responsible for all continuation coverage
requirements of the Code and ERISA with respect to all such plans and
for all such continuation coverage requirements as a result of the
sale of Assets to Buyer or any termination of Seller's employees
following the sale of Assets.

(b) Buyer shall have the right (but not the obligation)
in its sole discretion to offer to employ employees of Seller who are
employed in the Medical Services Business on the last business day
prior to the Closing Date, on terms and conditions determined solely
by Buyer; provided that Buyer shall not have any obligation to
continue the employment of any such person hired by Buyer or to
provide any benefits or pay any salaries comparable to those provided
by Seller.

(c) Except as set forth in Section 2.2(d) or Section 3.3,
Buyer is not assuming, nor shall Buyer be responsible for any
liability or obligation whatsoever to any present or former employee
of Seller, or any liability or obligation under any Employee Benefit
Plan with respect to any present or former employee of Seller whether
or not such present or former employee is hired by Buyer pursuant to
Section 9.4(b).

(d) Notwithstanding any other provision of this
Agreement, if the Closing occurs, Buyer and MEDIQ shall be responsible
for any and all liabilities, obligations, commitments, costs and
expenses, including reasonable fees and disbursements of attorneys and
other advisors, incurred in respect of any Transferred Employee
relating to or arising in connection with any and all claims made
after the Closing Date for

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workers compensation benefits arising in connection with any
occupational injury or disease occurring after the Closing Date.

9.5 Transitional Activities. From and after the Closing, Seller
promptly shall forward or refer to Buyer any orders, inquiries and requests
received by any of them for the sale, lease or rental of, or with respect to,
the Assets sold to Buyer hereunder, and shall take all other actions reasonably
requested by Buyer to assist in the prompt and orderly transition of the
Medical Services Business to Buyer.

9.6 Delivery of Financials. Within 40 days after the Closing,
Seller and KCI shall provide with respect to the Division: audited statements
of assets being purchased and liabilities being assumed for the years ended
December 31, 1991, December 31, 1992 and December 31, 1993 and audited
statements of income and cash flows for the years ended December 31, 1991, 1992
and 1993 (together with the original report thereon and required consents
related thereto of Seller's Auditors) and all interim financial statements, in
each case to the extent required for compliance by Buyer and Buyer's Affiliates
with the requirements of Rule 13a-11 of the SEC issued pursuant to the
Securities Exchange Act of 1934, as amended, and Rule 3-05 of Regulation S-X of
the SEC. The expense of such audit shall be borne equally by Seller and Buyer.
In addition, Seller shall reasonably cooperate and cause Seller's Auditors to
reasonably cooperate with Buyer and Buyer's Auditors in the preparation of any
other financial statements or schedules required to enable Buyer and Buyer's
affiliates to comply with applicable federal and state securities laws and
regulations.

9.7 Bug-Out Procedures. During the period described in Schedule
9.7 hereto, Buyer and Seller shall carry out the procedures described in
Schedule 9.7 hereto relating to the verification of the existence, location and
status (i.e., whether or not ready for patient use, whether or not under repair
and whether or not currently rented) of all of the equipment constituting
Assets and confirming the transfer of such Assets to Buyer.

9.8 Employee Health Insurance. From and after the effective time
of Closing, all employees of Seller who are employed by Buyer as of the Closing
shall cease to participate in any health insurance plans maintained by Seller
or KCI or any Seller Affiliate and shall, at the employee's election, commence
participation, on a basis whereby all waiting period and pre-existing condition
requirements shall have been waived or shall otherwise be inapplicable to such
employees (and covered dependents), in health insurance plans maintained by
Buyer or an Affiliate of Buyer. Any such health insurance plan maintained by
Buyer or an Affiliate of Buyer shall only cover (to the extent provided in such
plan) claims relating to health care services rendered after the Closing Date.
The health insurance plans maintained by Seller, KCI or a Seller Affiliate
shall cover (to the extent provided in such plans) all claims relating to
health care services rendered to such employees (and covered dependents) on or
prior to the Closing Date.

9.9 Customer Pricing. From and after Closing, Buyer shall, with
respect to all customer contracts of Seller relating to the Medical Services
Business that do not constitute

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Assumed Contracts, honor each pricing arrangement between Seller and a customer
of Seller under each such contract during the period beginning on the Closing
Date and ending on the earlier to occur of (i) the date 90 days after the
Closing and (ii) the date on which such pricing arrangement (or the customer
contract to which it relates), by its terms, expires.

9.10 Computer Software Support. In connection with obtaining
consents of third parties to the assignment to Buyer of Assumed Contracts that
provide for the provision by Seller or a Seller Affiliate of M.E.M.S. or
C.A.P.S. or maintenance with respect thereto (collectively, "Computer
Support"), Seller shall propose to the other parties to such contracts
alternate arrangements mutually satisfactory to, and approved by, Seller and
Buyer, with respect to the provision of such software or services from and
after Closing. Notwithstanding anything to the contrary set forth herein, to
the extent the third parties to any such Assumed Contracts included in the
Assets do not accept any such proposed alternate arrangements, KCI and Seller
shall, from and after Closing, remain liable for performance of the portions of
such Assumed Contracts pertaining to Computer Support and the obligations of
Seller or a Seller Affiliate under such Assumed Contracts with respect to
Computer Support shall constitute Excluded Liabilities hereunder.

9.11 Intercreditor and Subordination Agreements. (a) If Buyer
refinances its indebtedness to Congress Financial Corporation incurred pursuant
to the commitment letter described in Section 5.5, KCI and Seller will execute
and deliver an intercreditor and subordination agreement with the new lender on
terms substantially the same as those of the Congress Intercreditor Agreement.

(b) If MHM refinances its indebtedness to NationsBank,
N.A., KCI and Seller will execute and deliver a subordination agreement with
the new lender on terms substantially the same as those of the MHM
Subordination Agreement.

(d) Notwithstanding the foregoing, Seller and KCI shall
not be required to subordinate to an amount greater than the outstanding amount
of the Term Loan plus up to $15,000,000 of the revolving credit to which the
Congress Intercreditor Agreement applies or to more than the outstanding amount
to which the MHM Subordination Agreement applies.

(e) Notwithstanding the foregoing, Seller and KCI shall
not be required to subordinate to any refinancing of the indebtedness mentioned
in subsection (a) if either Note in the form of Exhibit IA or IC is outstanding
or if the refinanced indebtedness requires cash payments of principal and
interest in any fiscal year during which the Notes in the form of Exhibit 1B
are scheduled to be outstanding in an aggregate amount greater than the
scheduled principal and interest payments for such fiscal year on the term loan
portion of the indebtedness mentioned in subsection (a).

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SECTION 10. TERMINATION AND ABANDONMENT

10.1 Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to the
Closing:

(a) by Buyer and MEDIQ if the conditions precedent to
their obligations set forth in Section 7 have not been fulfilled on
or prior to December 2, 1994;

(b) by Seller and KCI if the conditions precedent to
their obligations as set forth in Section 8 have not been fulfilled on
or prior to December 2, 1994; or

10.2 Procedure for Termination. A party terminating this Agreement
pursuant to Section 10.1 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.
Seller, KCI, Buyer and MEDIQ and their respective directors, and officers shall
not have any liability to the other for costs, expenses, loss of anticipated
profits or otherwise if the transactions contemplated by this Agreement are
abandoned pursuant to Section 10.1 above. Nothing in the preceding sentence
relieves any party from liability on account of its failure to complete the
Closing in breach of its obligation to do so.

SECTION 11. INDEMNIFICATION.

11.1 Indemnification by Seller and KCI. Subject to Section 11.5,
Seller and KCI shall jointly and severally indemnify and hold Buyer 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, penalties and reasonable attorneys fees and disbursements,
net of any recoveries under insurance policies, indemnities or recoveries from
third parties or tax benefits to Buyer resulting from such damage
(collectively, "Damages"), which Buyer or any such person may suffer, incur or
become subject to arising out of, based upon or otherwise in respect of: (a)
any inaccuracy in or breach of any representation or warranty of Seller made in
Sections 4.2, 4.3, 4.6, 4.7, 4.8(a), 4.12, 4.14, 4.15, 4.16(c), 4.16(d), 4.17
or 4.20 of this Agreement; (b) any breach or nonfulfillment of Section 9.3 of
this Agreement or any other covenant of Seller or KCI contained in this
Agreement or any Seller Transaction Documents to be performed at or after
Closing; (c) any Excluded Liability; (d) any liability or obligation incurred
by Buyer as a result of the failure of Seller and/or Buyer to comply with
applicable bulk sales or bulk transfer laws; (e) any customer credit or
discount relating to any billing error of Seller or KCI with respect to any
period ending on or before the Closing Date (provided, in the case of clause
(e), that Buyer shall have referred the customer to Seller for resolution of
the claimed credit or discount and Seller shall not, within 90 days of such
referral, have certified to Buyer in writing (and

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provided supporting documentation) that such claimed customer credit or
discount does not arise from any billing error); and (f) Assumed Liabilities
described in Section 2.2(e) other than the first $20,000 of such Assumed
Liabilities.

11.2 Indemnification by Buyer and MEDIQ. Subject to Section 11.5,
Buyer, Holdings and MEDIQ shall jointly and severally indemnify and hold
Seller, KCI and Seller's and KCI's officers, directors and shareholders
harmless against and in respect of any and all Damages which Seller, KCI or any
such person may suffer, incur or become subject to arising out of, based upon
or otherwise in respect of: (a) any inaccuracy in or breach of any
representation or warranty of Buyer made in Sections 5.2, 5.3, 5.4 and 5.7(a)
of this Agreement; (b) any inaccuracy in or breach of any representation or
warranty of Buyer made in Section 5.6 of this Agreement or any breach or
nonfulfillment of any covenant or obligation of Buyer, Holdings or MEDIQ
contained in this Agreement or any Buyer Transaction Document to be performed
at or after Closing; (c) the Assumed Liabilities (other than Assumed
Liabilities described in Section 11.1(f) above); and (d) any and all
liabilities and obligations of Buyer related to the Medical Services Business
first arising after the Closing Date, including, without limitation,
liabilities and obligations which first arise after the Closing Date with
respect to Transferred Employees.

11.3 Inter-Party Claims. Any party seeking indemnification
pursuant to this Section (an "Indemnified Party") shall notify the other party
or parties from whom such indemnification is sought (an "Indemnifying Party")
of the Indemnified Party's assertion of such claim for indemnification,
specifying the basis of such claim.

11.4 Third Party Claims.

(a) Each Indemnified Party shall promptly notify the
Indemnifying Party of the assertion by any third party of any claim
with respect to which the indemnification set forth in this Section
relates (which shall also constitute the notice required by Section
11.3). The Indemnifying Party shall have the right, upon notice to the
Indemnified Party within twenty (20) 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 11.4(a) and 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 11.4(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.

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11.5 Limitations and Requirements. No party hereto shall have any
obligation to indemnify any other party hereto or any other person against
Damages pursuant to Section 11.1(a) (in the case of Seller and KCI) or Section
11.2(a) (in the case of Buyer, Holdings and MEDIQ) arising out of or based upon
any inaccuracy in or breach of any representation or warranty made in or
pursuant to this Agreement or any Transaction Document unless and until the
aggregate of all such Damages suffered or incurred by the Indemnified Parties
under this Agreement exceeds $750,000 (the "Basket"); in which event such
Indemnified Parties shall be entitled to indemnification only for the amount of
all Damages suffered or incurred in excess of the Basket; provided, however,
that the above limitation shall not be applicable to any claim for Damages
pursuant to Sections 11.1 (b) through (f) (in the case of Seller and KCI) or
Section 11.2(b) through (d) (in the case of Buyer, Holdings and MEDIQ) or
based upon a breach of any representation or warranty made in or pursuant to
Sections 4.20 or 5.4 of this Agreement. The aggregate amount of all Damages
for which Buyer may be indemnified pursuant to Section 11.1(a) of this
Agreement shall not exceed $10,000,000, and the aggregate amount of all Damages
for which Buyer may be indemnified hereunder shall not exceed the sum of
$81,300,000 and the Highline Buy-Out Amount. It is specifically understood and
agreed that in the event a misrepresentation or breach of warranty or covenant
is discovered by Buyer and asserted by it after the Closing, the remedy of
Buyer shall be limited to indemnification as set forth in this Section 11, and
Buyer shall not be entitled to a rescission of this Agreement. Notwithstanding
anything to the contrary in this Agreement, in seeking indemnification for
Damages solely under Section 11.1(a) of this Agreement, Buyer's sole and
exclusive remedy shall be to set off certain of the payments to be made to
Seller pursuant to the promissory notes delivered to Seller attached hereto as
Exhibit IB (the "IB Notes") in accordance with Section 11.6 of this Agreement;
provided, however, that in the event the IB Notes are pre- paid, in whole or in
part, and the aggregate amount of Damages under Section 11.1(a) for which Buyer
is entitled to indemnification (subject to the limitations set forth in this
Section 11.5) exceeds the aggregate outstanding principal balance of and
accrued but unpaid interest under the IB Notes, Buyer shall be entitled to
recover such excess Damages first by setting off, in accordance with Section
11.6, remaining payments to be made to Seller under the Note in the form of
Exhibit IC hereto; second by setting off, in accordance with Section 11.6,
remaining payments to be made to Seller under the Note in the form of Exhibit
IA hereto; and third (to the extent any excess Damages have not been recovered
through set off as aforementioned) by receiving cash from Seller or KCI. To
the extent that any claim for indemnification may properly be made under
Section 11.1 (a) or Section 11.2(a) and any other provision of this Agreement,
then such claim shall be deemed for all purposes of this Section 11.5 to have
arisen only under such other provision and not under such Section 11.1(a) or
Section 11.2(a), as the case may be. Each Indemnified Party shall notify the
Indemnifying Party of a claim under Section 11.1(a) or 11.2(a) within the nine
(9) month period referenced in Section 12.1(a), in accordance with Section
11.3.

11.6 Right of Set-Off. Subject to the limitations in Section 11.5,
Buyer shall have the right to set-off, against any amount which may be owed by
Buyer or any Affiliate of MEDIQ to Seller pursuant to the Notes, any Damages
owed by Seller or KCI to Buyer under

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this Agreement, plus interest at a rate of 10% per annum on such Damages
accruing from the date that Buyer receives notice of claim for such Damages.
The exercise of such right of set-off by Buyer and the consequent failure of
Buyer or a MEDIQ Affiliate to pay amounts otherwise due and payable under the
Notes shall not constitute an event of default under the Notes if: (a) Buyer
shall have given Seller written notice of Buyer's intended exercise of such
set-off at least 30 days prior to the time amounts otherwise due and payable
under a Note (but for the exercise of such right of set-off) would be due and
payable under the terms of such Note and such notice shall have specified (i)
the aggregate amount that Buyer intends to set-off based on such written notice
(the "Aggregate Set-Off Amount"), (ii) the Note or Notes against which Buyer
intends to effect some or all of the set-off contemplated in such written
notice and (iii) the identity of the banking institution (having assets of at
least $500 million) (the "Selected Depository") at which Buyer will establish
an interest-bearing escrow account for deposit of the Contested Amount (as
hereinafter defined) in accordance with the following subclause; and (b) after
the Uncontested Amount (as hereinafter defined) has been set- off, Buyer shall
have deposited the Contested Amount into such escrow account in one or more
installments, each such installment to have been deposited in such escrow
account no later than the time the corresponding amount otherwise due and
payable under a Note (but for such set-off) would be payable under the terms of
such Note. At the time Buyer establishes the aforementioned escrow account,
the Selected Depository shall be instructed to (i) hold all amounts deposited
into escrow by Buyer in accordance with this Section 11.6, and interest
earnings attributable thereto, in escrow until such time as either (A) Buyer
and Seller deliver joint instructions to such banking institution regarding the
disposition of such funds or (B) a court of competent jurisdiction directs the
disposition of such funds out of escrow. "Contested Amount" means the amount,
if any, of the Aggregate Set-Off Amount which Seller asserts, in a written
notice delivered to Buyer no later than 20 days after the date of Buyer's
exercise notice, Buyer is not entitled to set off in accordance with this
Agreement, provided that if at any time prior to the deposit of some or all of
the Contested Amount into escrow Seller withdraws its previous objection with
respect to some or all of the Aggregate Set-Off Amount, the Contested Amount
shall be reduced by the amount with respect to which Seller has withdrawn its
objection. "Uncontested Amount" means an amount equal to the Aggregate Set-Off
Amount minus the Contested Amount. Buyer shall be entitled to give more than
one written notice pursuant to this Section 11.6.

SECTION 12. MISCELLANEOUS.

12.1 Survival of Representations and Warranties.

(a) The representations and warranties set forth in
Sections 4.2, 4.3, 4.6, 4.7, 4.8(a), 4.11(b), 4.12, 4.14, 4.15,
4.16(c), 4.16(d), 4.17, 4.20, 5.2, 5.3, 5.4 and 5.7(a) made by the
parties in this Agreement and in the certificates, documents and
schedules delivered pursuant hereto shall survive the consummation of
the transactions herein contemplated for a period of nine (9) months
(and thereafter during the time a

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<PAGE> 50
claim with respect thereto brought prior to the end of such nine (9)
month period is pending). The representations and warranties set
forth in Section 5.6 shall survive until all amounts owed under the
Notes have been paid in full. The representations and warranties set
forth in Section 4.9 shall survive for the period described in such
Section 4.9. The remaining representations and warranties made by the
parties shall not survive the Closing of the transactions herein
contemplated. Anything in this Agreement to the contrary
notwithstanding, the representations and warranties of Seller and KCI
hereunder, and the right of Buyer to indemnification for breach
thereof, shall not be affected by any investigation of Seller, KCI or
the Medical Service Business made before or after the date hereof by
Buyer, MEDIQ or their agents or representatives.

(b) In the event of any inconsistency between the
statements made in the body of this Agreement and those contained in
the Disclosure Statement (other than an express exception to a
specifically identified statement), those in this Agreement shall
control.

12.2 Further Assurances. Each party hereto shall use best efforts
to comply with all requirements imposed hereby on such party and to cause the
transactions contemplated hereby to be consummated as contemplated hereby and
shall, from time to time and without further consideration, either before or
after the Closing, execute such further instruments and take such other actions
as any other party hereto shall reasonably request in order to fulfill its
obligations under this Agreement and to effectuate the purposes of this
Agreement and to provide for the orderly and efficient transition of the
Medical Services Business to Buyer. Seller and KCI shall, for five years after
the Closing, retain their various books and records relating to the Medical
Services Business and shall, upon prior notice, provide Buyer and its
authorized representatives reasonable access thereto, and in any event shall
not dispose of any of them without first offering them to Buyer. Each party
shall promptly notify the other parties of any event or circumstance known to
such party that could prevent or delay the consummation of the transactions
contemplated hereby or which would indicate a breach or non-compliance with any
of the terms, conditions, representations, warranties or agreements of any of
the parties to this Agreement.

12.3 Bulk Sales. The parties hereto waive compliance with all
applicable bulk sales laws, including, without limitation, the Uniform
Commercial Code Bulk Transfer provisions.

12.4 Costs and Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection herewith. Any and
all transfer, sales, use, documentary and similar taxes and recording and
filing fees incurred in connection with the transactions contemplated herein
shall be borne by Buyer.

12.5 Public Announcements. Upon execution and delivery of this
Agreement, Seller, KCI, Buyer and MEDIQ shall each issue a press release
reasonably satisfactory to Seller and Buyer. Otherwise, neither Seller, KCI,
Buyer, nor MEDIQ shall, prior to the

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<PAGE> 51
Closing, make any public announcement or disclosure relating to the
transactions contemplated herein without the prior agreement of each other
party hereto, provided that each party shall use best efforts to consult with
the other in advance of any disclosure required by law, but the agreement of
the other parties hereto shall not be required.

12.6 Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth below or if sent by
documented overnight delivery service or registered or certified mail, postage
prepaid, return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be
deemed to have been given as of the date received, in the case of personal
delivery, or on the date shown on the receipt or confirmation therefor in all
other cases.

To Buyer, Holdings or MEDIQ:

MEDIQ/PRN Life Support Services-I, Inc.
c/o MEDIQ Incorporated
1 MEDIQ Plaza
Pennsauken, New Jersey 08110
Telecopy (609) 665-2391
Attention: Bernard J. Korman and Michael F. Sandler and Alan
S. Einhorn, Esq.

With a copy to:

DRINKER BIDDLE & REATH
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Michael B. Jordan, Esq.

To Seller or KCI:

Kinetic Concepts, Inc.
8023 Vantage Drive
San Antonio, Texas 78230
(210) 524-9000
Telecopy (210) 308-3993
Attention: James R. Leininger, M.D.
and Dennis E. Noll, Esq.

-45-
<PAGE> 52
With a copy to:

Cox & Smith Incorporated
112 E. Pecan Street, Suite 2000
San Antonio, Texas 78205
Telecopy (210) 226-8395

Attention: Stephen D. Seidel, Esq.

12.7 Assignment and Benefit.

(a) Buyer may assign this Agreement in whole or in part
(including, without limitation, its rights with respect to some or all
of the Assets under Section 1.1 hereof) to any corporation which is a
direct or indirect majority-owned subsidiary of MEDIQ or to any person
which becomes a successor in interest (by purchase of assets or stock,
or by merger or otherwise) to Buyer; but no such assignment shall,
without the written consent of Seller, relieve Buyer, Holdings and
MEDIQ of their respective obligations hereunder. Seller shall not
assign this Agreement or any rights hereunder, or delegate any
obligations hereunder, without prior written consent of Buyer. Buyer
agrees that it will not unreasonably withhold its consent to the
assignment by Seller of all or a portion of its rights and the
delegation of all or a portion of its duties under this Agreement (and
the transfer, subject to Buyer's rights under this Agreement, of all
or a portion of the Assets and the Assumed Liabilities) to a Person
wholly-owned, directly or indirectly, by KCI, and if Buyer so
consents, Buyer will accept the conveyance of such portion of the
Assets from such Person; but no such assignment or delegation shall,
without the written consent of Buyer, relieve Seller or KCI of their
respective obligations hereunder. Buyer may condition its agreement
to such an assignment on Seller's and KCI's agreement to furnish
pursuant to Section 9.6 any additional financial statements required
for the purposes stated in that Section, and Seller shall be
responsible for the additional expenses in preparing the statements
required by Section 9.6 resulting from such assignment. No such
assignment by Seller shall be made unless Congress Financial
Corporation consents thereto. Subject to the foregoing, this
Agreement and the rights and obligations set forth herein shall inure
to the benefit of, and be binding upon, the parties hereto, and each
of their respective successors and assigns. In accordance with the
foregoing, Buyer intends prior to Closing to assign to First PRN
Buyer's rights under Section 1.1 with respect to the Assets described
in Section 1.1(a)(ii) hereof and the customer contracts which
constitute Assumed Contracts (in which case Seller will transfer such
Assets directly to First PRN and not to Buyer at Closing).

(b) This Agreement shall not be construed as giving any
person, other than the parties hereto and their permitted successors
and assigns, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any of the provisions

-46-
<PAGE> 53
herein contained, this Agreement and all provisions and conditions
hereof being intended to be, and being, for the sole and exclusive
benefit of such parties, and permitted successors and assigns and for
the benefit of no other person or entity.

12.8 Amendment, Modification and Waiver. The parties may amend or
modify this Agreement in any respect. Any such amendment, or modification
shall be in writing. The waiver by a party of any breach of any provision of
this Agreement shall not constitute or operate as a waiver of any other breach
of such provision or of any other provision hereof, nor shall any failure to
enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof.

12.9 Governing Law. This Agreement is made pursuant to, and shall
be construed and enforced in accordance with, the laws of the State of Delaware
(and United States federal law, to the extent applicable), irrespective of the
principal place of business, residence or domicile of the parties hereto, and
without giving effect to otherwise applicable principles of conflicts of law.

12.10 Section Headings and Defined Terms. The section headings
contained herein are for reference purposes only and shall not in any way
affect the meaning and interpretation of this Agreement. The terms defined
herein and in any agreement executed in connection herewith include the plural
as well as the singular and the singular as well as the plural, and the use of
masculine pronouns shall include the feminine and neuter. Except as otherwise
indicated, all agreements defined herein refer to the same as from time to time
amended or supplemented or the terms thereof waived or modified in accordance
herewith and therewith.

12.11 Severability. Subject to Section 9.3, the invalidity or
unenforceability of any particular provision, or part of any provision, of this
Agreement shall not affect the other provisions or parts hereof, and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provisions or parts were omitted.

12.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.

12.13 Entire Agreement. This Agreement, together with the
Disclosure Statement, the agreements, exhibits, schedules and certificates
referred to herein or delivered pursuant hereto and the Confidentiality
Agreement, constitute the entire agreement between the parties hereto with
respect to the purchase and sale of the Assets and assumption of the Assumed
Liabilities and supersede all prior agreements and understandings. The
submission of a draft of this Agreement or portions or summaries thereof does
not constitute an offer to purchase or sell the Assets, it being understood and
agreed that Buyer, MEDIQ, Seller or KCI shall

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<PAGE> 54
not be legally obligated with respect to such a purchase or sale or to any
other terms or conditions set forth in such draft or portion or summary unless
and until this Agreement has been duly executed and delivered by all parties.

12.14 Guaranty. KCI hereby guarantees all of the obligations of
Seller pursuant to this Agreement and shall be deemed a beneficiary of the
terms of this Agreement in consideration therefor. MEDIQ hereby guarantees all
of the obligations of Buyer and Holdings pursuant to this Agreement (the terms
of MEDIQ's guaranty with respect to amounts payable under the Notes are as set
forth in the Guaranty Agreement), and in consideration therefor shall be deemed
a beneficiary of this Agreement. Holdings hereby guarantees all of the
obligations of Buyer pursuant to this Agreement (the terms of Holdings'
guaranty with respect to amounts payable under the Notes with respect to which
Holdings is not maker are as set forth in the Guaranty Agreement) and in
consideration therefor shall be deemed a beneficiary of this Agreement.

IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, all as of the date first above written.

KINETIC CONCEPTS, INC.

By: /s/ ROBERT A. WEHRMEYER, JR.
Robert A. Wehrmeyer, Jr.,
Senior Vice President

KCI THERAPEUTIC SERVICES, INC.

By: /s/ ROBERT A. WEHRMEYER, JR.
Robert A. Wehrmeyer, Jr.,
Vice President

MEDIQ/PRN LIFE SUPPORT SERVICES-I, INC.

By: /s/ MICHAEL F. SANDLER
Michael F. Sandler,
Vice President

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<PAGE> 55
PRN HOLDINGS, INC.

By: /s/ MICHAEL F. SANDLER
Michael F. Sandler,
Vice President

MEDIQ INCORPORATED

By: /s/ MICHAEL F. SANDLER
Michael F. Sandler,
Senior Vice President -- Finance

-49-
<PAGE> 56

APPENDIX
LIST OF DEFINED TERMS

<TABLE>
<CAPTION>
TERM PAGE
- - ---- ----
<S> <C>
1934 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
A material adverse effect . . . . . . . . . . . . . . . . . . . . . . . . 28
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Aggregate Set-Off Amount . . . . . . . . . . . . . . . . . . . . . . . . 43
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Assumed Capital Leases . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assumed Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Basket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Bill of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . 22
Buyer's Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Closing Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Collateral Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Computer Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . 27
Congress Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . 29
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Escrow Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 5
February Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>

A-1

<PAGE> 57

<TABLE>
<CAPTION>
TERM PAGE
- - ---- ----
<S> <C>
First PRN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Guaranty Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Highline Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Highline Buy-Out Amount . . . . . . . . . . . . . . . . . . . . . . . . . 4
Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
IB Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
KCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
KCITS Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Marketing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Medical Services Business . . . . . . . . . . . . . . . . . . . . . . . . 1
MEDIQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MEDIQ Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
MHM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
MHM Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
MHM Subordination Agreement . . . . . . . . . . . . . . . . . . . . . . . 24
Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Negative Covenants Agreement . . . . . . . . . . . . . . . . . . . . . . 31
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Plant Closing Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Remedial Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Sadock Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Selected Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Seller Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Seller Transaction Documents . . . . . . . . . . . . . . . . . . . . . . 12
Seller's Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>

A-2

<PAGE> 58

<TABLE>
<CAPTION>
TERM PAGE
- - ---- ----
<S> <C>
Subordinated Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Transferred Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 9
WARN Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Welfare Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>

A-3

<PAGE> 59

SCHEDULE 1.1.1

A. Central Supply

1. Bassinets; Infant
2. Compression Devices
3. Compressors; Medical Air
4. Continuous Passive Motion (CPM)
5. Defibrillator
6. Enteral Feeding Pumps
7. Hypo/Hypothermia
8. Phototherapy
9. Suction Devices

B. Monitoring

1. Monitors; Adult
2. Monitors; Fetal
3. Monitors; Infant
4. Monitors; Neonatal
5. Monitors; Pulse Oximetry
6. Monitors; Respiratory
7. Monitors; Vital Signs

C. Respiratory

1. Ventilators; Adult
2. Ventilators; Infant
3. Ventilators; Portable Adult
4. Ventilators; Supports
5. Warmers; Blood
6. Warmers; Infant Warming

D. Infusion

1. Infusion; Dual Channel
2. Infusion; General
3. Infusion; Micro
4. Infusion; PCA
5. Infusion; Secondary
6. Infusion; Syringe
7. Infusion; TPN
8. Intravenous

A-4

<PAGE> 60

OMITTED EXHIBITS AND SCHEDULES

Registrant believes the following exhibits and schedules to the
Asset Purchase Agreement are not material and contain confidential information
and thus, such documents have not been filed herewith. Registrant agrees to
supplementally furnish a copy of any such exhibit or schedule to the Commission
upon request.

<TABLE>
<S> <C>
Schedule 1.1.2 Transferred Computer Assets
Schedule 1.1.3 Assumed Capital Leases
Schedule 1.1.4 Assumed Contracts
Schedule 1.1.5 Motor Vehicles
Schedule 2.4 Allocation of Aggregate Consideration
Schedule 3.4 Agreed upon Procedures for Accounts Receivable
Schedule 9.7 Bugout Procedures

Exhibit II Escrow Agreement
Exhibit III Certain Personnel Policies of Buyer
Exhibit IV Form of Opinion of Cox & Smith Incorporated
Exhibit V Marketing Agreement
Exhibit VI Form of Opinion of Drinker Biddle & Reath
Exhibit IX Form of General Assignment and Bill of Sale
Exhibit X Form of Assumption Agreement
</TABLE>

<PAGE> 61
OTHER EXHIBITS TO THE ASSET PURCHASE AGREEMENT -
CORRESPONDING EXHIBITS TO FORM 8-K

The following exhibits to the Asset Purchase Agreement are forms of the
promissory notes and other material agreements which were to be executed by the
parties at the closing of the transactions contemplated by the Asset Purchase
Agreement. See those exhibits to this Form 8-K as set forth below for the
executed copies of such promissory notes and material agreements, each of which
is in substantially the form of the corresponding exhibit attached to the Asset
Purchase Agreement.

<TABLE>
<CAPTION>
Exhibit to Asset Corresponding
Purchase Agreement Exhibit(s) to Form 8-K
- - ---------------------------- ---------------------------------
<S> <C>
Exhibit IA Exhibit 99.5
Exhibit IB Exhibits 99.1, 99.3 and 99.4
Exhibit IC Exhibit 99.2
Exhibit VII Exhibit 99.6
Exhibit VIII Exhibits 99.7 and 99.8
Exhibit XI Exhibit 99.9
</TABLE>

<PAGE> 1
EXHIBIT 2.2

AMENDMENT NO. 1
TO ASSET PURCHASE AGREEMENT

THIS AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT is dated as of
September 30, 1994 by and among Kinetic Concepts, Inc., KCI Therapeutic
Services, Inc., MEDIQ Incorporated, PRN Holdings, Inc. and MEDIQ/PRN Life
Support Services-I, Inc.

BACKGROUND

The parties hereto are parties to the Asset Purchase Agreement dated
as of August 23, 1994 (the "Asset Purchase Agreement"). In accordance with
Section 12.8 of the Asset Purchase Agreement, the parties desire to amend
certain provisions of the Asset Purchase Agreement immediately prior to the
consummation of the Closing under the Asset Purchase Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements set forth herein and in
the Asset Purchase Agreement, the parties hereto, intending to be legally
bound, hereby agree as follows:

1. Capitalized terms used herein, unless separately defined
herein, shall have the meanings ascribed to such terms in the Asset Purchase
Agreement.

2. If the liabilities or obligations of Seller under the first
Assumed Capital Lease referred to on Schedule 1.1.3 to the Asset Purchase
Agreement (the Master Lease between Citicorp North America, Inc. and Seller, as
successor by merger to Medirec, as amended and waived through and including as
of September 30, 1994 (the "Citicorp Lease")), are accelerated as a result of
any breach or default thereunder occurring on or after the Closing Date
pursuant to Paragraph 16(B), (C) or (D) of the Citicorp Lease, then (i) Seller
will immediately pay all obligations and liabilities under the Citicorp Lease
resulting from such acceleration, and (ii) Buyer will pay to Seller the
payments that would have been payable under the Citicorp Lease as and when such
payments would have been due if no such breach or default had occurred.

3. In the event of a default under the Citicorp Lease under
Paragraphs 16(B), (C) or (D) thereof, Seller and KCI shall, upon request of
Buyer, cooperate with Buyer and use all reasonable efforts to promptly obtain a
waiver of such default from the Lessor thereunder.

<PAGE> 2
4. (a) Section 11.1 of the Asset Purchase Agreement is hereby
amended by the insertion of the words "(including, without limitation, Holdings
and MEDIQ)" immediately after the word "shareholders" appearing in such
section.

(b) Schedule 2.4 to the Asset Purchase Agreement is hereby
deleted and replaced in its entirety with Exhibit A hereto.

"12.4 Costs and Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection herewith.
Any and all transfer, sales, use, documentary and similar taxes and
recording and filing fees incurred in connection with the transactions
contemplated herein shall be borne by Buyer. Notwithstanding the fact
that Buyer, First PRN, MEDIQ or any other Affiliate of MEDIQ may, in
order to facilitate the delivery of consents to assignments of Assumed
Contracts and Assumed Capital Leases, agree with third parties to pay
costs and expenses of such third parties in connection with the
assignment of Assumed Contracts and Assumed Capital Leases hereunder,
Seller and KCI jointly and severally shall indemnify and hold Buyer,
First PRN, MEDIQ and any other Affiliate of MEDIQ harmless from and
against all such costs and expenses of third parties who are parties
to an Assumed Contract or an Assumed Capital Lease in connection with
the assignment and assumption of the Assumed Contracts and Assumed
Capital Leases in connection with the consummation of the transactions
contemplated herein (but, in all cases other than with respect to the
assignment and assumption of the Citicorp Lease, only to the extent
such Assumed Contract or Assumed Capital Lease obligates Seller to pay
such costs and expenses)."

(d) Clause (i) of the fourth sentence of Section 3.3(a)
of the Asset Purchase Agreement is amended by changing "amount" to "amounts".

5. Except as specifically amended hereby, the Asset Purchase
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed in all respects. The Asset Purchase Agreement
and this

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<PAGE> 3

Amendment shall be read, taken and construed as one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the
date first above written.

KINETIC CONCEPTS, INC.

By: /s/ ROBERT A. WEHRMEYER
Name: Robert A. Wehrmeyer
Title: Senior Vice President

KCI THERAPEUTIC SERVICES, INC.

By: /s/ ROBERT A. WEHRMEYER
Name: Robert A. Wehrmeyer
Title: Vice President

MEDIQ INCORPORATED

By: /s/ MICHAEL F. SANDLER
Name: Michael F. Sandler
Title: Senior Vice President -- Finance

PRN HOLDINGS, INC.

By: /s/ MICHAEL F. SANDLER
Name: Michael F. Sandler
Title: Vice President

MEDIQ/PRN LIFE SUPPORT
SERVICES-I, INC.

By: /s/ MICHAEL F. SANDLER
Name: Michael F. Sandler
Title: Vice President

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<PAGE> 4

EXHIBIT A

Registrant believes that Exhibit A to Amendment No. 1 to the Asset
Purchase Agreement is not material and contains confidential information and
thus, such exhibit has not been filed herewith. Registrant agrees to
supplementally furnish a copy of any such exhibit to the Commission upon
request.

<PAGE> 1

EXHIBIT 99.1

PROMISSORY NOTE

$2,000,000 Pennsauken, New Jersey
September 30, 1994

FOR VALUE RECEIVED, PRN HOLDINGS, INC., a Delaware corporation
("Maker"), hereby unconditionally promises to pay to the order of KCI
THERAPEUTIC SERVICES, INC., a Delaware corporation ("Payee"), as hereinafter
provided, the principal amount of TWO MILLION AND NO/100 DOLLARS ($2,000,000),
together with interest on the unpaid principal balance from time to time
outstanding at the rate of ten percent (10%) per annum beginning on March 31,
1996 (the "Interest Start Date"). All past due principal hereof and accrued
unpaid interest thereon shall bear interest from the maturity thereof until
paid at the lesser of the Default Rate (as hereinafter defined) and the maximum
rate of interest per annum permitted by applicable law. Prior to the Interest
Start Date no interest shall accrue on those portions of the outstanding
principal balance hereof which are not then past due. Interest shall be
calculated on the basis of a 365 or 366 day calendar year, as the case may be.

As used in this Note, the following terms shall have the
respective meanings indicated below:

"Default Rate" shall mean the sum of the Prime Rate in effect from
day to day plus five percent (5%) per annum.

"Prime Rate" shall mean the rate of interest per annum established
from time to time by Bank of America National Trust and Savings Association in
San Francisco, California ("BOA"), and designated as its reference rate of
interest, which may not necessarily be the lowest interest rate charged by BOA.
In the event that BOA does not have a rate designated by it as its reference
rate, then the Prime Rate under this Note shall be deemed to be the variable
rate of interest per annum which is the rate designated by BOA as its "prime
rate", "base rate" or other similar rate and that Payee determines to be
comparable to the Prime Rate as described above. In the event that BOA shall
cease to announce any of the rates described in the preceding sentence, then
the Prime Rate shall be calculated using that variable rate of interest per
annum established by NationsBank of Texas, N.A., San Antonio, Texas, or such
other financial institution satisfactory to Payee, which institution may be
chosen by Payee, in its sole discretion, and changed by Payee, in its sole
discretion exercised in good faith, from time to time, any such change to
become effective on the date of such change.

This Note shall be repaid as follows:

(a) Interest, calculated on a daily basis, shall be due
and payable quarterly in arrears commencing on the 30th day of
September, 1996, and thereafter continuing regularly and quarterly on
the same day of each December, March, June, and September until
September 30, 1999 (the "Maturity Date").
<PAGE> 2
(b) The outstanding principal balance hereof and any and
all accrued but unpaid interest thereon shall be due and payable in
full on the Maturity Date or upon earlier maturity hereof, whether by
acceleration or otherwise.

Payments of principal and interest shall be made in lawful money of
the United States of America by wire transfer of immediately available funds or
cash or bank cashier's check at 8023 Vantage Drive, San Antonio, Texas 78230
or at such other place as Payee shall designate to Maker in writing.

Payee expressly agrees that Maker shall be entitled to offset against
the last to mature portion of the indebtedness evidenced hereby, any and all
payments owed by Payee or any of its Affiliates (as defined in the Asset
Purchase Agreement (hereinafter defined)) to MEDIQ/PRN Life Support Services-I,
Inc. ("PRN-I") pursuant to Section 11.1 of that certain Asset Purchase
Agreement (the "Asset Purchase Agreement") dated August 23, 1994, as amended by
Amendment No. 1 to Asset Purchase Agreement dated as of September 30, 1994, by
and among MEDIQ Incorporated, a Delaware corporation ("MEDIQ"), PRN-I, Maker,
Kinetic Concepts, Inc. ("KCI") and Payee.

Any check, draft, money order or other instrument given in payment of
all or any portion hereof may be accepted by Payee and handled in collection in
the customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.

Maker may prepay this Note in whole or in part at any time without
premium or penalty. All prepayments hereunder shall be applied first to
accrued but unpaid interest, then to discharge any expenses for which Payee may
be entitled to receive reimbursement under the terms of this Note, and, lastly,
to principal due hereunder. Maker shall be required to prepay this Note in
whole or in part to the full extent of any Prepayment Offering Proceeds (as
defined herein) which may be realized from time to time from any Subsidiary
Equity Offering (as hereinafter defined) or any MEDIQ Equity Offering (as
hereinafter defined). For purposes hereof, "Prepayment Offering Proceeds"
shall mean (i) with respect to a Subsidiary Equity Offering, an amount equal to
fifty percent (50%) of the Net Proceeds (as hereinafter defined) equal to or
less than $20,000,000, or (ii) with respect to a MEDIQ Equity Offering, an
amount equal to the product obtained by multiplying (x) an amount equal to
fifty percent (50%) of the Net Proceeds equal to or less than $20,000,000, by
(y) a fraction having a numerator equal to the total pro-forma combined gross
revenues for the previous four (4) fiscal quarters of the Subsidiaries (as
defined herein) on a consolidated basis and a denominator equal to the sum of
the pro-forma unconsolidated gross revenues for the previous four (4) fiscal
quarters of MEDIQ, plus, without duplication, (a) the sum of the products
derived by multiplying (i) the pro-forma unconsolidated gross revenues for the
previous four (4) fiscal quarters of each of the Subsidiaries by (ii) the daily
average percentage of capital stock directly or indirectly owned by MEDIQ in
the respective Subsidiary over the same period, plus (b) the sum of the
products of the pro-forma unconsolidated gross revenues for the previous four
(4) fiscal quarters of each company in which, at any time during the relevant
period, twenty percent (20%) or more of the capital stock

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<PAGE> 3
of such company was directly or indirectly owned by MEDIQ multiplied by the
daily average percentage of capital stock directly or indirectly owned by MEDIQ
in such company during the relevant period, all as determined using generally
accepted accounting principles consistently applied ("GAAP"), other than
principles of consolidation. Notwithstanding anything contained in this Note
to the contrary, if, in connection with any MEDIQ Equity Offering, if the
fraction derived from the calculation described in clause (y) above is less
than 1/2, no mandatory prepayment shall be due. Any such mandatory prepayment
will be due five (5) business days after the Prepayment Offering Proceeds are
realized by the party entitled thereto. For purposes hereof, "Net Proceeds"
shall mean an amount equal to the cumulative gross proceeds resulting from any
and all Subsidiary Equity Offerings and MEDIQ Equity Offerings, from and after
the date hereof, minus (x) any underwriter's fees, discounts and commissions
and other reasonable and customary fees and expenses incurred in connection
with such offerings, (y) any success fee paid to Congress Financial Corporation
in connection with such offerings, but not to exceed one-half of one percent
(.5%) of the gross proceeds resulting from such offerings, and (z) any unpaid
portion of any closing fee paid to Congress Financial Corporation, but not to
exceed $75,000 in the aggregate. For purposes hereof, a "Subsidiary Equity
Offering" shall mean a primary or secondary offering and sale of Equity
Securities (as defined herein) of any of the Subsidiaries for cash. A "MEDIQ
Equity Offering" shall mean a primary offering and sale of Equity Securities of
MEDIQ for cash. For purposes hereof "Equity Securities" shall mean any (i)
capital stock or other equity interests, (ii) other right(s) with respect to
any such capital stock or other equity interests, (iii) offers, options (other
than employee stock options), obligations, warrants, rights, subscriptions,
agreements, claims of any character, or commitments of any kind (contingent or
otherwise) relating to the issuance, conversion, exchange, registration,
voting, sale or transfer of any such capital stock or equity interests, or (iv)
any debenture, bond, note or other instrument that may be converted into or
exchanged for any capital stock or other equity instrument. For purposes
hereof "Subsidiaries" or "Subsidiary" means Maker, MEDIQ/PRN Life Support
Services, Inc., a Delaware corporation ("PRN"), PRN-I and/or any other entity
that is wholly or partially owned or controlled by Maker. For purposes hereof
an entity is "controlled by" another person or entity if such other person or
entity is in possession, direct or indirect, of the power to direct or cause
the direction of, the management and policies of the entity, whether by
ownership, contract or otherwise. For purposes hereof "pro-forma" revenues for
any entity means for any relevant period (a) the actual revenues of said entity
over the relevant period plus (b) the actual revenues during the relevant
period of any business acquired by the entity during the relevant period, as
accounted for in accordance with GAAP and Regulation S-X promulgated by the
Securities and Exchange Commission under the Securities Act of 1933. As an
example and without limiting the generality of the foregoing, the revenues of
PRN-I shall include the revenues of Payee from the Division (as defined in the
Asset Purchase Agreement) for that portion of the relevant period that precedes
the effective time of the sale of the assets under the Asset Purchase
Agreement. Any prepayment required to be made under this paragraph and the
corresponding provisions of Holdings Note 2 and Holdings Note 3 (as hereinafter
defined) shall be applied first to Holdings Note 2 and Holdings Note 3 in
accordance with the terms of Holdings Note 2 and Holdings Note 3 before being
applied to this Note.

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<PAGE> 4
The payment of this Note and the performance of Maker's obligations
hereunder is guaranteed by MEDIQ pursuant to the terms of that certain Guaranty
Agreement dated of even date herewith in favor of Payee (the "Guaranty").

The occurrence of any of the following shall constitute an Event of
Default hereunder: (a) default in any payment by Maker hereunder when due or a
default in Maker's obligations to escrow any disputed offset amounts pursuant
to the terms of the Section 11.6 of the Asset Purchase Agreement and such
default continues uncured for five (5) days after the date any such payment or
escrow was due; provided, however, that if in any consecutive twelve (12) month
period Maker defaults two times in making payments when due hereunder and/or
timely making any required escrow deposits pursuant to the Asset Purchase
Agreement, any such subsequent default shall immediately constitute an Event of
Default hereunder without the passage of any grace period; (b) any other
default occurs under this Note and such default remains uncured for thirty (30)
days after the delivery of notice from Payee to Maker; (c) default occurs under
the Guaranty; (d) any failure by PRN-I, Maker or MEDIQ as the case may be, to
perform and carry out, each and every of the respective agreements and
undertakings of such entities as set forth in that certain Negative Covenants
Agreement (so called herein) dated of even date herewith and entered into by
and among PRN-I, Maker, MEDIQ, KCI and Payee; (e) any failure by MEDIQ to
perform and carry out each and every of its agreements, covenants and
undertakings as set forth in that certain Collateral Transfer of Note (Security
Agreement) (so called herein) dated of even date herewith and executed by MEDIQ
in favor of Payee; (f) sale of all or substantially all of any of PRN-I's,
PRN's, Maker's or MEDIQ's assets, or any formal action in contemplation of the
dissolution, liquidation or termination of any of PRN-I's, PRN's, Maker's, or
MEDIQ's existence; (g) institution of any proceedings by or against any of
PRN-I, PRN, Maker or MEDIQ under any law relating to bankruptcy, insolvency,
reorganization or other form of debtor relief or any of PRN-I's, PRN's Maker's
or MEDIQ's making an assignment for the benefit of creditors, or the
appointment of a receiver, trustee, conservator or other judicial
representative for any of PRN-I, PRN, Maker or MEDIQ or any of PRN-I's, PRN's,
Maker's or MEDIQ's property, unless, in the case of any such proceeding or
appointment not instituted by any of PRN-I, PRN, Maker, or MEDIQ, such
proceeding or appointment is dismissed within sixty (60) days; (h) the
occurrence of any Change of Control (as hereinafter defined) without the prior
written consent of Payee; or (i) the failure of any Subsidiary to make any
payment when due under any indebtedness of any Subsidiary in excess of
$3,000,000.00 or the occurrence of any breach, default or event of default
under any such indebtedness that results in the acceleration of the maturity of
any such indebtedness.

Upon the occurrence of any Event of Default, the unpaid principal
balance hereof, together with accrued unpaid interest thereon, shall, at the
option of Payee, immediately become due and payable without presentment,
protest, demand, notice of intention to accelerate, notice of acceleration,
notice of non-payment, notice of protest, or other notice of any kind, all of
which are hereby expressly waived by Maker. If this Note is not paid at
maturity, however such maturity may be brought about, and the same is placed in
the hands of an attorney for collection, and/or if this Note is collected by
suit or through bankruptcy, or other legal proceedings, the

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<PAGE> 5
Maker agrees to pay all reasonable attorney's fees, court costs and other
expenses incurred by Payee in connection with such collection efforts.

Payee agrees that this Note is subject to the terms and provisions of
the Subordination and Standstill Agreement executed by and among Congress
Financial Corporation, Maker and Payee dated of even date herewith.

No failure or delay on the part of Payee to insist on strict
performance of Maker's obligations hereunder or to exercise any remedy shall
constitute a waiver of Payee's rights in that or any other instance. No waiver
of any of Payee'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.

Any notice or communication required or permitted hereunder shall be
in writing and shall be sent either by (a) personal delivery service with
charges therefor billed to shipper, (b) expedited delivery service with charges
therefor billed to shipper, (c) United States Mail, postage prepaid, registered
or certified mail, return receipt requested, or (d) prepaid telegram or telex
(provided that the contents of such telegram or telex are confirmed by
expedited delivery service or by mail in the manner previously described)
addressed to Maker or Payee, as the case may be, at the address set forth in
the Asset Purchase Agreement, or at such other address as Maker or Payee may
have designated by notice to the other given as provided above. Any notice or
communication sent as hereinabove provided shall be deemed given (i) upon
receipt if sent by telegram or telex or if personally delivered (provided that
such delivery is confirmed by the courier delivery service), (ii) on the date
of deposit in a post office or other official depository under the care and
custody of the United States Postal Service, if sent by United States Mail, or
(iii) on the date of delivery to any expedited delivery service.

Notwithstanding anything contained herein to the contrary, the term
"Payee" shall mean the party so defined as Payee in the first paragraph of this
Note for so long as such party is the holder of this Note and, thereafter,
shall mean, at any time, the then holder of this Note.

Maker and any and all sureties, guarantors and endorsers of this Note
and all other parties now or hereafter liable hereon, severally waive grace,
demand, presentment for payment, protest, notice of any kind (including, but
not limited to, notice of dishonor, notice of protest, notice of intention to
accelerate and notice of acceleration) and diligence in collecting and bringing
suit against any party hereto and agree (i) to all extensions and partial
payments, with or without notice, before or after maturity, (ii) to any
substitution, exchange or release of any security now or hereafter given for
this Note, (iii) to the release of any party primarily or secondarily liable
hereon, and (iv) that it will not be necessary for Payee, in order to enforce
payment of this Note, to first institute or exhaust Payee's remedies against
Maker or any other party liable therefor or against any security for this Note.

Notwithstanding anything to the contrary contained in this Note or in
any other agreement entered into in connection herewith or securing the
indebtedness evidenced hereby, whether now

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<PAGE> 6
existing or hereafter arising and whether written or oral, it is agreed that
the aggregate of all interest and any other charges constituting interest, or
adjudicated as constituting interest, and contracted for, chargeable or
receivable under this Note or otherwise in connection with the debt evidenced
hereby, shall under no circumstances exceed the maximum amount of interest
permitted by applicable law. In the event the maturity of this Note is
accelerated by reason of an election by the holder hereof resulting from a
default hereunder or under any other document executed as security herefor or
in connection herewith, or by voluntary prepayment by Maker or otherwise, then
earned interest may never include more than the maximum rate of interest
permitted by applicable law. If from any circumstance any holder of this Note
shall ever receive interest or any other charges constituting interest, or
adjudicated as constituting interest, the amount, if any, of which would exceed
the maximum rate of interest permitted by applicable law (the "Excess
Interest"), then the Excess Interest shall be applied to the reduction of the
principal amount owing on this Note or on account of any other principal
indebtedness of Maker to the holder of this Note, and not to the payment of
interest. If the Excess Interest exceeds the unpaid balance of principal
hereof and such other indebtedness, then that portion of the Excess Interest
which exceeds the unpaid balance of principal hereof and such other
indebtedness shall be refunded to Maker. All sums paid or agreed to be paid to
the holder of this Note for the use, forbearance or detention of the
indebtedness of Maker to the holder of this Note shall be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until
payment in full so that the actual rate of interest on account of such
indebtedness is uniform throughout the term thereof.

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

This Note shall be binding upon Maker's successors and assigns and
shall inure to the benefit of Payee and its successors and permitted assigns;
provided that Payee may not transfer or assign this Note or any right or
interest herein to any person or entity without Maker's prior written consent.

Maker recognizes and acknowledges that contemporaneously herewith (i)
Maker has delivered to Payee that certain other Promissory Note ("Holdings Note
2") dated of even date herewith, being in the original principal amount of
$5,000,000 to Payee, (ii) Maker has delivered to Payee that certain other
Promissory Note ("Holdings Note 3"), dated of even date herewith, being in the
original principal amount of $3,000,000 to Payee, (iii) PRN has delivered to
Payee that certain Promissory Note ("Acquisition Note") in the original
principal amount of $5,835,707 and payable to the order of Payee and (iv) PRN-I
has delivered that certain Promissory Note ("$2,956,957 Note") dated of even
date herewith, in the original principal amount of $2,956,957 and being payable
to the order of Payee. Maker covenants and agrees that any Event of Default
under, or with respect to Holdings Note 2, Holdings Note 3, the Acquisition
Note, and/or the $2,956,957 Note, or under any other instruments relating
thereto, shall also constitute an Event of Default hereunder, entitling Payee
to pursue all rights, remedies and recourses available to it, including
acceleration of this Note and foreclosure of any liens securing repayment
hereof.

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<PAGE> 7
This Note shall be construed and interpreted in accordance with, and
all issues relating to this Note or to the transaction which this Note relates
(including, without limitation, the validity and/or enforceability of this Note
or any portion of this Note) shall be governed by, the laws of the State of
Delaware (other than the conflict of law rules of the State of Delaware),
except as otherwise required by mandatory provisions of applicable law and
except to the extent that remedies provided by the laws of any state other than
Delaware are governed by the laws of said state.

The following definitions shall apply with respect to the provisions
set forth above:

"Change of Control" means (a) the acquisition after the date of this
Note, in one or more transactions, of beneficial ownership (within the meaning
of Rule 13d-3 under the Exchange Act) by (i) any Person (as hereinafter
defined) (other than a Permitted Holder) or (ii) any Persons who constitute a
group (within the meaning of Section 13(d) (3) of the Exchange Act) (other than
Permitted Holders), in either case, of any securities of MEDIQ such that, as a
result of such acquisition, such Person or group either (A) beneficially owns
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, a majority of MEDIQ's then outstanding voting securities entitled
to vote on a regular basis for a majority of the Board of Directors of MEDIQ or
(B) otherwise has the ability to elect, directly or indirectly, a majority of
the members of MEDIQ's Board of Directors, or (b) the acquisition after the
date of this Note, in one or more transactions, of beneficial ownership (within
the meaning of Rule 13(d)(3) under the Exchange Act) by (i) any Person (other
than a Permitted Holder) or (ii) any Persons who constitute a group (within the
meaning of Section 13(d)(3) of the Exchange Act) (other than Permitted
Holders), in either case, of any securities of any Subsidiary such that, as a
result of such acquisition, such Person or group either (A) beneficially owns
(within the meaning of Rule 13(d)(3) under the Exchange Act), directly or
indirectly, a majority of such Subsidiary's then outstanding voting securities
entitled to vote on a regular basis for a majority of the Board of Directors of
such Subsidiary or (B) otherwise has the ability to elect, directly or
indirectly, a majority of the members of such Subsidiary's of Board of
Directors.

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

"Permitted Holder" means (i) with respect to MEDIQ, the current
executive officers of MEDIQ as disclosed in item 10 of MEDIQ's Annual Report on
Form 10-K for the fiscal year ended September 30, 1993 (the "Executive
Officers"), (ii) with respect to Maker, the Executive Officers and/or MEDIQ,
and (iii) with respect to PRN and PRN-I, the Executive Officers, MEDIQ and/or
Maker and (iv) with respect to MEDIQ, PRN, PRN-I and Maker, Persons identified
under the caption "Security Ownership of Certain Beneficial Owners and
Management" in MEDIQ's 1994 Proxy Statement.

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<PAGE> 8
"Person" shall include an individual, a corporation, a joint venture,
a partnership, a trust, an unincorporated organization or a government or any
agency or political subdivision thereof.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
has duly executed and delivered this instrument.

PRN HOLDINGS, INC.,
a Delaware corporation

By: /s/ JAY M. KAPLAN
Printed Name: Jay M. Kaplan
Title: Senior Vice President

-8-

<PAGE> 1

EXHIBIT 99.2

PROMISSORY NOTE
$2,956,957.00 Pennsauken, New Jersey
September 30, 1994

FOR VALUE RECEIVED, MEDIQ/PRN LIFE SUPPORT SERVICES-I, INC., a
Delaware corporation ("Maker"), hereby unconditionally promises to pay to the
order of KCI THERAPEUTIC SERVICES, INC., a Delaware corporation ("Payee"), in
installments as hereinafter provided, the principal amount of TWO MILLION NINE
HUNDRED FIFTY SIX THOUSAND NINE HUNDRED FIFTY SEVEN AND NO/100 DOLLARS
($2,956,957), together with interest from the date hereof on the principal
amount from time to time remaining unpaid, at the lesser of the rate of eight
percent (8%) per annum and the maximum rate of interest per annum permitted by
applicable law. All past due principal hereof and accrued unpaid interest
thereon shall bear interest from the maturity thereof until paid at the lesser
of the Default Rate (hereinafter defined) and the maximum rate of interest per
annum permitted by applicable law. Interest shall be calculated on the basis
of a 365 or 366 day calendar year, as the case may be.

As used in this Note, the following terms shall have the respective
meanings indicated below:

"Default Rate" shall mean the sum of the Prime Rate in effect from
day to day plus five percent (5%) per annum.

"Prime Rate" shall mean the rate of interest per annum established
from time to time by Bank of America National Trust and Savings Association in
San Francisco, California ("BOA"), and designated as its reference rate of
interest, which may not necessarily be the lowest interest rate charged by BOA.
In the event that BOA does not announce a rate designated by it as its
reference lending rate, then the Prime Rate under this Note shall be deemed to
be the variable rate of interest per annum which is the general reference rate
designated by BOA as its "prime rate", "base rate" or other similar rate and
which Payee determines to be comparable to the Prime Rate as described above.
In the event that BOA shall cease to have any of the rates described in the
preceding sentence, then the Prime Rate shall be calculated using that variable
rate of interest per annum established by Nations Bank of Texas, N.A., San
Antonio, Texas, or such other financial institution satisfactory to Payee,
which institution may be chosen by Payee, or any subsequent holder hereof, in
its sole discretion and changed by Payee, or any subsequent holder hereof, in
its sole discretion exercised in good faith, from time to time, any such change
to become effective on the date of such change.

The principal amount hereof shall be repaid in equal monthly
installments of principal and interest of $310,748.17 with the first such
monthly installment being due and payable on December 31, 1994 and continuing
regularly and monthly on the last day of each successive calendar month
thereafter until September 30, 1995 (the "Maturity Date"), on which date the

<PAGE> 2
entire outstanding unpaid principal balance hereof, together with all accrued
and unpaid interest thereon, shall be due and payable.

Payments of principal and interest, shall be made in lawful money
of the United States of America by wire transfer of immediately available funds
or cash or bank cashier's check at 8023 Vantage Drive, San Antonio, Texas 78230
or at such other place as Payee shall designate to Maker in writing.

Payee expressly agrees that Maker shall be entitled to offset
against the last to mature portion of the indebtedness evidenced hereby, any
and all payments owed by Payee or any of its Affiliates (as defined in the
Asset Purchase Agreement (hereinafter defined)) to Maker pursuant to Section
11.1 of that certain Asset Purchase Agreement (the "Asset Purchase Agreement")
dated August 23, 1994, as amended by Amendment No. 1 to Asset Purchase
Agreement dated as of September 30, 1994, by and among MEDIQ Incorporated, a
Delaware corporation ("MEDIQ"), Maker, PRN Holdings, Inc. ("Holdings"),
Kinetic Concepts, Inc. ("KCI") and Payee.

Any check, draft, money order or other instrument given in payment
of all or any portion hereof may be accepted by Payee and handled in collection
in the customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.

Maker may prepay this Note in whole or in part at any time without
premium or penalty. All prepayments hereunder shall be applied first to
accrued but unpaid interest, then to discharge any expenses for which Payee may
be entitled to receive reimbursement under the terms of this Note, and lastly,
to installments of principal due hereunder in the inverse order of their
maturity. Subject to the subordination contained herein, Maker shall be
required to prepay this Note in whole or in part to the full extent of any
Prepayment Offering Proceeds (as hereinafter defined ) which may be realized
from time to time from any Subsidiary Equity Offering as defined herein) or any
MEDIQ Equity Offering (as hereinafter defined). For purposes hereof
"Prepayment Offering Proceeds" shall mean (i) with respect to a Subsidiary
Equity Offering, an amount equal to fifty percent (50%) of the Net Proceeds (as
hereinafter defined) equal to or less than $20,000,000 or (ii) with respect to
a MEDIQ Equity Offering, an amount equal to the product obtained by multiplying
(x) an amount equal to fifty percent (50%) of the Net Proceeds equal to or less
than $20,000,000 by (y) a fraction having a numerator equal to the total pro
forma combined gross revenues for the previous four (4) fiscal quarters of the
Subsidiaries (as defined herein) on a consolidated basis and a denominator
equal to the sum of the pro-forma unconsolidated gross revenues for the
previous four (4) fiscal quarters of MEDIQ, plus, without duplication, (a) the
sum of the products derived by multiplying (i) the pro-forma unconsolidated
gross revenues for the previous four (4) fiscal quarters of each of the
Subsidiaries by (ii) the daily average percentage of capital stock directly or
indirectly owned by MEDIQ in the respective

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<PAGE> 3
Subsidiary over the same period, plus (b) the sum of the products of the
pro-forma unconsolidated gross revenues for the previous four (4) fiscal
quarters of each company in which, at any time during the relevant period,
twenty percent (20%) or more of the capital stock of such company was directly
or indirectly owned by MEDIQ multiplied by the daily average percentage of
capital stock directly or indirectly owned by MEDIQ in such company during the
relevant period, all as determined using generally accepted accounting
principles consistently applied ("GAAP"), other than principles of
consolidation. Notwithstanding anything contained in this Note to the
contrary, if, in connection with any MEDIQ Equity Offering, if the fraction
derived from the calculation described in clause (y) above is less than 1/2, no
mandatory prepayment shall be due. Any such mandatory prepayment will be due
five (5) business days after the Prepayment Offering Proceeds are realized by
the party entitled thereto. For purposes hereof, "Net Proceeds" shall mean an
amount equal to the cumulative gross proceeds resulting from any and all
Subsidiary Equity Offerings and MEDIQ Equity Offerings, from and after the date
hereof, minus (x) any underwriter's fees, discounts and commissions and other
reasonable and customary fees and expenses incurred in connection with such
offerings, (y) any success fee paid to Congress Financial Corporation in
connection with such offerings, but not to exceed one-half of one percent (.5%)
of the gross proceeds resulting from such offerings, and (z) any unpaid portion
of any closing fee paid to Congress Financial Corporation, but not to exceed
$75,0000 in the aggregate. For purposes hereof, a "Subsidiary Equity Offering"
shall mean a primary or secondary offering and sale of Equity Securities (as
defined herein) of any of the Subsidiaries for cash. A "MEDIQ Equity Offering"
shall mean a primary offering and sale of Equity Securities of MEDIQ for cash.
For purposes hereof "Equity Securities" shall mean any (i) capital stock or
other equity interests, (ii) other right(s) with respect to any such capital
stock or other equity interests, (iii) offers, options (other than employee
stock options), obligations, warrants, rights, subscriptions, agreements,
claims of any character, or commitments of any kind (contingent or otherwise)
relating to the issuance, conversion, exchange, registration, voting, sale or
transfer of any such capital stock or equity interests, or (iv) any debenture,
bond, note or other instrument that may be converted into or exchanged for any
capital stock or other equity instrument. For purposes hereof "Subsidiaries"
or "Subsidiary" means Holdings, MEDIQ/PRN Life Support Services, Inc., a
Delaware corporation ("PRN"), Maker, and/or any other entity that is wholly or
partially owned or controlled by Holdings. For purposes hereof an entity is
"controlled by" another person or entity if such other person or entity is in
possession, direct or indirect, of the power to direct or cause the direction
of, the management and policies of the entity, whether by ownership, contract
or otherwise. For purposes hereof "pro-forma" revenues for any entity means
for any relevant period (a) the actual revenues of said entity over the
relevant period plus (b) the actual revenues during the relevant period of any
business acquired by the entity during the relevant period, as accounted for in
accordance with GAAP and Regulation S-X promulgated by the Securities and
Exchange Commission under the Securities Act of 1933. As an example and
without limiting the generality of the foregoing, the revenues of Maker shall
include the revenues of Payee from the Division (as defined in the Asset
Purchase Agreement) for that portion of the relevant period that precedes the
effective time of the sale of the assets under the Asset

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<PAGE> 4
Purchase Agreement. Notwithstanding anything contained herein to the contrary,
the mandatory prepayment provisions set forth herein are and shall at all times
be subordinate to the repayment of the Holdings Notes (each as hereinafter
defined) and Maker shall have no obligation to make any mandatory prepayments
to the extent, but only to the extent, that there remains any unpaid principal
and/or interest under the Holdings Notes at the time any Prepayment Offering
Proceeds are realized by the party entitled to such proceeds; provided,
however, that the foregoing shall not apply in the event that at the time any
Prepayment Offering Proceeds are realized payment of the Holdings Notes is
prohibited or restricted.

The payment of this Note and the performance of Maker's
obligations hereunder is guaranteed by MEDIQ and Holdings pursuant to the terms
of two (2) certain Guaranty Agreements dated of even date herewith, in favor of
Payee and executed by MEDIQ and Holdings, respectively, (respectively, the
"MEDIQ Guaranty" and the "Holdings Guaranty").

The occurrence of any of the following shall constitute an Event
of Default hereunder: (a) default in any payment by Maker hereunder when due or
a default in Maker's obligations to escrow any disputed offset amounts pursuant
to the terms of the Section 11.6 of the Asset Purchase Agreement and such
default continues uncured for five (5) days after the date any such payment or
escrow was due; provided, however, that if in any consecutive twelve (12) month
period Maker defaults two times in making payments when due hereunder and/or
timely making any required escrow deposits pursuant to the Asset Purchase
Agreement, any such subsequent default shall immediately constitute an Event of
Default hereunder without the passage of any grace period; (b) any other
default occurs under this Note and such default remains uncured for thirty (30)
days after the delivery of notice from Payee to Maker; (c) default occurs under
the MEDIQ Guaranty or the Holdings Guaranty; (d) any failure by Maker,
Holdings, or MEDIQ as the case may be, to fully perform and carry out, in any
material respect, each and every of the respective agreements and undertakings
of such entities as set forth in that certain Negative Covenants Agreement (so
called herein) dated of even date herewith and entered into by and among Maker,
Holdings, MEDIQ, KCI and Payee (e) any failure by MEDIQ to perform and carry
out each and every of its agreements, covenants and undertakings as set forth
in that certain Collateral Transfer of Note (Security Agreement) (so called
herein) dated of even date herewith and executed by MEDIQ in favor of Payee;
(f) sale of all or substantially all of any of Maker's, Holdings', PRN's or
MEDIQ's assets, or any formal action in contemplation of the dissolution,
liquidation or termination of any of Maker's, Holdings', PRN's or MEDIQ's
existence; (g) institution of any proceedings by or against any of Maker,
Holdings, PRN or MEDIQ under any law relating to bankruptcy, insolvency,
reorganization or other form of debtor relief or any of Maker's, Holdings',
PRN's or MEDIQ's making an assignment for the benefit of creditors, or the
appointment of a receiver, trustee, conservator or other judicial
representative for any of Maker, Holdings, PRN or MEDIQ or any of Maker's,
Holdings', PRN's or MEDIQ's property, unless, in the case of any such
proceeding or appointment not instituted by any of Maker, Holdings, PRN or
MEDIQ, such proceeding or appointment is dismissed within sixty (60) days, (h)
the occurrence of any Change of Control (as hereinafter

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<PAGE> 5
defined) without the prior written consent of Payee; or (i) the failure of any
Subsidiary to make any payment when due under any indebtedness of any
Subsidiary in excess of $3,000,000.00 or the occurrence of any breach, default
or event of default under any such indebtedness that results in the
acceleration of the maturity of any such indebtedness; or (j) if at any time
during the term of this Note the amount equal to the sum of the Tangible Equity
of MEDIQ plus the debt of MEDIQ, on an unconsolidated basis, that is
subordinate in right of payment to the MEDIQ Guaranty is less than $50,000,000
(for purposes of the foregoing the Tangible Equity (hereinafter defined) of
MEDIQ means an amount equal to the difference between the shareholders' equity
in MEDIQ and the goodwill (net of amortization) of MEDIQ other than goodwill
arising from the transactions contemplated by the Asset Purchase Agreement, all
as determined in accordance with generally accepted accounting principles
consistently applied).

Payee agrees that this Note is subject to the terms and provisions
of the Subordination and Standstill Agreement executed by and among Congress
Financial Corporation, Maker and Payee dated of even date herewith.

No failure or delay on the part of Payee to insist on strict
performance of Maker's obligations hereunder or to exercise any remedy shall
constitute a waiver of Payee's rights in that or any other instance. No waiver
of any of Payee'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.

Any notice or communication required or permitted hereunder shall
be in writing and shall be sent either by (a) personal delivery service with
charges therefor billed to shipper, (b) expedited delivery service with charges
therefor billed to shipper, (c) United States Mail, postage prepaid, registered
or certified mail, return receipt requested, or (d) prepaid telegram or telex
(provided that the contents of such telegram or telex are confirmed by
expedited delivery service or by mail in the manner previously described)
addressed to Maker or Payee, as the case may be, at the address set forth in
the Asset Purchase Agreement, or at such other address as Maker or Payee may
have designated by notice to the other given as provided above. Any notice or
communication sent as hereinabove provided shall be deemed given (i) upon
receipt if sent by telegram or telex or if personally delivered (provided that

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<PAGE> 6
such delivery is confirmed by the courier delivery service), (ii) on the date
of deposit in a post office or other official depository under the care and
custody of the United States Postal Service, if sent by United States Mail, or
(iii) on the date of delivery to any expedited delivery service.

Notwithstanding anything contained herein to the contrary, the
term "Payee" shall mean the party so defined as Payee in the first paragraph of
this Note for so long as such party is the holder of this Note and, thereafter,
shall mean, at any time, the then holder of this Note.

Maker and any and all sureties, guarantors and endorsers of this
Note and all other parties now or hereafter liable hereon, severally waive
grace, demand, presentment for payment, protest, notice of any kind (including,
but not limited to, notice of dishonor, notice of protest, notice of intention
to accelerate and notice of acceleration) and diligence in collecting and
bringing suit against any party hereto and agree (i) to all extensions and
partial payments, with or without notice, before or after maturity, (ii) to any
substitution, exchange or release of any security now or hereafter given for
this Note, (iii) to the release of any party primarily or secondarily liable
hereon, and (iv) that it will not be necessary for Payee, in order to enforce
payment of this Note, to first institute or exhaust Payee's remedies against
Maker or any other party liable therefor or against any security for this Note.

Notwithstanding anything to the contrary contained in this Note or
in any other agreement entered into in connection herewith or securing the
indebtedness evidenced hereby, whether now existing or hereafter arising and
whether written or oral, it is agreed that the aggregate of all interest and
any other charges constituting interest, or adjudicated as constituting
interest, and contracted for, chargeable or receivable under this Note or
otherwise in connection with the debt evidenced hereby, shall under no
circumstances exceed the maximum amount of interest permitted by applicable
law. In the event the maturity of this Note is accelerated by reason of an
election by the holder hereof resulting from a default hereunder or under any
other document executed as security herefor or in connection herewith, or by
voluntary prepayment by Maker or otherwise, then earned interest may never
include more than the maximum rate of interest permitted by applicable law. If
from any circumstance any holder of this Note shall ever receive interest or
any other charges constituting interest, or adjudicated as constituting
interest, the amount, if any, of which would exceed the maximum rate of
interest permitted by applicable law (the "Excess Interest"), then the Excess
Interest shall be applied to the reduction of the principal amount owing on
this Note or on account of any other principal indebtedness of Maker to the
holder of this Note, and not to the payment of interest. If the Excess
Interest exceeds the unpaid balance of principal hereof and such other
indebtedness, then that portion of the Excess Interest which exceeds the unpaid
balance of principal hereof and such other indebtedness shall be refunded to
Maker. All sums paid or agreed to be paid to the holder of this Note for the
use, forbearance or detention of the indebtedness of Maker to the holder of
this Note shall be amortized, prorated, allocated and spread throughout the
full term of such

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<PAGE> 7
indebtedness until payment in full so that the actual rate of interest on
account of such indebtedness is uniform throughout the term thereof.

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

Maker recognizes and acknowledges that contemporaneously herewith
(i) Holdings has delivered those three (3) certain Promissory Notes
(collectively the "Holdings Notes"), each dated of even date herewith, one in
the original principal amount of $5,000,000.00, the second in the original
principal amount of $3,000,000 and the other in the original principal amount
of $2,000,000.00, and each being payable to the order of Payee, and (ii) PRN
has delivered that certain Promissory Note (the "$5,835,707 Note") dated of
even date herewith, being in the original principal amount of $5,835,707 and
payable to the order of Payee. Maker covenants and agrees that any Event of
Default under or with respect to the $5,835,707 Note and/or any or all of the
Holdings Notes, or under any other instruments relating thereto, shall also
constitute an Event of Default hereunder, entitling Payee to pursue all rights,
remedies and recourses available to it, including, without limitation,
acceleration of this Note and foreclosure of any liens securing repayment
hereof.

This Note shall be construed and interpreted in accordance with,
and all issues relating to this Note or to the transaction which this Note
relates (including, without limitation, the validity and/or enforceability of
this Note or any portion of this Note) shall be governed by, the laws of the
State of Delaware (other than the conflict of law rules of the State of
Delaware), except as otherwise required by mandatory provisions of applicable
law and except to the extent that remedies provided by the laws of any state
other than Delaware are governed by the laws of said state.

The following definitions shall apply with respect to the
provisions set forth above:

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<PAGE> 8
directly or indirectly, a majority of the members of MEDIQ's Board of
Directors, or (b) the acquisition after the date of this Note, in one or more
transactions, of beneficial ownership (within the meaning of Rule 13(d)(3)
under the Exchange Act) by (i) any Person (other than a Permitted Holder) or
(ii) any Persons who constitute a group (within the meaning of Section 13(d)(3)
of the Exchange Act) (other than Permitted Holders), in either case, of any
securities of any Subsidiary such that, as a result of such acquisition, such
Person or group either (A) beneficially owns (within the meaning of Rule
13(d)(3) under the Exchange Act), directly or indirectly, a majority of such
Subsidiary's then outstanding voting securities entitled to vote on a regular
basis for a majority of the Board of Directors of such Subsidiary or (B)
otherwise has the ability to elect, directly or indirectly, a majority of the
members of such Subsidiary's of Board of Directors.

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

"Permitted Holder" means (i) with respect to MEDIQ, the current
executive officers of MEDIQ as disclosed in item 10 of MEDIQ's Annual Report on
Form 10-K for the fiscal year ended September 30, 1993 (the "Executive
Officers"), (ii) with respect to Holdings, the Executive Officers and/or MEDIQ,
(iii) with respect to Maker and PRN, the Executive Officers, MEDIQ and/or
Holdings and (iv) with respect to MEDIQ, Holdings, PRN and Maker, Persons
identified under the caption "Security Ownership of Certain Beneficial Owners
and Management" in MEDIQ's 1994 Proxy Statement.

"Person" shall include an individual, a corporation, a joint
venture, a partnership, a trust, an unincorporated organization or a government
or any agency or political subdivision thereof.

IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, has duly executed and delivered this instrument.

MEDIQ/PRN LIFE SUPPORT SERVICES-I, INC.,
a Delaware corporation

By: /s/ JAY M. KAPLAN
Printed Name: Jay M. Kaplan
Title: Senior Vice President

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<PAGE> 1

EXHIBIT 99.3

PROMISSORY NOTE

$3,000,000 Pennsauken, New Jersey
September 30, 1994

FOR VALUE RECEIVED, PRN HOLDINGS, INC., a Delaware corporation
("Maker"), hereby unconditionally promises to pay to the order of KCI
THERAPEUTIC SERVICES, INC., a Delaware corporation ("Payee"), as hereinafter
provided, the principal amount of THREE MILLION AND NO/100 DOLLARS
($3,000,000), together with interest on the unpaid principal balance from time
to time outstanding at the rate of ten percent (10%) per annum beginning on
March 31, 1996 (the "Interest Start Date"). All past due principal hereof and
accrued unpaid interest thereon shall bear interest from the maturity thereof
until paid at the lesser of the Default Rate (as hereinafter defined) and the
maximum rate of interest per annum permitted by applicable law. Prior to the
Interest Start Date no interest shall accrue on those portions of the
outstanding principal balance hereof which are not then past due. Interest
shall be calculated on the basis of a 365 or 366 day calendar year, as the case
may be.

As used in this Note, the following terms shall have the respective
meanings indicated below:

"Default Rate" shall mean the sum of the Prime Rate in effect from day
to day plus five percent (5%) per annum.

This Note shall be repaid as follows:

Maker may prepay this Note in whole or in part at any time without
premium or penalty. All prepayments hereunder shall be applied first to accrued
but unpaid interest, then to discharge any expenses for which Payee may be
entitled to receive reimbursement under the terms of this Note, and, lastly, to
principal due hereunder. Maker shall be required to prepay this Note in whole
or in part to the full extent of any Prepayment Offering Proceeds (as defined
herein) which may be realized from time to time from any Subsidiary Equity
Offering (as hereinafter defined) or any MEDIQ Equity Offering (as hereinafter
defined). For purposes hereof, "Prepayment Offering Proceeds" shall mean (i)
with respect to a Subsidiary Equity Offering, an amount equal to fifty percent
(50%) of the Net Proceeds (as hereinafter defined) equal to or less than
$20,000,000, or (ii) with respect to a MEDIQ Equity Offering, an amount equal
to the product obtained by multiplying (x) an amount equal to fifty percent
(50%) of the Net Proceeds equal to or less than $20,000,000, by (y) a fraction
having a numerator equal to the total pro-forma combined gross revenues for the
previous four (4) fiscal quarters of the Subsidiaries (as defined herein) on a
consolidated basis and a denominator equal to the sum of the pro-forma
unconsolidated gross revenues for the previous four (4) fiscal quarters of
MEDIQ, plus, without duplication, (a) the sum of the products derived by
multiplying (i) the pro-forma unconsolidated gross revenues for the previous
four (4) fiscal quarters of each of the Subsidiaries by (ii) the daily average
percentage of capital stock directly or indirectly owned by MEDIQ in the
respective Subsidiary over the same period, plus (b) the sum of the products of
the pro-forma unconsolidated gross revenues for the previous four (4) fiscal
quarters of each company in which, at any time during the relevant period,
twenty percent (20%) or more of the capital stock

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<PAGE> 3
of such company was directly or indirectly owned by MEDIQ multiplied by the
daily average percentage of capital stock directly or indirectly owned by MEDIQ
in such company during the relevant period, all as determined using generally
accepted accounting principles consistently applied ("GAAP"), other than
principles of consolidation. Notwithstanding anything contained in this Note
to the contrary, if, in connection with any MEDIQ Equity Offering, if the
fraction derived from the calculation described in clause (y) above is less
than 1/2, no mandatory prepayment shall be due. Any such mandatory prepayment
will be due five (5) business days after the Prepayment Offering Proceeds are
realized by the party entitled thereto. For purposes hereof, "Net Proceeds"
shall mean an amount equal to the cumulative gross proceeds resulting from any
and all Subsidiary Equity Offerings and MEDIQ Equity Offerings, from and after
the date hereof, minus (x) any underwriter's fees, discounts and commissions
and other reasonable and customary fees and expenses incurred in connection
with such offerings, (y) any success fee paid to Congress Financial Corporation
in connection with such offerings, but not to exceed one-half of one percent
(.5%) of the gross proceeds resulting from such offerings, and (z) any unpaid
portion of any closing fee paid to Congress Financial Corporation, but not to
exceed $75,000 in the aggregate. For purposes hereof, a "Subsidiary Equity
Offering" shall mean a primary or secondary offering and sale of Equity
Securities (as defined herein) of any of the Subsidiaries for cash. A "MEDIQ
Equity Offering" shall mean a primary offering and sale of Equity Securities of
MEDIQ for cash. For purposes hereof "Equity Securities" shall mean any (i)
capital stock or other equity interests, (ii) other right(s) with respect to
any such capital stock or other equity interests, (iii) offers, options (other
than employee stock options), obligations, warrants, rights, subscriptions,
agreements, claims of any character, or commitments of any kind (contingent or
otherwise) relating to the issuance, conversion, exchange, registration,
voting, sale or transfer of any such capital stock or equity interests, or (iv)
any debenture, bond, note or other instrument that may be converted into or
exchanged for any capital stock or other equity instrument. For purposes
hereof "Subsidiaries" or "Subsidiary" means Maker, MEDIQ/PRN Life Support
Services, Inc., a Delaware corporation ("PRN"), PRN-I and/or any other entity
that is wholly or partially owned or controlled by Maker. For purposes hereof
an entity is "controlled by" another person or entity if such other person or
entity is in possession, direct or indirect, of the power to direct or cause
the direction of, the management and policies of the entity, whether by
ownership, contract or otherwise. For purposes hereof "pro-forma" revenues for
any entity means for any relevant period (a) the actual revenues of said entity
over the relevant period plus (b) the actual revenues during the relevant
period of any business acquired by the entity during the relevant period, as
accounted for in accordance with GAAP and Regulation S-X promulgated by the
Securities and Exchange Commission under the Securities Act of 1933. As an
example and without limiting the generality of the foregoing, the revenues of
PRN-I shall include the revenues of Payee from the Division (as defined in the
Asset Purchase Agreement) for that portion of the relevant period that precedes
the effective time of the sale of the assets under the Asset Purchase
Agreement. A prepayment required to be made under this paragraph and the
corresponding provisions of Holdings Note 2 (as hereinafter defined) shall be
applied first to Holdings Note 2 in accordance with the terms of Holdings Note
2 before being applied to this Note.

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<PAGE> 5
Maker agrees to pay all reasonable attorney's fees, court costs and other
expenses incurred by Payee in connection with such collection efforts.

No failure or delay on the part of Payee to insist on strict
performance of Maker's obligations hereunder or to exercise any remedy shall
constitute a waiver of Payee's rights in that or any other instance. No waiver
of any of Payee'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.

Notwithstanding anything to the contrary contained in this Note or in
any other agreement entered into in connection herewith or securing the
indebtedness evidenced hereby, whether now existing

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<PAGE> 6
or hereafter arising and whether written or oral, it is agreed that the
aggregate of all interest and any other charges constituting interest, or
adjudicated as constituting interest, and contracted for, chargeable or
receivable under this Note or otherwise in connection with the debt evidenced
hereby, shall under no circumstances exceed the maximum amount of interest
permitted by applicable law. In the event the maturity of this Note is
accelerated by reason of an election by the holder hereof resulting from a
default hereunder or under any other document executed as security herefor or
in connection herewith, or by voluntary prepayment by Maker or otherwise, then
earned interest may never include more than the maximum rate of interest
permitted by applicable law. If from any circumstance any holder of this Note
shall ever receive interest or any other charges constituting interest, or
adjudicated as constituting interest, the amount, if any, of which would exceed
the maximum rate of interest permitted by applicable law (the "Excess
Interest"), then the Excess Interest shall be applied to the reduction of the
principal amount owing on this Note or on account of any other principal
indebtedness of Maker to the holder of this Note, and not to the payment of
interest. If the Excess Interest exceeds the unpaid balance of principal
hereof and such other indebtedness, then that portion of the Excess Interest
which exceeds the unpaid balance of principal hereof and such other
indebtedness shall be refunded to Maker. All sums paid or agreed to be paid to
the holder of this Note for the use, forbearance or detention of the
indebtedness of Maker to the holder of this Note shall be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until
payment in full so that the actual rate of interest on account of such
indebtedness is uniform throughout the term thereof.

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

Maker recognizes and acknowledges that contemporaneously herewith (i)
Maker has delivered to Payee that certain other Promissory Note ("Holdings Note
2") dated of even date herewith, being in the original principal amount of
$5,000,000 to Payee, (ii) Maker has delivered to Payee that certain other
Promissory Note ("Holdings Note 3"), dated of even date herewith, being in the
original principal amount of $2,000,000 to Payee, (iii) PRN has delivered to
Payee that certain Promissory Note ("Acquisition Note") in the original
principal amount of $5,835,707 and payable to the order of Payee and (iv) PRN-I
has delivered that certain Promissory Note ("$2,956,957 Note") dated of even
date herewith, in the original principal amount of $2,956,957 and being payable
to the order of Payee. Maker covenants and agrees that any Event of Default
under, or with respect to Holdings Note 2, Holdings Note 3, the Acquisition
Note, and/or the $2,956,957 Note, or under any other instruments relating
thereto, shall also constitute an Event of Default hereunder, entitling Payee
to pursue all rights, remedies and recourses available to it, including
acceleration of this Note and foreclosure of any liens securing repayment
hereof.

The following definitions shall apply with respect to the provisions
set forth above:

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

IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
has duly executed and delivered this instrument.

PRN HOLDINGS, INC.,
a Delaware corporation

By: /s/ JAY M. KAPLAN
Printed Name: Jay M. Kaplan
Title: Senior Vice President

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<PAGE> 1

EXHIBIT 99.4

PROMISSORY NOTE

$5,000,000 Pennsauken, New Jersey
September 30, 1994

FOR VALUE RECEIVED, PRN HOLDINGS, INC., a Delaware corporation
("Maker"), hereby unconditionally promises to pay to the order of KCI
THERAPEUTIC SERVICES, INC., a Delaware corporation ("Payee"), as hereinafter
provided, the principal amount of FIVE MILLION AND NO/100 DOLLARS ($5,000,000),
together with interest on the unpaid principal balance from time to time
outstanding at the rate of ten percent (10%) per annum beginning on March 31,
1996 (the "Interest Start Date"). All past due principal hereof and accrued
unpaid interest thereon shall bear interest from the maturity thereof until
paid at the lesser of the Default Rate (as hereinafter defined) and the maximum
rate of interest per annum permitted by applicable law. Prior to the Interest
Start Date no interest shall accrue on those portions of the outstanding
principal balance hereof which are not then past due. Interest shall be
calculated on the basis of a 365 or 366 day calendar year, as the case may be.

As used in this Note, the following terms shall have the respective
meanings indicated below:

"Default Rate" shall mean the sum of the Prime Rate in effect from day
to day plus five percent (5%) per annum.

This Note shall be repaid as follows:

(a) Interest, calculated on a daily basis, shall be due
and payable quarterly in arrears commencing on the 30th day of
September, 1996, and thereafter continuing regularly and quarterly on
the last day of each December, March, June, and September until
September 30, 1999 (the "Maturity Date").
<PAGE> 2
(b) The outstanding principal balance hereof and any and
all accrued but unpaid interest thereon shall be due and payable in
full on the Maturity Date or upon earlier maturity hereof, whether by
acceleration or otherwise.

Maker may prepay this Note in whole or in part at any time without
premium or penalty. All prepayments hereunder shall be applied first to accrued
but unpaid interest, then to discharge any expenses for which Payee may be
entitled to receive reimbursement under the terms of this Note, and, lastly, to
principal due hereunder. Maker shall be required to prepay this Note in whole
or in part to the full extent of any Prepayment Offering Proceeds (as defined
herein) which may be realized from time to time from any Subsidiary Equity
Offering (as hereinafter defined) or any MEDIQ Equity Offering (as hereinafter
defined). For purposes hereof, "Prepayment Offering Proceeds" shall mean (i)
with respect to a Subsidiary Equity Offering, an amount equal to fifty percent
(50%) of the Net Proceeds (as hereinafter defined) equal to or less than
$20,000,000, or (ii) with respect to a MEDIQ Equity Offering, an amount equal
to the product obtained by multiplying (x) an amount equal to fifty percent
(50%) of the Net Proceeds equal to or less than $20,000,000, by (y) a fraction
having a numerator equal to the total pro-forma combined gross revenues for the
previous four (4) fiscal quarters of the Subsidiaries (as defined herein) on a
consolidated basis and a denominator equal to the sum of the pro-forma
unconsolidated gross revenues for the previous four (4) fiscal quarters of
MEDIQ, plus, without duplication, (a) the sum of the products derived by
multiplying (i) the pro-forma unconsolidated gross revenues for the previous
four (4) fiscal quarters of each of the Subsidiaries by (ii) the daily average
percentage of capital stock directly or indirectly owned by MEDIQ in the
respective Subsidiary over the same period, plus (b) the sum of the products of
the pro-forma unconsolidated gross revenues for the previous four (4) fiscal
quarters of each company in which, at any time during the relevant period,
twenty percent (20%) or more of the capital stock

The payment of this Note and the performance of Maker's obligations
hereunder is guaranteed by MEDIQ pursuant to the terms of that certain Guaranty
Agreement dated of even date herewith in favor of Payee (the "Guaranty").

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<PAGE> 4
The occurrence of any of the following shall constitute an Event of
Default hereunder: (a) default in any payment by Maker hereunder when due or a
default in Maker's obligations to escrow any disputed offset amounts pursuant
to the terms of the Section 11.6 of the Asset Purchase Agreement and such
default continues uncured for five (5) days after the date any such payment or
escrow was due; provided, however, that if in any consecutive twelve (12) month
period Maker defaults two times in making payments when due hereunder and/or
timely making any required escrow deposits pursuant to the Asset Purchase
Agreement, any such subsequent default shall immediately constitute an Event of
Default hereunder without the passage of any grace period; (b) any other
default occurs under this Note and such default remains uncured for thirty (30)
days after the delivery of notice from Payee to Maker; (c) default occurs under
the Guaranty; (d) any failure by PRN-I, Maker or MEDIQ as the case may be, to
perform and carry out, each and every of the respective agreements and
undertakings of such entities as set forth in that certain Negative Covenants
Agreement (so called herein) dated of even date herewith and entered into by
and among PRN-I, Maker, MEDIQ, KCI and Payee; (e) any failure by MEDIQ to
perform and carry out each and every of its agreements, covenants and
undertakings as set forth in that certain Collateral Transfer of Note (Security
Agreement) (so called herein) dated of even date herewith and executed by MEDIQ
in favor of Payee; (f) sale of all or substantially all of any of PRN-I's,
PRN's, Maker's or MEDIQ's assets, or any formal action in contemplation of the
dissolution, liquidation or termination of any of PRN-I's, PRN's, Maker's, or
MEDIQ's existence; (g) institution of any proceedings by or against any of
PRN-I, PRN, Maker or MEDIQ under any law relating to bankruptcy, insolvency,
reorganization or other form of debtor relief or any of PRN-I's, PRN's Maker's
or MEDIQ's making an assignment for the benefit of creditors, or the
appointment of a receiver, trustee, conservator or other judicial
representative for any of PRN-I, PRN, Maker or MEDIQ or any of PRN-I's, PRN's,
Maker's or MEDIQ's property, unless, in the case of any such proceeding or
appointment not instituted by any of PRN-I, PRN, Maker, or MEDIQ, such
proceeding or appointment is dismissed within sixty (60) days; (h) the
occurrence of any Change of Control (as hereinafter defined) without the prior
written consent of Payee; or (i) the failure of any Subsidiary to make any
payment when due under any indebtedness of any Subsidiary in excess of
$3,000,000.00 or the occurrence of any breach, default or event of default
under any such indebtedness that results in the acceleration of the maturity of
any such indebtedness.

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<PAGE> 5
Payee agrees that this Note is subject to the terms and provisions of
the Subordination and Standstill Agreement executed by and among Congress
Financial Corporation, Maker and Payee dated of even date herewith.

No failure or delay on the part of Payee to insist on strict
performance of Maker's obligations hereunder or to exercise any remedy shall
constitute a waiver of Payee's rights in that or any other instance. No waiver
of any of Payee'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.

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<PAGE> 6
evidenced hereby, shall under no circumstances exceed the maximum amount of
interest permitted by applicable law. In the event the maturity of this Note
is accelerated by reason of an election by the holder hereof resulting from a
default hereunder or under any other document executed as security herefor or
in connection herewith, or by voluntary prepayment by Maker or otherwise, then
earned interest may never include more than the maximum rate of interest
permitted by applicable law. If from any circumstance any holder of this Note
shall ever receive interest or any other charges constituting interest, or
adjudicated as constituting interest, the amount, if any, of which would exceed
the maximum rate of interest permitted by applicable law (the "Excess
Interest"), then the Excess Interest shall be applied to the reduction of the
principal amount owing on this Note or on account of any other principal
indebtedness of Maker to the holder of this Note, and not to the payment of
interest. If the Excess Interest exceeds the unpaid balance of principal
hereof and such other indebtedness, then that portion of the Excess Interest
which exceeds the unpaid balance of principal hereof and such other
indebtedness shall be refunded to Maker. All sums paid or agreed to be paid to
the holder of this Note for the use, forbearance or detention of the
indebtedness of Maker to the holder of this Note shall be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until
payment in full so that the actual rate of interest on account of such
indebtedness is uniform throughout the term thereof.

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

Maker recognizes and acknowledges that contemporaneously herewith (i)
Maker has delivered to Payee that certain other Promissory Note ("Holdings Note
2") dated of even date herewith, being in the original principal amount of
$3,000,000 to Payee, (ii) Maker has delivered to Payee that certain other
Promissory Note ("Holdings Note 3"), dated of even date herewith, being in the
original principal amount of $2,000,000 to Payee, (iii) PRN has delivered to
Payee that certain Promissory Note ("Acquisition Note") in the original
principal amount of $5,835,707 and payable to the order of Payee and (iv) PRN-I
has delivered that certain Promissory Note ("$2,956,957 Note") dated of even
date herewith, in the original principal amount of $2,956,957 and being payable
to the order of Payee. Maker covenants and agrees that any Event of Default
under, or with respect to Holdings Note 2, Holdings Note 3, the Acquisition
Note, and/or the $2,956,957 Note, or under any other instruments relating
thereto, shall also constitute an Event of Default hereunder, entitling Payee
to pursue all rights, remedies and recourses available to it, including
acceleration of this Note and foreclosure of any liens securing repayment
hereof.

This Note shall be construed and interpreted in accordance with, and
all issues relating to this Note or to the transaction which this Note relates
(including, without limitation, the

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<PAGE> 7
validity and/or enforceability of this Note or any portion of this Note) shall
be governed by, the laws of the State of Delaware (other than the conflict of
law rules of the State of Delaware), except as otherwise required by mandatory
provisions of applicable law and except to the extent that remedies provided by
the laws of any state other than Delaware are governed by the laws of said
state.

The following definitions shall apply with respect to the provisions
set forth above:

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

IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
has duly executed and delivered this instrument.

PRN HOLDINGS, INC.,
a Delaware corporation

By: /s/ JAY M. KAPLAN
Printed Name: Jay M. Kaplan
Title: Senior Vice President

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<PAGE> 1

EXHIBIT 99.5
PROMISSORY NOTE

$5,835,707.00 Pennsauken, New Jersey
September 30, 1994

FOR VALUE RECEIVED, MEDIQ/PRN LIFE SUPPORT SERVICES, INC., a
Delaware corporation ("Maker"), hereby unconditionally promises to pay to the
order of KCI THERAPEUTIC SERVICES, INC., a Delaware corporation ("Payee"), in
installments as hereinafter provided, the principal amount of FIVE MILLION
EIGHT HUNDRED THIRTY-FIVE THOUSAND SEVEN HUNDRED SEVEN AND NO/100 DOLLARS
($5,835,707). All past due principal hereof shall bear interest from the
maturity thereof until paid at the lesser of the Default Rate (hereinafter
defined) and the maximum rate of interest per annum permitted by applicable
law.

As used in this Note, the following terms shall have the
respective meanings indicated below:

"Default Rate" shall mean the sum of the Prime Rate in effect from
day to day plus five percent (5%) per annum.

"Prime Rate" shall mean the rate of interest per annum established
from time to time by Bank of America National Trust and Savings Association in
San Francisco, California ("BOA"), and designated as its reference lending rate
of interest, which may not necessarily be the lowest interest rate charged by
BOA. In the event that BOA does not announce a rate designated by it as its
reference rate, then the Prime Rate under this Note shall be deemed to be the
variable rate of interest per annum which is the general reference rate
designated by BOA as its "prime rate", "base rate" or other similar rate and
which Payee or any subsequent holder hereof determines to be comparable to the
Prime Rate as described above. In the event that BOA shall cease to have any of
the rates described in the preceding sentence, then the Prime Rate shall be
calculated using that variable rate of interest per annum established by
NationsBank of Texas, N.A., San Antonio, Texas, or such other financial
institution satisfactory to Payee, which institution may be chosen by Payee, or
any subsequent holder hereof, in its sole discretion and changed by Payee, or
any subsequent holder hereof, in its sole discretion exercised in good faith,
from time to time, any such change to become effective on the date of such
change.

The principal amount hereof shall be repaid in ten (10) equal
monthly installments of $583,570.70, with the first such monthly installment
being due and payable on December 31, 1994 and continuing regularly and monthly
thereafter on the last day of each successive calendar month until September
30, 1995 (the "Maturity Date") on which date the entire outstanding unpaid
principal balance and interest hereof shall be due and payable.

Payments of principal and interest, if applicable, shall be made
in lawful money of the United States of America by wire transfer of immediately
available funds or cash or bank
<PAGE> 2
cashier's check at 8023 Vantage Drive, San Antonio, Texas 78230 or at such
other place as Payee shall designate to Maker in writing.

Payee expressly agrees that Maker shall be entitled to offset
against the last to mature portion of the indebtedness evidenced hereby, any
and all payments owed by Payee or any of its Affiliates (as defined in the
Asset Purchase Agreement (hereinafter defined)) to MEDIQ/PRN Life Support
Services-I, Inc., a Delaware corporation ("PRN-I") pursuant to Section 11.1 of
that certain Asset Purchase Agreement (the "Asset Purchase Agreement") dated
August 23, 1994, as amended by Amendment No. 1 to Asset Purchase Agreement
dated as of September 30, 1994, by and among MEDIQ Incorporated, a Delaware
corporation ("MEDIQ"), PRN-I, PRN Holdings, Inc. ("Holdings") (Maker, MEDIQ,
Holdings, and PRN-I are sometimes collectively referred to herein as the "MEDIQ
Group"), Kinetic Concepts, Inc. ("KCI") and Payee.

Any check, draft, money order or other instrument given in payment
of all or any portion hereof may be accepted by Payee and handled in collection
in the customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.

Maker may prepay this Note in whole or in part at any time without
premium or penalty. All prepayments hereunder shall be applied first to accrued
but unpaid interest, then to discharge any expenses for which Payee may be
entitled to receive reimbursement under the terms of this Note, and lastly, to
installments of principal due hereunder in the inverse order of their maturity.
Subject to the subordination contained herein, Maker shall be required to
prepay this Note in whole or in part to the full extent of any Prepayment
Offering Proceeds (as defined herein) which may be realized from time to time
from any Subsidiary Equity Offering (as hereinafter defined) or any MEDIQ
Equity Offering (as hereinafter defined). For purposes hereof "Prepayment
Offering Proceeds" shall mean (i) with respect to a Subsidiary Equity Offering,
an amount equal to fifty percent (50%) of the Net Proceeds (as hereinafter
defined) equal to or less than $20,000,000, or (ii) with respect to a MEDIQ
Equity Offering, an amount equal to the product obtained by multiplying (x) an
amount equal to fifty percent (50%) of the Net Proceeds equal to or less than
$20,000,000, by (y) a fraction having a numerator equal to the total pro- forma
combined gross revenues for the previous four (4) fiscal quarters of the
Subsidiaries (as defined herein) on a consolidated basis and a denominator
equal to the sum of the pro-forma unconsolidated gross revenues for the
previous four (4) fiscal quarters of MEDIQ, plus, without duplication, (a) the
sum of the products derived by multiplying (i) the pro-forma unconsolidated
gross revenues for the previous four (4) fiscal quarters of each of the
Subsidiaries by (ii) the daily average percentage of capital stock directly or
indirectly owned by MEDIQ in the respective Subsidiary over the same period,
plus (b) the sum of the products of the pro-forma unconsolidated gross revenues
for the previous four (4) fiscal quarters of each company in which, at any time
during the relevant period, twenty percent (20%) or more of the capital stock
of such company was directly or indirectly owned by MEDIQ multiplied by the
daily average percentage of capital stock directly or indirectly owned by MEDIQ
in such company during the relevant period, all as determined using generally
accepted accounting principles consistently applied ("GAAP"), other than
principles of consolidation. Notwithstanding anything contained

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<PAGE> 3
in this Note to the contrary, in connection with any MEDIQ Equity Offering, if
the fraction derived from the calculation described in clause (y) above is less
than 1/2, no mandatory prepayment shall be due. Any such mandatory prepayment
will be due five (5) business days after the Prepayment Offering Proceeds are
realized by the party entitled thereto. For purposes hereof, "Net Proceeds"
shall mean an amount equal to the cumulative gross proceeds resulting from any
and all Subsidiary Equity Offerings and MEDIQ Equity Offerings, from and after
the date hereof, minus (x) any underwriter's fees, discounts and commissions
and other reasonable and customary fees and expenses incurred in connection
with such offerings, (y) any success fee paid to Congress Financial Corporation
in connection with such offerings, but not to exceed one-half of one percent
(.5%) of the gross proceeds resulting from such offerings, and (z) any unpaid
portion of any closing fee paid to Congress Financial Corporation, but not to
exceed $75,000 in the aggregate. For purposes hereof, a "Subsidiary Equity
Offering" shall mean a primary or secondary offering and sale of Equity
Securities (as defined herein) of any of the Subsidiaries for cash. A "MEDIQ
Equity Offering" shall mean a primary offering and sale of Equity Securities
of MEDIQ for cash. For purposes hereof "Equity Securities" shall mean any (i)
capital stock or other equity interests, (ii) other right(s) with respect to
any such capital stock or other equity interests, (iii) offers, options (other
than employee stock options), obligations, warrants, rights, subscriptions,
agreements, claims of any character, or commitments of any kind (contingent or
otherwise) relating to the issuance, conversion, exchange, registration,
voting, sale or transfer of any such capital stock or equity interests, or (iv)
any debenture, bond, note or other instrument that may be converted into or
exchanged for any capital stock or other equity instrument. For purposes
hereof "Subsidiaries" or "Subsidiary" means Holdings, PRN-I, Maker, and/or any
other entity that is wholly or partially owned or controlled by Holdings. For
purposes hereof an entity is "controlled by" another person or entity if such
other person or entity is in possession, direct or indirect, of the power to
direct or cause the direction of, the management and policies of the entity,
whether by ownership, contract or otherwise. For purposes hereof "pro-forma"
revenues for any entity means for any relevant period (a) the actual revenues
of said entity over the relevant period plus (b) the actual revenues during the
relevant period of any business acquired by the entity during the relevant
period, as accounted for in accordance with GAAP and Regulation S-X promulgated
by the Securities and Exchange Commission under the Securities Act of 1933. As
an example and without limiting the generality of the foregoing, the revenues
of Maker shall include the revenues of Payee from the Division (as defined in
the Asset Purchase Agreement) for that portion of the relevant period that
precedes the effective time of the sale of the assets under the Asset Purchase
Agreement. Notwithstanding anything contained herein to the contrary, the
mandatory prepayment provisions set forth herein are and shall at all times be
subordinate to the repayment of the Holdings Notes and the $2,956,957 Note
(each as hereinafter defined) and Maker shall have no obligation to make any
mandatory prepayments to the extent, but only to the extent, that there remains
any unpaid principal and/or interest under the Holdings Notes or the $2,956,957
Note at the time any Prepayment Offering Proceeds are realized by the party
entitled to such proceeds; provided, however, that the foregoing shall not
apply with respect to the Holdings Notes in the event that at the time any
Prepayment Offering Proceeds are realized payment of the Holdings Notes is
prohibited or restricted.

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<PAGE> 4
The payment of this Note and the performance of Maker's
obligations hereunder is guaranteed by MEDIQ and Holdings pursuant to the terms
of those two (2) certain Guaranty Agreements dated of even date herewith,
being in favor of Payee and executed by MEDIQ and Holdings, respectively
(respectively, the "MEDIQ Guaranty" and the "Holdings Guaranty").

The occurrence of any of the following shall constitute an Event
of Default hereunder: (a) default in any payment by Maker hereunder when due or
a default by any member of the MEDIQ Group of its respective obligations to
escrow any disputed offset amounts pursuant to the terms of the Section 11.6 of
the Asset Purchase Agreement and such default continues uncured for five (5)
days after the date any such payment or escrow was due; provided, however, that
if in any consecutive twelve (12) month period Maker defaults two times in
making payments when due hereunder and/or any member or members of the MEDIQ
Group defaults two times in making any required escrow deposits pursuant to the
Asset Purchase Agreement, any such subsequent default shall immediately
constitute an Event of Default hereunder without the passage of any grace
period; (b) any other default occurs under this Note and such default remains
uncured for thirty (30) days after the delivery of notice from Payee to Maker;
(c) default occurs under the MEDIQ Guaranty and/or the Holdings Guaranty; (d)
any failure by PRN-I, Holdings or MEDIQ to fully perform and carry out, in any
material respect, each and every of the respective agreements and undertakings
of such entities as set forth, in that certain Negative Covenants Agreement (so
called herein) dated of even date herewith and entered into by and among
Holdings, MEDIQ, PRN-I, KCI and Payee; (e) any failure by MEDIQ to perform and
carry out each and every of its agreements, covenants and undertakings as set
forth in that certain Collateral Transfer of Note (Security Agreement) (so
called herein) dated of even date herewith and executed by MEDIQ in favor of
Payee; (f) sale of all or substantially all of any of Maker's, Holdings',
PRN-I's or MEDIQ's assets, or any formal action in contemplation of the
dissolution, liquidation or termination of any of Maker's, Holdings', PRN-I's
or MEDIQ's existence; (g) institution of any proceedings by or against any of
Maker, Holdings, PRN-I or MEDIQ under any law relating to bankruptcy,
insolvency, reorganization or other form of debtor relief or any of Maker's,
Holdings', PRN-I's or MEDIQ's making an assignment for the benefit of
creditors, or the appointment of a receiver, trustee, conservator or other
judicial representative for any of Maker, Holdings, PRN-I or MEDIQ or any of
Maker's, Holdings', PRN-I's or MEDIQ's property, unless, in the case of any
such proceeding or appointment not instituted by any of Maker, Holdings, PRN-I
or MEDIQ, such proceeding or appointment is dismissed within sixty (60) days;
(h) the occurrence of any Change of Control (as hereinafter defined) without
the prior written consent of Payee; (i) the failure of any Subsidiary to make
any payment when due under any indebtedness of any Subsidiary in excess of
$3,000,000.00 or the occurrence of any breach, default or event of default
under any such indebtedness that results in the acceleration of the maturity of
any such indebtedness; or (j) if at any time during the term of this Note the
amount equal to the sum of the Tangible Equity (hereinafter defined) of MEDIQ
plus the debt of MEDIQ, on an unconsolidated basis, that is subordinate in
right of payment to the MEDIQ Guaranty is less than $50,000,000 (for purposes
of the foregoing the Tangible Equity of MEDIQ means an amount equal to the
difference between the shareholders' equity in MEDIQ and the goodwill (net of
amortization) of MEDIQ other than goodwill arising from the transactions
contemplated by the Asset Purchase

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<PAGE> 5
Agreement, all as determined in accordance with generally accepted accounting
principles consistently applied).

Payee agrees that this Note is subject to the terms and provisions
of the Standstill Agreement executed by and among Congress Financial
Corporation, Maker and Payee dated of even date herewith.

Any notice or communication required or permitted hereunder shall
be in writing and shall be sent either by (a) personal delivery service with
charges therefor billed to shipper, (b) expedited delivery service with charges
therefor billed to shipper, (c) United States Mail, postage prepaid, registered
or certified mail, return receipt requested, or (d) prepaid telegram or telex
(provided that the contents of such telegram or telex are confirmed by
expedited delivery service or by mail in the manner previously described)
addressed to Maker or Payee, as the case may be, at the address set forth in
the Asset Purchase Agreement, or at such other address as Maker or Payee may
have designated by notice to the other given as provided above. Any notice or
communication sent as hereinabove provided shall be deemed given (i) upon
receipt if sent by telegram or telex or if personally delivered (provided that
such delivery is confirmed by the courier delivery service), (ii) on the date
of deposit in a post office or other official depository under the care and
custody of the United States Postal Service, if sent by United States Mail, or
(iii) on the date of delivery to any expedited delivery service.

Notwithstanding anything contained herein to the contrary, the
term "Payee" shall mean the party so defined as Payee in the first paragraph of
this Note for so long as such party is the holder of this Note and, thereafter,
shall mean, at any time, the then holder of this Note.

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<PAGE> 6
notice of intention to accelerate and notice of acceleration) and diligence in
collecting and bringing suit against any party hereto and agree (i) to all
extensions and partial payments, with or without notice, before or after
maturity, (ii) to any substitution, exchange or release of any security now or
hereafter given for this Note, (iii) to the release of any party primarily or
secondarily liable hereon, and (iv) that it will not be necessary for Payee, in
order to enforce payment of this Note, to first institute or exhaust Payee's
remedies against Maker or any other party liable therefor or against any
security for this Note.

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

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<PAGE> 7
$2,000,000.00 and each being payable to the order of Payee, and (ii) PRN-I has
delivered that certain Promissory Note (the "$2,956,957 Note") dated of even
date herewith, being in the original principal amount of $2,956,957 and payable
to the order of Payee. Maker covenants and agrees that any Event of Default
under or with respect to the $2,956,957 Note and/or any or all of the Holdings
Notes, or under any other instruments relating thereto, shall also constitute
an Event of Default hereunder, entitling Payee to pursue all rights, remedies
and recourses available to it, including, without limitation, acceleration of
this Note and foreclosure of any liens securing repayment hereof.

The following definitions shall apply with respect to the
provisions set forth above:

"Change of Control" means (a) the acquisition after the date of
this Note, in one or more transactions, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) by (i) any Person (as hereinafter
defined) (other than a Permitted Holder) or (ii) any Persons who constitute a
group (within the meaning of Section 13(d) (3) of the Exchange Act) (other than
Permitted Holders), in either case, of any securities of MEDIQ such that, as a
result of such acquisition, such Person or group either (A) beneficially owns
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, a majority of MEDIQ's then outstanding voting securities entitled
to vote on a regular basis for a majority of the Board of Directors of MEDIQ or
(B) otherwise has the ability to elect, directly or indirectly, a majority of
the members of MEDIQ's Board of Directors, or (b) the acquisition after the
date of this Note, in one or more transactions, of beneficial ownership (with
the meaning of Rule 13(d)(3) under the Exchange Act) by (i) any Person (other
than a Permitted Holder) or (ii) any Persons who constitute a group (within the
meaning of Section 13(d)(3) of the Exchange Act) (other than Permitted
Holders), in either case, of any securities of any Subsidiary such that, as a
result of such acquisition, such Person or group either (A) beneficially owns
(within the meaning of Rule 13(d)(3) under the Exchange Act), directly or
indirectly, a majority of such Subsidiary's then outstanding voting securities
entitled to vote on a regular basis for a majority of the Board of Directors of
such Subsidiary or (B) otherwise has the ability to elect, directly or
indirectly, a majority of the members of such Subsidiary's of Board of
Directors.

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

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<PAGE> 8
Executive Officers and/or MEDIQ, (iii) with respect to Maker and PRN-I, the
Executive Officers, MEDIQ and/or Holdings and (iv) with respect to MEDIQ,
Holdings, PRN-I and Maker, Persons identified under the caption "Security
Ownership of Certain Beneficial Owners and Management" in MEDIQ's 1994 Proxy
Statement.

"Person" shall include an individual, a corporation, a joint
venture, a partnership, a trust, an unincorporated organization or a government
or any agency or political subdivision thereof.

IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, has duly executed and delivered this instrument.

MEDIQ/PRN LIFE SUPPORT SERVICES, INC.,
a Delaware corporation

By: /s/ JAY M. KAPLAN
Printed Name: Jay M. Kaplan
Title: Senior Vice President

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<PAGE> 1

EXHIBIT 99.6

NEGATIVE COVENANTS AGREEMENT

This Negative Covenants Agreement (this "Agreement") is made as of the
30th day of September, 1994, by and among MEDIQ INCORPORATED, a Delaware
corporation ("MEDIQ"), MEDIQ/PRN Life Support Services-I, Inc., a Delaware
corporation (PRN-I), PRN Holdings, Inc., a Delaware corporation ("Holdings"),
(MEDIQ, PRN-I and Holdings are sometimes herein collectively referred to as the
"MEDIQ Group"). Kinetic Concepts, Inc., a Delaware corporation ("KCI"), and
KCI Therapeutic Services, Inc., a Delaware corporation ("KCITS") (KCI and KCITS
are collectively referred to herein as "Lender").

RECITALS:

WHEREAS, in connection with the sale of certain assets of KCITS to
MEDIQ/PRN Life Support Services, Inc. ("PRN") and PRN-I, KCITS has agreed to
make available to PRN, PRN-I and Holdings certain acquisition financing (the
"Acquisition Financing") evidenced by two Promissory Notes of even date
herewith, one in the original principal amount of TWO MILLION NINE HUNDRED
FIFTY SIX THOUSAND NINE HUNDRED FIFTY SEVEN AND NO/100 DOLLARS ($2,956,957.00)
executed by PRN-I (the "$2,956,957 Note"), and the other in the original
principal amount of FIVE MILLION EIGHT HUNDRED THIRTY-FIVE THOUSAND SEVEN
HUNDRED SEVEN AND NO/100 DOLLARS ($5,835,707.00) executed by PRN ("the
$5,835,707 Note"), and by three Promissory Notes of even date herewith
(collectively, the "Holdings Notes"), one in the original principal amount of
FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00), one the original principal
amount of THREE MILLION AND NO/100 DOLLARS ($3,000,000) and the other in the
original principal amount of TWO MILLION AND NO/100 DOLLARS ($2,000,000.00)
each executed by Holdings (the $2,966,957 Note, the $5,835,707 Note and the
Holdings Notes being herein referred collectively as the "Notes");

WHEREAS, payment of all the Notes is guaranteed by MEDIQ and payment
of the $2,956,957 Note and the $5,835,707 Note is guaranteed by Holdings
pursuant to the terms of certain Guaranty Agreements (the "Guaranties")
executed by MEDIQ and Holdings, respectively, and dated of even date with the
Notes and being in favor of KCITS; and

WHEREAS, as a condition to the extension of the Acquisition Financing,
Lender has required that the MEDIQ Group enter into this Agreement.

AGREEMENT:

NOW, THEREFORE, in consideration of the premises, and in consideration
of the extension of the Acquisition Financing and the mutual covenants
contained in the transaction documents for the transaction to which the
Acquisition Financing relates, MEDIQ, PRN-I and Holdings each hereby agrees to
comply with each of the following covenants, as applicable, so long as any
amounts remain unpaid and outstanding under any of the Notes:
<PAGE> 2
1. Negative Pledge. Neither Holdings nor PRN-I will create or
suffer to exist any mortgage, pledge, security interest, conditional sale or
other title retention agreement, charge, encumbrance or other Lien (whether
such interest is based on common law, statute, other law or contract) upon any
of their property or assets, now owned or hereafter acquired, except for
Permitted Liens. Neither Holdings nor PRN- I will sell, assign, transfer,
exchange, convey or otherwise hypothecate outside the ordinary course of any
such corporation's business a material portion of any such corporation's
properties or assets, whether now owned or hereafter acquired, without the
prior written consent of Lender.

2. Limitation on Investments. Without the prior written consent
of Lender, which consent shall not be unreasonably withheld, conditioned or
delayed, neither Holdings nor PRN-I shall directly or indirectly, make any
loans or advance money or property to any Person, or invest in (by capital
contribution, dividend or otherwise) or purchase or repurchase the stock or
indebtedness or all or a substantial part of the assets or property of any
Person, or guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except: (a) the
endorsement of instruments for collection or deposit in the ordinary course of
business; (b) investments in: (i) short-term direct obligations of the United
States Government, (ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of Holdings, PRN-I or to bearer,
and (iii) commercial paper rated A1 or P1; and (c) guarantees executed by
Holdings or PRN-I (i) in favor of Congress Financial Corporation ("Congress")
in connection with the $43,000,000 term promissory note (the "PRN-I Congress
Note") executed by PRN-I, payable to the order of Congress and dated of even
date herewith, including any refinancing thereof, provided that such
refinancing satisfies the requirements of Section 9.11 of the Asset Purchase
Agreement (hereinafter defined); (ii) in favor of Congress in connection with
the $15,000,000 revolving credit facility (the "Congress Revolver") made
available to PRN by Congress and evidenced by a promissory note executed by
PRN, payable to the order of Congress and dated of even date herewith,
including any refinancing thereof, provided that such refinancing satisfies the
requirements of Section 9.11 of the Asset Purchase Agreement (hereinafter
defined); (iii) in favor of KCI and/or KCITS; and (iv) in connection with the
Assumed Liabilities, as defined in the Asset Purchase Agreement (the "Asset
Purchase Agreement") dated August 23, 1994, as amended by Amendment No. 1 to
Asset Purchase Agreement dated as of September 30, 1994, by and among MEDIQ,
PRN-I, Holdings, KCI and KCITS; and (d) Holdings may make loans to, advance
money or property to, and/or invest in (i) PRN-I to the extent necessary to
enable PRN-I to make the payments owing by it under the $2,956,957 Note and the
PRN-I Congress Note, but only to the extent necessary to make such payments,
and (ii) PRN to the extent necessary to enable PRN to make the payments owing
by it under the $5,835,707 Note and the Congress Revolver, but only to the
extent necessary to make such payments.

3. Limitation on Restricted Payments. Neither Holdings nor PRN-I
shall directly or indirectly, make any Restricted Payment if, at the time of
such Restricted Payment, or after giving effect thereto (a) a Default or an
Event of Default shall have occurred and be continuing, or (b) the aggregate
amount expended for all Restricted Payments, including such Restricted

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<PAGE> 3
Payment (the amount of any Restricted Payment, if other than cash, to be the
fair market value thereof at the date of payment as determined in good faith
by the Board of Directors of such corporation) subsequent to the date of this
Agreement shall exceed the sum of (i) 50% of the aggregate Consolidated Net
Income of such corporation (or if such aggregate Consolidated Net Income of
such corporation is a loss, minus 100% of such loss) earned subsequent to the
date of this Agreement and on or prior to the date that the Restricted Payment
occurs (the "Reference Date") and (ii) that portion of the aggregate Net
Proceeds received by such corporation from any Person (other than a subsidiary
of the particular corporation) from the issuance and sale (including upon
exchange or conversion for other securities of such corporation), subsequent to
the date of this Agreement and on or prior to the Reference Date, of capital
stock of such corporation that is not required to be prepaid under any of the
Notes to the Payee (as defined in the respective Note) (excluding (A) capital
stock paid as a dividend on any capital stock of such corporation or as
interest on any indebtedness and (B) any Net Proceeds from issuances and sales
of capital stock of such corporation financed directly or indirectly using
funds borrowed from such corporation or any of its subsidiaries until and to
the extent such borrowing is repaid); provided, however, that the foregoing
provisions are not intended to, nor shall the same be construed to, modify the
provisions of the Notes relating to mandatory prepayments thereunder; and,
further provided that notwithstanding any of the foregoing provisions to the
contrary PRN-I may make a Restricted Payment to Holdings.

4. Subordination. If, for any reason whatsoever, Holdings and/or
PRN-I, is now or hereafter becomes indebted to MEDIQ: (a) all Affiliated Party
Debt Payments in respect thereof and all liens, security interests and rights
now or hereafter existing with respect to property of Holdings or PRN-I
securing same shall, at all times, be subordinate in all respects to the Notes
and to all liens, security interests and rights now or hereafter existing to
secure the Notes; (b) other than payments to MEDIQ by Holdings or PRN-I of any
indebtedness of Holdings or PRN-I, as the case may be, to MEDIQ incurred by
Holdings or PRN-I, as the case may be, to enable such company to make the
payments due and owing under the Notes or due and owing to Congress under the
PRN-I Congress Note, MEDIQ shall not be entitled to enforce or receive any
Affiliated Party Debt Payment, directly or indirectly, until the Notes have
been fully and finally paid; provided, however, that after the occurrence and
during the continuance of a Default or Event of Default the payments permitted
in this subsection (b) shall be prohibited; (c) all promissory notes, accounts
receivable ledgers or other evidences, now or hereafter held by MEDIQ, of
obligations of Holdings to MEDIQ and PRN-I to MEDIQ shall contain a specific
written notice thereon that the indebtedness evidenced thereby is subordinated
under and subject to the terms of this Agreement.

5. Event of Default. Each of MEDIQ, Holdings and PRN-I hereby
expressly acknowledges and agrees that any breach of, or default under, the
terms, covenants and provisions of this Agreement shall constitute an "Event of
Default" hereunder and an Event of Default under each of the Notes and
Guaranties, and in which event the Payee (as defined in the respective Notes)
under each of the Notes shall be entitled to exercise all rights and remedies
available to Payee under the Notes and Guaranties, including, without
limitation, immediately accelerating the maturity of such Notes.

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<PAGE> 4
6. Financial Statements; Reports. MEDIQ covenants to Lender
that, for so long as either the $5,835,707 Note or the $2,956,957 Note remain
unpaid, unless Lender shall otherwise consent in writing, (i) within one
hundred five (105) days after the close of each fiscal year of MEDIQ, MEDIQ
will deliver to Lender copies of (a) the consolidated balance sheet of MEDIQ
and its subsidiaries as of the end of such fiscal year, and (b) the
consolidated statements of income, cash flows, and shareholders' equity of
MEDIQ and its Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures of the previous annual audit, all in
reasonable detail, prepared in accordance with GAAP consistently applied
throughout the periods involved, and certified, on an unqualified basis, by
independent certified public accountants acceptable to the Lender in its
reasonable discretion; and (ii) within sixty (60) days after the close of each
quarter of each fiscal year of MEDIQ, MEDIQ shall deliver to Lender copies of
the consolidated balance sheet of MEDIQ and its subsidiaries as of the end of
such quarter, and the consolidated statement of income of MEDIQ and its
subsidiaries for such quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding period of the preceding fiscal
year, all in reasonable detail, prepared in accordance with GAAP consistently
applied throughout the periods involved and certified, subject to year-end
audit and adjustment by the chief financial officer of MEDIQ.

7. Glossary of Defined Terms. The following definitions shall
apply with respect to the negative covenants set forth above.

a. "Affiliated Party Debt Payment" means any payment
other than Permitted Payments of any principal, interest, fees, liabilities or
other obligations with respect to any indebtedness owed to MEDIQ or any of its
Affiliates (as defined in the Asset Purchase Agreement); provided, however,
that, after a Default or Event of Default, payments to MEDIQ under the Services
Agreement shall be excluded from Permitted Payments for the purposes of this
definition.

b. "Consolidated Net Income" with respect to any Person
for any period, means the aggregate of the net income (or loss) of such Person
and its subsidiaries for such period, on a consolidated basis, determined in
accordance with Generally Accepted Accounting Principles consistently applied
("GAAP"); provided that there shall be excluded therefrom (to the extent
otherwise included therein) (a) the net income of any other Person in which
such Person or any of its subsidiaries has an interest (which interest does not
cause the net income of such other Person to be consolidated with the net
income of such Person and its subsidiaries in accordance with GAAP) except to
the extent of the amount of dividends or distributions actually paid to such
Person or such subsidiary by such other Person in such period; (b) the net
income of any subsidiary of such Person that is subject to any Payment
Restriction to the extent such Payment Restriction actually prevented the
payment of an amount that otherwise could have been paid to, or received by,
such Person or a subsidiary of such Person not subject to any Payment
Restriction; and (c) (i) the net income (or loss) of any other Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition, (ii) all gains and losses realized on any asset sale, (iii) all
gains realized upon or in connection with or as a consequence of the issuance
or sale of the capital stock of such Person or any of its subsidiaries

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<PAGE> 5
and any gains on pension reversions received by such Person or any of its
subsidiaries, (iv) all gains and losses realized on the purchase or other
acquisition by such Person or any of its subsidiaries of any securities of such
Person or any of its subsidiaries, (v) all gains and losses resulting from the
cumulative effect of any accounting change pursuant to the application of
Accounting Principles Board Opinion No. 20, as amended, and (vi) all other
extraordinary gains and losses.

c. "Default" or "Event of Default" means any default,
event or default, Default or Event of Default, as the case may be, under any of
the Notes and/or the Guaranties.

d. "Lien" shall mean any lien, mortgage, security
interest, tax lien, pledge, encumbrance, conditional sale or title retention
arrangement, or any other interests in property designated to secure the
repayment of indebtedness, whether arising by agreement or under any statute or
law, or otherwise.

e. "Net Proceeds" means in the case of any issuance and
sale by any Person of capital stock, the aggregate net proceeds received by
such Person after payment of expenses, taxes, underwriter's fees and
commissions and the like incurred in connection therewith, whether such
proceeds are in cash or in property (valued at the fair market value thereof at
the time of receipt, as determined, in good faith by the Board of Directors of
such Person, which determination shall be evidenced by a board resolution
certified by the corporate secretary of such company).

f. "Payment Restriction" means, with respect to a
subsidiary of any Person, any encumbrance, restriction or limitation, whether
by operation of the terms of its charter or by reason of any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation,
on the ability of (i) such subsidiary to (a) pay dividends or make other
distributions on its capital stock or make payments on any obligation,
liability or indebtedness owed to such Person or any other subsidiary of such
Person, (b) make loans or advances to such Person or any other subsidiary of
such Person or (c) transfer any of its properties or assets to such Person or
any other subsidiary of such Person, or (ii) such Person or any other
subsidiary of such Person to receive or retain any such (a) dividends,
distributions or payments, (b) loans or advances or (c) transfer of properties
or assets.

g. "Permitted Liens" shall mean (i) pledges or deposits
made to secure payment of Worker's Compensation (or to participate in any fund
in connection with Worker's Compensation), unemployment insurance, pensions or
social security programs; (ii) Liens imposed by mandatory provision of law such
as for materialmen's, mechanics, warehousemen's and other like Liens arising in
the ordinary course of business, securing indebtedness whose payment is not yet
due; (iii) Liens for taxes, assessments and governmental charges or levies
imposed upon a person or upon such Person's income or profits or property, if
the same are not yet due and payable or if the same are being contested in good
faith and as to which adequate reserves have been provided; (iv) good faith
deposits in connection with leases, real estate bids or contracts (other than
contracts involving the borrowing of money), pledges or deposits to

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<PAGE> 6
secure public or statutory obligations, deposits to secure (or in lieu of)
surety, stay, appeal or customs bonds and deposits to secure the payment of
taxes, assessments, customs duties or other similar charges; (v) encumbrances
consisting of zoning restrictions, easements, or other restrictions on the use
of real property, provided that such do not impair the use of such property for
the uses intended, (vi) purchase money security interests (including those in
the nature of capital leases) arising in the ordinary course of business
consistent with past practices, (vii) liens securing the PRN-I Congress Note
and the Congress Revolver, and liens securing any refinancing thereof that
satisfies the requirements of Section 9.11 of the Asset Purchase Agreement and
covering the same collateral securing such credit facilities, and (viii) the
Assumed Capital Leases, as defined in the Asset Purchase Agreement. For
purposes of the preceding sentence, "purchase money security interest" means a
security interest (including the interest of a lessor under a capital lease) in
any assets securing indebtedness incurred at the time of the acquisition of
such asset or within one year thereafter provided that the amount of such
indebtedness does not exceed the cost of such assets and that the security
interest does not extend to property other than such assets.

h. "Permitted Payments" means any payment by any member
of the MEDIQ Group (i) to MEDIQ pursuant to the Services Agreement (the
"Services Agreement"), dated as of the date hereof, among the members of the
MEDIQ Group, for certain management, financial, accounting, legal and other
administrative services consistent with past practice, as such Services
Agreement may be amended from time to time; provided, however, that any such
amendment shall in no event alter the methodology utilized to compute the
payment obligations of any member of the MEDIQ Group under such Services
Agreement if such amendment would cause the payment obligations of any member
of the MEDIQ Group to be more than such obligations would have been under the
methodology utilized on the date hereof; provided further that payments under
the Services Agreement shall be limited to $50,000, in the aggregate, per
fiscal year; (ii) pursuant to the Tax Sharing Agreement, dated as of the date
hereof, among the members of the MEDIQ Group, as such Tax Sharing Agreement may
be amended from time to time, so long as the payment thereunder by any member
of the MEDIQ Group shall not exceed the amount of taxes such member would be
required to pay if it were the filing Person for all applicable taxes; (iii) to
MEDIQ pursuant to the Insurance Agreement, dated as of the date hereof, among
the members of the MEDIQ Group, as such Insurance Agreement may be amended from
time to time; provided, however, that any such amendment shall in no event
alter the methodology utilized to compute the payment obligations under such
Insurance Agreement if such amendment would cause such obligations to be more
than such obligations would have been than under the methodology utilized on
the date hereof; and (iv) to MEDIQ pursuant to the Reimbursement Agreement,
dated as of the date hereof, among the members of the MEDIQ Group, as such
Reimbursement Agreement may be amended from time to time; provided, however,
that any such amendment shall in no event alter the methodology utilized to
compute the payment obligations of any member of the MEDIQ Group under such
Reimbursement Agreement if such amendment would cause such payment obligations
to be more than such obligations would have been under the methodology utilized
on the date hereof.

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<PAGE> 7
i. "Person" shall include any individual, corporation,
joint venture, partnership, limited liability company, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

j. "Restricted Debt Payment" means any payment,
purchase, redemption, defeasance (including, but not limited to, in substance
or legal defeasance) or other acquisition or retirement for value, directly or
indirectly, by any of Holdings and PRN-I, prior to the scheduled maturity or
prior to any scheduled repayment of principal or sinking fund payment, as the
case may be, in respect of any indebtedness of said company that is subordinate
in right of payment to the Notes.

k. "Restricted Payment" means any (i) Stock Payment, (ii)
Restricted Debt Payment, (iv) Affiliated Party Debt Payment.

l. "Stock Payment" means, with respect to any Person,
(a) the declaration or payment by such person, either in cash or in property,
of any dividend on (except dividends payable solely in capital stock which does
not result in a Change of Control (as defined in the Notes), or the making by
such person or any of its subsidiaries of any other distribution in respect of,
such Person's capital stock or any warranties, rights or options to purchase or
acquire shares of any class or such capital stock (other than exchangeable or
convertible indebtedness of such Person) or (b) the redemption, repurchase,
retirement or other acquisition for value by such Person or any of its
subsidiaries, directly or indirectly, of such Person's capital stock (and, in
the case of a subsidiary, the capital stock of any corporation that controls,
directly or indirectly, such subsidiary) or any warrants, rights or options to
purchase or acquire shares of any class of such capital stock (other than
exchangeable or convertible indebtedness of such Person).

7. Miscellaneous.

(a) Waiver. Any failure of any of the parties hereto to
comply with any of the covenants, terms and provisions hereof may be waived
only in writing by the party or parties for whose benefit such obligation
covenant, term or provision was made.

(b) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given two
(2) days after deposit in a regularly maintained receptacle of the United
States Postal Service, certified mail, return receipt requested, addressed as
set forth below, upon receipt of confirmation of delivery by telecopy to the
telecopy number set forth below, or upon personal delivery as follows:

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<PAGE> 8
If to any of the MEDIQ Group:

MEDIQ/PRN Life Support Services-I, Inc.
c/o MEDIQ Incorporated
1 MEDIQ Plaza
Pennsauken, New Jersey 08110
Telecopy (609) 665-2391
Attention: Bernard J. Korman, Michael F. Sandler and
Alan Einhorn, Esq.

With a copy to:

DRINKER BIDDLE & REATH
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Michael B. Jordan, Esq.

To Lender:

Kinetic Concepts, Inc.
8023 Vantage Drive
San Antonio, Texas 78230
(210) 524-9000
Telecopy (210) 308-3993
Attention: James R. Leininger, M.D.
and Dennis E. Noll, Esq.

With a copy to:

Cox & Smith Incorporated
112 E. Pecan Street, Suite 2000
San Antonio, Texas 78205
Telecopy (210) 226-8395
Attention: Stephen D. Seidel, Esq.

(c) Joint Venture, Partnership and Agency. Nothing
contained in this Agreement shall be deemed to create a joint venture,
partnership or agency relationship between Lender and any of the MEDIQ Group.

(d) Governing Law; Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.

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<PAGE> 9
(e) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original; and any person
may become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.

(f) Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

(g) Entire Agreement. This Agreement, together with the
Exhibits hereto, if any, and the documents referred to herein, embodies the
entire agreement and understanding between the parties hereto relating to the
subject matter hereof and supersedes any prior agreements and understandings.

(h) Amendment and Modification. This Agreement may be
amended or modified only by written agreement executed by Lender and each of
the MEDIQ Group.

(i) Binding Effect; Benefits. Subject to the provisions
of Subsection 7(k) below, this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Agreement, express or implied, is intended to confer on any
person other than the parties hereto and their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.

(j) Legal Invalidity. If any part or provision of this
Agreement is or shall be deemed violative of any applicable laws, rules or
regulations, such legal invalidity shall not void the Agreement or affect the
remaining terms and provisions of this Agreement, and the Agreement shall be
construed and interpreted to comport with all such laws, rules or regulations
to the maximum extent possible.

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<PAGE> 10
(k) Assignability. This Agreement shall not be
assignable by any party hereto without the prior written consent of the other
parties hereto.

EXECUTED this 30th day of September, 1994.

MEDIQ INCORPORATED,
a Delaware corporation

By: /s/ MICHAEL F. SANDLER
Title: Sr. Vice President -- Finance

MEDIQ/PRN LIFE SUPPORT
SERVICES-I, INC.,
a Delaware corporation

By: /s/ MICHAEL F. SANDLER
Title: Vice President

PRN HOLDINGS, INC.,
a Delaware corporation

By: /s/ MICHAEL F. SANDLER
Title: Vice President

KINETIC CONCEPTS, INC.

By: /s/ ROBERT A. WEHRMEYER JR.
Title: Senior Vice President

KCI THERAPEUTIC SERVICES, INC.

By: /s/ ROBERT A. WEHRMEYER JR.
Title: Vice President

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<PAGE> 1

EXHIBIT 99.7

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT is made by PRN HOLDINGS, INC., a Delaware
corporation, whose address is One MEDIQ Plaza, Pennsauken, New Jersey 08110
("Guarantor"), in favor of KCI THERAPEUTIC SERVICES, INC., a Delaware
corporation ("KCIT");

W I T N E S S E T H:

WHEREAS, in connection with the sale to MEDIQ/PRN Life Support
Services-I, Inc. ("Borrower") by KCIT of certain assets of KCIT pursuant to the
terms of that certain Asset Purchase Agreement (so called herein) dated August
23, 1994, as amended by Amendment No. 1 to Asset Purchase Agreement dated as of
September 30, 1994, by and among Kinetic Concepts, Inc., a Texas corporation
("KCI"), KCIT, Guarantor, MEDIQ Incorporated ("MEDIQ") and Borrower, KCIT has
made available to Borrower, MEDIQ/PRN Life Support Services, Inc. ("PRN")
and/or Guarantor, as the case may be, several seller financing loans
(collectively the "Loan") being evidenced by the following: (i) a Promissory
Note (the "$2,956,957 Note") dated the date hereof, in the original principal
amount of $2,956,957, executed by Borrower and made payable to the order of
KCIT, (ii) a Promissory Note (the "$5,835,707 Note") dated the date hereof, in
the original principal amount of $5,835,707, executed by PRN and made payable
to the order of KCIT; (iii) a Promissory Note ("Holdings Note-I") dated the
date hereof, in the original principal amount of $5,000,000 executed by
Guarantor and payable to the order of KCIT; (iv) a Promissory Note ("Holdings
Note-II") dated the date hereof in the original principal amount of $3,000,000
executed by Guarantor and payable to the order of KCIT; and (v) a Promissory
Note ("Holdings Note-III") dated the date hereof, in the original principal
amount of $2,000,000 executed by Guarantor and payable to the order of KCIT
(the $2,956,957 Note and the $5,835,707 Note, are herein collectively called
the "Guaranteed Notes" and Holdings Note-I, Holdings Note-II and Holdings
Note-III are herein collectively called the "Holdings Notes"), the Guaranteed
Notes and the Holdings Notes being entitled to the benefit of a Negative
Covenants Agreement executed by Borrower, MEDIQ and Guarantor in favor of KCI
and KCIT (such Negative Covenants Agreement, being herein called the "Negative
Covenants Agreement" and the Asset Purchase Agreement being herein called the
"Acquisition Agreement"), and;

WHEREAS, KCIT has made it a condition precedent to KCIT making the
Loan available to Borrower, PRN and Guarantor that Guarantor guaranty payment
of the Guaranteed Notes on the terms and conditions set forth in this Guaranty
Agreement;

AGREEMENT:

NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and as a material inducement to
KCIT to extend credit to Borrower, PRN and Guarantor, Guarantor hereby
guaranties to KCIT the prompt and full
<PAGE> 2
payment of the Indebtedness described in Section 1 below in this Guaranty
(collectively called the "Guaranteed Obligations"), this Guaranty being upon
the following terms and conditions:

1. GUARANTY OF PAYMENT. Guarantor hereby unconditionally and irrevocably
guarantees to KCIT the punctual payment when due, whether by lapse of
time, by acceleration of maturity, or otherwise, and at all times
thereafter, of all principal, interest (including interest accruing
after the commencement of any bankruptcy or insolvency proceeding by
or against Borrower or PRN as the case may be, whether or not allowed
in such proceeding), costs, expenses, and other sums of money now or
hereafter due and owing pursuant to (i) the terms of the Guaranteed
Notes, and (ii) all renewals, extensions, refinancings, modifications,
supplements or amendments of such indebtedness or any part thereof
(the indebtedness described in clauses (i) and (ii) above in this
Section 1 is herein collectively called the "Indebtedness"). This
Guaranty covers the Indebtedness, whether presently outstanding or
arising subsequent to the date hereof. The guaranty of Guarantor as
set forth in this Section 1 is a continuing guaranty of payment and
not a guaranty of collection.

2. PRIMARY LIABILITY OF GUARANTOR.

(a) This Guaranty is an absolute, irrevocable and unconditional
guaranty of payment. Guarantor shall be liable for the payment
of the Guaranteed Obligations, as set forth in this Guaranty,
as a primary obligor. This Guaranty shall be effective as a
waiver of, and Guarantor hereby expressly waives, any and all
rights to which Guarantor may otherwise have been entitled
under any suretyship laws in effect from time to time.

(b) In the event of default by Borrower and/or PRN, in payment of
the Guaranteed Obligations, or any part thereof, when such
indebtedness becomes due, either by its terms or as the result
of the exercise of any power to accelerate, Guarantor shall,
on demand and without presentment, protest, notice of
acceptance of this Guaranty, protest, further notice of
nonpayment or of dishonor or of default or nonperformance, or
notice of acceleration or of intent to accelerate, or any
other notice whatsoever, make payment in respect of or fully
perform, as the case may be, the Guaranteed Obligations.
Further, it shall not be necessary for KCIT, in order to
enforce such payment by Guarantor, first to institute suit or
pursue or exhaust any rights or remedies against Borrower, PRN
or others liable on such indebtedness, or to enforce any
rights against any security that shall ever have been given to
secure such indebtedness, or to join Borrower, PRN or any
others liable for the payment of the Guaranteed Obligations or
any part thereof in any action to enforce this Guaranty, or to
resort to any other means of obtaining payment or performance
of the Guaranteed Obligations.

(c) Suit may be brought or demand may be made against all parties
who have signed this Guaranty or any other guaranty covering
all or any part of the Guaranteed

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<PAGE> 3
Obligations, or against any one or more of them, separately or
together, without impairing the rights of KCIT against any
party hereto. At any time that KCIT is entitled to exercise
its rights or remedies hereunder, it may in its discretion
elect to demand payment.

3. CERTAIN AGREEMENTS AND WAIVERS BY GUARANTOR.

(a) Guarantor hereby agrees that neither KCIT's rights or remedies
nor Guarantor's obligations under the terms of this Guaranty
shall be released, diminished, impaired, reduced or affected
by any one or more of the following events, actions, facts, or
circumstances, and the liability of Guarantor under this
Guaranty shall be absolute and unconditional irrespective of:

(i) any limitation of liability or recourse in any
other document relating to the Guaranteed
Obligations or arising under any law;

(ii) the taking or accepting of any other security or
guaranty for any or all of the Guaranteed
Obligations;

(iii) any release, surrender, abandonment, exchange,
alteration, sale or other disposition,
subordination, deterioration, waste, failure to
protect or preserve, impairment, or loss of, or
any failure to create or perfect any lien or
security interest with respect to, or any other
dealings with, any collateral or security at any
time existing or purported, believed or expected
to exist in connection with any or all of the
Guaranteed Obligations;

(iv) whether express or by operation of law, any
partial release of the liability of Guarantor
hereunder, or if one or more other guaranties are
now or hereafter obtained by KCIT covering all or
any part of the Guaranteed Obligations, any
complete or partial release of any one or more of
such guarantors under any such other guaranty, or
any complete or partial release of Borrower, PRN
or any other party liable, directly or
indirectly, for the payment or performance of any
or all of the Guaranteed Obligations;

(v) the insolvency, bankruptcy, disability,
dissolution, liquidation, termination,
receivership, reorganization, merger,
consolidation, change of form, structure or
ownership, sale of all assets, or lack of
corporate, partnership or other power of
Borrower, PRN or any other party at any time
liable for the payment of any or all of the
Guaranteed Obligations;

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<PAGE> 4
(vi) either with or without notice to or consent of
Guarantor: any renewal, extension, modification
or rearrangement of the terms of any or all of
the Guaranteed Obligations (including the
Guaranteed Notes), including, without limitation,
material alterations of the terms of payment
(including changes in maturity date(s) and
interest rate(s)) or performance or any other
terms thereof, or any waiver, termination, or
release of, or consent to departure from, the
Guaranteed Notes or any other guaranty of any or
all of the Guaranteed Obligations, or any
adjustment, indulgence, forbearance, or
compromise that may be granted from time to time
by KCIT to Borrower, PRN, Guarantor, and/or any
other party at any time liable for the payment of
any or all of the Guaranteed Obligations;

(vii) any neglect, lack of diligence, delay, omission,
failure, or refusal of KCIT to (a) take or
prosecute (or in taking or prosecuting) any
action for the collection or enforcement of any
of the Guaranteed Obligations, or (b) foreclose
or take or prosecute any action to foreclose (or
in foreclosing or taking or prosecuting any
action to foreclose) upon any security therefor,
or (c) exercise (or in exercising) any other
right or power with respect to any security
therefor, or (d) take or prosecute (or in taking
or prosecuting) any action in connection with any
document relating to the Guaranteed Obligations,

(viii) any failure to sell or otherwise dispose of in a
commercially reasonable manner any collateral
securing any or all of the Guaranteed
Obligations.

(ix) any failure of KCIT to notify Guarantor of any
creation, renewal, extension, rearrangement,
modification, supplement, or assignment of the
Guaranteed Obligations or any part thereof, or of
the Guaranteed Notes, or of any release of or
change in any security or of any other action
taken or refrained from being taken by KCIT
against Borrower, PRN or any security, it being
understood that KCIT shall not be required to
give Guarantor any notice of any kind under any
circumstances with respect to or in connection
with the Guaranteed Obligations, and any and all
rights to notice that Guarantor may have
otherwise had being hereby waived by Guarantor;

(x) KCIT being required to refund any payment by
Borrower to Borrower or by PRN to PRN, as the
case may be, or any other party liable for the
payment of any or all of the Guaranteed
Obligations;

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<PAGE> 5
(xi) the existence of any claim, set-off, or other
right that Guarantor may at any time have against
Borrower or PRN whether or not arising in
connection with this Guaranty or the Guaranteed
Notes (provided, that nothing contained herein
shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim); or

(xii) the unenforceability of all or any part of the
Guaranteed Obligations against Borrower or PRN,
whether because the Guaranteed Obligations exceed
the amount permitted by law or violate any usury
law, or because the act of creating the
Guaranteed Obligations, or any part thereof, is
ultra vires, or because the officers or persons
creating same acted in excess of their authority,
or because of a lack of validity or
enforceability of or defect or deficiency in the
Guaranteed Notes, or because of the subordination
of, or moratorium on, payments due and owing
under the Guaranteed Notes at such times as the
same would otherwise become due and owing under
the Guaranteed Notes but for such subordination
or moratorium, regardless of the party or
parties, including, without limitation, Congress
Financial Corporation, intended to be benefited
by such subordination or moratorium or because
Borrower's or PRN's obligation ceases to exist by
operation of law, or because of any other reason
or circumstance, it being agreed that Guarantor
shall remain liable hereon regardless of whether
Borrower, PRN or any other person be found not
liable on the Guaranteed Obligations, or any part
thereof, for any reason (and regardless of any
joinder of Borrower, PRN or any other party in
any action to obtain payment of any or all of the
Guaranteed Obligations); provided, however, that
if any part of the Guaranteed Obligations is not
enforceable against Borrower or PRN, as the case
may be, because of the proper exercise of any
right of set-off against the Guaranteed Notes
pursuant to the terms of the Acquisition
Agreement, that such part of the Guaranteed
Obligations shall not be enforceable against
Guarantor.

(b) In the event any payment by Borrower, PRN or any other party
to KCIT is held to constitute a preference, fraudulent
transfer or other voidable payment under any bankruptcy,
insolvency or similar law, or if for any other reason KCIT is
required to refund such payment or pay the amount thereof to
any other party, such payment by Borrower, PRN or any other
party to KCIT shall not constitute a release of Guarantor from
any liability hereunder, and this Guaranty shall continue to
be effective or shall be reinstated (notwithstanding any prior
release or discharge by KCIT of this Guaranty or of
Guarantor), as the case may be, with respect to, and this
Guaranty shall apply to, any and all amounts so refunded by
KCIT or paid by KCIT to another party, together with any
interest paid by KCIT and any attorneys' fees, costs and
expenses paid or incurred by KCIT in

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<PAGE> 6
connection with any such event (all of which amounts shall
constitute part of the Guaranteed Obligations). It is the
intent of Guarantor and KCIT that the obligations and
liabilities of Guarantor hereunder are absolute and
unconditional under any and all circumstances and that until
the Guaranteed Obligations are fully and finally paid, and not
subject to refund or disgorgement, the obligations and
liabilities of Guarantor hereunder shall not be discharged or
released, in whole or in part, by any act or occurrence that
might, but for the provisions of this Guaranty, be deemed a
legal or equitable discharge or release of a guarantor. KCIT
shall be entitled to continue to hold this Guaranty in its
possession for a period of one year from the date the
Guaranteed Obligations are paid and performed in full and for
so long thereafter as may be necessary to enforce any
obligation of Guarantor hereunder and/or to exercise any right
or remedy of KCIT hereunder.

(c) If acceleration of the time for payment of any amount payable
by Borrower and/or PRN under the Guaranteed Notes is stayed or
delayed by any law or tribunal, all such amounts shall
nonetheless be payable by Guarantor on demand by KCIT.

4. OTHER LIABILITY. If Guarantor becomes liable for any indebtedness
owing by Borrower or PRN to KCIT other than under this Guaranty, such
liability shall not be in any manner impaired or affected hereby, and
the rights of KCIT hereunder shall be cumulative of any and all other
rights that KCIT may have against Guarantor. If Borrower or PRN is or
becomes indebted to KCIT for any indebtedness other than or in excess
of the Indebtedness for which Guarantor is liable under this Guaranty,
any payment received or recovery realized upon any indebtedness of
Borrower or PRN to KCIT may, except to the extent paid by Guarantor on
the Indebtedness for which Guarantor is liable under this Guaranty or
specifically required by law or agreement of KCIT to be applied to the
Indebtedness for which Guarantor is liable under this Guaranty, in
KCIT's sole discretion, be applied upon indebtedness of Borrower or
PRN to KCIT other than the Indebtedness for which Guarantor is liable
under this Guaranty.

5. KCIT ASSIGNS. This Guaranty is for the benefit of KCIT and KCIT's
successors and assigns, and in the event of a permitted assignment of
the Guaranteed Obligations, or any part thereof, the rights and
benefits hereunder, to the extent applicable to the Guaranteed
Obligations so assigned, may be transferred with such Guaranteed
Obligations. Guarantor waives notice of any transfer or assignment of
the Guaranteed Obligations, or any part thereof, and agrees that
failure to give notice will not affect the liabilities of Guarantor
hereunder.

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<PAGE> 7
corporations and other legal entities, including public or governmental
bodies, agencies or instrumentalities, as well as natural persons.

7. GOVERNING LAW. This Guaranty, and its validity, enforcement, and
interpretation, shall for all purposes by governed by and construed in
accordance with the laws of the State of Delaware and applicable
United States federal law, and is intended to be performed in
accordance with, and only to the extent permitted by, such laws. All
obligations of Guarantor hereunder are payable and performable at the
place or places where the Guaranteed Obligations are payable and
performable.

8. INVALIDITY OF CERTAIN PROVISIONS. If any provision of this Guaranty
or the application thereof to any person or circumstance shall, for
any reason and to any extent, be judicially declared to be invalid or
unenforceable, neither the remaining provisions of this Guaranty nor
the application of such provision to any other Person or circumstance
shall be affected thereby, and the remaining provisions of this
Guaranty, or the applicability of such provision to other Persons or
circumstances, as applicable, shall remain in effect and be
enforceable to the maximum extent permitted by applicable law.

9. ATTORNEYS' FEES AND COSTS OF COLLECTION. Guarantor shall pay on
demand all reasonable attorneys' fees and all other costs and expenses
incurred by KCIT in the enforcement of or preservation of KCIT's
rights under this Guaranty. Guarantor agrees to pay interest on any
expenses or other sums due to KCIT under this Section 9 that are not
paid when due, at a rate per annum equal to the lesser of (i) the
maximum rate of interest permitted by applicable law, or (ii) the
Default Rate (as defined in the Guaranteed Notes). Guarantor's
obligations and liabilities under this Section 9 shall survive any
payment or discharge in full of the Guaranteed Obligations.

10. PAYMENTS. All sums payable under this Guaranty shall be paid in
lawful money of the United States of America that at the time of
payment is legal tender for the payment of public and private debts.

11. CONTROLLING AGREEMENT. It is not the intention of KCIT or Guarantor
to obligate Guarantor to pay interest in excess of that lawfully
permitted to be paid by Guarantor under applicable law. Should it be
determined that any portion of the Guaranteed Obligations or any other
amount payable by Guarantor under this Guaranty constitutes interest
in excess of the maximum amount of interest that Guarantor, in
Guarantor's capacity as guarantor, may lawfully be required to pay
under applicable law, the obligation of Guarantor to pay such interest
shall automatically be limited to the payment thereof in the maximum
amount so permitted under applicable law. The provisions of this
Section 11 shall override and control all other provisions of this
Guaranty and of any other agreement between Guarantor and KCIT.

12. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF GUARANTOR. Guarantor
hereby represents, warrants, and covenants that (a) after giving
effect to this Guaranty,

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<PAGE> 8
Guarantor is solvent, and does not intend to incur or believe that it
will incur debts that will be beyond its ability to pay as such debts
mature; (b) KCIT has no duty at any time to investigate or inform
Guarantor of the financial or business condition or affairs of
Borrower or PRN or any change therein, and Guarantor will keep itself
fully appraised of Borrower's and PRN's financial and business
condition; (c) Guarantor acknowledges and agrees that Guarantor may be
required to pay and perform the Guaranteed Obligations in full without
assistance or support from Borrower, PRN or any other party; and (d)
Guarantor has read and fully understand the provisions contained in
the Guaranteed Notes. Guarantor's representations, warranties and
covenants are a material inducement to KCIT to make the Loan and
accept the Guaranteed Notes and shall survive the execution hereof and
any bankruptcy, foreclosure, transfer of security or other event
affecting Borrower, PRN, Guarantor, any other party, or any security
for all or any part of the Guaranteed Obligations.

13. NOTICES. Unless specifically provided otherwise, any notice for
purposes of this Guaranty or any other document relating hereto shall
be given in writing or by telex or by facsimile (fax) transmission and
shall be addressed or delivered to the respective addresses set forth
in this Guaranty, or to such other address as may have been previously
designated by the intended recipient by notice given in accordance
with this Section. If sent by prepaid, registered or certified mail
(return receipt requested), the notice shall be deemed effective when
deposited in a regularly maintained receptacle of the United States
Postal Service; if transmitted by telex, the notice shall be effective
when transmitted (answerback confirmed); and if transmitted by
facsimile or personal delivery, the notice shall be effective when
received. No notice of change of address shall be effective except
upon actual receipt. This Section 13 shall not be construed in any
way to affect or impair any waiver of notice or demand provided in
this Guaranty or in any other Loan Document or to require giving
notice or demand to or upon any Person in any situation or for any
reason.

14. CUMULATIVE RIGHTS. The exercise of KCIT of any right or remedy
hereunder or under the Guaranteed Notes, or at law or in equity, shall
not preclude the concurrent or subsequent exercise of any other right
or remedy. KCIT shall have all rights, remedies and recourses
afforded to KCIT by reason of this Guaranty, the Guaranteed Notes, or
by law, equity or otherwise, and the same (a) shall be cumulative and
concurrent, (b) may be pursued separately, successively or
concurrently against Guarantor or others obligated for the Guaranteed
Obligations, or any part thereof, or against any one or more of them,
or against any security or otherwise, at the sole discretion of KCIT,
(c) may be exercised as often as occasion therefor shall arise, it
being agreed by Guarantor that the exercise of, discontinuance of the
exercise of or failure to exercise any of such rights, remedies, or
recourses shall in no event be construed as a waiver or release
thereof or of any other right, remedy, or recourse, and (d) are
intended to be, and shall be, non-exclusive. No waiver of any
default on the part of Guarantor or of any breach of any of the
provisions of this Guaranty or of any other document shall be
considered a waiver of any other or subsequent default or breach, and
no delay or omission in exercising or

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<PAGE> 9
enforcing the rights and powers granted herein or in any other
document shall be construed as a waiver of such rights and powers, and
no exercise or enforcement of any rights or powers hereunder or under
any other document shall be held to exhaust such rights and powers,
and every such right and power may be exercised from time to time. The
granting of any consent, approval or waiver by KCIT shall be limited
to the specific instance and purpose therefor and shall not constitute
consent or approval in any other instance or for any other purpose.
No notice to or demand on Guarantor in any case shall of itself
entitle Guarantor to any other or further notice or demand in similar
or other circumstances. No provision of this Guaranty or any right,
remedy or recourse of KCIT with respect hereto, or any default or
breach, can be waived, nor can this Guaranty or Guarantor be released
or discharged in any way or to any extent, except specifically in each
case by a writing intended for that purpose (and which refers
specifically to this Guaranty) executed, and delivered to Guarantor,
by KCIT.

15. TERM OF GUARANTY. This Guaranty shall continue in effect until all
the Guaranteed Obligations are fully and finally paid, and discharged,
except that, and notwithstanding any return of this Guaranty to
Guarantor, this Guaranty shall continue in effect (i) with respect to
all obligations and liabilities of Guarantor under Section 9 of this
Guaranty, and (ii) as provided in Section 4(b) hereof.

16. FURTHER ASSURANCES. Guarantor at Guarantor's expense will promptly
execute and deliver to KCIT upon KCIT's request all such other and
further documents, agreements, and instruments in compliance with or
accomplishment of the agreements of Guarantor under this Guaranty.

17. NO FIDUCIARY RELATIONSHIP. The relationship between KCIT and
Guarantor is solely that of KCIT and guarantor. KCIT has no fiduciary
or other special relationship with or duty to Guarantor and none is
created hereby.

18. INTERPRETATION. The term "KCIT" shall be deemed to include any
permitted subsequent holder(s) of the Guaranteed Notes. Whenever the
context of any provisions hereof shall require it, words in the
singular shall include the plural, words in the plural shall include
the singular, and pronouns of any gender shall include the other
genders. Captions and headings herein are for convenience only and
shall not affect the construction of the document. All references in
this Guaranty to Schedules, Articles, Sections, Subsections,
paragraphs and subparagraphs refer to the respective subdivisions of
this Guaranty, unless such reference specifically identifies another
document. The terms "herein," "hereof," "hereto," "hereunder" and
similar terms refer to this Guaranty and not to any particular section
or subsection of this Guaranty. The terms "include" and "including"
shall be interpreted as if followed by the words "without limitation."
All references in this Guaranty to sums denominated in dollars or with
the symbol "$" refer to the lawful currency of the United States of
America, unless such reference specifically identifies another
currency.

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<PAGE> 10
19. TIME OF ESSENCE. Time shall be of the essence in this Guaranty with
respect to all of Guarantor's obligations hereunder.

20. ENTIRE AGREEMENT. This Guaranty embodies the entire agreement between
KCIT and Guarantor with respect to the guaranty by Guarantor of the
Guaranteed Obligations. This Guaranty supersedes all prior agreements
and understandings, if any, with respect to the guaranty by Guarantor
of the Guaranteed Obligations. No condition or conditions precedent
to the effectiveness of this Guaranty exist. This Guaranty shall be
effective upon execution by Guarantor and delivery to KCIT.

IN WITNESS WHEREOF, Guarantor duly executed this Guaranty as of the
30th day of September, 1994.

GUARANTOR:

PRN HOLDINGS, INC.

By: /s/ JAY. M. KAPLAN
Printed Name: Jay M. Kaplan
Title: Senior Vice President

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<PAGE> 1

EXHIBIT 99.8

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT is made by MEDIQ INCORPORATED, a Delaware
corporation, whose address is One MEDIQ Plaza, Pennsauken, New Jersey 08110
("Guarantor"), in favor of KCI THERAPEUTIC SERVICES, INC., a Delaware
corporation ("KCIT");

W I T N E S S E T H:

WHEREAS, in connection with the sale to MEDIQ/PRN Life Support
Services-I, Inc. ("Borrower") by KCIT of certain assets of KCIT pursuant to the
terms of that certain Asset Purchase Agreement (so called herein) dated August
23, 1994, as amended by Amendment No. 1 to Asset Purchase Agreement dated as of
September 30, 1994, by and among Kinetic Concepts, Inc., a Texas corporation
("KCI"), KCIT, Guarantor, PRN Holdings, Inc. ("Holdings") and Borrower, KCIT
has made available to Borrower, MEDIQ/PRN Life Support Services, Inc. ("PRN")
and/or Holdings, as the case may be, several seller financing loans
(collectively the "Loan") being evidenced by the following: (i) a Promissory
Note (the "$2,956,957 Note") dated the date hereof in the original principal
amount of $2,956,957, executed by Borrower and made payable to the order of
KCIT, (ii) a Promissory Note (the "$5,835,707 Note") dated the date hereof in
the original principal amount of $5,835,707, executed by PRN and made payable
to the order of KCIT; (iii) a Promissory Note ("Holdings Note-I") dated the
date hereof in the original principal amount of $5,000,000 executed by Holdings
and payable to the order of KCIT; (iv) a Promissory Note ("Holdings Note-II")
dated the date hereof in the original principal amount of $3,000,000 executed
by Holdings and payable to the order of KCIT; and (v) a Promissory Note
("Holdings Note-III") dated the date hereof in the original principal amount of
$2,000,000 executed by Holdings and payable to the order of KCIT (the
"$2,956,957 Note, the $5,835,707 Note, Holdings Note-I, Holdings Note-II, and
Holdings Note-III are herein collectively called the "Notes"), the Notes being
entitled to the benefit of a Negative Covenants Agreement executed by Borrower,
Holdings and MEDIQ in favor of KCI and KCIT (such Negative Covenants Agreement,
being herein called the "Negative Covenants Agreement" and the Asset Purchase
Agreement being herein called the "Acquisition Agreement"), and;

WHEREAS, KCIT has made it a condition precedent to KCIT making the
Loan available to Borrower, PRN and Holdings that Guarantor guaranty payment of
the Notes on the terms and conditions set forth in this Guaranty Agreement;

AGREEMENT:

NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, and as a material inducement to
KCIT to extend credit to Borrower, PRN and Holdings, Guarantor hereby
guaranties to KCIT the prompt and full
<PAGE> 2
payment of the Indebtedness described in Section 1 below in this Guaranty
(collectively called the "Guaranteed Obligations"), this Guaranty being upon
the following terms and conditions:

1. GUARANTY OF PAYMENT. Guarantor hereby unconditionally and irrevocably
guarantees to KCIT the punctual payment when due, whether by lapse of
time, by acceleration of maturity, or otherwise, and at all times
thereafter, of all principal, interest (including interest accruing
after the commencement of any bankruptcy or insolvency proceeding by
or against Borrower, PRN or Holdings as the case may be, whether or
not allowed in such proceeding), costs, expenses, and other sums of
money now or hereafter due and owing pursuant to (i) the terms of the
Notes, and (ii) all renewals, extensions, refinancings, modifications,
supplements or amendments of such indebtedness or any part thereof
(the indebtedness described in clauses (i) and (ii) above in this
Section 1 is herein collectively called the "Indebtedness"). This
Guaranty covers the Indebtedness, whether presently outstanding or
arising subsequent to the date hereof. The guaranty of Guarantor as
set forth in this Section 1 is a continuing guaranty of payment and
not a guaranty of collection.

2. PRIMARY LIABILITY OF GUARANTOR.

(b) In the event of default by Borrower, PRN and/or Holdings, in
payment of the Guaranteed Obligations, or any part thereof,
when such indebtedness becomes due, either by its terms or as
the result of the exercise of any power to accelerate,
Guarantor shall, on demand and without presentment, protest,
notice of acceptance of this Guaranty, protest, further notice
of nonpayment or of dishonor or of default or nonperformance,
or notice of acceleration or of intent to accelerate, or any
other notice whatsoever, make payment in respect of or fully
perform, as the case may be, the Guaranteed Obligations.
Further, it shall not be necessary for KCIT, in order to
enforce such payment by Guarantor, first to institute suit or
pursue or exhaust any rights or remedies against Borrower,
PRN, Holdings or others liable on such indebtedness, or to
enforce any rights against any security that shall ever have
been given to secure such indebtedness, or to join Borrower,
PRN, Holdings or any others liable for the payment of the
Guaranteed Obligations or any part thereof in any action to
enforce this Guaranty, or to resort to any other means of
obtaining payment or performance of the Guaranteed
Obligations.

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<PAGE> 3
(c) Suit may be brought or demand may be made against all parties
who have signed this Guaranty or any other guaranty covering
all or any part of the Guaranteed Obligations, or against any
one or more of them, separately or together, without impairing
the rights of KCIT against any party hereto. At any time that
KCIT is entitled to exercise its rights or remedies hereunder,
it may in its discretion elect to demand payment.

(d) Notwithstanding anything contained herein to the contrary, if
following an Event of Default (as defined in the Notes) by
Borrower, PRN and/or Holdings under any of the Notes, the
acceleration of the Notes is prohibited pursuant to (i) that
certain Standstill Agreement dated as of September 30, 1994,
by and among PRN, KCIT and Congress Financial Corporation
("Congress"), (ii) that certain Subordination and Standstill
Agreement dated September 30, 1994, by and among Borrower,
KCIT and Congress, or (iii) that certain Subordination and
Standstill Agreement dated September 30, 1994 entered into by
and among Holdings, KCIT and Congress (said agreements being
herein collectively called the "Standstill Agreements"), then
Guarantor shall, on demand and without presentment, protest,
notice of acceptance of the Guaranty, further notice of
non-payment or of dishonor or of default or non-performance,
or any notice of acceleration or notice of intent to
accelerate or any notice whatsoever, make payment to KCIT, or
the then owner or holder of the Notes, in an amount equal to
the then entire outstanding balance, including all principal,
regardless of whether or not same is then due under the terms
of the Notes, and accrued but unpaid interest thereon, of the
Guaranteed Obligations. Furthermore, it shall not be
necessary for KCIT, in order to enforce such payment by
Guarantor, first to institute suit or pursue or exhaust any
rights or remedies against Borrower, PRN, Holdings or others
liable on such indebtedness or to enforce any rights against
security that shall ever have been given to secure such
indebtedness, or to join Borrower, PRN, Holdings or any others
liable for payment of the Guaranteed Obligations or any part
thereof in any action to enforce this Guaranty, or to resort
to any other means of obtaining payment or performance of the
Guaranteed Obligations.

3. CERTAIN AGREEMENTS AND WAIVERS BY GUARANTOR.

(i) any limitation of liability or recourse in any
other document relating to the Guaranteed
Obligations or arising under any law;

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<PAGE> 4
(ii) the taking or accepting of any other security or
guaranty for any or all of the Guaranteed
Obligations;

(iv) whether express or by operation of law, any
partial release of the liability of Guarantor
hereunder, or if one or more other guaranties are
now or hereafter obtained by KCIT covering all or
any part of the Guaranteed Obligations, any
complete or partial release of any one or more of
such guarantors under any such other guaranty, or
any complete or partial release of Borrower, PRN,
Holdings or any other party liable, directly or
indirectly, for the payment or performance of any
or all of the Guaranteed Obligations;

(v) the insolvency, bankruptcy, disability,
dissolution, liquidation, termination,
receivership, reorganization, merger,
consolidation, change of form, structure or
ownership, sale of all assets, or lack of
corporate, partnership or other power of Borrower,
PRN, Holdings or any other party at any time
liable for the payment of any or all of the
Guaranteed Obligations;

(vi) either with or without notice to or consent of
Guarantor: any renewal, extension, modification or
rearrangement of the terms of any or all of the
Guaranteed Obligations (including the Notes),
including, without limitation, material
alterations of the terms of payment (including
changes in maturity date(s) and interest rate(s))
or performance or any other terms thereof, or any
waiver, termination, or release of, or consent to
departure from, the Notes or any other guaranty of
any or all of the Guaranteed Obligations, or any
adjustment, indulgence, forbearance, or compromise
that may be granted from time to time by KCIT to
Borrower, PRN, Holdings, Guarantor, and/or any
other party at any time liable for the payment of
any or all of the Guaranteed Obligations;

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<PAGE> 5
foreclosing or taking or prosecuting any action to
foreclose) upon any security therefor, or (c)
exercise (or in exercising) any other right or
power with respect to any security therefor, or
(d) take or prosecute (or in taking or
prosecuting) any action in connection with any
document relating to the Guaranteed Obligations,

(viii) any failure to sell or otherwise dispose of in a
commercially reasonable manner any collateral
securing any or all of the Guaranteed Obligations.

(ix) any failure of KCIT to notify Guarantor of any
creation, renewal, extension, rearrangement,
modification, supplement, or assignment of the
Guaranteed Obligations or any part thereof, or of
the Notes, or of any release of or change in any
security or of any other action taken or
refrained from being taken by KCIT against
Borrower, PRN or Holdings or any security, it
being understood that KCIT shall not be required
to give Guarantor any notice of any kind under any
circumstances with respect to or in connection
with the Guaranteed Obligations, and any and all
rights to notice that Guarantor may have otherwise
had being hereby waived by Guarantor;

(x) KCIT being required to refund any payment by
Borrower to Borrower, by PRN to PRN or by Holdings
to Holdings, as the case may be, or any other
party liable for the payment of any or all of the
Guaranteed Obligations;

(xi) the existence of any claim, set-off, or other
right that Guarantor may at any time have against
Borrower, PRN or Holdings whether or not arising
in connection with this Guaranty or the Notes
(provided, that nothing contained herein shall
prevent the assertion of any such claim by
separate suit or compulsory counterclaim); or

(xii) the unenforceability of all or any part of the
Guaranteed Obligations against Borrower, PRN or
Holdings, whether because the Guaranteed
Obligations exceed the amount permitted by law or
violate any usury law, or because the act of
creating the Guaranteed Obligations, or any part
thereof, is ultra vires, or because the officers
or persons creating same acted in excess of their
authority, or because of a lack of validity or
enforceability of or defect or deficiency in the
Notes, or because of the subordination of, or
moratorium on, payments due and owing under the
Notes at such times as the same would otherwise
become due and owing under the Notes but for such
subordination or moratium, regardless of the party
or parties, including, without limitation,
Congress Financial Corporation, intended to be
benefited by such

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<PAGE> 6
subordination or moratium or because Borrower's,
PRN's or Holding's obligation ceases to exist by
operation of law, or because of any other reason
or circumstance, it being agreed that Guarantor
shall remain liable hereon regardless of whether
Borrower, PRN, Holdings or any other person be
found not liable on the Guaranteed Obligations, or
any part thereof, for any reason (and regardless
of any joinder of Borrower, PRN, Holdings or any
other party in any action to obtain payment of any
or all of the Guaranteed Obligations); provided,
however, that if any part of the Guaranteed
Obligations is not enforceable against Borrower,
PRN or Holdings, as the case may be, because of
the proper exercise of any right of set-off
against the Notes pursuant to the terms of the
Acquisition Agreement, that such part of the
Guaranteed Obligations shall not be enforceable
against Guarantor.

(b) In the event any payment by Borrower, PRN, Holdings or any
other party to KCIT is held to constitute a preference,
fraudulent transfer or other voidable payment under any
bankruptcy, insolvency or similar law, or if for any other
reason KCIT is required to refund such payment or pay the
amount thereof to any other party, such payment by Borrower,
PRN, Holdings or any other party to KCIT shall not constitute
a release of Guarantor from any liability hereunder, and this
Guaranty shall continue to be effective or shall be reinstated
(notwithstanding any prior release or discharge by KCIT of
this Guaranty or of Guarantor), as the case may be, with
respect to, and this Guaranty shall apply to, any and all
amounts so refunded by KCIT or paid by KCIT to another party,
together with any interest paid by KCIT and any attorneys'
fees, costs and expenses paid or incurred by KCIT in
connection with any such event (all of which amounts shall
constitute part of the Guaranteed Obligations). It is the
intent of Guarantor and KCIT that the obligations and
liabilities of Guarantor hereunder are absolute and
unconditional under any and all circumstances and that until
the Guaranteed Obligations are fully and finally paid, and not
subject to refund or disgorgement, the obligations and
liabilities of Guarantor hereunder shall not be discharged or
released, in whole or in part, by any act or occurrence that
might, but for the provisions of this Guaranty, be deemed a
legal or equitable discharge or release of a guarantor. KCIT
shall be entitled to continue to hold this Guaranty in its
possession for a period of one year from the date the
Guaranteed Obligations are paid and performed in full and for
so long thereafter as may be necessary to enforce any
obligation of Guarantor hereunder and/or to exercise any right
or remedy of KCIT hereunder.

(c) If acceleration of the time for payment of any amount payable
by Borrower, PRN and/or Holdings under the Notes is stayed or
delayed by (i) any law or tribunal, or (ii) pursuant to the
terms of the Standstill Agreements, all such amounts shall
nonetheless be payable by Guarantor on demand by KCIT.

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<PAGE> 7
4. OTHER LIABILITY. If Guarantor becomes liable for any indebtedness
owing by Borrower, PRN or Holdings to KCIT other than under this
Guaranty, such liability shall not be in any manner impaired or
affected hereby, and the rights of KCIT hereunder shall be cumulative
of any and all other rights that KCIT may have against Guarantor. If
Borrower, PRN or Holdings is or becomes indebted to KCIT for any
indebtedness other than or in excess of the Indebtedness for which
Guarantor is liable under this Guaranty, any payment received or
recovery realized upon any indebtedness of Borrower, PRN or Holdings
to KCIT may, except to the extent paid by Guarantor on the
Indebtedness for which Guarantor is liable under this Guaranty or
specifically required by law or agreement of KCIT to be applied to the
Indebtedness for which Guarantor is liable under this Guaranty, in
KCIT's sole discretion, be applied upon indebtedness of Borrower, PRN
or Holdings to KCIT other than the Indebtedness for which Guarantor is
liable under this Guaranty.

6. BINDING EFFECT. This Guaranty is binding not only on Guarantor, but
also on Guarantor's successors and assigns. Words importing persons
herein shall include firms, associations, partnerships (including
limited partnerships), joint ventures, trusts, corporations and other
legal entities, including public or governmental bodies, agencies or
instrumentalities, as well as natural persons.

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<PAGE> 8
9. ATTORNEYS' FEES AND COSTS OF COLLECTION. Guarantor shall pay on
demand all reasonable attorneys' fees and all other costs and expenses
incurred by KCIT in the enforcement of or preservation of KCIT's
rights under this Guaranty. Guarantor agrees to pay interest on any
expenses or other sums due to KCIT under this Section 9 that are not
paid when due, at a rate per annum equal to the lesser of (i) the
maximum rate of interest permitted by applicable law, or (ii) the
Default Rate (as defined in the Notes). Guarantor's obligations and
liabilities under this Section 9 shall survive any payment or
discharge in full of the Guaranteed Obligations.

12. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF GUARANTOR. Guarantor
hereby represents, warrants, and covenants that (a) after giving
effect to this Guaranty, Guarantor is solvent, and does not intend to
incur or believe that it will incur debts that will be beyond its
ability to pay as such debts mature; (b) KCIT has no duty at any time
to investigate or inform Guarantor of the financial or business
condition or affairs of Borrower, PRN or Holdings or any change
therein, and Guarantor will keep itself fully appraised of Borrower's,
PRN's and Holdings' financial and business condition; (c) Guarantor
acknowledges and agrees that Guarantor may be required to pay and
perform the Guaranteed Obligations in full without assistance or
support from Borrower, PRN, Holdings or any other party; and (d)
Guarantor has read and fully understand the provisions contained in
the Notes. Guarantor's representations, warranties and covenants are
a material inducement to KCIT to make the Loan and accept the Notes
and shall survive the execution hereof and any bankruptcy,
foreclosure, transfer of security or other event affecting Borrower,
PRN, Holdings, Guarantor, any other party, or any security for all or
any part of the Guaranteed Obligations.

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<PAGE> 9
previously designated by the intended recipient by notice given in
accordance with this Section. If sent by prepaid, registered or
certified mail (return receipt requested), the notice shall be deemed
effective when deposited in a regularly maintained receptacle of the
United States Postal Service; if transmitted by telex, the notice
shall be effective when transmitted (answerback confirmed); and if
transmitted by facsimile or personal delivery, the notice shall be
effective when received. No notice of change of address shall be
effective except upon actual receipt. This Section 13 shall not be
construed in any way to affect or impair any waiver of notice or
demand provided in this Guaranty or in any other Loan Document or to
require giving notice or demand to or upon any Person in any situation
or for any reason.

14. CUMULATIVE RIGHTS. The exercise of KCIT of any right or remedy
hereunder or under the Notes, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or
remedy. KCIT shall have all rights, remedies and recourses afforded
to KCIT by reason of this Guaranty, the Notes, or by law, equity or
otherwise, and the same (a) shall be cumulative and concurrent, (b)
may be pursued separately, successively or concurrently against
Guarantor or others obligated for the Guaranteed Obligations, or any
part thereof, or against any one or more of them, or against any
security or otherwise, at the sole discretion of KCIT, (c) may be
exercised as often as occasion therefor shall arise, it being agreed
by Guarantor that the exercise of, discontinuance of the exercise of
or failure to exercise any of such rights, remedies, or recourses
shall in no event be construed as a waiver or release thereof or of
any other right, remedy, or recourse, and (d) are intended to be, and
shall be, non-exclusive. No waiver of any default on the part of
Guarantor or of any breach of any of the provisions of this Guaranty
or of any other document shall be considered a waiver of any other or
subsequent default or breach, and no delay or omission in exercising
or enforcing the rights and powers granted herein or in any other
document shall be construed as a waiver of such rights and powers, and
no exercise or enforcement of any rights or powers hereunder or under
any other document shall be held to exhaust such rights and powers,
and every such right and power may be exercised from time to time.
The granting of any consent, approval or waiver by KCIT shall be
limited to the specific instance and purpose therefor and shall not
constitute consent or approval in any other instance or for any other
purpose. No notice to or demand on Guarantor in any case shall of
itself entitle Guarantor to any other or further notice or demand in
similar or other circumstances. No provision of this Guaranty or any
right, remedy or recourse of KCIT with respect hereto, or any default
or breach, can be waived, nor can this Guaranty or Guarantor be
released or discharged in any way or to any extent, except
specifically in each case by a writing intended for that purpose (and
which refers specifically to this Guaranty) executed, and delivered to
Guarantor, by KCIT.

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<PAGE> 10
respect to all obligations and liabilities of Guarantor under Section
9 of this Guaranty, and (ii) as provided in Section 4(b) hereof.

18. INTERPRETATION. The term "KCIT" shall be deemed to include any
permitted subsequent holder(s) of the Notes. Whenever the context of
any provisions hereof shall require it, words in the singular shall
include the plural, words in the plural shall include the singular,
and pronouns of any gender shall include the other genders. Captions
and headings herein are for convenience only and shall not affect the
construction of the document. All references in this Guaranty to
Schedules, Articles, Sections, Subsections, paragraphs and
subparagraphs refer to the respective subdivisions of this Guaranty,
unless such reference specifically identifies another document. The
terms "herein," "hereof," "hereto," "hereunder" and similar terms
refer to this Guaranty and not to any particular section or subsection
of this Guaranty. The terms "include" and "including" shall be
interpreted as if followed by the words "without limitation." All
references in this Guaranty to sums denominated in dollars or with the
symbol "$" refer to the lawful currency of the United States of
America, unless such reference specifically identifies another
currency.

19. TIME OF ESSENCE. Time shall be of the essence in this Guaranty with
respect to all of Guarantor's obligations hereunder.

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<PAGE> 11
guaranty by Guarantor of the Guaranteed Obligations. No condition or
conditions precedent to the effectiveness of this Guaranty exist.
This Guaranty shall be effective upon execution by Guarantor and
delivery to KCIT.

IN WITNESS WHEREOF, Guarantor duly executed this Guaranty as of the
30th day of September, 1994.

GUARANTOR:

MEDIQ INCORPORATED

By: /s/ MICHAEL F. SANDLER
Printed Name: Michael F. Sandler
Title: Sr. Vice President -- Finance

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<PAGE> 1

EXHIBIT 99.9

COLLATERAL TRANSFER OF NOTE
(SECURITY AGREEMENT)

This Collateral Transfer of Note (Security Agreement) (this
"Collateral Transfer of Note") is executed to be effective as of the 30th day
of September, 1994, by MEDIQ INCORPORATED ("Debtor") for the benefit of Secured
Party (hereinafter defined).

W I T N E S S E T H:

WHEREAS, Debtor, PRN Holdings, Inc., MEDIQ/PRN Life Support
Services-I, Inc. ("PRN- I"), Kinetic Concepts, Inc. ("KCI") and KCI Therapeutic
Services, Inc., a Delaware corporation ("Secured Party") entered into that one
certain Asset Purchase Agreement (so called herein) dated August 23, 1994, as
amended by Amendment No. 1 to Asset Purchase Agreement dated as of the date
hereof, whereby PRN-I agreed to acquire certain of the assets of Secured Party
(the Asset Purchase Agreement as so amended being herein called the
"Acquisition Agreement");

WHEREAS, in connection with the transactions contemplated by the
Acquisition Agreement, the promissory notes described in Section 18 herein
(collectively, the "Notes") and incorporated herein for all purposes have been
delivered to Secured Party. For purposes of this Agreement, the makers of the
Notes are herein collectively called the "Borrower"; and

WHEREAS, the Acquisition Agreement requires Debtor to enter into
that one certain Guaranty Agreement dated of even date herewith (the
"Guaranty"), whereby Debtor unconditionally guarantees the prompt and timely
payment of the Notes; and

WHEREAS, the Acquisition Agreement requires Debtor to enter into
this Agreement to secure the Guaranty.

NOW, THEREFORE, for good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged and confessed, Debtor agrees
as follows:

1. Collateral Transfer and Grant of Security Interest.
Debtor hereby collaterally transfers, assigns and conveys to Secured Party, and
grants to Secured Party a first priority security interest in, the following
described promissory note (herein called the "Collateral Note") and all liens,
rights, titles, equities and interests securing the same, to- wit:

That one certain $11,500,000.00 Promissory Note dated August 31, 1993,
executed by Mental Health Management, Inc., a Virginia corporation
("MHM"), and made payable to the order of Debtor.

2. Indebtedness Secured. The security interest and pledges and
assignments, as applicable, granted hereby are to secure punctual payment and
performance of the following:
<PAGE> 2
(i) the Guaranty, and any and all extensions, renewals, modifications,
increases and rearrangements thereof, (ii) all costs incurred by Secured Party
to enforce this Agreement and to defend and preserve the security interests
created herein, to collect the amounts owed under the Guaranty, this Collateral
Transfer of Note and to preserve, collect and enforce the Collateral Note,
including, but not limited to, taxes, assessments, insurance premiums,
reasonable attorneys' fees and legal expenses, and expenses of sale, and (iii)
interest on the above amounts at the highest rate applicable to the Notes from
time to time or, if less, at the highest lawful rate (all of which are herein
separately and collectively referred to as the "Obligations"). Debtor
acknowledges that the security interest hereby granted shall secure all future
advances pursuant to or under this Agreement or the Guaranty.

3. Representations and Warranties. Debtor represents and
warrants as follows:

a. This agreement constitutes the legal, valid and
binding obligation of the Debtor enforceable against the Debtor in
accordance with its respective terms.

b. The execution, delivery and performance of this
agreement will not violate or contravene any requirement of law
(assuming KCI and Secured Party execute the subordination agreement
contemplated by Section 7.9 of the Acquisition Agreement and that
notice is given to NationsBank, N.A. pursuant to the MHM Subordination
Agreement (as defined in the Acquisition Agreement)) or any
contractual obligation of the Debtor and, except as contemplated
hereby, will not result in, or require, the creation of imposition of
any lien on the Collateral Note pursuant to any requirement of law.
No contract between the Debtor and any governmental authority forbids
the security interest (and pledge and assignment, as applicable)
evidenced by this agreement.

c. The Debtor is the owner of good and marketable title
to the Collateral Note free and clear of all security interests, liens
or rights except for the security interests (and pledges and
assignments, as applicable) granted hereby and the rights of
NationsBank, N.A. under the MHM Subordination Agreement.

4. Default. For purposes of this Agreement, the term "Event of
Default" has the meaning given to that term in the Notes.

5. Remedies. If an Event of Default shall occur and be
continuing, Secured Party, in addition to any other rights and remedies
available to Secured Party at law or in equity, shall have the right to sell
the Collateral Note at private or public sale after sending reasonable notice
to Debtor and to such other person or persons legally entitled thereto under
the Uniform Commercial Code of any applicable jurisdiction (the "UCC"), of the
time and place of such sale. Secured Party shall transfer to the purchaser at
such sale the Collateral Note, together with all liens, rights, titles,
equities and interests securing the payment of the Collateral Note, and the
recitals in such transfer shall be prima facie evidence of the truth of the
matters therein stated and all prerequisites to such sale required hereunder
and under the laws of any applicable jurisdiction shall be presumed to have
been performed. The proceeds of the sale shall be applied

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<PAGE> 3
first to the expenses of the sale and then, in such order of application as
Secured Party may, in its sole discretion, elect toward the payment of the
principal, interest and reasonable attorney's fees due and unpaid upon the
Obligations hereby secured, rendering the balance, if any, and surplus, if any,
to the person or persons legally entitled thereto under the UCC, but if there
be any deficiency, Debtor shall remain liable therefor. Secured Party shall
have the right to purchase at any public sale of the Collateral Note, being the
highest bidder therefor, and, to the extent permitted by applicable law at any
private sale of the Collateral.

6. Additional Remedies. Secured Party, in addition to the
rights and remedies provided for in the preceding paragraph and the other
provisions hereof, shall have all the rights and remedies of a Secured Party
under the UCC and Secured Party shall be entitled to avail itself of all such
other rights and remedies as may now or hereafter exist at law or in equity for
the collection and/or enforcement of the Obligations and the foreclosure of the
security interest created hereby, or by any other law of applicable
jurisdiction, shall not prevent the concurrent employment of any other
appropriate remedy or remedies.

7. Expenses. Debtor shall be liable for and agrees to pay the
reasonable expenses incurred by Secured Party in enforcing its rights and
remedies, in retaking, holding, appraising, evaluating, selling, or disposing
of the Collateral Note, or like expenses, including, without limitation,
reasonable attorneys' fees and out-of-pocket legal expenses (including, but not
limited to, the reasonable expenses and hourly fees of in-house counsel)
incurred by Secured Party. These expenses, together with interest thereon from
the date incurred until paid by Debtor at the highest rate applicable to the
Notes from time to time or, if less the highest rate allowed by law, shall
constitute additional Obligations and shall be secured by and entitled to the
benefits of this agreement.

8. Notice. The requirement of reasonable notice to Debtor of the
time and place of any public sale of the Collateral Note, or of the time after
which any private sale or any other intended disposition thereof is to be made,
shall be met if such notice is mailed, postage prepaid, to Debtor at least ten
(10) days before the date of any public sale or at least ten (10) days before
the time after which any private sale or other disposition is to be made.

9. Remedy of Defaults and Waiver. Secured Party may remedy any
default, without waiving same, or may waive any default without waiving any
prior or subsequent default.

10. Other Security; Extensions; Election of Remedies. The
security interest herein created shall not be affected by or affect any other
security taken for the Obligations, and any extensions may be made of the
Obligations without affecting the priority of such security interest or the
validity thereof with reference to any third party, and the holder of the
Obligations shall not be limited by any election of remedies if it chooses to
foreclose such security interest by suit. The right to sell under the terms
hereof shall also exist cumulative with said suit and one method shall not bar
the other, but both may be exercised at the same or different times, nor shall
one be a defense to the other.

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<PAGE> 4
11. Possession and Collection of Collateral Note. Debtor shall
deliver possession of the Collateral Note to Secured Party, and shall endorse,
in a manner satisfactory to Secured Party, the Collateral Note payable to the
order of Secured Party. Prior to the occurrence of an Event of Default,
Debtor may collect and receipt for any and all sums becoming due upon the
Collateral Note; provided, however, that any prepayments of principal under the
Collateral Note or the payment of any outstanding unpaid principal owing under
the Collateral Note at or after maturity shall be made to Secured Party or a
designated escrow agent in accordance with paragraph 12 below. After the
occurrence of an Event of Default, Debtor (i) authorizes Secured Party, at
Secured Party's option, to collect and receipt for any and all sums becoming
due upon the Collateral Note, such sums to be held by Secured Party without
liability for interest thereon and applied toward the payment and/or
performance of the Obligations as and when the same become due, and Secured
Party shall have the full control of the Collateral Note and any liens securing
the same until the Obligations are fully performed and shall have the further
right to release any lien or liens securing the Collateral Note upon the full
and final payment thereof to Secured Party, but Secured Party is under no
obligation to make or enforce the collection of the Collateral Note and the
failure of Secured Party from any cause to make or enforce the collection
thereof shall not in any way prejudice the right of Secured Party to thereafter
make or enforce collection thereof or in any way affect the indebtedness to
Secured Party hereby secured, and (ii) hereby agrees to direct,
contemporaneously with the execution hereof, MHM to make such payments directly
to Secured Party upon its receipt of notice from Secured Party demanding such
direct payment to Secured Party.

12. Prepayments and Balloon Payments. Notwithstanding anything
contained herein to the contrary, in the event that MHM makes any prepayments
of principal under the Collateral Note or makes any payment of principal at or
after maturity of the Collateral Note, as the same may be extended in
accordance with the terms hereof, such payments shall be made in accordance
with the terms of, and directly to the escrow agent designated in, an Escrow
Agreement executed and delivered by and between Secured Party and Debtor, the
form and substance of which shall be satisfactory to Secured Party and Debtor
(but which in any event will contain a provision requiring Secured Party to
immediately deliver notice to MHM designating the escrow agent under such
Escrow Agreement), and further subject to the execution and delivery of any
security agreements, instruments or financing statements, or the making of any
filings Secured Party may deem necessary or desirable in order to perfect its
first priority security interest in and to such proceeds of the Collateral Note
(subject, however, to any rights of NationsBank, N.A., pursuant to the MHM
Subordination Agreement); provided, however, that Debtor shall,
contemporaneously with the execution hereof, direct MHM to make any such
payments directly to Secured Party (x) unless, on or prior to the date that
such payment(s) are to be made, Secured Party has delivered to MHM a notice
designating the escrow agent to whom such payment should be made or (y) unless,
on or prior to the date that such payment(s) are to be made, Secured Party has
delivered to MHM a notice stating that Debtor has provided substitute
collateral satisfactory to Secured Party, in its reasonable discretion. In
consideration of the grant of security interest by Debtor herein, Secured Party
hereby covenants and agrees to deliver the notice required in subsection (x)
above immediately upon the execution and delivery of such Escrow Agreement and
such other agreements, instruments and financing

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<PAGE> 5
statements, and the making of such filings, and subsection (y) above
immediately upon Debtor providing substitute collateral satisfactory to Secured
Party, in its reasonable discretion, and with respect to which Debtor has
executed and delivered all security agreements, instruments and financing
statements, and all filings have been made, that are necessary to establish a
first priority security interests in favor of Secured Party in and to such
substitute collateral. If such payments are made directly to Secured Party in
accordance with the foregoing, such sums shall be held by Secured Party without
liability for interest thereon and applied toward the payment and performance
of the Obligations as and when the same become due, until such time as (i)
Secured Party and Debtor have executed an Escrow Agreement satisfactory, in
form and substance, to Secured Party and Debtor, and Debtor has executed and
delivered to Secured Party any and all such security agreements, instruments,
and/or financing statements, and all such filings have been made, as Secured
Party determines to be necessary in order to perfect and preserve its first
priority security interest in and to the proceeds of the Collateral Note or
(ii) Debtor has provided substitute collateral satisfactory to Secured Party,
in its reasonable discretion, and with respect to which Debtor has executed and
delivered to Secured Party any and all such security agreements, instruments
and/or financing statements, and all such filings have been made, as Secured
Party determines to be necessary in order to perfect a first priority security
interest in and to such substitute collateral in favor of Secured Party.

13. Debtor's Actions on Collateral Note. Prior to the occurrence
of an Event of Default, Debtor may take such actions as it may reasonably deem
necessary to enforce performance by MHM under the Collateral Note in accordance
with the terms thereof; but in no event shall Debtor, without the prior written
consent of Secured Party, compromise or settle any action or otherwise agree to
accept any amount less than an amount equal to one hundred percent (100%) of
the outstanding unpaid principal balance of the Collateral Note, together with
all accrued and unpaid interest thereon, in full and final satisfaction of
MHM's obligations under the Collateral Note. Additionally, Debtor hereby
expressly agrees that any proceeds that represent principal of the Collateral
Note which result from any such enforcement action by Debtor shall be deemed to
be a prepayment of principal on the Collateral Note, subject to all the terms
and provisions of paragraph 12 above, and the direction to MHM by Debtor in
accordance with the terms of paragraph 12 shall also include a direction that
the proceeds of any enforcement action shall be treated the same as the
prepayment of principal. If an Event of Default shall occur and be continuing,
the Debtor shall not accelerate the maturity of the Collateral Note or take any
affirmative collection actions without the prior written consent of the Secured
Party, which consent may be withheld in the Secured Party's sole discretion.
In the event the Secured Party consents to the sale of any collateral securing
the Collateral Note such sale shall be for cash (and such cash proceeds shall
be immediately paid to Secured Party), and the Debtor may not bid a credit
against the Collateral Note without the prior or contemporaneous written
consent of the Secured Party, which consent may, but need not, set a maximum
amount which may be so credited.

14. Receipt of Principal by Debtor. In the event that,
notwithstanding the terms of this Collateral Transfer of Note, Debtor receives
any payments of principal or proceeds that represent principal of the
Collateral Note which result from any enforcement action with respect

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<PAGE> 6
to the Collateral Note, the Debtor shall be deemed to hold the same in trust
for Secured Party and shall immediately forward such payments to the designated
escrow agent or, unless, prior to or contemporaneously with Debtor's receipt of
the same, Substitute Collateral satisfactory to Secured Party, in its
reasonable discretion, with respect to which all matters necessary to create a
first priority security interest in favor of Secured Party have been completed,
to Secured Party in accordance with the terms hereof.

15. Modifications of Collateral Note. Prior to the occurrence of
an Event of Default, Debtor may modify the terms of the Collateral Note as
follows: (i) Debtor may agree to extend the maturity of the Collateral Note so
long as such extension is conditioned upon MHM's agreement to continue making
monthly payments of all accrued and unpaid interest and level monthly payments
that effect an amortization of the principal of the Collateral Note over the 15
year amortization period described therein in equal monthly installments of
$63,889.00, and (ii) Debtor may agree to any such other modifications that do
not impair the enforceability or the economic value of the Collateral Note;
provided, however, that Debtor shall provide Secured Party with written notice
of any proposed extension or modification together with the proposed terms of
such extension or modification at least ten (10) days prior to executing any
extension or modification agreement governing such extension or modification.
Debtor further agrees to immediately deliver to Secured Party the completely
executed original of any such extension or modification agreement, properly
endorsed to Secured Party.

16. Construction; Successors and Assigns. The pronouns used in
this agreement in any gender shall be construed as referring to any gender as
occasion may require. "Secured Party" and "Debtor" as used in this agreement
shall include, and this Collateral Transfer of Notes shall bind and shall inure
to the benefit of, the respective heirs, executors or administrators,
successors, representatives, receivers, trustee and permitted assigns of such
parties.

17. Governing Law; Definition of Terms. The law governing this
secured transaction shall be the UCC and other applicable laws of the State of
Delaware. All terms used herein which are defined in the UCC shall have the
same meaning herein as in the UCC.

18. Release of Collateral Transfer of Note. So long as no Event
of Default, or event which with the passage of time, giving of notice, or both,
would constitute an Event of Default shall have then occurred, this Collateral
Transfer of Note shall be released and terminated on that date ("Release Date")
on which the last of:

a. that certain Promissory Note in the original
principal amount of $5,835,707.00 executed by MEDIQ/PRN Life Support
Services, Inc., dated of even date herewith and payable to the order
of Secured Party;

b. that certain Promissory Note in the original
principal amount of $2,956,957 dated of even date herewith executed
by MEDIQ/PRN Life Support Services-I, Inc. and payable to the order of
Secured Party;

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<PAGE> 7
c. that certain Promissory Note in the original
principal amount of $5,000,000 executed by PRN Holdings, Inc., of even
date herewith and payable to the order of Secured Party;

d. that certain Promissory Note in the original
principal amount of $3,000,000 executed by PRN Holdings, Inc., of even
date herewith and payable to the order of Secured Party; and

e. that certain Promissory Note in the original
principal amount of $2,000,000 executed by PRN Holdings, Inc., of even
date herewith and payable to the order of Secured Party;

has been paid in full. On the Release Date, Secured Party shall deliver
possession of the Collateral Note to Debtor and shall endorse the Collateral
Note payable to the order of Debtor without representation, warranty or
recourse; provided, however, if, at the time the last to be repaid of said
notes is repaid in full, an Event of Default, or any event which with the
giving of notice, passage of time, or both, would constitute an Event of
Default has occurred and is continuing then, until no Event of Default and no
such event shall exist, (i) this Collateral Transfer of Note shall not be
released and terminated, (ii) Secured Party shall have no obligation to deliver
the Collateral Note to Debtor, and (iii) this Collateral Transfer of Note shall
continue in full force and effect.

19. Execution by Secured Party. Secured Party has joined in the
execution of this Collateral Transfer of Note in order to evidence its
acceptance of the grant of security interest made herein and the other terms
and provisions hereof, as well as to evidence its agreement to

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<PAGE> 8
perform its covenant and agreement to deliver notice to MHM in accordance with
paragraph 12 hereof.

EXECUTED to be effective as of the date first written above.

MEDIQ INCORPORATED,
a Delaware corporation

By: /s/ MICHAEL F. SANDLER
Printed Name: Michael F. Sandler
Title: Senior Vice President -- Finance

KCI THERAPEUTIC SERVICES, INC.,
a Delaware corporation

By: /s/ ROBERT A. WEHRMEYER, JR.
Printed Name: Robert A. Wehrmeyer, Jr.
Title: Vice President

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<PAGE> 1

EXHIBIT 99.10

KCI COMPLETES SALE OF
THE MEDICAL SERVICES DIVISION

San Antonio, Texas, September 30, 1994 -- Kinetic Concepts, Inc. (NASDAQ:
KNCI) announced today that it has completed the sale of its Medical Services
Division to MEDIQ Incorporated (AMEX-MED) for approximately $65 million in cash
and notes payable with a principal amount of $19 million.

Commenting, James R. Leininger, M.D., KCI's Chairman, President and
Chief Executive Officer, said, " The sale of KCI Medical Services and the
receipt of the $84.75 million patent litigation settlement with Support Systems
International, Inc. earlier this week, has enabled us to repay our borrowings
under the Company's revolving credit and term loan agreement. The September
30 balance sheet will reflect a significant improvement over our strong balance
sheet at December 31, 1993."

Kinetic Concepts, Inc. is a leading manufacturer and distributor of
specialized therapeutic surfaces and medical equipment to select markets
worldwide.